Ladies and gentlemen, good day, and welcome to the Q3 and nine months FY 2026 earnings conference call of Finolex Cables Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand the conference over to Mr. Pratik Patil from the Dentsu One Investor Relations team. Thank you, and over to you, sir.
Thank you, Steve. Good evening, and thank you all for joining us on the Finolex Cables Q3 and nine-month FY 2026 earnings conference call. Today, we have with us Mr. Mahesh Viswanathan, Deputy CEO and Chief Financial Officer from Finolex Cables Limited. 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 quarter 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, and good evening, ladies and gentlemen. Thank you for joining this call. Very quickly, let me take you through the quarter with some brief remarks or bullet points on the performance, and then I will open up for questions. You must have seen the results that were hosted on both the exchange as well as our own website day before yesterday. We've had a pretty good quarter in terms of overall performance. Revenue was close to INR 1,600 crores for the quarter, and for the nine-month period was about INR 4,370 crores. In the quarter, an incremental performance of about 35%, quarter-on-quarter, and for the nine-month period, about 17% higher than the corresponding period last year.
As a consequence, EBITDA numbers were also showed an improvement, 12% quarter-on-quarter and 17% over the nine-month period. PAT also reflected a 10% increase quarter-on-quarter and 18% over the nine-month period. In terms of performance, this was not just a price-led performance, it was also a quantity-led performance. So overall, wires and cables, the volume increase was more than 25-26%. Individual product lines performed slightly differently. Electric wires was about 28% in the quarter, auto cables was almost 42% in the quarter, industrials was about 28%, and power cables were also about 22%. Big new entrant for us during the quarter was solar cables.
So, we are currently hitting close to 80%-85% of our capacity that we built up last year. So, that's good news again. What didn't do so well was the agricultural applications. It was off-season and there were pricing issues, so the overall numbers on the agricultural side was little lower than the previous years. The other part of the quarter was the continued increase in copper prices and commodity prices. We had to take multiple price corrections. Overall, during the quarter, we took a correction of about 12% in the selling prices. And most of the input price increases have been covered.
Utilization, like I mentioned earlier, solar, auto, and power cable plant utilizations are in the late 70s. Others are catching up. So if I move to the communication cable side, then OFC volumes were up by almost a third. The issue in this segment is that during the quarter and prior quarters, fiber prices had been depressed. We are now seeing a reversal of that trend. Globally, fiber prices are hardening. The overall demand outside of India, in fact, including India, has strengthened considerably, and we are now witnessing a period of shortage both on the preform side as well as on the fiber side. That is as we speak today, and prices are hardening.
So from an average of about slightly under $3, which was prevailing during quarter three, the prices currently, as on date, are closer to $5 mark. So that's the extent of the demand pull that has happened over the last few months. So the net effect of this will be seen in the coming quarters. As a corollary, the investment that we are making on both the preform factory as well as in the expansion on towers, those investments, the work is progressing fairly good. Currently, the preform factory is under production trials. We expect to commission it within this fiscal. The fiber draw expansion, the building is more or less ready.
Equipment for phase one, that is to take up the fiber capacity from 4 million to 6 million. That equipment is already at site, and as soon as the clean room work is completed, we will start the installation there. The second part from 6 to 8 million, that equipment is expected to reach by March end. We expect to have a fiber draw capacity of about 8 million kilometers by end of Q1 in the coming fiscal. CapEx in the quarter, we spent about INR 36 crores, and for 9 months it is INR 146 crores, in line with the projections that we had made in the beginning of the year. So most of those projects should be coming to a fruition by now.
We had a very good quarter, like I said earlier, and that also reflected in the cash flows. The cash flow from operations was about INR 78 crore for the three months, against INR 9 crore in the corresponding period last year, and INR 220 crore for the nine months, against INR 75 crore in the corresponding period of last year. So this is broadly the comments on the performance. Additionally, one single point I would like to make is that, after the announcement of the new labor code going live, effective twenty-first of November, we have reassessed the obligations towards gratuity and have taken a provision of INR 6 crore, which has been booked in this current quarter. That's it from me for opening remarks. So now I'm open to questions. Thank you.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Vidit Trivedi with Asian Market Securities. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Any, sir, any update on the BharatNet project as of now? And I just wanted to know your views on the way commodity is behaving and the overall outlook, and how many price hike, price hikes have we taken as of today?
Okay. So let me talk about the commodity first. Well, it's very difficult to predict where it will reach and how long it will stay there. So even in the last couple of weeks, you have seen movements which have taken it up to $14,000, then it's back to $12,800, and then again back to $13,200. So it is a bit of a yo-yo at this point in time. Difficult to predict how the swings are likely to be. What we have always been doing, and we will continue to do, is to not take long calls, look at what we need to produce and therefore procure only that much quantity and buy on average, which is what we've been doing all along.
And treat it as a passthrough to the extent possible. While there will be a lag in passing on any changes, that will even out over a longer period of time. The next part of your question was how many price changes have we taken? Last quarter, we took 5 with an overall correction of about 12% in the selling prices. This quarter, between January and today, we have already done 2 changes. So, as and when it is necessary, depending on how the fluctuation is or how big the fluctuation is, we will take that call. We also need to keep in mind as to what level the market can bear, because at some point things might become inelastic. So, we keep that in mind.
Your second point was on BharatNet. As I mentioned in the earlier call, we have not secured a direct position on the BharatNet phase three tenders that were floated by BSNL. But given the fiber position in the global market at this point in time, we are getting inquiries from participants who have secured the positions. So it's a little too early yet, but we are hopeful that there will be adequate business for us over the next two years from these projects.
Got it. Sir, sir, what's the percentage? In terms of percentage, the price hike, have you taken during this quarter?
5, I think.
Sorry?
5, I think.
...Okay. The second question is on the inventory days. They have, you know, improved significantly, from 61 days, you know, from 69 to 61 days. So what are the structural changes in the supply chain, you know, we have taken in this area? And can we expect this further room to improvement, for improvement, you know, bring it down to at least 50, 55 days in the coming quarters?
That would be a little difficult, I think. I think what we are trying to do is to look at each segment of the inventory chain. So how much should be in raw material, how much in work in process, and how much in finished goods. So we have been squeezing all three at this—I mean, and this can only happen when two things change: A, your supply from the raw material suppliers, that chain is kept open and there is a continuous feed from there. And B, our operating efficiencies at the plant goes up, and that will happen as capacity utilizations improve.
The last one is at the field level in terms of improving service, which will mean the waiting period for the customers will be lower, and we should be able to service practically on demand. So we are trying to squeeze all three areas. And yeah, I think 2-month cycle across the chain is reasonable, given the fact that when you get into industrials and automobile cables, the number of SKUs are substantially large. It is not just like... It's not like building where the number of SKUs are limited, but as you get into flexibles and auto cables, the number of SKUs are substantially high.
You need to have sufficient production runs or minimum order quantity for each of those runs for you to run an efficient operation. So there will be a slight trade-off between efficiency and, you know, in the overall efficiency numbers. We try to limit it to about two months.
Got it, sir. Thanks a lot. I'll just squeeze one more question. You know, there's a significant amount sitting in your capital work in progress, almost INR 307 crore.
Right.
You know, what's the specific project it is tied to, and when can we expect it to be commissioned?
So, a lot of it is tied up on the preform project. So as I mentioned in my opening, remarks, the preform factory is, right now, production trials are ongoing, and we expect to commission the, the plant by, next month. So when that is done, out of the 300, about 230 or 220, somewhere around that, will get capitalized. So then you will only be left with what is there for the, fiber draw towers, which will get, which will get, capitalized in the coming quarter.
Got it, sir. Thanks a lot. All the best.
Yeah.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question comes from the line of Shreya Wazel with BMSP iCapital. Please go ahead.
Hi, good evening. Thank you for the opportunity. So sir, there have been a lot of talks on a few big players with deep pockets entering the space. So how do you see their capacities ramping up, and what product segments of Finolex will get affected, and how? If you could just throw some light on if you see a meaningful impact on our business operations due to the entrance of these players?
Okay. So over the last one year, there have been announcements from the Birla's side. They are coming in from their the cement group. They are putting up a cable, wire and cable factory, and we are... Our information is that it is likely to get into production mode sometime next calendar year. What the information that I have is it's probably around second or third quarter next year. And that will be on the wire side, so that will be in direct competition to us. The second piece of information was about Adani is getting into wire and cables.
Barring the initial announcement, nothing more has been heard from them, so we do not know yet if their plans include introduction in 2027 or 2028 or 2029. That is still something that we are not clear about. But yes, there will be competition, primarily to a large extent on the wire space. But we do believe that there is sufficient space for people to exist, coexist. Competition will intensify, and I think in a way, that's okay. We should be able to handle those pressures. Yeah, there's not much that I am aware of besides this.
Okay, thank you. My second question is, what is Finolex's strategy to grow its telecom cables business? As in, what is the total market opportunity for players like Finolex from the data center building in India and globally, respectively? And how is Finolex building its product portfolio to participate in this opportunity?
So, yes, you're right. Data centers will have an impact on our, not just the telecom operations, it will also have an impact on our, power cable operations. Because data centers will be massive consumers of power, and they will need, fairly heavy-sized pipes for the, power consumption, besides, fiber as well as, LAN cables. So that could lead to more market size in terms of the, in terms of the optical fiber cables that would be available for sale. In that context, I think our integration backwards into making preforms, expanding our fiber draw capacity, all this is part of that, part of preparing for that additional volumes that are expected to come.
Currently, the glass preforms are all imported by us. There is only one manufacturer in the country, which is Sterlite. We would be the second entity there. And so that what it means is, it reduces import dependence. It at the same time brings a certain self sustenance part there. Simultaneously, we're also expanding our fiber draw capacity. We're doubling it over the next three months. So that will again make products available. Designs that would be necessary for data center applications, we already can make them, so that is not a so big a challenge. The capacity to make those is also available with us at this point in time, so again, that is not a big challenge.
So material availability at the moment is an issue, like I mentioned in the opening remarks. The market has changed over the last 3-4 months. At the moment, neither fiber nor preform is available for literally any amount of money. So the demand scenario has changed at this point in time, and I think our additional capacity coming into play at this time is going to be beneficial to us.
Okay. Thank you so much, and all the best.
Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Participants who wish to ask a question to the management may press star and one. The next question comes from the line of Srinivasan with Sundaram Mutual Fund. Please go ahead.
Hello, sir. Thank you for the opportunity. Am I audible?
You are not audible.
Is it better now? Can you hear me better now?
Sir, can you please use your handset?
Yeah, I am using the handset.
Okay. Okay, you may go ahead.
Slightly better now. Let me try and see if I can hear you completely.
Sure. Yes. I have two questions. Firstly, on our expansion that we are doing, I think you had mentioned that from 4 million kilometers, we are going to 8 million kilometers by Q1 FY2026.
Mm-hmm.
So I wanted to know, like, what is the revenue that we could generate with this asset? And where, if you can tell me, like, how the margin profile has improved, will improve, because you were mentioning about realization going up from about $3- $5.
Correct. So, over the last 2-3 years, the demand globally was a little depressed in relation to capacities available. So prices, which were running at about $4.5, had slipped to slightly above $2 over the last 2- 2.5 years, and that has now changed in the last few months. We understand that there is a lot of application in the defense industry. We also understand that there is a lot of applications in the data center industry overseas, which is pushing this demand to these levels. And, as the previous participant asked, as more and more data centers get up to a functioning stage in India, this demand in India will also increase.
Add to it the BharatNet and other programs that are likely to come in the future. I think over the medium and long term, the demand is fairly robust. The issue in this industry has been where you are dependent on the telecom side, and especially in our country, bulk of the funding comes from government programs. And if that funding is not consistent or sustained over a period of time, then you do have blips. Plus, government programs do have this tendency of time lag between announcement and tendering, and then again, execution. So those have been issues in this industry.
But I think with the committed funds for those programs, we should see a period where over the next two years, besides data centers, you will also get in AI applications, and a lot of fiber will be required. The fiber design or construction might be different for different applications, but the overall demand is likely to be fairly robust. Currently, we have a market share of about 11-12% in India. The biggest player is Sterlite, followed by the Birla stable and then HFCL. But we should be able to grow from here on with our additions to capacity.
Sir, could you just answer the second part of my question? Like, what is our current capacity? The 4 million, what is the potential in terms of top line, and what margin do you think we can expect given that?
Okay, the top line potential is not simply a multiplication of the capacity times the fiber prices. The top line would depend on the cable selling prices, and again, cable selling prices would depend on the design of the cable. It should go up now with fiber prices going up. But depending on the configuration within the cable, prices can go up to INR 150,000-INR 180,000 per kilometer of different kinds of cables. So, little difficult to estimate it, but let me try. I think with the additional capacity that we have put up, total revenues from this can go to about between anywhere between INR 600-INR 700 crore in a full year.
Okay, this is the additional revenue or the overall revenue you see, sir?
This would be the total revenue.
Okay. Margins, how is the margin improvement here for us, given the prices have come up?
If you look at our numbers, if you go back and look at our numbers, when utilizations were higher than 75% or so, we have generated margins, EBIT margins of around 9 odd %. It's only in the last 3 years or so, that number has fallen to the levels they are now, 2.5% or so. So there is a potential that it can go to about 8%-9%.
Got it, sir. Got it. So just one last question. We generate a very healthy amount of cash flow every year. So what is our plan in terms of reinvesting after this?
Like I mentioned in the beginning, capacity utilizations are starting to go up. I also mentioned to you that automobile and solar applications are touching their 80% numbers. So those are areas where we can look at additional investment. There is a need as well. Even within the construction wire, as we see capacities climbing beyond 70, we should start planning for something new. So because planning to execution will take about a year and a half. So as we see those numbers inching up and touching 70, we would start planning those. So those are areas where we can, we will invest. Whether it will happen next year or the year after, that will depend on how quickly the ramp-up happens.
We had already mentioned other potential areas that where we could grow, and 2 quarters ago, we commissioned our EV plant, and that opens up multiple applications for us. So as we get the clearances and certifications, we should start investing on for those applications as well. So these are possible areas.
Got it. Thank you, sir.
Thank you.
Thank you. The next question comes from the line of Vineet with Investec. Please go ahead.
Hi. Good evening, sir. Thank you, for giving me the opportunity, and very strong set of numbers. Congratulations on that. So a couple of questions from me, from my side. One is the inventory levels, in the channel. Given such a strong growth we've had and even the industry, and considering the price, increases we've had, would it be, right to assume that there would have been, some bit of demand which would have happened in Q3, and consequently, at least at the start of Q4, the channel inventories would have been, much higher than usual?
... I believe so, yes. The channel inventory would have been higher than usual. I believe so, yes.
Sir, if you were to hazard a guess, how much could it be different than the usual levels?
I think for all the participants in this industry, some amount of volumes were pushed by the constant commodity price increases. They cared probably that they would make, if you buy low and then as the price is increasing, you would get to sell it at a higher price. To some extent, I'm sure that is there. But for whom, how much is a difficult guess to do, and I think I will refrain from that, but I'm sure there is, there was some.
Understood. Understood. So my second question is on margins. Now, pre-COVID or maybe 2016, 2017, 2018, we used to do mid-teen sort of EBIT margins for the cables division. Those subsequently came down to, you know, low teens, and then subsequently now, it's in low double digits. And sometimes we've also recorded high single digits sort of margins in that segment. Now, I understand you've had a change in distribution model, which has had an impact by 2%-3% on those margins. But what has led to such a sharp margin drop in this segment? And should we think that these are the bottoms and they should stabilize here, or we should see any improvement from here on?
Okay. I think a similar question was asked during the last call as well. Yes, there was a time when we used to do about 15-16%. But then we brought in distribution, so some money had to be surrendered there to ensure that the distributors' costs are managed. So I think the sustainable level is anywhere between 11% and 12%. Above that, in today's context, with the intensified competition, is a little difficult to sustain. You might have the odd quarter when you do better than that, but I think what should be sustainable would be between 11% and 12%. We are slightly behind that at this point in time. That also has to do a little bit with the change in mix.
More of automobile cable-related sales or more of industrial products tend to depress the margin a little bit because of the nature of that business. As the volumes grow faster and higher on the construction side, then the balancing would happen. So, in last quarter, the margins were about 11.5% or so. This quarter, it is dipped a little bit. So it depends on which quarter, what takes higher share of the pie. So the mix is also a little bit of an issue.
But, so just as we were discussing some time back, with competition likely to pick up in the next twelve months' time, don't you think again that will have some bit of pressure, if not much, and consequently margin expansion from these sales will be tough?
There would definitely be some pressure. I don't discount that at all. There would be some pressure, and we need to be prepared to handle that. And I think one of the, one of the things that we are doing right now is to make sure that our channel continues to be motivated, that our distribution network continues to be motivated, and that we also educate them more about life cycle cost and things like that, so that people understand that when they buy a product like ours, when you use it, you use it for 20, 30, 40 years. And so your investment at this point in time is going to pay you back over those 30, 40 years.
Everybody may not have the same level of quality that we have. So that is something that we would need to reinforce in our marketing pitch.
Yeah. Yeah. Yeah. Okay, understood. Thank you. Thank you so much, sir.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you, ladies and gentlemen, for participating in this conference today. I hope the interaction has been of use to you. If there are questions, please do reach out to us again. Thank you.
Thank you. On behalf of Finolex Cables Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.