Ladies and gentlemen, good evening and welcome to the Polycab India Limited Q3 FY26 Earnings Conference Call. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Niyant Maru, Chief Financial Officer, Polycab India Limited. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us today. I hope all of you are staying healthy and safe. I am Niyant Maru, CFO at Polycab India Limited. On today's call, we will be discussing the Q3 FY26 results, which were approved by the Board of Directors earlier today. We will be referring to the earnings presentation, financial results, and financial statements, all of which are available on the stock exchanges and on the investor relations section of our website. Joining me today from the management team are Shashank Yagnick, Head Strategy, Chirayu Upadhyaya, Head Investor Relations. Before we get into quarterly performance, I would like to share a very important update announced at the board meeting today. It gives me immense pleasure to inform you that the Board of Directors, at its meeting held today, has approved the re-designation of Mr. Bharat Jaisinghani and Mr.
Nikhil Jaisinghani from Executive Directors to Joint Managing Directors of the company with immediate effect, subject to approval of the shareholders. Over the years, Bharat and Nikhil have played an integral role in shaping the company's growth trajectory, strengthening the market leadership, and building a strong foundation for long-term value creation. Their deep understanding of the business, strategic clarity, and hands-on leadership have been key contributors to the company's success. I'm confident that in their enhanced role as Joint Managing Directors, they will continue to provide strong leadership and guidance and work closely with the board and the management team to steer the company towards sustained growth and scale newer milestones in the years ahead. With that, let me now take you through the macro environment.
On macro environment, the year 2025 marks a pivotal phase for the global economy defined by shifting trade dynamics and heightened geopolitical and tariff-related uncertainties. Elevated U.S. tariffs disrupted the established supply chain and moderated global growth, even as labor markets remain resilient and inflationary pressures ease across the major economies. Against this backdrop, the global economy is expected to grow at around 3.2% in 2025, reflecting a period of stabilization amid persistent trade tensions. Overall, the global environment in 2025 has been characterized by steady but uneven growth, improving inflation dynamics, and cautious monetary easing across regions. India continues to stand out as a clear outperformer in this global landscape, demonstrating remarkable resilience and adaptability. With Q2 FY26 GDP growth at 8.2%, India continues to be the fastest-growing major economy, underscoring the strength of its internal growth engines.
In November 2025, India overtook Japan to emerge as the fourth-largest economy globally, reaching a GDP of $4.19 trillion. Domestic consumption has witnessed a notable revival following last year's direct and indirect taxes. Credit growth has strengthened meaningfully, with total credit uptake reaching INR 11 trillion till November 2025, compared to INR 9.5 trillion last year. Two-wheeler sales also increased by 18.1% year-on-year over the September-November period, while passenger vehicle sales rose by 7.3% during the same time frame, reflecting improving confidence among consumers and businesses alike. Encouragingly, this recovery has occurred alongside a continued moderation in inflation. Headline inflation has trended lower, led by easing food prices, while lower global energy prices have provided additional relief. Despite currency depreciation during the fiscal year, the pathway to inflation has remained limited. Overall inflation across both goods and services has stayed relatively benign.
In this favorable macro backdrop, the RBI delivered a 25 basis point policy rate cut, revising its growth forecast upward to 7.3% for the year and lowering its inflation projection to 2%. For the next fiscal year, first-half inflation expectations have been revised downward to 4%, compared to 4.5% earlier. The rare combination of stronger growth and softer inflation enabled the Monetary Policy Committee to proceed with the rate cut, taking cumulative easing to 125 basis points during the calendar year. Investment activity has also gathered momentum, rising capacity utilization, strong investment announcements, and improving credit uptake points to a broad-based recovery in economic activity and increasing job creation. The real estate sector remains healthy, with launches and sales across the top seven cities closely tracking the previous decade's highs. The affordable housing segment is also witnessing renewed momentum, supported by lower borrowing costs and rising household incomes.
At the same time, government capital expenditure has accelerated meaningfully, with approximately 59% of the FY26 CapEx outlay already utilized by November 2025, a 28% year-on-year increase. Overall, we are witnessing signs of recovery in consumption, and this improving demand environment is expected to translate into a revival in private CapEx, complemented by sustained public investment, providing strong confidence in India's growth outlook. I will now hand over to Shashank to take you through the financial performance for the quarter and the year.
Thank you, Niyant. Let me now take you through slide four of the earnings presentation. For the quarter ended 31st December 2025, we are pleased to report that our company delivered 46% year-on-year growth in consolidated revenues, driven by strong execution in the wire and cable segment and healthy growth in the FMEG business.
Our EBITDA for the quarter grew by 34% year-on-year, with EBITDA margins at 12.7%. Excluding the one-off impact of INR 219 million on account of gratuity provisioning due to the implementation of the new Labor Code, the EBITDA margins would have been approximately 13%. At the PAT level, the company delivered its highest-ever quarter three PAT at INR 6.3 billion, reflecting 36% year-on-year growth. PAT margins stood at 8.3% for the quarter. Finance costs came in at INR 687 million, while other income stood at INR 505 million. A detailed breakdown of these line items is available on slide 17 of the presentation. We continue to maintain a strong balance sheet, closing the quarter with a net cash position of INR 30.3 billion. On working capital front, same as last quarter, inventory days continued to be higher as we built up inventory in anticipation of strong demand in quarter four FY26.
Correspondingly, given the use of letters of credit for raw material procurement, payable days were also higher, resulting in the working capital cycle to be at 27 days at the end of quarter three FY26. We expect this to normalize to our long-term steady range of 50-55 days in the coming quarters. Capital expenditure for the quarter was INR 3.4 billion, taking the nine-month FY26 total to INR 10.9 billion, and this is in line with our Project Spring guidance of investing INR 12-INR 16 billion annually through FY30. On a nine-month basis, I'm proud to share that nine-month FY26 revenues, EBITDA, and PAT are the highest ever in the company's history for any nine-month period. Revenues grew 30% year-on-year, crossing the INR 200 billion milestone. EBITDA grew 47% year-on-year, with margins strong at 14.2%. PAT grew 47% year-on-year, with PAT margins of 9.6%. We'll now move to slide six.
The wires and cables business delivered very strong performance, recording 53% year-on-year revenue growth during the quarter. This growth was led by domestic wire and cable business, which posted an exceptional 59% year-on-year growth, supported by robust demand conditions and sustained commodity price inflation. In volume terms, the domestic wire and cable business recorded nearly 40% growth, reflecting healthy underlying demand. This strong performance underscores a further strengthening of our market position, with continued market share gains in the domestic market during the quarter. Execution excellence under Project Spring remains a key enabler, driving superior market execution, improved relationships with our channel partners, and consistent outperformance. During the quarter, wires growth outperformed cables, driven by pre-stocking by channel partners amid elevated copper prices. Within the cables segment, institutional sales growth outpaced the channel sales, reflecting strong traction in project-led demand.
Looking at the broader environment, demand remains robust across key sectors. Government CapEx surged nearly 28.2% year-on-year in the first eight months of FY26, reaching INR 6.6 trillion versus INR 5.1 trillion last year, also 12.4% higher than in the eight-month period in FY24. Additionally, the Government of India released loan of INR 1.25 trillion to states for capital expenditure during the same period. The private CapEx cycle in India is showing signs of recovery, aided by the monetary policy support and the stimulative impact on GST rate cuts on consumption, laying the foundation for sustained investment growth. The real estate market remains strong, following last year's record sales and launches, a trend that should continue to support wire demand in the coming years. Our international business maintained its steady momentum, recording a 5% year-on-year growth during the quarter, despite a high pace and contributing 6% to the consolidated revenues.
Backed by a healthy order book, we remain confident that this growth trajectory will continue in the coming quarters. Segment profitability was impacted during the quarter due to multiple factors, primarily on account of continued commodity price inflation and depreciation of the Indian rupee. Between September 2025 and December 2025, copper and aluminum prices in rupee terms increased sequentially by approximately 21% and 11%, respectively, which represents an unusually sharp escalation over a short period of time. In order to avoid demand disruption arising from elevated input costs, the company took a strategic decision to pass on the increase in raw material prices in a staggered manner. While this approach resulted in near-term margin pressure at the company level, it enabled us to protect volumes, gain market share, and further strengthen relationships with our channel partners. Moving on to slide eight for an update on the FMEG business.
The FMEG segment sustained its impressive growth momentum, delivering a 17% year-on-year increase in Quarter 3 FY26 and consistently outperforming the industry in line with our Project Spring growth aspirations. Within the segment, the solar business has been a standout performer, growing more than 2x compared to the same quarter last year, driven by strong uptake under central and state rooftop solar incentive scheme. With favorable policy support and strong demand visibility, we expect this momentum to continue in the coming quarters. Other product categories delivered steady inline performance, reinforcing the segment's balanced and resilient portfolio. Importantly, the FMEG segment remained profitable for the fourth consecutive quarter, even while strategically ramping up our A&P investments to strengthen brand presence and drive long-term growth. As we continue to scale, we expect profitability to expand further, reflecting the leverage in our business model.
Looking ahead, we are confident in the long-term potential of the FMEG segment and remain on track to achieve our Project Spring targets of 1.5- 2x industry growth and EBITDA margins in the range of 8%-10% by FY30, positioning the business for sustained growth and value creation. Moving on to slide 10, which provides an update on our EPC business. During quarter three FY26, EPC revenues grew by 4% year-on-year, reaching INR 4,069 million. This quarter, we commenced execution of our existing orders under AFNET scheme, which is expected to generate INR 4.5 billion over the next three years for project execution and an additional INR 3.5 billion over 10 years for NOFN. Segment profitability stood at INR 272 million, translating to a margin of 6.7%. Looking ahead, the annual sustainable operating margin is expected to remain in the high single digits over mid to long term.
That was the update for the quarter. Thank you, and we are now open for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking their questions. Ladies and gentlemen, we will wait for a moment while the questions are sent. The first question is from the line of Sonali Salgaonkar from Jefferies. Please go ahead.
Thank you for the opportunity and congratulations on a strong revenue growth. So I have three questions. Firstly, of the strong revenue growth in the C&W segment, would it be able to quantify what is the volume growth for this quarter year-on-year?
Yeah, thank you for the question.
And you wanted to understand the volume growth, right?
Yes, in C&W, cables and wires segment.
For both cables and wires, our volume growth is about 40%. Great. And I think in the presentation you said the volume growth in cable and wire business.
Could you say that again, sir?
I'm saying our domestic cable and wire business grew at 40% volume this quarter.
Right. And any more details you would like to share as to which end-user industries contributed higher? Because 40% is a very significantly high number.
There is sustained momentum in both government and private CapEx that we have seen. And in case of real estate, it has picked up really well. Our internally also, due to the commodity price rise, it is very obvious that channel partners usually tend to stock, especially in case of wires.
That has also led and contributed to the higher surge in top line.
Understood. My second question is on the EBITDA margin. We understand the reasons that you have outlined in your presentation as to why the QoQ drop was there in the EBITDA margin. So the C3 follow-up question, firstly, such a high volume growth would intuitively result in good operating leverage, right? So that is one. Secondly, I think you did take a price hike of about 6% year-on-year. So could you help us understand what exactly led to this fall of EBITDA margin both year-on-year and QoQ?
So Sonali, I'll try and answer that. There are multiple factors here. The major reason here is the rise in commodity prices. Now, if you look at year-on-year increase, the copper has risen almost 50% and aluminum almost 25%. Right?
And in this quarter itself, the 22% inflation has happened in copper price compared to the previous quarter. Now, all of it to be passed on, it's a strategic call for management to pass it on in a staggered manner. So we've been revising our prices, but not all of it has been passed on. So it takes time to pass on these rise in input cost prices. That is the first thing.
So Sonali, as Shashank mentioned, when the copper prices rise so high and so suddenly, you have to take a conscious call of how you want to pass on. Because if you look at this specific financial year from April till December, the copper prices have risen by 35%. And this is including the rupee depreciation. And similarly, if you look at aluminum, aluminum has risen by 27%.
Now, out of that, out of the 35% of copper rise, 21% has happened within this quarter itself, and 11% of that has happened in December itself. Right? So we've been consistently passing on that copper pricing inflation to the end customers month on month. But we have taken a conscious call that such high 35% passing of inflation can't be done every month, and hence we do it in a bit of a staggered manner. So we've been doing it. We've taken a bit of a price hike towards the end of the quarter. We have again taken a bit of a price hike towards the beginning of this quarter as well. But still, we haven't passed on the complete price hike of the commodity pricing inflation.
Hence, if you look at the financial statement, you'll realize that most of the decline in the EBITDA margins has been on the gross margin level. You are correct in mentioning that such high top line growth will result in operating leverage, which is very much visible if you look at everything below the gross margin. We have realized a lot of improvement as far as our operating leverage and everything is concerned. But yes, this is a conscious call what we have taken. One will also need to appreciate that what we've been able to achieve through this staggered passing on. See, if you look at our performance in this year, our cables and wires segment has grown 35% year-on-year. And that too on a base wherein we are operating at 2x of the industry or the second largest tier.
Also, this has resulted that the staggered passing on of copper prices to our end customers have also resulted in the improvement of loyalty of those customers with us because they don't have to take a brunt of reduced demand, neither of lower margin. We'll definitely be passing on whatever commodity inflation will be coming up gradually. But this is something that we have taken as a strategic call. Since you've been following this sector for many years, you will recall that even in FY22, similar commodity price inflations were there. Copper had gone up by 40%, whereas aluminum had gone up by almost 25%, 27%. Even at that point of time, Polycab margins had taken a hit for a quarter or two, but then we had gradually recovered back those margins. So we believe that a pretty much similar is something that will play out.
There can be margin impact for a quarter or two, but if you look at more of a longer-term view, we should be able to recover some of our margins back.
Very clear, Chirayu. Thank you for this detailed answer. May I just ask, what is the quantum of price hike that we have taken at the start of this quarter you mentioned before?
Please repeat that question once.
What would be the quantum of price hikes that you have taken at the start of this quarter?
The total price hikes that we would have taken within this quarter would be almost 75%-80% of whatever commodity inflation was there.
Understood. Got it. And just one last question on the exports. While there has not been any growth, but how do you foresee the exports to shape up in the coming quarter? That's it from my side. Thank you.
So Sonali, on exports, in fact, majority of the revenue that we've accrued this quarter has come from other geographies other than the U.S. And in fact, when the U.S. comes in, it will further add to the revenues. In fact, we've done better in the Middle East, Latin America. So all of these geographies are contributing significantly. And there is a healthy order book. So I think which we'll see in the further quarters, it will translate into revenues for the segment.
Any reason why the U.S. is weak this quarter? Is it tariff-related?
Yeah, of course it is tariff-related. And I think this is a global overhang which I believe is impacting everybody, not just in India, but worldwide. So we are awaiting the final resolution of this matter.
Got it. Thank you and all the best. Thank you.
The next question is from the line of Akshay Mane from UBS. Please go ahead.
Hi, sir. Thank you for the opportunity and congratulations on the strong set of numbers, so you highlighted 40% volume growth, domestic volume growth. In your sense, what would have been industry growth and where is your market share trending now? Any qualitative color will also be helpful.
It's very difficult to give market share perspective today when we are the first ones in the industry to come up with the results, so I think others are still going to come out, so then you'll get a better estimate and in terms of, I think, volume growth, we've also seen very strong volume growth, volume growth, and value growth, but we are yet to comment on the market. We cannot comment on the market till others come up with the results. Got it.
Second question, sir, like you highlighted, strategically you have not passed through all commodity inflation to protect the demand. Do you think if the way copper and aluminum are moving up, if this continues, there could be some demand curtailment, some demand postponement, temporary demand postponement?
It's very difficult to comment on the commodity price. I think we are also reviewing, reading various reports, and everybody has their own view, but on the demand side, we are very confident that the growth momentum is going to continue. We've seen a good amount of movement in government, private CapEx, real estate. All segments are pumping in money into power, utilities, and infrastructure. I think from that perspective, I don't think demand is going to be a challenge for us.
Got it. That's all from me. Thank you. Thank you.
The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you for the opportunity. Can you also give some sense of breakup between what are the difference in the performance between wires and cables separately?
We probably are a mix of cable and wires in the ratio of 70-30. Okay? But in this specific quarter, we've seen wires growth outpacing the cables growth. Okay? So you can add a few percentage points there. And of course, in the value case, you will see that since copper commodity price has increased significantly, the wire contribution has been higher. Understood.
In terms of price hike, can you also divide it between how much price hike you took in the previous quarter, what did you take in the current quarter, which is starting January, and how much do you still need to take to make up for the price inflation, commodity inflation?
I mean, as I mentioned to Sonali, we've taken almost 75%-80% of the commodity inflation, which was there during the quarter, already within the quarter. The remaining will happen during this quarter. But the January one, which you said, that you've already taken or yet to take? We've taken partially, and we will further pass on further increasing prices gradually.
Understood. That's helpful.
Secondly, if you can also give some color on what you see on your distributor side, how much of this demand would be just restocking and how much would be end-consumer driven?
Probably, see, largely, as Shashank had mentioned, largely see restocking happening mostly on wires rather than cables. Generally, when our distributors stock inventory, they maintain roughly 30 days' worth of inventory. At the end of the previous quarter or beginning of this quarter, the channel inventory was in the beginning of around 40-45 days. Around 10-15 days of additional inventory was there. Of course, see, the demand is pretty strong. Even till date in this quarter, we have seen very good sales happening, and there is definitely very good secondary and tertiary sales which are also happening.
So the demand, since it's very strong, will definitely see realization of all this sales that we have seen. If you recall, in the last three to four quarters, every quarter, we've seen similar pre-stocking happening because commodity prices have been continuously going up. Even then, every successive quarter, we see improvement in terms of growth rate. So that means the fundamental demand itself is so strong. So I don't think there's any reason to worry. Anyways, we are coming into Q4 where executions are at its peak, and everybody would want to achieve the real target spend, government and private side. So Q4 should be another good quarter for us, and we are quite optimistic on that.
Excellent. Just lastly, if you can also give some sense of how does your capacity utilization stack up currently?
So our capacity utilization in the quarter stood at somewhere around early 80s. Okay? And yeah, I think that's a fair estimate to take.
Okay. That's very helpful. Thank you so much and all the best.
Thank you. The next question is from the line of Praveen Sahay from PL Capital. Please go ahead.
Yeah, thank you. Yeah, hi. Thank you for the opportunity. My first question is related to the institutional sales, as you had highlighted. This time, the institutional sales has outperformed the B2C. So can you quantify that in terms of percentage?
I mean, generally, our mix of distribution versus institutional sales are around 90%-10%, but this time around, institutional sales have grown faster than our distribution sales. It would have improved by about a couple of hundred basis points. Okay.
Also, as you highlighted about this institution, there is the CapEx-led private or government and the real estate both has done well. So also, if you can give some more color on that, how is the real estate contribution for the wire, which has also outperformed?
I think if I got your question correctly, you're asking about the real estate market. So see, we've studied some data where, at least in top eight cities, the amount of launches in terms of number of units and the amount of sales that has happened has been pretty robust in 2024, and the same momentum is continuing in 2025. We expect that same growth momentum to continue in the coming quarters as well. So wire demand is not a problem.
I mean, to add to Shashank's point, we have been talking since a couple of quarters now that while we have seen majority of the positive demand on the premium side, recent data also suggests that there is a pickup happening even on the affordable side. So that is something wherein we have been targeting to improve our market share since last two to three years. You are aware that we had introduced Etira brand, which was to compete with the unorganized players in tier three to five cities. And we have seen very good growth happening in tier three to five cities through our launches. More than about that as well, even in tier one, tier two cities, our focus has been more on Class 2 wires, wherein we are definitely seeing a lot of market share gains for us. So both of them are working.
Even the industry growth is picking up pace, and we are also seeing a lot of market share gains for us because of initiatives that we are taking with these projects.
So just lastly, if you can give on the -
Sorry to interrupt in between, Mr. Praveen, can you please use the handset mode and speak as we're not able to hear you?
Yeah, I'm in handset mode. Am I audible?
Yes, please. Yes, you are audible. Yeah, yeah.
So can you give us some color on the volume growth for the wire and the cable? Out of the 10% of the volume growth in overall, how much is the wire, how is the cable?
So Praveen, let me give a very clear distinction between top-line growth as well as volume growth. For us in the domestic circuit, the volume growth has been around 40%.
Both cables and wires have grown at pretty much similar pace in terms of volume. In case of revenue, as Shashank had mentioned, since wires are copper-based and copper has seen more inflation, for us, wire growth was at a revenue level at 70%, whereas for cables, the growth was at around 50%. Thank you.
Thank you so much. That's helpful. Thanks, sir.
Thank you. The next question is from the line of Ravi Swaminathan from Avendus Spark. Please go ahead.
Hi, sir. Thanks for taking my question, and congrats on a good set of numbers. I have only one question. This is regarding the cable segment. If you can call out the top three or four, five sectors which are driving the sales growth, I think power T&D would be one of the sizable sectors which would be driving the growth. What would be the approximate contribution of that?
Yeah, so all these segments, how they are growing, which is growing faster, which is growing relatively slower, if you can give a broad contour.
See, major consumption, if you go to product category level in cables, happens in power cables, control cables, which largely go into power infrastructure. Okay? Energy utility infrastructure. That's the primary demand sector. Followed by that, there is strong growth that we are seeing in industry segment also. If you look at all verticals, besides the sunrise, but if you look at key verticals, manufacturing, utility, government, all of them have picked up a good amount of demand.
Okay. The contribution of power T&D in the overall cable demand, how much will it be? Any sense on that?
Sorry, come again?
The contribution of power T&D in the overall demand for cables, how much will it be?
Almost 30% for us. 30%.
Okay. And the second largest segment would be after that?
Then it comes to MV and LV, medium voltage and low voltage cables.
Okay. And these would go into which sectors?
Sorry, come again?
These would go into which end-using sectors?
So Ravi, your normal power cables, which are MV and LV, they go across different sectors. Be it power, utilities, or your normal institutional infra, everywhere your power cables are used. So they will be the maximum in terms of the variance within the industry. At an industry level, around 40%-45% of the cables sold will be low voltage, medium voltage cables. Then that will be followed by control cables and what we call flexible cables. Now, both of these are used in a separate set of industries. Flexible cables are something which is used in our day-to-day life.
For example, cables which are used for your laptop, for your TV, AC, refrigerators. Those are called flexible. So they are the largest. And then you have control cables, cables where you need to have a signal, a pass-on where you can control the outcome. That kind of cable. So again, these are used across different sectors. Control cables at an industry level, the salience will be somewhere around 15%-20%, whereas for flexible cables, the salience will be between 10%-15%.
Understood. Yeah. Thanks a lot. Yeah.
Thanks, Ravi.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participants in the conference call, we request you to kindly limit your questions to per participant. If you have a follow-up question, please rejoin the queue again.
The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
So thank you for taking my questions. Just a couple. Firstly, you mentioned that copper price increase had been unprecedented, which is why you took the active call of passing it on in a deferred way. Is it also true that customer in that case would have had significant sort of restocking, which means probably what typically plays out for a few days could have played out for maybe a couple of fortnights, i.e., in case copper prices don't move much, our Q4 numbers may be slightly negatively impacted because of this massive restocking. Is that a fair assumption?
So I think partly this was addressed earlier by Chirayu. So largely, the stocking has happened in case of wires. Usually, it happens in case of wires. Cables, there's usually no stocking, right?
The real estate segment, we continue to see an uptick. Also, if you see previously, I think you mentioned once this event has also happened past in FY22, where again, we saw that after one quarter, the following quarters continued to show growth momentum. We don't see, we don't believe that there's going to be anything different this time.
Okay. It's not that there's unusual stocking that has happened despite copper price increase. That's how I should read that answer?
Yes, Pulkit, as I had mentioned, there is about a bit of an elevated inventory as far as wires is concerned, but since the demand itself is pretty strong, we are quite confident that there won't be any slowdown in terms of momentum in Q4.
Even in case of cables, as I had mentioned, Q4 is generally the peak when we see the demand for cables and from across different industries. And hence, we are quite sure of absorption of whatever new demand is coming in. See, commodity prices are obviously something which we can't control, and we wouldn't know how it would play out in Q4. To the best of our ability, we'll try and pass on whatever price hikes come across and to the end customers in such a way that the demand is not impacted.
Okay. Okay. Point taken. Secondly, on your ad spend, which is considerably higher and almost three times of what your quarterly ad spends are, is this the new run rate? Is this some new thought process in terms of gaining market share? How should we look at this from an outer year perspective?
You need to appreciate that this is the time of the year when there's more festive period, the second half of the year, and this is the time when we also did invest significantly in brand building. We participated with a few celebrities and stuff like that. So that's a strategic call, and it's not a new baseline, but I think, yes, it's a conscious call. It's a strategic investment into FMEG, and that has also translated not entirely, but I'm sure it will translate further into our growth also. Pulkit, as far as margin concerns, we've given a guidance that we want to spend around 3%-5% of B2C top-line every year on A&P. Even with this increased spend of this quarter, we are hardly at around 1.5%. So every year going ahead, you can definitely consider an improvement or increase in our investments towards A&P.
But it will be difficult to say that this will be every year or every quarter done it because first half of this year, we didn't spend much on A&P. This quarter, we did spend. Q4 is again a quarter where you start doing more A&P because you are in pre-summer season and you want to do more spend for your brand sales. So there are those quarterly variations which happen. Second half of the year is always heavier as far as investments on A&P is concerned. But on a yearly level, going ahead, as we've been guiding, we want to take A&P spend up to 3%-5% of B2C top-line, and that is something that we'll plan to do gradually year on.
Okay. Thank you so much for your answers.
Thanks, Pulkit. Thank you.
The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance Company Limited. Please go ahead.
Thank you for the opportunity. First question is on the profitability side. Just want to understand, so Q1, Q2, generally Q4 is bigger than Q3, saying that backdrop. Should sequentially margin be better than Q3 since we'll have better operating leverage?
Yes. I mean, it should definitely get better. I mean.
Okay. So just basically.
I mean, in quarter four. As far as the gross margin level is concerned, as I had initially mentioned, to the best of our ability, we will try and pass on whatever price hike if there are required to be done to the end customer. We are not sure whether copper prices will continue to move up or go down.
Whatever it might be, the least we'll try and pass on whatever it is to the end customer as much as possible.
Understood. Understood. And just one more follow-up on the profitability side. So generally, we have maintained profitability margin in a particular range, 12%-14% for cables and wires. And just to reaffirm, so our profitability is linked to percentage margins, right, and not some specific rupees per tonne, something like that. So copper inflation in general helps in maintaining those percentage margins.
Yeah, that's right. Your understanding is correct. And if I tell you to add to that, to refer to our Project Spring guidance, we've given a long-term guidance of 11%-13%, but in the near term, yes, what you mentioned is correct.
Understood. But basically, it is percentage margin that is internalized and not rupees per tonne kind of metrics.
Yeah, yeah, yeah.
It's not rupees per ton. It's just percentage analyzed.
Understood. Noted. Sir, thanks a lot and all the best.
Thanks, Keyur.
Thank you. The next question is from the line of Ashish Jain from Macquarie India. Please go ahead.
Hi, sir. Good evening. My first question is on, again, cable and wire margins. One is the one-off employee cost. Is it booked in any specific segment or where is it with the segmental results?
No, it's not in any specific segment. It's across.
Okay. Okay. This is one-off, right? This is not recurring from next quarter onwards because this is at one time for retirals or? Okay. Okay. Got it. And secondly, in the presentation, we have listed 300 basis points impact on margins due to unfavorable product mix and all.
So that is largely higher institutional sales or because exports was anyways not doing that well for us. So is it largely the higher institutional sales or there's something else also within that to drive such a margin here?
So we've explained this, but I'll try and summarize that. So we see there are three, four things that have happened. One is due to copper price inflation, we've delayed or staggered our pass-through of rising prices to our customers. Okay? That is one. Second is there is an unfavorable business mix change wherein there is further growth in institutional business compared to channels in this quarter. And further, our contribution from export has also marginally reduced. So all three coming together has resulted in some bit of drop in margins.
Ashish, if you recall, last year, Q3, the contribution of exports to the company's top line was at about 8.3%, whereas in this quarter, it is at 6%, right? So that contribution has gone down while obviously you are correct in mentioning that exports for us have been relatively stopped. But even within quarter-on-quarter comparatively, the contribution has gone down. So that was one point. The other two points were as Shashank mentioned.
Okay. Okay. Okay. Got it. Thank you so much.
Thanks, Ashish.
Thank you. A reminder to all the participants, please restrict your questions to per participant. If you have a follow-up question, please rejoin the queue again. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead.
Hi. Thank you for the opportunity. I had two questions which were linked to each other.
First one was in terms of cables, this acceleration from, say, 20% plus volumes to 40% now, which segments, I mean, from the data that you see, which segments have seen the most kind of uptick versus last quarter? And the second one was, given that 88% of your sales are through distributors, it would mean that even a large portion of your cable sales are through distributors. Wouldn't they logically tend to upstock cables also when they see aluminum and copper kind of go up just like wires stocking happens? Those were the two questions.
Thanks. So Umang, as far as cable sales to distributors are concerned, see, ultimately, distributors are kind of servicing institutional demand, right? So depending on when the project requires a specific cable shipment, that is to the extent that the distributor would stock up on that product.
Cables relative to wires are very bulky, right? So, to a further extent than a certain extent, even the distributors wouldn't be able to stock up a lot on those cables. Plus, even in terms of average pricing, cables are very expensive compared to wires. So all these distributors would have a limit to the extent that capital is available to them. And if they lock it up in something which is cables and which might not have a demand from an institutional project right away, then they might lose out on investing in products like wires or even in FMEG where there might have been better demand, right? So generally, even though cable sales are through distributors, we don't see distributors stocking up cables. To a small extent, it might be possible, but largely, this is a wires phenomenon, not cables phenomenon. Sorry, your first question was on cables volume.
I couldn't get that. Can you repeat?
Yeah. The question was that this acceleration from 20 plus to 40, which segments have seen the highest uptick versus last quarter?
So Umang, you are aware that since we are not directly supplying to the end customers, we don't have a full visibility on which sectors are generating what kind of demand in particular sector. We get to know to the extent that our distributors will give us visibility to or to the extent that we generate that demand from the end customers for our distributors. So it will be very difficult for me to guide you that in specific this quarter, what will be the segment which will be driving what percentage of demand for the cables.
But maybe on a yearly basis, after the Q4 call, during the Q4 call, I will be able to give you much clearer or maybe a bit better guidance on the sectors that are generating what kind of demand.
Sure, Thank you so much.
Thanks, Umang.
Thank you. The next question is from the line of Achal Lohade from Nuvama Wealth Management Ltd. Please go ahead.
Yeah. Good afternoon, team. Thank you for the opportunity. Two questions. First, on the growth. If I understand right, essentially, the copper aluminum price will be up 40%-50% on a YY basis if we assume the same price continues for next two, three quarters, right? So do you see any impact on the demand given the budgets will take a hit in that case or the customer will have to rework in terms of their requirements? Is there any case for such risk?
So I think, as mentioned earlier, we have zero control over commodity prices. So we cannot comment. Lately, we've been also reading the same that there is uncertainty, but if prices continue or not is something beyond our control. But any demand, foreseeable demand in the coming quarter and the next, I think there is strong momentum. So we don't see any difficulty with respect to demand. Does that answer your question?
Yeah. So essentially, you're saying you're not seeing any impact of such steep increase in the commodity price on the demand as such for next two quarters?
Yeah, absolutely not.
Got it. The second question I had was with respect to the margins. So if I see the inventories, what we carry, we do carry substantial inventories. Even for the current quarter closing, we are talking about close to INR 6,000 crores worth of inventory, right?
Raw materials plus finished goods. So in a rising price scenario, wouldn't that benefit actually initially before it really, I mean, if you could explain to us the inventory cycle as to how it plays out, how much typically we hold, and how it gets sold out eventually.
So Ashish, you are aware that for us, we hedge our inventory. So our pricing is not at the time of procurement, but it is done at a future level once we have an order for that inventory. So while we obviously have our going on with higher inventory levels, those inventories are not priced. They will get priced in the future. And that is something which is there for stability of our margins which we've been reporting for over a decade now. So we don't see scenarios of inventory gains or inventory losses just because we price it at a future date.
The higher inventory that we are maintaining is because of the reason as Shashank mentioned that we are anticipating good demand for Q4, similar to what we had done at the end of Q2 and which played out quite well for us in Q3, where we were able to service a lot of end customers' demand because we had higher inventory and obviously, we have a lot of capacity.
Understood. Great. Those were my two questions. Thank you so much.
Thanks, Achal.
Thank you. The next question is from the line of Vidit Trivedi from Asian Market Securities. Please go ahead.
Yeah, hi sir. Thank you for the opportunity and congratulations. Great set of numbers. Most of the questions have been answered. I just wanted to know what's the margin profile when it comes to the institutional sales, the retail sales, and the exports?
So margins in exports are definitely much higher as compared to domestic margins. When we export cables, obviously, I think it depends a lot on the geography that we are exporting. But generally, historically, we've been making at least around 15% of EBITDA margins in our exports. If you look at the domestic sales for our cables versus wires, in cables, generally, we make anywhere between 9%-12% of EBITDA margins. Whereas in case of wires, it is between 15%-16%. Obviously, there are variations on a quarterly basis depending on the commodity prices, demand, etc. But generally, this is the range of margin profile across the different regions.
Got it, sir. Thank you. Just one last clarification. As you have mentioned that the price hike during the quarter is almost 70%-80% of whatever the commodity, the way commodity has reacted.
Is it fair to assume that it is a minimum in the range of 10%-15% overall price hike?
You can obviously compute the commodity inflation which was there in the past quarter along with the rupee depreciation. Just give a multiple of 75%-80% to that. More or less, you'll get the amount of pass-through that.
Got it, sir. Thanks a lot. Thank you.
Thank you. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah. Thanks for the opportunity. So in terms of FMEG, two questions. Can you articulate more on the business of fans, how it has shaped up? Again, that business is also facing some of the regulatory headwinds. And again, commodity prices have also gone up. So how is the performance in case of fans? Secondly, if you can share more details on the solar business.
I guess you initially mentioned that it has grown 100% YY. But at least what is the current revenue run rate, EBIT margin in that business, etc.? Yeah. Thanks.
Sure, Aniruddha. So on the fans business, as we've been discussing during the quarter as well, initially, during the beginning of the quarter, the uptake was pretty low because, as you are aware, the summer season this time around was lower, and there was a lot of general inventory which was there during the year. And those inventories were getting liquidated during the beginning of the quarter in October and November, and hence the uptake was pretty slow. In December, it took off in a small way because there was BEE transition which was to be implemented from 1st of January onwards, and hence, there was good uptake, a bit of good uptake in December.
Hence, on an overall quarterly basis, the fans industry would have been largely flattish or a small regroup, and our performance was also pretty much in line with the industry. As far as the Q4 or Q1, as far as 27 expectations are concerned, it will depend a lot on how the coming summer season is expected to be. Definitely, because the BEE is getting implemented from 1st of January, the newer norms are getting implemented from 1st of January, there will be a bit of price hike that everybody will be taking. I believe the price hike would be in the range of 2%-4%, which will be taken during the course of 1st one, 1 and a half months of this calendar year as well.
But to a larger extent, the uptake and performance of next quarter and the quarter to come will depend on how the anticipation of next summer season is. As far as your question on solar is concerned, solar, as I was mentioning in the opening comment, had a very good quarter, another very good quarter. After having one and a half years of very good uptake momentum, we expect even Q4 to be very strong. You would have seen that we had actually launched a newer range of 350 kilowatts solar inverters last quarter, and that did very well for us. The outlook is very, very positive from our side.
We believe solar, which is already the top, also the largest contributor for us on the FMEG segment, will continue to grow even faster in the coming couple of years as well since all the government schemes are already getting implemented and are in motion. Hence, from our side, the outlook is very positive. As I had mentioned in the previous quarters, the margin profile of solar is currently in high single digits, and we are maintaining that. To a certain extent, solar has now become the largest category for us in FMEG. That is one of the reasons why for us, FMEG has become profitable. And that is what we had mentioned in our earnings presentation as well. The business mix or the product mix change which has gone through, that solar has become the largest category.
Switches and switchgears have been doing quite well since last three to four years. Conduit pipes and fittings are doing much better. All of that has contributed to FMEG now becoming continuously profitable for us. And every year going ahead now, we believe that FMEG will continue to improve its profitability towards a guided range of 8%-10% of FY 30.
Yeah. Thanks. This is very helpful. Just second question. You have mentioned in the PPT that we have grown 59% in domestic C&W, and we would have gained market share. So roughly, what will be the market growth means upwards of 50%, upwards of 40% means? Where will you pick the market growth per se?
Getting exact market growth for this quarter will be very difficult at this point of time because we'll have to wait out for other larger listed companies to come up with their results over the course of next two to three weeks. But I would definitely believe that the growth would have been higher in this quarter compared to what it was in the first half. To the best of our estimation in the first half of this year, industry growth was at around 15%-16%. I believe the industry growth would have been more closer to 20% at least. And this is the entire industry put together, organized plus unorganized. But specifically to our kind of market share gains, we would have realized within this quarter.
I think we should probably wait out for another two to three weeks to get to know the exact numbers of our peers. No, but that's surely we will wait. But if 59% is our growth and market growth maybe 20%, that's a massive jump in the market share for us. Is that a fair understanding?
Yes. That's something that I was mentioning. We need to appreciate the fact that in spite of a 300 basis points decrease in our margin profile, we've been able to deliver 34% profitability growth in this segment. And that is on the back of such high 59% domestic growth. There's obviously a bit of an export growth as well. I think our strategy is working very well.
We have been working on the ground since the inception of Project Spring, where we are going into each and every white spaces that we have within cables as well as in wire, be it product category or be it geography. We are working very extensively with our distributors and trying to improve their growth as well as our wallet share of their growth. So all of these initiatives are helping us. You know, in the first half as well, we had grown cables and wires at 26% year on year. While, as I mentioned, we believe the industry growth would have been around 16%, whereas in this quarter, we've grown at around 60%. So definitely, we have gained a lot of market share.
Yeah, that's really great. Yeah. Thanks. Thanks. And congrats on the market share gains.
Thanks, Aniruddha. Thank you very much.
We will take that as a last question. I would now like to hand the conference over to Mr. Niyant Maru for closing comments. Thank you, and over to you, sir.
Thank you, everyone, for your attendance. Thank you. Thank you very much. On behalf of Polycab India Limited, that concludes this conference. Thank you for joining with us today, and you may now disconnect your lines.