Polycab India Ltd:Annual Report 2023-24 Analysis

Polycab India Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: Polycab India Ltd. was established in 1996 as Polycab Wires Private Limited. The company was founded by Mr. Inder T. Jaisinghani.

Headquarters Location and Global Presence: The company’s headquarters are located in Mumbai, India. While primarily focused on the Indian market, Polycab also exports its products to over 40 countries globally.

Company Vision and Mission:

• Vision: To be the most respected and preferred electrical solutions provider.
• Mission: To provide high-quality, innovative, and sustainable electrical solutions that enhance the lives of our customers and create value for our stakeholders.

Key Milestones in Their Growth Journey:

• 1996: Incorporated as Polycab Wires Private Limited.
• 2000: Commenced exports.
• 2009: Restructuring through merger of four Jaisinghani family-owned companies.
• 2019: Initial Public Offering (IPO) on BSE and NSE.

Stock Exchange Listing Details and Market Capitalization: Polycab India Ltd. is listed on both the Bombay Stock Exchange (BSE: 542649) and the National Stock Exchange (NSE: POLYCAB). As of late 2023, the market capitalization is a significant figure, reflecting its strong market position. [Insert Actual Market Cap Here]

Recent Financial Performance Highlights: Polycab has consistently demonstrated strong financial performance in recent years, with increasing revenue and profitability. [Insert specific data points from recent annual reports like revenue, net profit, and growth percentages. Include the fiscal year the data represents.]

Management Team and Leadership Structure:

• Chairman & Managing Director: Inder T. Jaisinghani
• Executive Director & CFO: Gandharv Tongia
• and other key management positions

Notable Awards or Recognitions:

• [Insert specific awards and recognitions received by the company. Include the awarding body and year if possible]

Their Products #

Complete Product Portfolio with Categories:

• Wires and Cables:
  • Power Cables
  • Control Cables
  • Instrumentation Cables
  • Building Wires
  • Flexible Cables
  • Communication Cables (including Optical Fiber Cables)
  • Special Cables
• Fast Moving Electrical Goods (FMEG):
  • Fans (Ceiling, Table, Wall, Exhaust)
  • Lighting (LED, Conventional)
  • Switches
  • Switchgear
  • Conduits & Accessories
• Engineering, Procurement & Construction (EPC):
  • Execution of power distribution projects, industrial electrification projects, and other infrastructure projects.

Flagship or Signature Product Lines: Polycab’s flagship products include its range of high-quality power cables and building wires, known for their durability and safety features.

Key Technological Innovations or Patents: Polycab has invested in R&D and innovation, securing patents for cable designs and manufacturing processes. [Insert specific information about key patents if available.]

Manufacturing Facilities and Production Capacity: Polycab operates multiple manufacturing facilities across India, strategically located to serve its diverse customer base. [Insert number of plants and general locations if possible. Specific production capacity figures would be ideal.]

Quality Certifications and Standards: The company adheres to stringent quality standards and holds certifications such as:

• ISO 9001: Quality Management Systems
• ISO 14001: Environmental Management Systems
• OHSAS 18001/ISO 45001: Occupational Health and Safety Management Systems
• BIS (Bureau of Indian Standards) certifications for various products

Unique Selling Propositions or Technological Advantages: Polycab differentiates itself through its focus on quality, reliability, and innovation. Their technological advantages include advanced cable designs, energy-efficient FMEG products, and a commitment to sustainable manufacturing practices.

Recent Product Launches or R&D Initiatives: [Insert recent product launches like new fan models, LED lighting solutions or cable technologies. Include details of R&D initiatives, such as development of specialized cables for specific industries.]

Primary Customers #

Target Industries and Sectors:

• Infrastructure
• Power
• Oil and Gas
• Telecom
• Automotive
• Real Estate
• Agriculture
• Industrial Manufacturing

Geographic Markets (Domestic vs. International): While Polycab has a growing international presence, its primary market is India. They are actively expanding their export business to various regions globally.

Major Client Segments (Agricultural, Industrial, Residential, etc.): Polycab serves a wide range of client segments, including:

• Residential: Supplying wires, cables, and FMEG for homes.
• Commercial: Catering to offices, retail spaces, and other commercial establishments.
• Industrial: Providing specialized cables and solutions for manufacturing plants, factories, and other industrial facilities.
• Infrastructure: Supporting infrastructure projects with power cables, communication cables, and EPC services.
• Agricultural: Offering cables and wires for irrigation systems and agricultural equipment.

Distribution Network and Sales Channels: Polycab boasts a vast distribution network across India, comprising a large number of authorized dealers, distributors, and retailers. They also utilize online sales channels to reach a wider customer base.

Major Competitors #

Direct Competitors in India and Globally:

• India: KEI Industries, Havells India, RR Kabel, Finolex Cables
• Globally: Prysmian Group, Nexans, General Cable (now part of Prysmian Group)

Competitive Advantages and Disadvantages:

• Advantages: Strong brand reputation in India, wide product portfolio, extensive distribution network, established manufacturing capabilities, increasing focus on FMEG.
• Disadvantages: High dependence on the Indian market, vulnerability to fluctuations in commodity prices (copper, aluminum), intense competition.

How They Differentiate From Competitors: Polycab differentiates itself through:

• Product Quality and Reliability: Focusing on manufacturing high-quality products that meet stringent industry standards.
• Extensive Product Range: Offering a comprehensive portfolio of wires, cables, and FMEG.
• Strong Distribution Network: Ensuring widespread availability of its products across India.
• Customer Service: Providing excellent pre- and post-sales support to its customers.

Industry Challenges and Opportunities:

• Challenges: Fluctuations in raw material prices, increasing competition, evolving regulatory landscape, technological disruptions.
• Opportunities: Growing infrastructure development in India, increasing demand for renewable energy, rising adoption of FMEG products, expansion in export markets.

Future Outlook #

Expansion Plans or Growth Strategy: Polycab is focused on expanding its market share in both the wires and cables and FMEG segments. The company plans to increase its manufacturing capacity, strengthen its distribution network, and invest in new product development.

Upcoming Products or Innovations: [Insert information regarding upcoming product lines or improvements to existing ones. Mention anything about adopting new technologies.]

Sustainability Initiatives or ESG Commitments: Polycab is committed to sustainability and has implemented various initiatives to reduce its environmental impact. [Insert specific details about their sustainability initiatives, such as reducing carbon emissions, conserving water, and promoting waste management. Include information about ESG (Environmental, Social, and Governance) commitments and goals.]

Industry Trends Affecting Their Business: Several industry trends are shaping Polycab’s business, including:

• Increasing urbanization and infrastructure development: Driving demand for wires, cables, and FMEG.
• Growing adoption of renewable energy: Creating opportunities for specialized cables and solutions.
• Rising demand for energy-efficient products: Encouraging innovation in FMEG.
• Digitalization and automation: Transforming manufacturing processes and supply chains.

Long-Term Vision and Strategic Goals: Polycab’s long-term vision is to be a leading electrical solutions provider in India and a significant player in the global market. The company aims to achieve sustainable growth, enhance customer satisfaction, and create value for its stakeholders.

Financial Performance Analysis #

3-Year Trend Analysis of Key Financial Metrics (Consolidated) #

• Revenue: Increased from ₹122,038 million (FY22) to ₹141,078 million (FY23) and reached ₹180,394 million (FY24), showing a significant upward trend.
• EBITDA: Rose from ₹12,626 million (FY22) to ₹18,429 million (FY23) and ₹24,918 million (FY24), indicating improved operational profitability.
• Profit After Tax (PAT): Increased consistently from ₹9,173 million (FY22) to ₹12,831 million (FY23) and ₹18,029 million (FY24), reflecting substantial profit growth.
• Net Debt: Decreased to a net cash position of ₹(16,725.05) million in FY24 and ₹(12,261.09) Million in FY23.
• Return on Capital Employed (ROCE): Grew from 20.4% (FY22) to 25.74% (FY23) and 29.42%(FY24).

Business Segment Performance #

• Wires and Cables: Revenue increased by 27% YoY in FY24, reaching ₹158,922 million. This was driven by 30-40% domestic volume growth and it represents 88% of total FY24 sales. The North region had highest growth geographically. It holds 25-26% of organized market share.
• FMEG: Showed marginal revenue growth to ₹12,828 million in FY24, from Marginal growth YoY to 12,749 Mn with the previous year at ₹12,512 Million. Faced challenges due to weak consumer sentiment and competitive pressure. Focus has been on restructuring and expansion.
• Others (including EPC): Revenue increased by 169% YoY in FY24 to ₹9.6 billion and has EBIT margin of 11.5% , largely because of projects related to the government’s RDSS scheme.
• International Business: Representing 8% of overall revenue, it only showed marginal growth from previous year due to softness in exports to USA where a transition to a distributorship model is underway.

Major Strategic Initiatives and Their Progress #

• Project LEAP: Aimed at energizing the B2B portfolio, driving growth in B2C, and fostering organizational excellence. It’s contributed to outperforming industry growth in the W&C segment, though FMEG growth is lagging. New mid-term goals under Project LEAP are planned to be unveiled.
• Distribution Model Expansion: The Company has successfully increased product availability and is transitioning to a distribution model in international operations, starting with the USA.
• Vertical Specialization: Structuring the B2C business into distinct entities for each product line, with dedicated sales and technical support teams.
• New Product Development (NPD): Introduction of new wire ranges (Etira, Primma, Maxima+) contributed 34% to retail wires in FY24. 90+ SKUs added in fans vertical.
• Digitalisation and Data Analytics: The Company is incorporating AI/ML-powered pricing engines and CRM systems to increase operational efficiency and improve customer service.
• Increased Capex Average of 3-4 Billion per annum, increased to 8.58 Billion, guided higher for near term with levels of 10-11 Billion annually for next three years.

Risk Landscape Changes #

• Geopolitical and Social Instability: Identified as a critical risk, with mitigation through geographic diversification of manufacturing, supply chain, and market presence.
• Threats to Information Security: The risk is stable, though potentially significant. Mitigation measures include robust IT security systems, cloud-based applications, and enhanced VAPT and RED teaming for IT infrastructure.
• Technological Lag: Addressed through investments in digital transformation, ERP upgrades, and implementation of new technologies.
• ESG Risks: Identified as material. The Company has established an ESG Roadmap and Charter and is increasing its use of renewable energy.

ESG Initiatives and Metrics #

• ESG Framework and Charter: Formulated to address material ESG topics, with progress monitored and reported.
• Climate Change and Energy: Energy consumed from renewable sources was 126,522 GJ in FY24, up 2% YoY. Emissions avoided due to renewable energy were 25,093 MTCO2e.
• Water Management: Total water withdrawal decreased from 762,603 KL in FY23 to 263,991 KL in FY24.
• Waste Management: Total waste recycled was 7,380 MT in FY24. 83.7% of the Company’s inputs by value were sourced sustainably.
• Social: CSR expenditure was ₹264 million, impacting 77,930 lives. Employee engagement score was 86%. LTIFR was 0.08.
• **Governance:**50% board independence, a code of conduct, and a whistleblower policy are in place. Zero cases of discrimination were reported.

Management Outlook #

• Optimistic about W&C Growth: Anticipates 12-14% growth in the domestic W&C industry in the near to mid-term, driven by government infrastructure spending, private capex, and real estate sector upcycle.
• FMEG Stabilization and Growth: Expects stabilization in the FMEG segment over the next 3-4 quarters, followed by growth exceeding industry averages after strategic restructuring.
• International Business Expansion: Focus on stabilizing the distribution model in the USA, obtaining certifications, and securing partnerships to expand global presence.
• Capital Expenditure: Plans to sustain capex levels of H 10-11 billion annually for the next three years.

Detailed Analysis #

Polycab India Limited Financial Analysis: Balance Sheet Review #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (Consolidated) #

(₹ in million)

The total assets, liabilities, and equity, increased by 28.15%,39.42% and 23.50% respectively as of March 31st, 2024.

(₹ in million)

Significant Changes in Major Line Items (>10% YoY) #

(₹ in million)

• Property, Plant, and Equipment (Consolidated): Increased from ₹ 22,611.95 to ₹ 27,462.03 (21.45%) , primarily due to capital expenditure on factory building expansion in Halol and plant & machinery enhancements across the W&C and FMEG segments.
• Capital Work-in-Progress (Consolidated): Increased significantly from ₹ 2,507.67 to ₹ 5,784.46(130.67%), mainly due to ongoing expansion in W&C and FMEG manufacturing capacities.
• **Right of use assets:**Increased from ₹ 361.82 to ₹ 728.26(101.28%)
• Trade Receivables (Consolidated): Increased from ₹ 12,992.33 to ₹ 21,661.87(66.73%), reflecting higher sales volume and, to some extent, increased credit periods in the institutional business.
• Other Non-Current Assets (Consolidated): Increased from ₹ 1,128.10 to ₹ 2,561.76 (127.08%), due to a rise in capital advances.
• Cash and Bank Balances (Consolidated): Decreased from ₹ 6,952.43 to ₹ 4,023.58, a reduction of 42.13%
• Current Investments (Consolidated):Increased from ₹ 13,504.95 to ₹ 18,224.17(34.94%).
• Current loans Increased from ₹ 108.47 to ₹ 1,061.26(878.26%)
• Other Equity (Consolidated): Increased from ₹ 64,874.42 to ₹ 80,368.98(23.88%), driven by retained earnings growth.
• Non-Current Borrowings (Consolidated): Increased from ₹ 42.08 to ₹ 226.04 (437.17%)
• Other non-current financial liabilities(Consolidated) Increased from ₹ 0 to ₹ 537.66.
• Other Non-Current Liabilities(Consolidated):Increased from ₹ 165.18 to ₹ 422.86(156.01%).
• Lease Liabilities (Consolidated): Current lease liabilities increased from ₹ 138.96 to ₹ 468.23 (236.95%).
• Acceptances (Consolidated): Increased from ₹ 12,257.56 to ₹ 18,619.66(51.90%).
• Other current financial liabilities(Consolidated): Increased from ₹ 1,677.91 to ₹ 2,420.84(44.28%).
• Other Current Liabilities(Consolidated):Increased from ₹ 2,817.76 to ₹ 3,145.03(11.61%).

Working Capital Trends #

• Inventory: Increased significantly from ₹ 29,513.84 million to ₹ 36,751.14 million, indicating higher stocking levels, possibly in anticipation of continued demand growth. Inventory days remained relatively stable (101 days vs. 102 days).
• Trade Receivables: Increased, and receivable days increased from 32 to 41, suggesting a potential lengthening of the credit cycle.
• Trade Payables: Increased substantially, but payable days also increased from 71 to 79, indicating potentially improved supplier terms or stretched payment cycles.

Asset Quality Metrics #

• Impairment Allowance for Trade Receivables: Increased from ₹ 1,163.08 million to ₹ 1,352.68 million, indicating a higher provision for potential bad debts.
• Impairment allowance for contract assets - credit impaired Increased from ₹ 5.65 to ₹ 15.23.

Debt Structure and Maturity Profile #

• Non-Current Borrowings: Increased from ₹ 42.08 million to ₹ 226.04 million, suggesting reliance on longer-term debt. Term loans from HDFC Bank and SIDBI have tenures extending to 2029.
• Current Borrowings: Cash credit and buyer’s credit facilities are utilized, with current maturities of long-term borrowings also reported.
• Lease Liabilities: Increased significantly, both current and non-current portions. Maturity analysis shows obligations extending beyond five years.

Off-Balance Sheet Items #

• Contingent Liabilities: Include disputed tax liabilities (sales tax, service tax, excise duty, customs duty, and income tax), and obligations related to export commitments under various schemes.
• Corporate Guarantees: The Company has provided guarantees for credit facilities availed by subsidiaries and joint ventures.
• Capital Commitments: Significant capital commitments of ₹ 10,319.79 million exist for property, plant, and equipment, indicating ongoing expansion plans.

Polycab India Limited: Financial Analysis FY24 #

Revenue Breakdown by Segment/Geography #

• Wires and Cables: ₹ 158,922 million (88% of total sales), 27% YoY growth. Domestic cables exhibited double-digit growth. International business: ₹14,360 million (8% of revenue).
• FMEG: ₹12,828 million, marginal YoY growth, 7% of total revenue.
• Others (primarily EPC): ₹ 9.6 billion, 169% YoY growth, 5% of total sales.

Geographical Revenue (FY24) #

• Domestic: Strong growth, highest contribution from the West region and highest growth rate from the North.
• International: ₹14,360 million. North America was flat due to business model transition. Major growth came from Rest of the World (ROW). Exports were made to 79 countries.

Cost Structure Analysis #

• Cost of Materials Consumed: Increased by 29.88% YoY.
• Employee Benefit Expenses: Increased by 33% YoY (annual increments, new hiring, and ESOP charges).
• Other Expenses: Increased by 28.6%, including advertising and sales promotion spending (up by ~60% YoY)

Margin Analysis #

• EBITDA Margin: Improved to 13.81% in FY24 from 13.06% in FY23 (strategic pricing, product mix, operational leverage).
• Net Profit Margin: Increased to 9.99% in FY24 from 9.09% in FY23.
• Cables and Wires Segment EBIT Margin: Improved to 13.7%.

Operating Leverage #

• Increased EBITDA margin indicates positive operating leverage from volume growth in the Wires & Cables segment.

EPS Analysis #

• Basic EPS: Increased to ₹ 118.93 in FY24 from ₹ 84.93 in FY23.
• Diluted EPS: Increased to ₹ 118.49 in FY24 from ₹ 84.66 in FY23.

Cash Management: Financial Analysis #

Cash Flow Components #

• Operating Cash Flow (OCF): Consolidated OCF decreased to H 12,962 million in FY24 from H 14,275 million in FY23. Key drivers of the decrease include:
  • Higher income tax payments (up by H 2,039 million).
  • A significant increase in trade receivables (up by H 9,736 million).
  • Partially offset by increased trade payables and acceptances.
• The wires and cables segment was a core driver of revenue growth, and related project activities under “other” segment showed significant revenue increase. These are likely significant contributors to OCF.
• Investing Cash Flow (ICF): Consolidated ICF showed a net outflow, decreasing to H (7,519) million in FY24, compared to (12,026) million in FY23. The main components were:
  • Major outflows were for Purchase of Property, Plant, and Equipment (including CWIP).
  • Net proceeds were from mutual funds and fixed deposits.
• Financing Cash Flow (FCF): Consolidated FCF outflow was (3,874) million, mainly attributed to dividends and interest payments.
• The Consolidated OCF decreased while ICF also decreased.

Working Capital Management Efficiency #

• Inventory days were relatively stable: 101 days in FY24 vs. 102 days in FY23 (consolidated).
• Receivable days increased: 41 days in FY24 vs. 32 days in FY23 (consolidated), indicating a potential lengthening of the collection cycle, partly due to higher institutional sales, where the Company extends credit.
• Payable days: 79 days in FY24 vs 71 days in FY23(consolidated).
• Consolidated Net Cash Cycle: 48 Days

Capex Analysis by Segment #

• The Company incurred significant capex of H 8,580 million in FY24 (Consolidated). H8,189 million was on a Standalone basis.
• Major capitalisation was towards Wires and Cables production (~80%) and FMEG (~20%).
• Capex includes factory building expansion, new plant and machinery.
• Future capex plans: H 10-11 billion annually for the next three years, primarily to expand manufacturing capacities.

Dividend and Share Buyback Trends #

• Dividend Payout Ratio: Increased to 25.4% in FY24, up from 23.6% the prior year.
• Proposed Dividend: H 30 per share for FY24, pending shareholder approval.
• No share buybacks are mentioned in the document.

Debt Service Coverage #

• Interest Coverage Ratio: Decreased to 20.74 in FY24 from 27.34 in FY23. Due to increase in acceptances and a hike in interest rate.

Liquidity Position and Cash Conversion Cycle #

• Current Ratio: 2.44 in FY24, a slight decrease from 2.64 in FY23 (consolidated).
• Cash Position (Consolidated): Improved to H 22,248 million, up from H 20,457 million. This includes cash, bank balances, and short-term investments.
• Net Debt (Consolidated): The Company maintains a significant net cash position.
• Cash Conversion Cycle: Consolidated is 48 days in FY24, was stable compared to the previous year.

Free Cash Flow Yield Trends #

• Free cash flow is not directly mentioned, a decrease of 35% in FCF is to be expected for the year ended on March 31, 2024, from the previous year, based on the increase in capital expenditures (Capex) and a decrease in cash generated from operations.

Risk Framework for Polycab India Limited #

Comprehensive Risk Assessment #

This document outlines a segment-wise financial risk analysis for Polycab India Limited.

Wires and Cables (W&C) Segment #

The W&C segment constitutes 88% of Polycab’s total revenue.

Strategic Risks #

• Severity: High
• Likelihood: Possible (due to government infrastructure spending, real estate market fluctuations, and private capex variations)
• Trend: Stable (Company is increasing market share)
• Mitigation Strategies: Capacity expansion, R&D investment, stabilization of the U.S. distribution model, capturing unorganized market share.
• Control Effectiveness: Partially Effective (Strong domestic volume growth, marginal international growth)
• Potential Financial Impact: Significant (Revenue growth was 27% YoY, reaching H 159 billion, but reliance on favorable external factors presents vulnerability)

Operational Risks #

• Severity: Moderate
• Likelihood: Likely (Threats to information security, technological lag, and reliance on commodity prices)
• Trend: Increasing (Marginal growth on its international operations.)
• Mitigation Strategies: IT security system investments, ERP upgrades, and digital initiatives under Project LEAP.
• Control Effectiveness: Moderate (Remarkable acceleration in the institutional business, IT security enhancements are in place. The transition in the USA to a distribution model of operations have affected the business.)
• Potential Financial Impact: Moderate (Disruptions could lead to production delays and affect supply)

Financial Risks #

• Severity: Moderate
• Likelihood: Likely (Directly exposed to commodity price volatility)
• Trend: Stable (Due to the Company implementing hedging strategy)
• Mitigation Strategies: Commodity and foreign exchange risk management policy, hedging framework, and automatic pricing module.
• Control Effectiveness: Effective (EBIT margins improved to 13.7% due to strategic pricing and favorable product mix)
• Potential Financial Impact: Moderate (Fluctuations can impact material costs and profitability)

Compliance/Regulatory Risks #

• Severity: Moderate
• Likelihood: Possible (Risk of failing to meet statutory compliance guidelines)
• Trend: Stable (The Company implemented various controls to mitigate risk)
• Mitigation Strategies: Implementation of compliance tools and trackers, regular statutory and internal audits.
• Control Effectiveness: Effective (Ensuring adherence to regulations)
• Potential Financial Impact: Moderate (Fines or penalties due to non-compliance)

Emerging Risks #

• Severity: Moderate
• Likelihood: Possible (Emerging technology needs.)
• Trend: Stable
• Mitigation Strategies: Addressing them as a part of Project LEAP.
• Control Effectiveness: Moderate (Making investments in R&D)
• Potential Financial Impact: Moderate (Changes can affect the demand of the cable industry)

Fast-Moving Electrical Goods (FMEG) Segment #

The FMEG segment represents 7% of total revenue.

Strategic Risks #

• Severity: Moderate
• Likelihood: Likely (Marginal growth, market share risk in a competitive environment, and dependence on consumer sentiment)
• Trend: Decreasing (Reported only marginal growth in this segment)
• Mitigation Strategies: Distribution network restructuring, advertising spend increases, portfolio expansion, and price laddering.
• Control Effectiveness: Partially Effective (Gross margin improvement achieved, but top-line growth was marginal)
• Potential Financial Impact: Moderate

Operational Risks #

• Severity: Moderate
• Likelihood: Likely (Execution inefficiencies and competition in the segment.)
• Trend: Increasing (The Company is implementing a new organizational structure to address the issue.)
• Mitigation Strategies: New organizational structure implementation, addressing execution inefficiencies, expanding the distribution network.
• Control Effectiveness: Moderate (Restructuring is ongoing, with full effectiveness yet to be determined)
• Potential Financial Impact: Moderate (Inefficiencies impact sales)

Emerging Risks #

• Severity: Moderate
• Likelihood: Possible (Rapid technological changes.)
• Trend: Increasing
• Mitigation Strategies: New product development and innovation.
• Control Effectiveness: Partially Effective (New SKU launches in fans)
• Potential Financial Impact: Moderate (Innovation and adaptation costs could be significant)

Strategic Analysis of Polycab India Limited #

Long-Term Strategic Goals and Progress #

• Wires & Cables (W&C): Aims to expand production capacity and increase R&D investment to maintain technological leadership. Progress is demonstrated by achieving the highest sales revenue and EBITDA margins in the industry, and a 2%-3% increase in organized market share.
• FMEG: Targets market leadership across all product categories by enhancing production capacities and diversifying the product range, with a focus on premium offerings. Progress is marked by restructuring the distribution network and increasing advertising, though faced a year of marginal growth.
• International Business: Strategically transitioning to a distribution model, mirroring Indian operations, aiming for a manifold increase in benefits. Flat performance this year, due to this business model transition.

Competitive Advantages and Market Positioning #

• W&C: Holds a 25-26% market share of the organized W&C market in India, achieving the highest growth in sales revenue and EBITDA margins among industry peers.
• FMEG: Leverages strong W&C foothold to offer holistic solutions. Aims to improve the market share gain, as switches and switchgears hold less comptetion.
• International: Focuses on UL-approved products, customer service, and timely delivery in North America. Exports to 78 countries, with a peak export order book driving sales in developed economies.

Innovation Initiatives and R&D Effectiveness #

• W&C: The Polymer R&D centre, recognised by DSIR, India, focuses on polymer technology, prioritising stakeholder value, safety, and sustainability, complying with global standards. The introduction of new wire ranges (Etira, Primma, Maxima+) contributed significantly (34%) to retail wire sales in FY 2023-24.
• FMEG: Launched 90+ new SKUs in the fans vertical following BEE norms, with the Silencio series expanding from six states to nationwide distribution. 11% Contribution of 6kA MCBs to FY 2023-24 sales.
• Overall: Investments in R&D are focused on developing future-ready products and improving services. 78 IPR registered in FY2023-24, with 424 applied.

Management’s Track Record in Execution #

• Overall: Achieved industry-leading revenue and PAT growth, with the highest-ever figures reported. EBITDA and PAT margins improved, demonstrating operational efficiency and strategic pricing.
• Project LEAP: Successfully increased its market share, achieving industry-leading growth and profitability every year. The Company has identified opportunities to foray in to specail purpose cable market.
• W&C: Delivered double-digit growth and gained market share, outperforming the industry.
• FMEG: Implemented distribution network restructuring, resulting in improved gross margins across all product categories.
• International Buisness: Identified the new growth opportunities by expanding its business.

Capital Allocation Strategy #

• Capex: Increased significantly, with H 8.58 billion incurred in FY 2023-24 and plans to maintain H 10-11 billion annually for the next three years to expand manufacturing capacities.
• Dividends: Increased dividend payout ratio to 25.4%, with a proposed dividend of H 30 per share.
• Cash Reserves: A portion of cash will be retained as a buffer for flexibility in navigating business environments.
• Mergers and Acquisitions: Will actively pursue opportunities for inorganic expansion

Organizational Changes and Their Impact #

• B2C Business Restructuring: Each product line within the B2C business is being structured as a distinct entity, with dedicated sales and technical support teams. This is intended to enhance focus, accountability, and agility, with leaders possessing deep product category expertise.
• FMEG Restructuring: Transitioning to a streamlined structure with one B2C head supported by deputy business heads for specific product categories, aiming to improve focus, accountability, and decision-making agility.

ESG Framework #

ESG and Sustainability Analysis #

Environmental Metrics and Targets #

• Energy consumption from renewable sources increased by 2% YoY, reaching 126,522 GJ in FY 2023-24.
• Emissions of 25,093 MTCO2e were avoided due to renewable energy usage.
• Total waste recycled was 7,380 MT in FY 2023-24.
• Total waste generated was 17,316 MT, and waste recovered (recycling and reuse) was 7,380 MT.
• Water withdrawal decreased significantly from 762,603 KL in FY 2022-23 to 263,991 KL in FY 2023-24.
• Targets have been set internally across areas like climate resilience, aligning with India’s net-zero emissions target.

Social Responsibility Programs #

• CSR expenditure for FY 2023-24 was H 264 million, impacting 77,930 lives.
• Key CSR focus areas include healthcare, skill development, education, rural development, and the environment.
• Specific initiatives include village-to-village medical outreach, malnutrition camps, support for senior citizens, and establishing a multi-specialty hospital in Halol.
• Skill development programs focused on artisans, computer training for girls, and sewing courses.
• Impact assesment findings (FY 2020-23) have total no. of Beneficiaries of 639,860, 39,151,48,607, 25,478 under health care, educational and skill development, rural development, environment, projects respectively.

Governance Structure and Effectiveness #

• The Board of Directors has a Governance Framework based on five pillars: Governance Philosophy, Directives, Structure, Systems, and Evaluation.
• 50% of the Board comprises Independent Directors, and all major committees are chaired by them.
• A Whistleblower Policy is in place, aligned with Section 177 of the Companies Act, 2013, and SEBI regulations.
• A Risk Management Committee oversees the risk management process, which includes identification, assessment, mitigation, monitoring, and reporting.
• The Board’s performance, along with its Committees and individual Directors, undergoes annual evaluation.
• Audit Committee comprises 4 members out of which 3 are independent.

Sustainability Investments #

• Investments were made in advanced water-saving technologies and upgraded effluent and sewage treatment plants.
• Expansion of renewable energy initiatives included augmenting solar panel installations and exploring wind and hydropower opportunities.
• Planned projects include the installation of 3.3 MW of solar power capacity in Daman and Halol, with a 0.72 MW solar rooftop system already installed in Daman.

ESG Ratings #

• Polycab underwent assessment by S&P Global, a prominent global ESG agency.
• CDP Score for Climate Change is ‘C’.

Regulatory Compliance #

• The Company has a Compliance Tool and tracker in place, with compliance owners mapped.
• Polycab is compliant with ISO 9001:2015 (QMS), ISO 14001:2015 (EMS), ISO 45001:2018 (OHMS), ISO 50001:2018 (EnMS), and ISO 17025:2017.
• Products are RoHS & REACH compliant.
• The Supplier Code of Conduct (SCoC) aligns with national and international standards, including safety, health, environment, labor, human rights, ethics, and fair business.
• 83.7% of inputs by value were sourced from sustainable sources in FY 2023-24.
• Zero cases of discrimination were reported in FY 2023-24.
• Zero instances of complaints pertaining to child labour, forced labour and involuntary labour.

Forward Outlook #

Wires & Cables (W&C) Segment #

Management Guidance and Assumptions #

• Management anticipates continued strong momentum in the W&C business, outperforming competitors in the domestic market.
• There is an assumption that the government’s focus on long-term infrastructure development, coupled with a revival in private capital expenditure and a real estate upcycle, will sustain demand.
• Assumes its estimated supply chain issue. *Assumes that the transition to the distribution model of operations internationally, especially in the USA, will stabilize in 3-5 quarters.

Market Growth Forecasts #

• The domestic W&C industry is projected to grow by 12%-14% in the near to mid-term.
• The global cable industry is projected to increase to an estimated $410 billion by FY 2029-30.

Planned Strategic Initiatives #

• Expansion of production capacities to meet rising market demand.
• Penetration of unexplored market segments to expand market footprint.
• Enhancement of the existing distribution network’s efficiency and effectiveness.
• Targeting unorganized players in the retail wires sector, particularly in Tier 3 to 5 cities.
• Securing certifications and approvals in additional countries for international business expansion.
• Implementation of price laddering strategy across customer segments.

Capital Expenditure Plans #

• The Company plans to maintain capex levels between H 10-11 billion annually over the next three years, primarily directed towards W&C capacity expansion.

Efficiency Improvement Targets #

• Refining the distribution approach in the USA to enhance service delivery and competitiveness.

Potential Challenges and Opportunities #

• Opportunities: Government expenditure on infrastructure, real estate upcycle, private capex recovery, growth in renewable energy, and expansion of telecommunications and data centers are all creating increased demand. The ‘China+1’ strategy and global demand for specialized cables present export opportunities.
• Challenges: Potential margin pressure from increased competition and capacity additions by peers. The Red Sea crisis impacted delivery timelines, showing effects in the second half of FY 2023-24.

Scenario Analysis and Sensitivity #

• Margin is dependent upon domestic cable vs. wire mix.
• Margin direction will be influenced by a) A&P spends relative to B2C revenue. b) International vs. Domestic business contribution, as international operations presently contribute to higher margins. c) Operational Leverage.

Fast-Moving Electrical Goods (FMEG) Segment #

Management Guidance and Assumptions #

• Management anticipates that improved consumer sentiment, controlled inflation, and refined execution strategies will lead to growth.
• The goal is to achieve market leadership across all product categories.
• Assumed rebound of consumer sentiments and controlled inflation.
• Achieving a 10% EBITDA margin range is reinstated as a target over time.

Market Growth Forecasts #

• The Indian FMEG industry’s Total Addressable Market is expected to reach H 1.2+ trillion by 2030. *The fans and lights segments remain highly competitive, whereas the switches and switchgear segment experience a reduced level of competition.

Planned Strategic Initiatives #

• Implementation of a new organizational structure with dedicated teams for each product line.
• Addressing execution inefficiencies to improve overall business performance.
• Expansion of the distribution network and enhancement of the influencer management program.
• Targeting premiumisation in fans and lighting segments.
• Introduction of new product SKUs to address portfolio gaps.

Capital Expenditure Plans #

• Capex will be allocated towards enhancing production capacities and diversifying the product range, with a focus on premium offerings.

Efficiency Improvement Targets #

• Restructuring the vertical with dedicated product category heads to improve focus, accountability, and agility.
  • Decentralizing decision-making to empower local teams.

Potential Challenges and Opportunities #

• Opportunities: Favorable demographics and increasing urbanization are expected to drive consumption growth. The switches and switchgears segment faces less competition.
• Challenges: Achieving profitability targets for the FMEG business appears challenging. Intense competition and margin pressures are present, especially in the fans and lights segments.

Others (including EPC) Segment #

Management Guidance and Assumptions #

• The segment’s growth was primarily attributed to projects under the government’s RDSS scheme.
• Management anticipates a single-digit contribution of this segment to the consolidated Company top-line in the mid-to-long term.
• Sustainable operating margins are expected to be in the high single digits.

Planned Strategic Initiatives #

• Strategic capitalization on EPC opportunities with a selective approach to drive growth.
• Prioritization of project selection to optimize the supply component of W&C.

Efficiency Improvement Targets #

• The company will focus on achieving favorable capital returns and minimal risk.

Potential Challenges and Opportunities #

• Opportunities: Government projects, particularly under the RDSS scheme, provide growth potential.
• Challenges: The EPC business is project-based and may have varying revenue and profitability depending on project timelines and execution.

Audit and Compliance #

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The Auditors’ Report on Standalone and Consolidated Financial Statements for FY 2023-24 does not contain any qualification, observation, disclaimer, or adverse remark.
• The Independent Auditor’s Report mentions Search operations carried out by the Income tax authorities in December 2023. Due to the pending completion of these proceedings, the impact is not ascertainable. This is presented as an emphasis of matter but the overall audit opinion is not modified.

Key Accounting Policies and Changes #

• The Group prepares its Consolidated Financial Statements in compliance with Indian Accounting Standards (Ind AS).
• During the year of reporting, no material changes were encountered.

Internal Control Effectiveness #

• The Company maintains an internal audit system commensurate with its size and nature of business.
• There were no reported instances of material weaknesses or significant deficiencies in internal financial controls over financial reporting.
• The Company experienced a cyber security incident in March 2024 (ransomware attack), but core systems and operations were not impacted.

Regulatory Compliance Status #

• The Company has complied with the requirements of Regulations 17 to 27 and Clauses (b) to (i) of Regulation 46(2) and other relevant clauses of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,
• The company states that it had complied with all applicable laws.
• No penalties or strictures were imposed on the Company by the Stock Exchanges or SEBI on any matter related to capital markets during the last three years.
• No instances of non-compliance with any requirements of Corporate Governance Report as detailed in the provided documentation.
• The Company has registered itself on the Online Dispute Resolution (ODR) portal.

Legal Proceedings and Their Potential Impact #

• There are pending litigations related to taxation matters, including disputed liabilities for sales tax/VAT, service tax, excise duty, customs duty, and income tax. The total disputed liability across these matters amounts to a specific sum.
• The Company does not expect the outcome of these matters to have a material adverse effect on its financial conditions, results of operations, or cash flows.

Related Party Transactions #

• All related party transactions (RPTs) were conducted on an arm’s length basis and in the ordinary course of business.
• RPT details were presented to and reviewed by Audit Committee.

Subsequent Events #

• No significant adjusting events occurred between the balance sheet date (31 March 2024) and the date of approval of the financial statements (10 May 2024).

Analysis of Accounting Quality #

• The Company follows Ind AS, ensuring consistency and comparability.
• There are no observed qualifications or adverse remarks in audit reports, indicating financial statements and reporting are free from material misstatement.
• Management of Key Accounting Estimates: Company uses judgements and estimates for long-term contracts, provision, valuation of financial instruments, etc.

Regulatory Risk Assessment #

• Compliance: The Company states compliance with all relevant laws and regulations, including the Companies Act, SEBI regulations, and other statutory dues.
• There were no reported instances of non-compliance or penalties.
• Income Tax Search: The income tax search conducted in December 2023 presents a potential regulatory risk. While the Company states cooperation and no current communication of outcomes, this remains an area to monitor. The impact is currently unascertainable.