Q1 21/22

Jul 22, 2021

Thank you, operator, and a very good afternoon to everyone present on the call. I am Ganjar Tongya, CFO at Polycap India Limited. Thank you for joining us. On this call, we shall discuss our operational and financial highlights of Q1 fiscal 2022. Please note, during this call, we will be referring to the presentation, financial results and financial statements, which are available on the stock exchanges as well as Investor Relations webpage of our website. It can also be downloaded through the link or QR code on Slide 8 of our earnings presentation. From our management team, we have with us our Chairman and Managing Director, Mr. Inder Jaisinglani. Let me now hand it over to Inder Bai for his comments. Good afternoon, everyone. 1st quarter performance has been encouraging despite challenges posed by downtown in many states. We were able to record much better business compared to last year. We remain diligent in the managing costs and mitigating the volatile demand environment. More importantly, we are progressing well on a strategic agenda a natural new milestone, which will drive transmission over mid to long term. We continue to serve Communities and fulfill our purpose are meaningful ways. I now request Ganjar to take you through our earnings presentation. Thank you, Indalbai. As you all are aware, the business environment has been very dynamic in the previous quarter. Despite that, we have been able to achieve decent performance honing to resilient business model. On the good side, such as some activities continued for better part of the quarter, albeit at a slower pace. All thanks to our calibrated efforts taken by government in terms of lockdowns. Project and industrial activities started trending up as case load subsided from its peak. Our learnings from the past also helped us improve our supply chain and production which remain largely unaffected. Consumer sentiment remain positive and we believe there could be some pent up demand in coming quarters. On the flip side, raw material volatility continued. The inflation in our input basket was in low teens during the quarter and our blended price hike was in high single to just double digit. In mid June, sharp correction in copper prices caused other complications to an improving demand scenario as dealers refrain from stocking in anticipation of price cuts. Accordingly, inventory levels in distribution channel dipped significantly with secondary sales tracking ahead of primary sales. Though we believe this is a temporary sentimental setback and primarily will eventually catch up with underlying demand. Nevertheless, July seems to be panning out better than previous months. Retail outlets across the market are largely open at the moment and activity is picking up. We continue to believe that second half of is likely to be better than the first half of the year, similar to last year. Of course, and assuming that 3rd wave, if any, doesn't really impede the economic progress. Moving on to presentation with Slide 4 for the quarter ended June 2021, our consolidated revenue was up by 93% year on year. EBITDA increased by 144% year on year with 153 bps improvement in margin. Cost saving initiatives We are more than offset by unfavorable operating leverage and input cost volatility. This limited the EBITDA margin to 7.3%. Having said that, I would like to reiterate that the right way to analyze our operating profitability would be on an annualized basis as several dynamic factors can be on quarter to quarter margins. Our staff cost at INR 959,000,000 or 5.1 percent of sales was higher than last year but broadly at par with Q4. A and C spend at INR78 1,000,000 or 0.4 percent of sales were optimized, something the subdued business environment seen in Q1. Our finance cost at INR122 million were lower by 25% year on year. Other income at INR 2.53 million was down by 25% year on year due to one off interest income gains in the base quarter. A detailed breakup of our other income and finance costs have been provided on Slide 12 of our earnings presentation. Our profit before tax at rupees 982,000,000 was up by 151% year on year, while NPAT at RMB1053 million was down by 36% year on year, again on account of 1 off gains in the base quarter as explained on Slide 9. Normalized Pet is 10x of last year. Pet margins in Q1 stood at 4.0% against our normalized margin of 0.8% in the same quarter last year. Moving on to segment, On Slide 5, Wires and Cable revenue doubled over the last year despite the multiple challenges. In domestic business, Cable outperformed buyers in Q1, but that was partly on account of relatively favorable base. Distribution as well as institutional business grew over 100% year on year with institutional being marginally better again on software base. Though from an overall market perspective, we believe the institutional business should continue to see remain subdued due to relatively lower number of large scale projects. As I mentioned earlier, in June, we saw sharp correction in copper prices. This impacted the trade sentiment particularly for primary sales of retail buyers just when markets had started to open up. Exports business grew 12% year on year. The share of overall revenue improved sequentially to 6% in 1st quarter versus 4.5% in previous quarter. The growth was driven by Asia, Australia, UK and Africa. Logistical challenges due to shortage of container globally continues. Overall segmental profitability for wires and cables was impacted by raw material inflation and adverse operating leverage. On Slide 6, FMEA revenue increased by 39% year on year. The business momentum was affected by closure of retail shops across many large cities. Distribution expansion continued with greater trust on digital marketing campaign. Innovation driven product development and improving competitive positioning remain key focus area. We have a healthy pipeline of new products across categories. Fan, which is our largest category in SMEG grew in healthy double digits. However, lockdown in April May, which are key summer stocking period, impacted for our 2nd consecutive year. Within France, portfolio mix continued to improve towards premium. Light business grew with higher emphasis on augmenting portfolio across price Pyramid. Switchgear saw strong growth, however, switches remained subdued. With learnings and success from a strategic Intervention in switch gears, we are now in process of integrating switches with Light Business, which will help us unlock synergies through operational advantage and distribution overlap. Solar and Conduit Pipe saw healthy traction. Overall, segment profitability was largely impacted by adverse operating leverage. Raw material inflation is being counterbalanced by pricing action and Cost per Shipments. While many of you may be aware of this, but for the benefit of larger audience, I would like to update you All that vast month we acquired Silvan Innovation Labs. It is a Bangalore based technology company focused on providing cutting edge automation offering for homes, offices, banks, retail outlets, hotels and other spaces. Silver pioneered the concept of home automation in the Indian residential industry Market and has a proven track record with many prominent real estate developers. Acquisition of Silvan augments our R and D and innovation capabilities. It will enable us to address evolving consumer needs. Home and Sylvan put together gives us strong foothold in IoT space and is in line with our ambition to become a forefront consumer centric company. Moving to Slide 7, Other segments which is largely our strategic EPC business clocked INR575 1,000,000 in revenue, up by 19% on year on year basis, but decreased by 25% on a sequential basis due to impact of pandemic. Segment margins stood at about 11%. This copper segment, as disclosed the financial results, largely reflects Ryker Bay, which is a part of our backward integration initiative. We continue to explore options to improve utilization rate at Ryker plant in order to optimize production cost structure at Ryker. Moving on to financials from Slide 9 onwards. Our net cash position stood at over RMB6.7 billion as of June end, which was RMB3.3x of same period last year. Working capital is a mixed bag. While receivables levels have been quite good, inventory levels were higher than normal as we were anticipating better demand scenario in June. Our numeric distribution metrics continued to trend positively. Even during lockdown, we were able to onboard many new dealers, especially on the B2C side. Project Shikar, which is implemented in 5 markets in its first phase, is helping us penetrate new retail outlets and improve shelf space. This was supported by aggressive digital marketing campaign which helped in increasing brand awareness and connect with consumers. These campaigns across digital formats have cumulatively made over 24 crore impressions during the quarter. Project LEAP continues to make good progress and we hope to share some updates in the next quarter. I am also delighted to highlight that our power cable test laboratory at Halod is accredited by National Accreditation Board for Testing and Calibration Laboratory or NABL. It is possibly the only private laboratory in India having a wider scope of more than 4,000 plus tests covering multitude of national and international standards. It is also the 1st laboratory capable of testing a single cable length from 50 meters to maximum to 4 kilometer. The test certificate issued by this lab would be accepted worldwide as per the agreement with NABL. Lastly, given the kind of building blocks that we are putting in place and our strong brand equity, we are very optimistic of a stronger performance top line as well as bottom line in the coming quarters, particularly in the second half of the year. With a clear strategic focus, we remain excited about our future growth prospects. With that, I conclude my opening remarks and we will be pleased to answer your questions now. Over to you, operator. Thank you very much. We will now begin the question and answer session. The first question is from the line of Ravi Swaminathan from Spark Capital. Please go ahead. My first question is with respect to the price hikes that on a blended basis that we will have taken over the past 6 months in the cables and wires business. Thanks, Ravi. Ravi, you know our business model. In the case of Cable and Wire Business, generally, We revised our price list on a monthly basis and there are 2 variables which are considered while deciding the price list. One is the increase in average copper LME prices in the previous month. And second is change in the foreign exchange rate. Both were considered even in the current quarter. On a blended basis, the raw material cost would have increased by in early teens, whereas the price hike which we have taken is just touching the double digit. So there is a bit of a negative delta there, which is also getting reflected in the contribution margin in the current quarter's peak term. Got it. Would we wait for Commodity prices to cool off over the next 6 months or is it likely that you will go ahead and take the differential price hike which is yet to be taken? Yes. So the model which I just elaborated is essential to our business. So we will continue to follow the same model, But Ravi, you and me have discussed this several times. In our business, what happens is on a quarterly basis, there are, let's say, some of dynamic factors which can be in on quarter to quarter margin. So that's the only thing. But if I were to take an analyzed view, I don't expect any material change in the contribution margin. And if you recollect, even last year's first half, the Contribution margin and EBITDA margin were slightly softer, but in the second half of the year and overall for the entire year, it was completely a better number. So we'll have to at times take an annualized view. But directly, I believe that in quarters to come, particularly in the H2, The numbers are going to be relatively better than what we are seeing today. Got it, sir. And with respect to the SMEE business, so basically, There has been a EBIT level loss which has been there. Is it because of the fact of lack of P. Vijay Kumar:] Because of a combination of also delays in taking price increases across So you can do. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes, absolutely right. Primarily because of negative or adverse operating leverage, One of the reasons is the employee cost. Ravi, you would be able to recollect that last year we didn't offer any increment to our employees, whereas in the current year, we have given that and partially it is more like a 2 years increment rather than a single year increment. So that is where the fixed cost for the corporate laborer as well as our employees has gone up. The second one is the A and P spend though it was calibrated it's slightly higher than the base quarter and is also getting reflected because A and P is primarily attributable to our B2C business, not to B2B business, and that is where these numbers are located to the segment. So these are the 2 main reasons, operating leverage is because of fixed cost and as well as A and P. On the contribution, there is no significant or material difference, sir. Okay. Got it, sir. And my final question is with respect to the CapEx, sir, for next 2 years, That is FY22 and 2023, what kind of CapEx we are likely to reduce, will it be the INR 300 crores range per annum? Absolutely. So in the current year, we are anticipating almost INR 300 crores of outflow. In the current quarter, we would have incurred outflows INR 80 crores or thereabout. And next year, I think it's slightly early to give any guidance. We'll probably wait for a couple of quarters towards the end of the year. We'll come back to you For the next fiscal, but this fiscal, I think should be around INR 10.3 crore broadly. Okay, sir. Thanks. Thank you, Ravi. Thank you. Before we take the next question, We'd like to request participants to please limit your questions to 2 per participant. Should you have a follow-up question, we request you to rejoin the queue. We take the next question from the line of Naval from MK Global. Please go ahead. Mr. Naval from MK Global, you may go ahead with the question. Yes. Am I audible? Yes, sir. Please go ahead. Okay. Thank you for the opportunity. Gandhar, I have a couple of questions. First, if I compare your SMEG revenues with the market leader who also reported numbers yesterday, on a higher base, they are like flattish on 2 year CACR And we are like down around 11%. So on a low base also, this is a weak kind of number. So Can you elaborate was this because of regional specific things where you are heavy on West and West was more impacted with Maharashtra For lockdowns or there was something else over here? So that is my first question. Thanks, Naval. So Naval, we are in this business since last 6, 6 years. Completely, we are a smaller The industry size is almost 60 odd crore rupees, and we did almost 1,000 crore rupees, which is around 1.5% of market share we have across several product categories. Within that, the largest is Span and Span Sales got impacted because of localized lockdown in this particular current quarter. So that's there. And second is, since our base is growing year after 3 years, you would have seen the revenue CAGR raise hovering between 35% to 40% on a over a 5 year period. That is also impacting the overall number. But on that growth of the 2C business, including FMEA Retail Wire, we remain positive. The projects like LEAP are also going to help us in augmenting the top line. We are in the process of augmenting the distribution more particularly on the smaller towns. And in The quarters to come, I'm sure these initiatives, whether the LEAP or Shikar, would help us in improving the overall top line. That was the distribution side. On the product side, the brands like Home or the Filmon Acquisition, which we have done recently, would also help us in augmenting the product portfolio. And we would be able to get into the premium product categories because IoT is going to be our premium offering. So overall, looks like that we are here to experience the best of consumer business both at retail wire as well as FMEA and B remain positive on both these businesses. And second question on other operating expenses, Although you have given the schedule, so any specific reason sales are down 38% sequentially while other operating Which are down only 18.5%. So if you want to put give your insights whether this is one off And operating leverage will be will bounce back strongly once the revenue recovers or there was something else to it? You're right, Kamal. Primarily, it is operating leverage only because, as I mentioned to Ravi also in the previous question, The increase in fixed cost in the form of employee remuneration as well as payments for our contractors was affected from the current quarter, whereas the top line was not necessarily good from that perspective. And that is where it has impacted negatively on the working leverage. Other than that, I don't think there's any specific line item that requires specific mentions. Other expenses are broadly in line with what we had anticipated. Understood. And lastly, can you give your insights on region specific momentum in Sales or demand recovery, what you have seen in 1Q, East, West, North, South and how they are trending in the current quarter? So as of current quarter, Sunsil, it's too early to comment, it's barely 2021 days, but But sequentially, it looks like that the current month is better than the previous month. On the And the other thing which I should clearly call out is that's not necessarily reflective of the overall monthly performance because not necessarily 20 days would be reflective of the entire month's performance. On the regions, I think South got infected. Other than South, all other regions have done well. And South, I think we can attribute to the localized lockdown which was there in the southern states. But other than South, I think almost all the regions have recorded significant growth across all the product categories. Got it. Thank you. I'll come back in the queue and all the best for ensuing quarters. Thank you, Nava. Thank you very much. Thank you. The next question is from the line of Nava Shah from Gerrick Capital. Please go ahead. Hello. Yes. Hi, sir. Sir, can you give us your outlook on the wire and cables business? Separately, what do you think about each segment? And also, you mentioned the institutional demand is Lower. So just more clarification on that. And just more of the demand levers for the Cables business, given the spending where the government is going on, there are a lot of spending happening on the solar park as well. So I assume there will be Some new demand coming from that segment as well and we are leaders. So what sort of demand visibility do we have for this year and the next year along with exports? And then I'll come to the second question. Sure, sure. That's quite comprehensive. Thanks for asking. Let me talk about the macro But cable and wireless is visualized consumed in almost all the sectors. You think of any infrastructure, any new Expansion, Greenfield, Brownfield, any new offers, everywhere you'll need cable and wire. And we are the only company in the country which can provide all types the cable suppliers. And our distributors are well placed to attend almost all the requirements which our consumer would have. The other thing is, generally speaking, we have ability to provide the required material almost there just in time or within a day or 2. And that is a significant differentiator between us and our peers in the industry. You are aware about the initiative that the government is taking in terms of reforms. I would not like to spend time on that in this call, but I'm sure you're well aware about that. That will continue to help us in improving the GDP, the overall consumption Cable and Wire and Health Sector as well as a company like ours, which is a bucket leader by far. On the Slide side and the JTM side, what we are doing as part of Project Shikhar and Project Leap is we are focusing on increasing our reach, increasing our number of dealers and distributors, catering to the requirements in the geographies where we don't necessarily are present or currently under index, for example, smaller towns. And both the government Kit Fist and our initiative in penetrating the market would help us in improving the rate. You would have already seen our March presentation where we have talked about that Cable and Buyer, we expect to grow on a 5 year basis at 1.5x of the industry growth. And it could differ from a year to 2, but overall, our 5 year horizon, we are hopeful full that we will be able to do that and that is why we are working with PCG under the project REIT Prabhak to do that. So that was on the overall cable environment. Correct. So now like if you look at FY 2020, we were at like around 7,500 crores top line. Now so and 'twenty one was INR7,600 crores. So now here we already have like a 30%, 35% of Inflation built into this when we talk about the future numbers. So what sort of guidance would you give us in terms of say By next 3 year period, where do we see this business reaching, considering building in the inflation? So this is what we had covered as part of Project LEAP when I presented to the investors after the March results. On 5 years basis, we expect that we will be able to touch almost 20,000 cropees of top line, where the core All of our business will grow at 1.5x of the industry growth. We have factored in the inflation or movement in the commodity prices when we have completed this number 3,000. But as I mentioned in the March call as well, allow us to come back to you with next level of detailing in the second quarter where I would be able to give you additional color on these numbers. Okay. So on the cable side, you do color on these numbers. Okay. So on the cable side, you don't see any sort of problem in terms of your demand, right, like coming From the new factories being built or all your demand levels are seems to be in place? B. Balaji:] We are confident of the growth. India is a multi decadeal story. So it's not only at the company level, even at the industry level, we are confident of the growth. Got it, got it. Okay, fine. Now in my second question with the FMEG side, so we did around INR 192 crores top line this quarter. And compared with like in Q2 FY 2020 also we were around this level only, but there we did not go into loss. So is there a large part of the price hike is yet to be passed on and plus also we have a larger cost Structure compared to the 2 years back and that's why we have a loss in the SMEG? Yes. As I mentioned to the earlier A participant is primarily because of increase in fixed cost and that is also increase in the employee cost or the contractor cost. Last year, we didn't give any increment to our employees, which was given this year. And this was slightly more than which Otherwise, you would expect on an annualized basis. So that is one reason. The second is the A and P spend has slightly increased and A and P predominantly is for our B2C business. Of course, B2B business gets a bit of a rub off effect of A and P, but resonators of B2C business. So these are two main reasons because of which since EBIT margins have gone into negative trajectory. But I'm still confident of the guidance We provided in the last call that in 2 years period, we should be able to get to high single digit EBIT margins for FMEG Business. Okay. Great, sir. Good to know. I'll come back in the queue again, sir. Thank you. Thank you. The next question is from the line of Rahul Agarwal from INGRED Capital. Please go ahead. Hi, good afternoon and congratulations for a decent set of results. I had two questions. Firstly, wanted to understand contribution margins a bit Better for Polycap. So to start with, is there any link between copper prices and gross margins? Because we as analysts try to link that And quarter on quarter, obviously, as you said, it's better to understand on an annual basis. But overall, is it fair to say that a rising commodity scenario where copper is going up, Gross margins fall and it's vice versa, it's true. Is that correct? Not really. As I mentioned to Ravi as part of his first question, We have broadly 2 or 3 types of businesses within cable and wire. And I'm talking from a channel perspective. 1 is distribution where we factored in Previous month's production rate, U. S. E and I production rate as well as copper LME and revised the list price. The second was 4th business where the dynamics could be different, where you quote the price up and then a product pricing. And third is the SKU store where generally you take back to back project. So these are three things which we follow consistently. At times, you take calibrated approach in the pricing, and this is what was done in the current quarter as well. The increase in raw material cost at the basket level was almost in early teens, whereas the price hike which were taken in the current Quarter was just touching the double digit and that is where you can see a delta or a negative delta on the contribution margin. But generally speaking on annualized basis, we have not seen significant difference in the margins and that is what is important. And the other thing is at times there is a mix change. If you are attending customers which are far away from your plant, you end up incurring some additional freight costs. And if there is an increase in the export business, which is generally there in few of these quarters, They are the street institute that also plays in. So there are a few dynamic factors. But you know, Rahul, we are aware about this. We are probably the largest consumer of copper in India. And we have pricing ability to price the copper at the most appropriate that is where we don't generally see any significant risk because of the risk management framework which we have in place. Correct. So fair to say that the normalized level of 25% obviously comes back as and when the entire pricing thing Is passed through and overall we see a normal sale environment in India. Broadly, we should be back in terms of cable and wire, gross margin should be back to normal levels, fair to say that? Absolutely, absolutely. Okay. And second question was on inventory. At INR 2,600 crores looks very high than normal For Polycap given the history and debt at INR 900 crores obviously looks very low versus history versus normal levels. Could you help us understand this change? Yes. So both of these numbers are not questionable. Let me deal with receivables and then I'll come back to inventory. After softening of copper prices in mid of June, slowly sales started getting infected adversely, and that is where we continue to collect on the outstandings of the sales which are made in the earlier months, But there were a dip in the overall sales in the month of June, and that is where the number of days of receivables or the absolute amount of receivables is slightly looking lower. I don't think it's a sustainable number. Of course, with the help of channel financing for penetration, we would be able to bring it down, but not on the basis of what we just experienced in the quarter gone by. On inventory, I mean 2, 3 things. 1 is since softening of Papa President and Goods impacted our See, it has indirectly driven an increase in our affinity growth. And second is we were expecting and we are still expecting that in the quarters to come, We will have uptick in demand. And this is what, if you recollect, we experienced even in last fiscal where the Q2 was better than Q1 and H2 was better than H1. So that is where there is slight appreciation in our inventory levels. As I mentioned in earlier quarters as well, inventory continues to be First area for us, we learned that with IT of peers as well that working capital is the area where we can do better and I completely believe that we can do that better. In the quarters to come, we should be able to normalize it and have a better handle on it. So there is no case of Obviously, there is some buildup because of temporary issues, which would obviously normalize over the past over the next 9 months. And broadly, there is no case of inventory write offs, right? It's never happened in the history, right? Never ever. Okay, perfect. Thank you so much. All the best, Ganjar. Thanks. Thank you very much. Thank you. The next question is from the line of Devansh from SIMPL. Please go ahead. Hello. Yes, sir. Thanks for the opportunity. So just wanted to understand on 2 opportunities. 1 is EV cable and second is The telecom cables which can be for 5 gs next year. So in both if you can just elaborate on The technological preparedness and the manufacturing preparedness as of now and how are we seeing this opportunity and what is the kind of interest that we have In participating in these opportunities? So I am sure you would have heard about our telecom division which we have. We already have optical fiber manufacturing facility and we have executed several projects, 1 in Gujarat, another in Bihar on optical pipe. But we are slowly and gradually expanding on our telecom footprint. These are early days to give you any specific guidance, but we remain Positive on the overall growth potential of this particular vertical. And as I mentioned in response to one of the questions, I think by the Q2, we should be able to come back to you with nitty gritty of few of these items where we can give information publicly. Okay, okay, okay. That's it from me. Thank you. Thank you very much. Thank you. The next question is from the line of Atul Tiwari from Citigroup. Please go ahead. Yes. Hi, Ganjar. Thanks a lot. Again, one question on margins. I'm just trying to understand sort of what is going to be that we have seen in this quarter. So from the time when this commodity rally started, okay, how much your R and M costs have gone up in percentage terms? And how much price hikes you have taken and how much more price hikes you need to take to kind of fully pass on everything? So that is one. And if you could just kind of walk us through that why did company not take enough price hikes to kind of maintain Say 11% or 12% kind of margin. So why was there a bit of a mismatch? I mean, we understand that On a full year basis, the mismatch will be kind of made up, but why it could not happen during the quarter? What was the operational issue or static reason? Sure. So probably, Azul, you feel like I'm repeating what I mentioned to another participant. But In the current quarter at the iron basket level, the cost price increase both of copper, aluminum and other raw material put together was in low teens, whereas the price hike which we have been able to take was almost touching the double digit and that is where there is a negative contribution delta which you are seeing in the C and L. Now Now this specific in the current quarter, what happens is when you're working in a dynamic period where You want to manage both profitability as well as top line growth. At times, you take decision of balancing the 2 with an assumption that higher sales will help you in getting better margins at the EBITDA level. What do I mean by that is if I am able to increase See the top line, I would be able to utilize my plant more effectively. That would mean that my fixed cost absorption would be better, and that is where the EBITDA margins would be slightly better. So it's a play between contribution and EBITDA and at times we do that. And this quarter was also one of those quarters where the pandemic impacted several of the geographies. And we have all types of cables. We have retail wires as well as we have cables which are used by Telhousay's B2B products and all that. So all of those reasons I expected the margins slightly in the current quarter. But as you would have seen even in the last 3 years, The H1 margins were slightly lower at EBITDA level, but on annualized basis, as you Consider the H2 margins were better. So we are still confident of going back to our normal margins as we progress in the current quarter. Okay, great. And just one last one, what will be the number of dealers and distributors and the retail touch points that the company is reaching now? And what are some of the medium term targets on that? And how much of that channel is now covered with channel finance? That is my last one. So we are around 4,000 all dealers and distributors at the country level and around 165,000,000, 170,000 retailers. In terms of channel financing and cable and wire, we are holding around the same percentage of 65%, 70%. However, in the case of FMEG, we have been able to make Some progress there and now we are hoping between 25% to 30%. We are hopeful that in FMEA, we will be able to further penetrate tenant financing and include this by the end of the year. Okay, great. Thank you. And that's all. Thank you. Thank you. The next question is from the line of Saranjit Singh from DSP Mutual Fund. Please go ahead. Yes. Hi, sir. Am I audible? Yes, you are audible. Sanjeet, please go ahead. So just one thing, 1, in terms of in our overall business split, what is the proportion which is coming from the institutional segment? In terms of general price hikes, can we talk more than the institutional segment? What pace it follows? Is it coming with a big lag? But generally in the other normal channel what we've seen is that pricing is being passed on at a very rapid pace in the cable and wire segment. So how the pricing mechanism works especially for the institutional side? Thanks, Jaranjit. Just an important one. So generally, around 85% of business is distribution and 15% is sorry, 85% is distribution and 15% is institutional. Institutions are generally you take the copper price as and when you get the approval on the sales from the institutional client, which means back to back and that is where there is a lag. The lag which I was talking about on a monthly rest was for distribution where we increase the list price on a monthly list after factoring in the NME as well as connection rate which was there in the previous month. But there is no such mechanism in the case institution. It's order on order basis and generally take back to back position on the basis of orders confirmed by the clients. Okay. And so now you also talked about this initiative with BCG on ATM and Vijay Sutherland initiative. So if you can just elaborate in terms of by when we see that our targeted goal, which We have to achieve these initiatives, what's the target timeline? And if you can elaborate 1 on the GTM and any Initiatives which are also on the cost front which you are trying to do through these consulting firms? Just a second. Sure. Thanks, Ranjeet. So there are 3 initiatives which we are running as of now. One is Project Oran, which we embarked on almost a year back, which the cost optimization initiative. The entire cost base of the company is with the full view of this particular program, and we have Already identified saving potential, translating to 80, 200 bps. And these initiatives are in the process of implementation and we should expect getting credits to our P and L occurring over the period of 1 or 2 years. That was the first on Project Orion, which is cost optimization. The second one is, which is a multiyear transformational program. The end objective is to get to INR 20,000 crores of top line by the end of fiscal 2026, which is 5 years, and which is slightly more than double of what we achieved in fiscal 2021. This covers almost all the Facet of the organization, it's not only GTM, how we are going to shape the B2B, B2C, what type of process we will have, What type of digital footprint we'll have, what type of organization we'll have, what type of new product categories that we decide to enter into, we will get to. And in the March quarter, I had mentioned that by Q2 of this year, we'll come back to all of you and highlight the progress. And the third one is Project Shikhar, which is again our distribution program where we want to penetrate identified geographies and ensure that we are able to get higher share of wallet or higher share of sales from the identified distribution target, which primarily would include channel expansion, having engagement with the influencer of the expert program and this program will cover almost 300 cities in next 2 years. Okay. So just lastly on the PAN side, so our mix comes from the base versus the What is it right now? And in terms of the in sourcing versus outsourcing, how it will change in the next 1 year time frame? So premium fans are now almost in high teens and this proportion as we go along would go up. Most of the fans are getting manufactured in our Roorkee facility. We are also in the process of augmenting fan manufacturing Liti and another facility is getting arrested in Halod in Gujarat and expected to be operational later in the current year. There is very small amount of fans which are manufactured with the help of 3rd party suppliers, But their contribution to the top line at this stage is significant. Most of it or almost all of it is getting manufactured in house. The next question is from the line of Ankur Sharma from HDFC Standard Life Insurance. Please go ahead. Yes. Hi, sir. Good morning. Good afternoon. Just a few questions. First on our Q1 numbers in the Cable and Wire segment, how much was the volume growth and how Much was the thrice growth in that 97% growth that we've shown on the top line? Thanks for asking this. In our business, slightly difficult to compare that way because 1 kilometer of aluminum cable will cost significantly different if you compare that same cable if it is manufactured with copper. And that is where volumetric data is not This is the best way to analyze our company's performance. If you were to analyze our performance, there are 2 or 3 ways. 1 is, of course, you Check year's performance and our performance. And second is you can check what is the movement in LME prices and foreign exchange rate and compare that with our growth. Volumetric data will probably give you misleading inform. Okay, okay. Fair. So, Difilje, I think you said wires Ios haven't done as well as cables during the quarter. So what is the mix of wires and cables in this quarter? There is no significant change In comparison to previous quarter, we are broadly in the same range. Okay. Observation. So if you're looking for a specific number, it will be around 50%, 51% type. Okay. And so I think on the margin outlook, you said that while Q1 obviously margins were fairly weak because of the lag And passing on the higher copper and RM prices, what do you believe would be a more sustainable number, say 22%, 23%, do you go back to that 12% kind of EBIT margin range? Is that the number you have in mind? So on annualized basis, generally, we have been talking about 11% to 13% of EBITDA margin. And if you see fiscal 2021, we were able to beat that guidance. But as I mentioned to others that we are working on Project Leap and give us time till second quarter, It's quite possible that we will be able to give you more general information on Project Leap. And then on actual basis, on half yearly or yearly basis, we'll come back to you and update you on the actual SAGI's website. Okay, fair. And just one last one, if I may, and I think this was discussed earlier in the call as well In terms of recovery in demand on the cable side, so if you could just talk about are you seeing large projects On the manufacturing side, on the infra side, any pickup over there? So primarily on the B2B that is Starting to happen, this kind of gives you confidence that over the next few quarters, you start seeing a fairly sizable pickup on the Cable business, so can you talk about either the inquiry levels or how is the current demand situation? You are right. So overall in the current quarter, the institutional business has picked up. Having said that, The larger projects are probably still on a slow track, but the smaller project, we have some visibility, and that is where we can see A bit of uptick in demand both at order label as well as at execution label and the execution side of the business. Having said that, I don't think we have these 2 pre COVID labels. And we'll have to wait for some time before we finally conclude whether we are weak to the pre COVID labels or not. Okay, great. That's all for myself. Thank you. Thank you. Thank you. The next question is from the line of Sanjay Sathapathy from Ampersand Capital. Please go ahead. Yes. Hi. Thanks a lot for taking my question. You have mentioned And about your margin, which way that we should not really look at quarter 1 and look at the full year. And then you have mentioned that your margin was affected because of the copper price volatility. Can you just tell us that whether all those are behind us that is copper price are stable and your pricing actions So more or less done. And so that way Q2 will not have any such exceptional situation, which was there in Q1? Yes. So let me just explain the business model so that you are able to appreciate what we are doing here. 85% of our business comes from distribution, and we get a distribution business, the list price is generally revised on monthly rest. And when we do the revision, we factor in 2 things. 1 is change in LME prices in the previous month as well as change in exchange rate. So there is a 1 month lag which is there. And attempt in dynamic situation like these, you take calibrated approach While balancing the price hike as well as and profitability and as well as the top line growth, this is what we have witnessed. But generally, in our experience, generally speaking, pluses and minuses are offset within the fiscal. And if you see on an annualized basis, the margins are not significantly different from earlier period. And that is what I was mentioning to the other participants that If you take an analyzed view, you will not see significant change. But because of this 1 month lag and at times dynamic approach of balancing top line and bottom line. At times, you would see some aberration between one quarter or the other. Yes. No, that I understood. I think that Are those kind of behind us? Is this just a small maintenance kind of a question from a near term point of view? That is what I was trying to kind of understand. The second thing that I wanted to understand is that so it is there are your peers are also reporting results and their numbers and your numbers are Appearing as very different. And I understand that it could be because of some technical factor like your geographical mix or many other such things. So what we really want to understand here is that your competitive position and your Strategy of growth and gaining market share, are you confident that you'll be able to kind of silence your critics or Whatever you say, sometime very soon and you're fairly confident that you are doing better than your peers in Bitbit because you have a superior Is this strategy end of the growth? Thanks for highlighting that. So as I mentioned in my opening remarks, We remain absolutely confident and comfortable on our strategy and execution. If we have any which we have highlighted our ambition under Project LEAP, which is 20,000 core top line in 5 years from now. And growth in one particular product category of 1.5x of the industry and another product category of 2x. And I have no And another product category of 2x. And I have no reasons to doubt our ability to achieve those numbers. Okay. Thanks a lot. Thank you. Thank you. The next question is from the line of Bobby Jairam from Falcon Investments. Please go ahead. Please go ahead. Hi. Could you talk a bit about how you're going to penetrate the SMEG market Categories like fan, given larger players like Havels and Crompton's are already well Established. So what's your strategy, the pricing led or product led? If you could talk a bit about that. Thank you. I'm sure you're aware we are already in top 6 or 7 in France. We Poured into this business 5, 6 years back and since 2nd or 3rd year, we are EBIT positive in fan business. We are working on several initiatives, 1 on the GTN. We want to ensure for the penetration both at distribution and retailer label. 2nd is on the availability of our products across different pricing parameters. 3rd is in house production, which gives us confidence on the quality as well as the value for money for our consumers. You will be pleased to note that our field returns in fan are lowest in the industry because of the quality, the student quality parameters we have in place. And the another important thing is the recent initiatives both on the IoT side through Sylvan and Home and the e commerce initiative where we want to get to the next Generation of the consumer, we are extremely positive on the uptick in the demand in the pen business for our company. What is the IoT fans or appliances? What differentiates that from the products in the market? It's a complete basket of offering where app based products are available which can be operated with the help of air or with the help of air. And this is not only restricted to fan, almost all the products, whether you think of water heater, you think of lighting or Staying off and almost everything can be operated. And this way is being marketed under the brand Home. The recent execution of Silvan will help us in getting to Home Motivation and that is where the entire Home Motivation Product portfolio will also help us in improving our SME product sales, which would include among other sales as well. And these are And these are the products which are manufactured in house, made in India with strict quality supervision and that is where the fees returns are best in the industry. Yes. The question I have is whether this kind of automation is something that's demanded by consumers because even in advanced markets, I don't see these kind of products. When someone buys a fan, they essentially want a fan that is breezy, doesn't break down and costs and it's priced reasonably. They don't want a lot of fancy settings and IoT and all that. So is this customer driven or are you By any chance, over engineering these products? Yes. I understand from your coming. That's probably one school of thought. But if AI if we go by the broad industrial IoT market, it was almost 2,600 crore in 2020. It is expected to grow at 30% CAGR. And I won't be surprised if it reaches 100004 by 2025, And it could well very much continue its northward presence even after 2025. And in this pandemic, all of us have experienced that IoT or web based applications and rising connectivity is the only way to look at the product development and this will help us that will help. All right. Thank you. Thank you. The next question is from the line of Kedar Keralje from Fortress Group. Please go ahead. Thanks for the opportunity. So my first question is again on the SMEG business. So, sir, Kamir, your Q1 FY 2021 revenue, that was about INR137 crores and we have almost Then 20%, 30% higher revenue. So actually operating leverage should have been much better as compared to Q1 last year. So why is it that our loss has more than doubled at the EBIT level in the SMEG business? Yes. The absolute amounts are slightly misleading because of the base. But if you see the type Organization which we have in place for SMEG and the agreement which we have given, that is where the operating cost has gone up incremental last year, and that is where you can see the EBIT margin negative trajectory. The other thing which I should specifically call out is A and T spend, which has moved over the period. For example, we used to incur IPL spend, which got reflected in the quarter's P and L. In this particular quarter also, we have incurred some A and P spend, which is getting reflected in the P and L or SMET business. On the base quarter, the NPE spend was almost negligible. Okay, okay, sir. Thank you. Sir, second question is on the EPC business. Sir, on the other segment that is EPC. So are you confident of maintaining this revenue run rate in EPC and the margins? Will it be stable at around 11%, 12%? So EPC is not a core business for us. We do it as a natural extension of cable business. It is our focus. We are cognizant of the fact that we are not an EPC company. We are a B2C company. Whatever small business we do as natural access shop, a CapEx. We are hopeful that we will be able to continue with high single digit, low double digit type margins. Okay, okay. Thank you, sir. That's it. Thank you. Thank you. The next question is from the line of Rajesh Pothari from Alpha Acurate. Please go ahead. Good afternoon, sir. Sir, I have two questions. One is, is there any Inventory mark to market losses in this quarter? So there are no mark to market losses because we follow hedge accounting. In the case of hedge accounting, if there are heavy relationships which are established, then it is at content under OCI. And that is where there is a significant impact. But on a generalized basis, always there will be some ups and downs because the inventory is linked with LME in any of the month end quarter end that will be movement in LME. But there is no significant one offs in the overall mark to market or hedging accounting in the current quarter. So since you are saying you already hate and therefore it doesn't impact the margins, then why the higher raw material prices impact the margins? I am sorry, I am a little bit confused. Yes. So either the actual cost of procurement vis a vis the price hike fixed year station was calibrated and that is where there is a delta which is getting reflected in the contribution margin. As I have mentioned to one of the participants, we have called at times in In a dynamic quarter like these where there is significant impact of Wave 2, you optimize on top line with anticipation of better margins because you would be better at EBITDA margins because you would be able to elaborate on the fixed cost and that is where you take these calls. And the contribution margin, if you see, has dipped by 200 basis points in the current quarter. So basically what kind of price hike is required to compensate for the higher raw material or might be that now this is completely gone because in the raw material cost has already started coming down and therefore you may not able to do price hike. So what is gone is almost lost kind of margin. That's the right way to look at it? And that is why I highlighted in earlier responses as well that in our business, it's best to see on an annualized basis because there will be some pluses and minuses. And overall, on a 12 month basis, we are generally able to maintain the contribution margins. If you see last year for that matter, the first half EBITDA margins, if I'm not wrong, was around 12% or zerobout, but in the second half, it was 14%. And that is how The overall margins are competitively maintained on an annualized basis. No, better understood. What I'm trying to ask is a little bit different. What I'm saying is that the raw metal cost has increased, but you are not able to take the similar kind of price, right, due to whatever reasons. So what was the difference? That's point number 1. And point number 2, that's our 2 questions. It's getting reflected in contraction and contribution margin. Okay, understood. And the FMEG business, there also we have seen the similar numbers. But if I look at for example, HEAVELS, the another company probably in the similar segments, there the margin profile and everything is quite significantly different So what would be the primary reason for SMEG segment apart from the operating leverage because the revenue decline is not that much? This means the operating leverage. As I mentioned to the previous participant as well, the increase in fixed Cost, previously the nature of increase in employee cost as well as the subcontracted cost and increase in A and P spend has impacted adversely the average margin of SMEG Business. And Rajesh, as you would be able to recollect in the last quarter call also I had mentioned, and I'm continuing with the same position that in 2 years from now, which is 23%. We are confident of getting into high single digit EBIT margins. Yes, yes, of course. And last question from my side, in terms So the employee cost which is roughly about INR 92 crores and there you mentioned that you've done some We know this increase in employee cost something, which I could not understand because your Q4 it was INR 96 crores and in Q1 it is INR 92 crores. So there is I cannot see any increase compared to 4Q. So is there does it include any one off bonuses or Any such elements? So the Q1 last year was INR 81 crore and the Q1 this year is INR 96 crore and that is where you can see that there is an increment which is visible. Okay. But on QOK basis there is no such increase. So I was actually wondering that since the Revenue declined so much. There are no basically steps to reduce the other cost Because if I look at, for example, revenue from INR 3,000 crores, it declined to INR 1800 crores, correct? But if I look at the operating leverage actually, To that extent, there is no significant increase in your other cost. So I'm just trying to understand the picture here. So is it that We are now basically becoming like a normal cost base and from this cost base we'll work on? Yes. So I think 2 things, Rajesh, one is in our business, always the 4th quarter would be best from the sales contribution to the annualized revenue. In our experience, at times, 4th quarter has contributed anywhere between 28% to 32% to annualized revenue, whereas the Q1 and I'm not talking about the year affected the pandemic. I'm saying generally speaking, the Q1 contributes only 22% of the top line. And that is where It's slightly unfair to compare Q4 top line with the Q1 top line. The second thing is in the Q4 last year, there were some incentive The reasons which were accounted for in the details are this that in the Q1 of June 2020, we decided not to give any variable It was our employees considering the pandemic. But considering the performance of the company on an annualized basis, management decided to continue with the variable payment and which accounted for in the Q4. So there are a couple of such one offs, including India's 'nineteen adjustment like Equity and Leave and Cashman. And if you normalize that, you can see there is an increase in employee cost. For example, June of 2020 was INR 81 crore and June of 20 One is almost INR 95, INR 96 crores. And specific whether we add these to the normalized cost, Yes and no. Yes, because we are there. But on no, because as I mentioned to another participant, we will continue to make investment On our go to market strategy, we will continue to expand on distribution, penetrate the market where we are currently under indexed. And for that, we would need additional working hands and will make that investment. We will not shy away from making those investments. Great. Wish you all the best. Thank you. Thank you very much. Thank you very much. We will take that as the last question. I would now like to hand the conference back to Mr. Gandharth Tongya For closing comments. Thank you, participants, for taking out time and attending this call. In case if your questions are not attended, please feel free to write to us at investor. Relationspolycap.com, and we will be pleased to attend your questions. Thank you. Thanks a lot for your time. Stay safe and take care. Thank you very much. On behalf of