Ladies and gentlemen, good evening and welcome to the Q1 FY 2026 Earnings Conference Call of Finolex Cables Ltd. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference, please signal for an operator by pressing star and then zero on your touch-tone telephones. I now hand the conference over to Mr. Pratik Patil from Dentsu Creative PR Investor Relations Team. Thank you and over to you, Mr. Patil.
Thank you, Farah. Good evening and thank you for joining us on the Finolex Cables Ltd Q1 FY 2026 Earnings Conference Call. Today we have with us Mr. Mahesh Viswanathan, Deputy CEO and Chief Financial Officer from Finolex Cables Ltd. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session. I must remind you that the discussion in today's earnings call may include certain forward-looking statements and must be viewed, therefore, in conjunction with the risks that the company faces. Please restrict your questions to the quarterly performance and to strategic questions only. I would now request Mr. Viswanathan for the opening remarks. Thank you and over to you, sir.
Thank you, Pratik. I hope my voice is clear.
Yes.
Good afternoon, everyone. Thank you for participating in this evening's call. A quick set of opening remarks from me, and then I'm free to take questions. For the quarter, we ended at just under INR 1,400 crores of sales, about 13% higher than the corresponding period of last year. PAT also was in line with that number. That was also up by about 13%. On the gross margin side, we were stable at about 20%, comparable to the corresponding period of the previous year. Within the segments, electrical segments, overall values were up by about 16%. More contribution came from power cables than wires. The second part was in the electrical wires. Agricultural applications were impacted because of the unseasonal rains, which started sometime around mid-May. On the communication cables segment, volumes and values were slightly depressed.
Contracts which we were hoping to close with some of our customers took longer to close. Some of those contracts have been closed in July, and some are still under discussion. There has been a drop in the revenue from that sector. Others, again, because of erratic weather, as well as price erosion, especially in the lighting sector, the values have been slightly depressed. The other key feature of the quarter was our ad spends were higher. Both ad and promotional expenditures were higher than the corresponding period of last year. That's probably what I wanted to start off and introduce the quarter. I'm now free to take questions. I'm sure you've seen the numbers. You must have done your analysis already.
Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may enter star followed by one on their touch-tone telephones. If you wish to remove yourself from the queue, you may enter star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vidit Trivedi from Asian Market Securities. Please go ahead.
Yeah, hi, sir. Thank you for the opportunity. My question is that you have said that the volume growth was close to 16%. Despite having a volume growth of 16% in the wires category and cables almost doubled, we've seen a hardly 1.5% jump in the EBIT in this segment. What's the main reason behind this?
The product looks basically... There is just, and this is a trend that we've been seeing over the last few quarters. There is more of sales towards projects, and those are at discounted prices.
Got it, sir. What’s the absolute number for cables and wires during the quarter as well as for the financial year FY 2025?
Sorry?
Your absolute number for cables for this quarter and wires separately, and for this quarter and for the financial year FY 2025.
FY 2025, last year, you mean?
Yeah, for this quarter as well.
Okay, I'll have to give that to you separately. I don't have that information right in front of me, but I can get back to you separately on that.
Sure, sir. Thank you.
Thank you. Participants, if you have any questions at this time, you may enter star and one. The next question is from the line of Manoj Gori from Equirus Capital. Please go ahead.
Yeah, thank you for the opportunity, sir. Sir, I have two questions. Not being on quarter specific, but if we look at over the last 4-5 years or even 6 years, we have seen some underperformance by Finolex Cables versus the industry. Now, my question is whether this should be attributed to rising competition where we have been underperforming, especially in the wire segment. I'm doing a wire-to-wire comparison, or probably when we look at, I think, all the management-related issues also somewhat started around 6- 6.5 years back. Prior to that, we were growing in line or better than the industry. Can you throw some light qualitatively like where are we missing on the growth front on such a longer time horizon that I've been referring to?
Okay. In terms of the growth, I think we have been quite subdued on the power cable side, whereas all our peers have grown substantially on that side. Within wires, yes, competition has been a little more aggressive on the pricing, while we have not been that aggressive. We have been focusing more on the overall margins rather than just on the absolute numbers. There could be some impact of that. Most of the growth that the peers have had is on the cable side, where our participation has been kind of limited until now. Your second part of your question was whether the dispute within the promoter family has impacted the results of the business. I wouldn't say too much. Yes, there would be some impact, but not overall. The business is being managed by people who have been in this industry for a long time.
The product has a certain quality attached to it. That premiumization continues. I don't believe that the market has moved away from us so much.
Got it, sir. When I look at probably somewhere around FY 2015 or probably FY 2016 - FY 2019 period, where our gross margins were significantly higher, even when we look at the EBITDA margin at company level on the standalone basis, we were doing reasonably well. If we look at our gross margin from close to around 27%- 28% mark today, in FY 2025, we ended close to around 19%, if I'm not wrong. Our EBITDA margins were high single-digit, probably came down to below 10%. I'm not sure when was the last time we reported below 10% on an annual basis. When you say we are trying to protect our margins of profitability, I think your probably numbers also, even on the margin side, we are seeing some sluggishness.
Plus, we are seeing top line or volumes which have been underperforming because when I look at some of the peers, including the market leaders or some players who have gradually increased their exposure into wires and have been growing at an exponential pace, there we have seen margin improvement as well as top line growth. That's what I was actually referring to.
Okay. I don't have an immediate response except to say that my belief is that the growth explosion that some of my peers have had was more on the power cable side rather than on wires. Since not many people report those numbers separately, it's only recently that some of them have started indicating certain numbers in the public domain. If you have other information which is not in the public domain, then I wouldn't be able to compare and comment on it. Whatever is there in the public domain is available only in the last couple of quarters, not before that. From there, you can get a sense of where their revenue stream is coming from. Yes, there have been margin pressures over the last two quarters, that is for sure. That is also a result of our change in the product mix, like I mentioned earlier.
Correct, sir. Just one last question. If I look at probably for the rest of the year or probably medium-term projections or a roadmap that the company would have set internally, how do we see probably from year on? If you look at wire, demand anywhere has been a bit slow as compared to cables. On the flip side, if you look at, I think there are a lot of projects which would be near completion in the current and in the next year, those which were especially announced after COVID, where we saw some significant pickup into real estate bookings.
Correct.
If you see these projects reaching near completion, which would actually translate into double-digit kind of volume growth for wires as a category, which will obviously lead to some operating leverage also. What are the internal projections? If you can share, that would be very helpful for our modeling purpose.
I think that the last 2-3 quarters ago, over the last 2-3 quarters, people have been witnessing a slightly high collection on the sale of real estate. My sense is that most of the accumulated inventory has gotten exhausted. The projects which were announced and which are getting completed now will get into their end phase in the coming quarters. Some of it probably has started now, but the bulk of it should come maybe by third quarter this year. I think that should be the time that we should also see growth picking up.
That should continue for at least 5-6 quarters.
Should continue at least for a few quarters, 4-6 quarters for sure.
Yes, sir. Got it, sir. Thank you, sir, and wish you all the best.
Thank you.
Thank you. Ladies and gentlemen, if you have any questions at this time, you may enter star followed by one. The next question is from the line of Achal Lohade from Nuvama. Please go ahead.
Good afternoon, sir. Thank you for the opportunity. Sir, can you help us understand the mix in terms of cables, and wires? You did mention that as of now in your earlier answer. If you could give us some sense in terms of how do you see this cable, what kind of capacity, how much have we invested, what has returned, how much incremental investment is going into cable? That's my first question, sir.
Okay. On the cable side, we have not substantially increased our investment from what it was, let's say, a year ago. Our utilizations have improved, and that means that we have stuck our neck out in a few projects and have taken orders. We were a little reluctant in the past to take an exposure on the utility side. We have been a little careful, and we have taken some exposures on the utility side over the last two quarters. Those have resulted in these numbers. Our capacity still is available. I think we can still improve the numbers by another 30-40% with the present investment. The question more was, what kind of a risk would you like to take when you're being exposed to the DISCOMs or some of the transmission utilities. That was always the question in our mind.
I don't know if it answers your question fully, but this is what I have. What was your second part of the question?
Yeah, what kind of investment are we looking at? What is the CapEx and how the split is in terms of cables and wires? I'm just talking about electrical cables at this stage .
Yeah, okay. On the investment side, we had made an announcement on our CapEx program a couple of quarters ago, and that is continuing. From there, what was relevant to electrical cables was the e-beam facility, which is completed, and the e-beam QR products are now available since March this year. The utilization is ramping up, and we hope to reach a satisfactory level in the coming months. Beyond that, our investment in greenfield addition to the capacity, we've not done anything so far. There is, of course, continuous additions to the segment, either in terms of replacement or in terms of improving productivity. For the current year, that number should be somewhere around INR 60-INR 80 crore.
Right. This is the existing gross block, what you have. What is the potential turnover you could reach for the electrical cables and wire segment, sir?
The potential turnover only on the segment?
Yeah, only for the electrical cable segment. This is the capacity is what you have. I'm assuming same copper price. What is the maximum turnover you could achieve?
At current prices, it could go up to INR 6,500 crores.
Right. Okay. This assumes what asset turn, sir?
My gross block there is what? Gross block will be around INR 700-INR 750 crore. About 7x . No, about 8x , sorry.
Right. If I were to just squeeze on this, out of the INR 750 crore, how much would be cable? Would that be, say, less than INR 100 crore?
You mean the investment?
Yeah, in gross block for cables.
Yeah, 120 or so.
Understood. Got it. Sir, just on this exposure to DISCOM s transmission utilities, any particular reason? Have you seen substantial money getting locked in the past for the peers for the industry, or is it just their health is so weak that you are concerned about that rather than really seeing any evidence of that?
Two things. One is their health has been always bad.
Right.
That is one. Secondly, the business there is tender-driven, so you have to be L1. If you're not L1, you don't get it. Even if you do get it, you have to match the L1 prices. The last part is there are several gray practices which we are not happy to get into.
Got it. May I ask one more question, sir, or I can fall back in it?
No, go ahead.
Sir, on the communication cable, if you could help us explain, you know, we are seeing fairly stagnant number for a few years now, and the margins being in the range of 1- 2%.
Right.
How do we explain this presence? What is the endgame here, and what is the synergy out here, if I were to ask?
It is a cable product, but then we are integrating backwards, so those facilities should be ready. In fact, with the preform facility ready, we are waiting for the trials to be completed, and there has been a small hitch with the power supply. That should be sorted out in the next one month or so, after which the trials will commence. What that will do is be able to reduce our dependence completely from all inputs, and we will be making our own preform, which means there will be value addition within the company. That should see margins improve. Secondly, that will also allow us to sell the excess capacity of preforms into the market if the cable demand is lower. The issue with this segment has been it's largely dependent on government programs.
While huge amounts are announced as part of the government programs, the execution part has always been very slow. Announcements have preceded the execution by substantial amounts of time. If you were to look at the National Optic Fiber Network, it was announced sometime in 2010, and we are in 2025, and we are now starting on phase III. Originally, all this was supposed to have been completed by, I think, 2013 or 2014. Money deployment into these programs has been slow. At times when there has been a lack of money deployment, yes, it has impacted the business. Unfortunately, the cycles on fiber also have coincided with the periods when large investment deployment from the government sector has been less. For example, right now, fiber prices have been depressed, and the reason for that is large-scale availability of fiber from China, which is getting dumped globally.
The government of India did take action in terms of bringing anti-dumping duties. That's still whatever has already come in was worth enough to spoil the market. The long delays mostly have had an impact on the business. Even as we speak, phase III of BharatNet program, orders have recently been issued to the people that run the tenders. Now we are expecting orders to flow to us for the cable supplies. I expect some pickup again to happen maybe from the end of this year. On the private side, there are mainly two people who buy, Bharti and Reliance. Our contract with Bharti has been there for a long time, and it continues now also. Reliance has been focusing more on reaching their FTTH offerings, fiber-to-home offerings. There, the fiber count that is in the cable is fairly low. It's maybe one or two fibers.
While kilometers you will get, you will not get the revenues. In fact, I made this statement a couple of times again, a couple of quarters also. That's been the issue with this optic fiber business.
Got it. The investment you've made in this in terms of gross block and potential revenue, if at all?
Currently, we announced a program of INR 500 crore, out of which about INR 325 -INR 350 crore would go under the fiber business.
To be spent over what period of time?
It should be over by this fiscal.
Okay, I got it. I'll call back in the queue. Thank you so much for answering the question.
Thank you. Participants, if you have any questions at this time, you may enter star followed by one on your touch-tone telephones. The next question is from the line of Rehan Saiyyed from Trinetra Asset Managers. Please go ahead.
Good evening, and thank you for giving me the opportunity. Sir, I have only one question on the copper price volatility side. Copper price volatility and product mix have affected margins this quarter. Are you considering changes to strategy or planning to protect margins going forward?
No, we have spent considerable time on this. The way we handle copper is we do not take, we do not buy copper on spot. We only buy on the month average. Whatever is the month average is what I'm paying for. Yes, that will be followed by a pricing action. Typically, anytime there is a pricing action, there is a slight delay before the pricing action is introduced into the market and the time that the copper price has actually moved. For example, if copper price today is, let's say, $9,700 on LME and it moves to $10,000 tomorrow morning, I do not change the price tomorrow morning because the market will not accept it. They will be prepared for an increase, but they will not accept it tomorrow morning. I have to ensure that the increase is not just a one-day spike.
It is going to be the new norm, let's say, and which kind of I will be able to change the price upwards. There is pressure. While you increase the prices, there is pressure from the market to delay it a little bit. On the other way around, there is pressure from the market to quicken it a little bit. This is not something that happens only to me. It happens to everybody else. You will see that in most cases, we announce the changes first and then peers follow in a few days' time. That is the nature of this market. The issue is if you are stuck with a fairly large inventory and the price falls, then you have a problem. Therefore, your ability to manage with a reasonable stock base is what really matters.
Understood. Understood. Sir, if I put a more clarification regarding this price, if you suppose if you know because copper price is still normalized, copper price at current level, what will be the target EBITDA margin range just for the next two quarters or three quarters?
Okay. Now, I would like to see my equipment margins around 12%, but that has not been the case over the last two quarters. Prior to that, it was fairly consistent. Over the last two quarters, it has dropped.
Okay. Thank you for clarification, sir, and I'll jump back in the queue.
Thank you. Participants with questions may enter star and one on the touch-tone mobiles. The next question is from the line of Manoj Gori from Equirus Capital. Please go ahead.
Yeah. Sir, my question is on the FMEG portfolio. Somewhere we ventured into this portfolio in 2017, in FY 2017. Probably after COVID, we also laid down the plan that we are, I think, close to around 100,000-150,000 touchpoints to our retail network, which will be boosting our FMEG portfolio as well as our wire sales. When I look at the FMEG portfolio, so far, if you look at from FY 2017 - FY 2025, probably we have reached close to around INR 40 crore to close to around INR 250 crore last year. I know at EBIT level, we are not burning cash into these businesses. Any aspirational target and what are we planning to do differently? Even here, if we look at probably somewhere we have been missing our internal targets as well.
You're right. The growth there has been much slower than what we expected to have. There have been serious conversations within the organization, also in terms of where we are heading and how we're getting there. One solution was to increase the retail footprint, and that is ongoing. The second solution is also to increase your product offering. Newer models are coming into play. Since we are still dependent on third-party sources for our products, one is to be able to design the product and hand it over to them. The second is to ensure that the development of the product happens the way you want it and the features that you want. That has been some issue which we are trying to overcome. I think in the coming season, you will find more product releases.
If I am selling the same thing again and again, the interest from the market will also go down over a period of time. I will need to vary those offerings, which is currently happening. The third point in this is that on the lighting sector, the price erosion has been enormous over a period. That's something that's been felt by every company in this field. That is something that is dragging the top line. Volumes have been okay. They've been growing as well and at a good percentage. The erosion has eaten up the volume growth. That's a problem. That's something common to everybody. I can't complain as being alone in that. These three, four elements have been dragging us. I think we do need to show more aggression on this area, that point, I think.
Right, sir. Secondly, if you look at over the last 4-5 years, especially, most of the leading brands have been focusing on increasing their in-house manufacturing percentage of the overall thing. We have been looking to invest into communication cables, where so far we haven't seen any promising or encouraging numbers, especially in the previous four years. We haven't explored anything or probably discussed internally on the FMEG side. If you want to invest heavily on manufacturing, then you can have a better control over production, on product launches, and also on the quality. I just want to understand probably because, see, somewhere if you look at, there is one business where we have been very hopeful. Even government orders probably have not been coming on time on the communication cable side.
There has been some slowdown or liquidity issues with some of the service providers as well for the communication cables. On the other side, we have a business which will be largely controlled by you if you go aggressive on this business.
We have, look, our initial thought was that we will need to have certain scale before we start putting investments on the ground. That is where we've been struggling. The other alternative was to see whether we could acquire some players, where again, the valuations today did not match to the profile of the company. Yes, there are some questions which we have to ask ourselves and answer. I take your point on this. This is something that we should be looking at seriously.
Sure, sir. Thank you, sir.
Thank you. Participants of the request, please limit your questions to two questions per participant. The next question is from the line of Anirudh Agarwal from Valuequest. Please go ahead.
Yeah, hi. Thanks for the opportunity. First question was on the margins front. For electrical cable segment, if you could help us understand what sort of margins you were making on the agri-wires and what is the contribution of that to the overall sales? Even excluding agri-business getting impacted in this quarter, core margins seem to be under pressure. What did the bridge for us to get back from the current level of margins to the targeted 12% that you spoke about?
Agriculture application, those products went down by almost half this quarter, right? The product there would give us about 10%- 11%. That is something that we missed out on. The private business picked up quite a bit of the slack. Private business is at a deep discount. You do not make the same number as what you would on a boxed product. The discounts are fairly deep, and you get volumes. You get faster efficiency in the plant, but at the end of the day, the margins are definitely lower, and they are lower by about 4 - 5 percentage points. That's basically the issue. It's the mix and the larger focus on project sites.
Okay. As the project segment basically seems to be the place which is driving the growth and incrementally also, as we were discussing earlier in the call, with projects expected to pick up, margins would take time to get back to 12%. Is that the way we should think about it?
I think another couple of quarters before they reach that.
Okay. Was there any element of inventory losses, etc., in this quarter which would have decreased the margin?
No.
Understood. You spoke about ad and promotional expenditures being higher in this quarter. If you could just quantify that, how much were the ad and promotional expenditures?
The total promotional cost this quarter was about INR 20 crore. That is sitting under the line other expenses. The corresponding number was about INR 11 crore, I think.
Understood. Okay. Final question was on the.
Sorry.
No, please continue.
These were commitments which were made on spots which had been bought earlier. We had to go ahead with them.
Got it. Final question was on the BharatNet projects. Basically, have you received any orders from the people who would have won vendor tenders yet, or are those discussions still ongoing?
Discussions are ongoing.
Okay. Any broad timeline that you expect execution to kick off for us?
Those people have received their orders in the last one month or so. It is not just cables that they have to line up. There are a whole bunch of other electronics and stuff that they need to get together. They have a prep time of two to three months before they will release all those final orders. There is still some time for us to get those orders.
Got it. Thanks, and all the best.
Thanks.
Thank you. Participants, please limit your questions to only two questions per participant. The next question is from the line of Varun Singh from AlfAccurate Advisors. Please go ahead.
Thank you. I just wanted to check anything that you would like to call out on demand for cable for data centers.
Power cables would have a requirement for power cables there besides the data cables. Quite a few of the data center announcements have been seen. Similar to construction activity, the center has to be structurally ready before the cable part of it gets in there. I think there is scope for increasing our power cable sales over the next.
Sorry, did you have a question?
How would you think about how big should typically be the opportunity for the planned cable for this particular sector? If you can offer some mental math or how should we look at it?
Typically, the data center numbers that they talk about, they talk about in terms of how many megawatts of power they would be consuming. That's how they describe their investments. It will be a combination of both high voltage and extra high voltage cables there on the power side. Of course, you will have LAN and other data cables being required. In order to translate that into size, I think
Typically for 1 MW of power needs, how much value of cable is required?
I am not able to say that because it depends on what kind of design they want to use, and each design's cost is very different.
Sure, sure. Okay, sir. Thank you very much.
Thank you. Participants, if you have any questions at this time, you may enter star and one on your touch-tone telephones. To ask a question, you may enter star and one. We have a question from a line of Achal Lohade from Nuvama. Please go ahead.
Sir, thank you for the follow-up opportunity. Sorry, just a clarification, sir. With respect to the electrical cables, you said the projects are doing well compared to the retail wires, and projects are at a lower margin. Have I understood right? This is pertaining to wires you're talking about, right, sir?
Correct.
What would be the mix? Broadly, if we were to see, what is the mix of projects for us, and how much would that be for the industry as a whole?
I wouldn't know that. I wouldn't know what it is for the industry because that level of granularity is not available to us. All I know is in our case, that mix has changed in the last two quarters, and that is impacting the numbers a little bit.
Right. Any number you want to point out, sir?
There used to be a time when retail sales, retail in the sense the box sales, used to be close to 75-80%. Now that has dropped to about 60%, I think.
60, six zero?
Yeah.
Understood. Are you saying this is the trend for the industry as well, where the project wires are basically seeing more sales?
It could be, yes.
Right. That is driving, so for us, wires is almost 90% of our electrical cable segment revenue. Have I understood right, sir?
75% - 80%.
75% - 80%.
Because there is also automobile, there is also industry as well.
Understood. Got it. Sir, total CapEx , if you could mention what would that number be? You've said about INR 80-INR 90 crore for the replacement, maintenance CapEx for the electrical cable.
Even replace plus enhancements in productivity-related expenditure.
Right. What is the total CapEx for the full year at the company level?
Including, it should be around INR 300 crores, I think.
Of that, close to INR 80 crores-INR 90 crores basically this one, and balance is for the optic fiber cables?
Yeah.
Communication cables. Understood. Got it, sir. Thank you so much.
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Viswanathan for closing remarks.
Again, thank you, everybody, for participating in this meeting. There was one gentleman whose question I could not respond to. Maybe he can connect with me later on. Thank you.
Thank you. On behalf of Finolex Cables Ltd, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.