Q4 20/21

Jun 7, 2021

Ladies and gentlemen, good day and welcome to Polycab India Q4 FY 2021 earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * then 0 on your touchtone phone. We would like to remind you that certain statements made by the management in today's presentation may be forward-looking statements. These forward-looking statements reflect management's best judgment and analysis as of today. Actual results may differ materially from current expectations based on the number of factors affecting the business. Please refer to safe harbor disclosure in the presentation. Please note that this conference is being recorded. I now hand the conference over to Mr. Gandharv Tongia. Thank you, and over to you, sir. Thank you, operator. A very good afternoon, everyone. I hope you all are staying healthy and safe. I'm Gandhar Tongia, CFO at Polycab India Limited. We are very happy to have you on the call today to discuss our Q4 fiscal 2021 business performance. I know this call had been long overdue. Thank you for being considerate. Unfortunately, the night after our board meeting on 13th of last month, I started observing a few common COVID symptoms, which aggravated the next morning. As a precautionary step, we decided to postpone the call. However, I'm fortunate to have recovered well and feeling much better now. Moving on. Please note, during the 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 web page of our website. It can also be downloaded through the link or QR code on slide 10 of our earnings presentation. From our management team, we have with us our Chairman and Managing Director, Inder T. Jaisinghani. Let me now hand it over to Inder bhai for his comments. Good afternoon, everybody. Welcome to all. FY 2021 has been extraordinary year marked. Sorry to interrupt, sir, but your voice is bit feeble. If you can come a bit closer. Okay. Just a second. Good afternoon, everyone. Welcome to all. FY 2021 has been extraordinary year marked by disruption, resilience, compassion, and transformation. Our endeavor to ensure safety of Polycab and help the society at large remain uninterrupted. Concurrently, we also ensured undertake operation through the agility and technology, which helped us leverage the favorable market trends and report robust business performance in the fourth quarter. We are excited to commence a journey towards our five-year vision, which will shift orbit our brand positioning, operations, and business growth, along with the strong emphasis on the governance and sustainability. Considering our ongoing transformation initiative, I believe we all are well-placed to take a leap and create long-term value for everyone connected to the Polycab. I now request Gandhar to take you through our earnings presentations. Thank you very much, Inder bhai. Overall, we had strong Q4 with healthy market share gains. The underlying business performance was fairly good across the board. The domestic demand trends remained supportive. Pandemic-related disruption across all facets of economy was relatively minimal in Q4. As a result, infrastructure and construction activities picked up in full swing. Central and state government, as well as private project activity showed up an uptick. Private sector investments have been evidently higher in the second half. Consumer sentiment improved with unlocking and vaccination drive, leading to buy-out demand for B2C products. With that, we continue to remain cautious and agile in the face of ongoing second wave of COVID-19. While the severity of it seems high, I believe we, as a country, are much better placed than last year given increased safety awareness and fast-paced vaccine rollouts. Even as a company, we are well-placed from an operational standpoint. Hence, we don't foresee any significant disruption. Our teams continue to perform at a very high level while adopting a nimble approach to seize all opportunities regardless of business environment. Moving on to presentation with slide 4. For the quarter ended March 31, 2021, our consolidated revenue at INR 30.3 billion grew by 43% year-on-year. Performance has been quite strong even if we normalize it for the impact of pandemic. B2C portfolio continued to outpace B2B, thereby increasing its overall contribution. EBITDA grew by 43% year-on-year, resulting in 13.9% margin led by pricing action, leverage benefit, cost-saving initiatives, offsetting sharp input cost inflation. Our stock cost at INR 997 million was higher versus last year. Polycab ensured that employees are well rewarded for the effort and commitment, especially during such challenging times. Accordingly, hikes, promotions, and variable pay were rolled out for FY 2021. Moving on. A&P spend at INR 144 million or 0.5% of sales was lower versus last year as we reorganized our marketing strategy to better suit the business objective. We can take this quarter as an aberration. Our annual interest spend are likely to be in the tune of INR 1.5 billion-INR 2 billion for fiscal 2022. Finance cost was broadly stable while other income was lower on a year-over-year basis to higher mark-to-market gains in base quarter. A detailed breakup of our other income and finance costs have been provided on slide 13 of our earnings presentation. Our profit before tax at INR 3.8 billion and profit after tax at INR 2.8 billion increased by 36% year-over-year and 32% year-over-year respectively. On slide 5, for the fiscal year 2021, I'm delighted to highlight that we surpassed last year despite a dismal start to the year. Our revenue grew on a year-on-year basis with B2C contribution rising by over 750 bps from 32.6% in fiscal 20 to about 40.2% in fiscal 21 on a standalone basis. Adjusting for a large export order, it would have been increased further. EBITDA margin was relatively stable, which again. Requesting all the participants to please stay connected. We lost the line for the management. Ladies and gentlemen, thank you for patiently waiting. We have the line for the management reconnected. Thank you, and over to you, sir. Sincere apologies, participants. There was some technical issue in the line. Let me just go back to slide 5, which I was trying to explain, and then let's continue from there. If we go to slide 5, for the fiscal year 2021, I'm delighted to highlight that we surpassed last year despite a dismal start to the year. Our revenue grew on a year-on-year basis with B2C contribution rising by over 750 bps from 32.6% in fiscal 20 to about 40.2% in fiscal 21 on a standalone basis. Adjusting for a large export order, it would have increased further. EBITDA margin was relatively stable, which again, is a decent achievement I would say, considering the adverse leverage and sharp rise in input costs seen during the year. Sales grew 16% year-on-year, partly led by few one-off gains in Q1 as highlighted on slide 10. Moving on to segment on slide 6. Wire and cable business clocked a healthy growth of 35% year-on-year, led by pickup in construction activity, higher realization, increased distribution reach, and portfolio enhancement. On the domestic side, institutional business outperformed distribution business during the quarter. However, this was on the back of a soft base, and hence it may be a bit early to call out for recovery. Having said that, the business certainly continued to gain traction on a sequential basis. Exports portfolio, excluding the large order, declined by 7% year-on-year, mainly on account of the stalling of few large projects on account of pandemic. However, we continue to build presence in many key geographies through appointment of distributors and expanding product offering. We believe the business will get back to growth trajectory soon. For the year as a whole, our domestic market assessment suggests we would have gained at least 200 bps of market share in fiscal 2021. However, we await the market and industry data as of now. On the profitability side, segment EBIT margin at 13.4% was broadly stable versus previous quarter. This was supported by pricing actions to offset a double-digit inflation seen in our raw material basket. Moving to slide 7. FMEG posted an impressive 89% year-on-year growth in Q4 on the back of strong execution. All categories as well as regions witnessed strong growth with market share gains. Consumer demand remained healthy on account of returning normalcy. FMEG contribution to overall sales increased over 290 bps year-on-year to 11.4%. During the quarter, FMEG posted healthy growth despite stiff competition and cost push. Lighting products business nearly doubled led by better demand and supply alignment. Switches and CGI grew 2.5x while other categories also witnessed strong uptake. Profitability continued to move in an upward trajectory despite input cost inflation, helped by pricing intervention, premiumization, better working capital management, and cost optimization. Segmental EBIT margin stood at 7% in Q4 and 5.5% for fiscal 2021. While the ongoing phase of intermittent lockdown do pose a challenge, we are well-placed from a supply perspective to cater the demand across the nation. We have also observed some resilience in retail channel as the retailers are now delivering directly at home. While this may not be meaningful, it does offer some optimism and showcase resilience of Indian trade. On slide 8, other segment, which is largely our strategic EPC business, witnessed a decline on a perceived impact of pandemic and higher base of last year. The copper segment, as disclosed in our financial result, largely reflects Ryker Base, which is a part of our backward integration initiative. Moving on to financials from slide 10 onward, our balance sheet grew stronger with over INR 9 billion of net cash position as of March 2021, which is a 5.5x of same period last year. ROCE and ROE in Q4 stood at 32% and 24% respectively. Working capital looks optically stable on a YOY basis. However, there has been decent underlying improvement. The numbers should be correlated to the fact that the prices of key imports like copper, aluminum have nearly increased. As a matter of fact, copper has doubled over last year, and this inflation reflects in mark-to-market inventory as of 31st March 2021. Besides financials, during the year, we have made tremendous progress on expanding our distribution and influencer ecosystem. Our authorized dealers and distributors count as of March 2021 grew by about 17% year on year to over 4,100. Our retail outlet reach increased by about 32% year on year to over 165,000 electricians, while our influencer program grew by about 33% year on year to over 180,000. We now have seven knowledge and experience centers across several large cities across India. Furthermore, we are also now redefining our retail marketing approach through different outlet formats. First is Polycab Galleria, which we also call it as knowledge centers. These are large showrooms with virtual reality showcase as well as audio-visual facilities. They also serve as training hubs for influencers and a sales back office for our employees. Second is Polycab Arena. These include experience centers as well as Polycab exclusive retail outlets. The third format is Polycab Shoppe, which is a shop-in-shop model where we design the exclusive earmarked space granted by the retailer. We believe this concept will help us provide a better brand experience to millions of customers and influencers. Under Project Shikhar or Sales Acceleration Program, we have also launched the Expert Program, which is a robust 360-degree influencer management initiative promoting inclusive growth. The electricians and retailers enrolled in this program are provided loyalty-based monetary incentives in conjunction with training in their respective fields by industry experts. Once trained, they are certified as experts by Polycab. The certificate will be provided through government-recognized institutes. The aim is to help them build soft skills like people, social, communication skills, and time management, along with professional knowledge. Leveraging on this program, we will also be piloting a bunch or basket offering soon. A glimpse of our new product, the Polycab Galleria open in Cochin, is on slide 14. We have some exciting stuff on the next few slides. It gives a portrait of our five-year vision project, which we have titled it as Project LEAP. This year marks the 25th anniversary of Polycab as a structured entity. Since 1998, we have recorded a robust 43% compounded annual growth rate in business. Even in the last five years, the growth has been relatively healthy at about 11% CAGR while maintaining market leadership and tackling challenges like the pandemic. By diversifying our portfolio, building robust manufacturing capability, creating a strong IT platform, and strengthening our brand positioning, we have created a very functional platform which has the potential to unlock significant amount of latent growth. Now is the time to leverage these competencies to the fullest and challenge ourselves to realize our future vision for the company over the next five years. Accordingly, we have embarked on a multi-year transformational journey with an aim to cross INR 200 billion in sales by FY 2026. We can't possibly do business without thinking of the environment, social development, and good governance. Hence, we also aim to significantly up the pedals on our sustainability agenda as well. Let us come how do we formulate our direction towards this vision. For this, we believe simplicity is excellence. We have essentially created four core areas, that is B2B, B2C, capabilities, and sustainability. I will probably touch each one of these briefly over the next few slides. Slide 16. On the left, we have highlighted few block targets, while on the right, we have key work streams to achieve that target. On the B2B side, we want to reenergize the business and strengthen our leadership position. This will be done by refining our business model to win in large accounts, enhance value proposition to explore untapped opportunities, enable demand generation through micro-market analytics, and have a strong business development hub. On slide 17, for B2C business, we wish to achieve breakout growth and position ourselves to win in these categories. We want to make our product an integral part of consumers' day-to-day life. We aim to build a comprehensive portfolio across price points, redefining our brand architecture, adopt digital-first approach, and explore adjacent fields. Slide 18 highlight three core growth enablers which will guide us through the journey. We will build an operating model which fosters performance, innovation, and customer-first driven culture with increased autonomy and accountability. We plan to take our IT capabilities to the next level by having digital analytics-driven decision making across all facets of business. Slide 19. Lastly, most importantly, we believe our progress will be analogous to our sustainability initiative. While we have made wonderful progress in terms of reducing environmental impact and promoting inclusive growth, we believe there is lot of work which can be done in the areas of renewable energy, optimizing usage of energy, water and other resources, recycling of waste and water, and further augmenting social development contribution. We have already taken baby steps by appointing an environment consultant who will help us with our green initiative. Our Polycab Social Welfare Foundation will help us drive significant and focused CSR initiatives. We have also embarked on an integrated reporting journey starting fiscal 2021, which we hope will meaningfully increase transparency and form a base for good governance. Environment, sustainability, and governance focus will be ingrained further into core business. We aim to achieve leading ESG score in Indian corporate space. In the coming period, we will also develop long-term ESG targets. There are a couple of updates that I would like to share with you. Considering the healthy financial position of the board has recommended for payment of final dividend of INR 10 per equity share for the year ended 31st March 2021, subject to the approval of the shareholders. Our dividend payout ratio on shareholder profit will sequentially improve to 18% in FY 2021. There has been some reorganization in the board of directors. On the Executive Director side, Mr. Ajay Jaisinghani, Mr. Ramesh Jaisinghani, and Mr. Bharat Jaisinghani have stepped down from the board, and Mr. Varad Jaisinghani, Mr. Nikhil Jaisinghani, and Mr. Rakesh Talati have been appointed as Executive Directors, subject to approval of the members at the ensuing annual general meeting of the company. The change was a part of our larger succession planning. Varad and Nikhil have been working in different areas of sales, marketing, production, IT, and others for nearly 15 years now, and both have played instrumental roles in driving several important projects within the company. On the independent director side, we had two changes. Firstly, Ms. Hiroo Mirchandani had resigned from the post of independent director with effect from 12th of May 2021 in order to rebalance her board portfolio in line with her professional and personal goals. We really admire the guidance and all that she provided which helped the company grow. We wish her good luck for her future endeavors. For the second change, I'm very pleased to announce Mrs. Sutapa Banerjee has joined the board as an independent director with effect from 13th May 2021. Mrs. Banerjee comes with over 30 years of professional experience heading many large financial services company. Mrs. Banerjee is a gold medalist economics and advanced leadership fellow at Harvard University and visiting faculty with IIM Ahmedabad. Mrs. Banerjee is also an adjunct faculty with Indian Institute of Public Administration, the Government of India think tank under the Ministry of Personnel, Public Grievances and Pensions. With this appointment, she adds Polycab to the list of esteemed companies like Godrej Properties, JSW Cement, Zomato, Manappuram Finance, and others, where she is a board member. Lastly, we have entered the new financial year, and we are progressing well across all facets of our business. We are gearing ourselves to a leap into the future. I feel confident about our organization's vision and execution capabilities to deliver maximum value to our consumers, partners, and shareholders alike. Thank you, 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. Hi, sir. Good afternoon. Congrats on a good set of numbers. Mr. Swaminathan, if you can speak closer to the handset, please. Yeah. Hi, sir. Good afternoon. Congrats on a good set of numbers. My first question is with respect to the pricing action that we had taken at cables and wire segment over the past three to six months. What kind of price hike that we had taken, and how much is more left given the fact that commodities have been on a rising trend? Sure. Thanks, Ravi, for your kind word. On the pricing action, if I reflect on the quarter gone by, the raw material cost at the basket level increased in almost double digit, whereas the price hike on a weighted average basis, we would have taken in lower teens. That is where slightly you see the margins have improved, at contribution level. You know this industry already, Ravi. Every month, a player like us, we are revising our prices after considering increase or decrease in input cost, for example, copper or change in foreign exchange rate between USD and INR. We'll continue to follow the practice which we have been following consistently over the period, and wherever there is a need to adjust the prices, we will continue to do that. Yeah. Are you confident that through the year you'll be able to sustain or maintain gross margins, given the fact that past couple of quarters gross margins have contracted a bit year-over-year basis, in spite of the fact that wires and other higher margin products have increased in proportion. Would we be able to maintain gross margins which we had seen, say, last year, say, FY 2021? For you, Ravi, the business model which we have gives us flexibility to price our input cost, particularly copper, when we have significant visibility on the selling price. That is how we have been able to maintain our margins. At times, because of lag impact or the inventory in the distribution, there could be some delay. If you take a 12-month view or annualized view, I generally believe that we should be able to give and take a few hundred basis points here and there. Generally, we should be able to maintain our EBITDA margins. Got it, sir. With respect to traction, with respect to the first quarter so far, April, May, and some part of June, how has it been in terms of demand given the lockdown scenario? If I compare April and May of 2020 with, say, April and May of 2021, I think 2021 is significantly better than the base. I know there are restrictions, there are lockdowns. In comparison to last year, these are slightly less negative on the business side of it. Since, in the current month, most of the states have started relaxing the lockdown restrictions, we expect that in the coming quarter the performance will continue to improve. I believe that second quarter will be better than first quarter, and directionally, it seems that the second half of the fiscal will be better than the first half of the current fiscal. Got it, sir. With respect to, say, the breakup of revenue for FMEG you can give and the CapEx plan next two years you can give that in detail. That's my last question. Sure. The CapEx, we anticipate that we would incur around INR 300 crore this fiscal. Around 35% will go for FMEG, which would have, say, for example, new CapEx on fan factory, TPW factory, as well as factories for pipe and all that. That's around 35%. Balance would have a combination of a bit of backward integration as well as cable and wire facilities. In cable and wire, predominantly it would be because of special cables and export cables, where we need to make some investment. Special cable, even in earlier quarters I also had talked about that we are focusing on something called import substitute, and we have been able to secure several approvals in the last few quarters. We want to now set up our facility so that we can manufacture these products in India in true spirit of Make in India and Atmanirbhar Bharat and supply it to the Indian customer. That's a broad blueprint. There will be some slight maintenance cost and all that, but overall the CapEx will be around INR 300 crore and thereabout. The second part of the question was around the breakup of FMEG business. You would have already noticed that this year we have entered the INR 1,000 crore club in FMEG, and I think it's a commendable performance by the team Polycab to reach that number in five, six years. If I break it down for you, it would be around 35%-40% of Fans, followed by lighting, which would be around 25%-30%, followed by switches and switchgear, around 15%, and pipe would have touched almost double-digit now. That's a broad breakup of FMEG revenue, which is INR 1,000 crore plus in FY 2021. Got it, sir. Thank you. Thank you, Ravi. Thank you. The next question is from the line of Pritesh Chheda from the Lucky Investment Managers. Please go ahead. Yes, sir. I have one broader question. From your Project LEAP, Bandhan, and Project Josh, which have been mentioned over the last one year now. Over the next three to five years, where do you see your company revenue sum total rising to? What kind of margins do we see three to five years from now? What CapEx would you incur to derive that size of the business? What would be your reach as a percentage of the market by then? What is the organizational building activity that has been done or needed to achieve that? Yeah. Let me demystify it for you. I think these are two or three different projects. Let me spend some time on Project LEAP. This is a new project which we have just started barely a month back. We are working with a consultancy firm, Boston Consulting Group, BCG. The objective is to transform the organization, and I dwelt about it in my opening remarks as well. We want to work on B2B, B2C, have the IT capabilities as well as the process and organization in place. By end of FY 2026, it's a forward-looking statement, we expect that we would be able to touch almost INR 20,000 crore of top line, which is more than double than the current year. There could be several activities which will be carried out to build each of these blocks, which are B2B, B2C, organization, process and IT capabilities, and governance and ESG. Every half yearly, we will come back to you on your specific questions on EBITDA margins, CapEx, and what we have done and all that. At this stage, I would be able to give you color only on revenue. As we go along, we would be happy to give you additional input. Directionally, it appears that our EBITDA margin will improve because the proportion of B2C business is increasing, and that is where the margins are expected to go up. I think we should wait for half yearly update, where we can come and update you on the activities which we have implemented or carried out and the results thereof. On your specifics on the market share and all that, I think we have already covered a part of it in my presentation that we are gunning for 1.5x in one particular business category and 2x in other business category, as far as growth is concerned as in comparison to industry growth. I think I would love to give you more information and color when we come to the September presentation. The second project is Project Udaan, which we initiated almost a year back, and it was a cost optimization project. As of now, we have already identified cost optimization initiatives translating to almost 80 to 100 basis points of our top line. These are in the process of implementation, and we expect that these benefits will accrue over the period to the P&L of the company. The project is ongoing, and it is quite possible that we are able to unlock values in addition to what we already unlocked in the quarters to come. For Josh and others, the third project is actually the Project Shikhar, which is the acceleration program, which in a way covers both Bandhan as well as Josh, and that is on how we are going to penetrate the focal geographies and empower and train our influencers. These are three projects on which we are working on and would be happy to update you on a half-yearly basis on the progress. Sir, what is the distribution reach as a percentage of the total market after this 165,000 retailers? We have almost 4,100 authorized dealers and distributors, around 165,000 retailers. We believe we have a sizable significant presence as far as authorized dealers and retailers are concerned. The base of universe is decided, it's slightly difficult to come to a precise number, and that is why it would be difficult for me to give you an absolute number as an answer to your question. Every year, we have been able to improve our number of dealers and retailers, and we'll continue to do that. Okay. Just one last clarification I missed it. You mentioned CapEx for 2022 was 300, it will be INR 300 crores. The mix that you gave for FMEG for FY 2021 was 30% fans, 20% lighting, and I missed the other parts. These are two different topics. Yeah. Revenue breakup is what I explained, wherein the fan is almost 35%-40%, lighting almost 25%-30%, switchgear around 15%, followed by piping, which is just about double digit. On the CapEx side of it for FY 2022, not for FY 2021. FY 2022, we believe that we would be able to incur almost INR 300 crores thereabout, and around 35% will be invested in FMEG, and balance will be invested in cable and wire, particularly in special cables, exports cable, and part of network integration. There will be some element of maintenance CapEx as well. How much did you spend in 2021, CapEx? It's there in the presentation. It's just shy of INR 200 crores, INR 191 crores. It's on slide number 12. Thank you very much. All the best to you, sir. Stay safe. Thank you. Thank you very much. Thank you. The next question is from the line of Rahul Aggarwal from InCred Capital. Please go ahead. Hi, good afternoon, and good to see you back, Dander. Congratulations for a good performance in the past year. Just two questions. One is on the capacity expansion. You answered it partly on the fiscal 2022 side. I was more focusing on the 5-year plan to reach INR 20,000 crore. I would imagine the company would need significant investment into capacity. Since the ethos of the group is to manufacture in-house, even if I take an average of INR 300 crore a year into 5, it's INR 1,500 crore of CapEx. If you help us understand what are the areas of investment you're thinking to reach that INR 20,000 crore goal over 5 years will be really helpful in terms of what factories, what products are you thinking bringing in-house versus the outsource right now. That is one. Secondly, on the B2B slide, where you mentioned that one and a half times or 2X type growth for core and emerging products. If you help understand what are the products we're talking about, if you're splitting them into core and emerging, will be really helpful. Thank you so much. Hi, Rahul. Thanks a lot for your kind words. I'm glad that you like our performance. On the capacity expansion CapEx for next five years, Rahul, on this particular project, I must admit that these are early days. We have barely embarked on this journey almost a month back. Though we have a broad picture available in terms of the top line and how we are going to do it, but there's a fair amount of detailing which is being done by the team, both by Polycab as well as the consulting partner. I expect that by the second quarter of the year, sometime in October, when we have the earnings presentation, I would be able to give you a bit of additional color. I will continue to update you on a half-yearly basis. If for the time being on LEAP, I think we should pick up the key messages. One is we are committed to growth, and we want to ensure that we are value additive for all the stakeholders, including the investors. That is why we have embarked on this journey with a very credible consultancy group. The second is the top-line target is INR 20,000 crores. Beyond this detailing, if you allow me to come back to you in the month of October as part of Q2 presentation, I think that would be a good approach to have. Okay. One small thing on inventory. I'm not sure about the project name, my sense is Polycab was working on inventory rationalization and improvements. If I look at last five-year numbers, broadly, we have stabilized about 80 days of sales. I'm looking at it as a number on sales and not on COGS. Could you help me understand? I mean, I've not seen real improvement there. Could you help me understand if that project is already completed and the numbers have already come through or there's something left there? That's my last question. Thank you. Yeah. You're right. If I see on absolute number of days wise, optically it would look like that there is a change of improvement. If I play it with the top-line growth and increase in market share, that would help us in understand the availability of each of these SKUs at a different phase where it has increased. That is where the science has been implemented. There's a fair amount of work which we have completed on finished goods, right from having the right architecture in place, what we need to store where, whether at the mother warehouse or at the plant, or whether we need to add to distribution and all that. There's a bit of a work which we haven't completed yet on the RM side, on the raw material side, which is going on. Directionally, we believe that we can certainly optimize the inventory levels further. In the last couple of quarters, there was a bit of a challenge on availability. I'm sure you would have also heard about the availability and pricing pressure on the raw material side, and that is where we had to, at times, take a step back and see whether we need to relook on the overall approach. To answer your question that whether the inventory can be further optimized or not, I believe that, yes, certainly it can be further optimized. What we want to, at the same time ensure is that we increase the availability, because that is the key clear differentiator for us at the marketplace. The OTIF or On Time In Full, is generally between 95%-98% as of now, which has improved significantly in, I would say, last three to four years. We as a company would like to reach to 100%. I know it sounds impossible, but directionally we would like to reach 100%, and that is where we have all of our work in. Perfect. Thank you so much. All the best. Thank you very much. Thank you. The next question is from the line of Aditya from Axis Capital. Please go ahead. Hi, Gandhar and team. First off, congratulations on great set of numbers. I hope, Gandhar, you're doing well. Gandhar, I have three questions. One is on our FY 2026 roadmap that we've put through. I would assume that the FMEG growth of high teens to early twenties would be a key cornerstone of that strategy. Just wanted to understand from you some nuances as to which segments is it that we are targeting for high growth, how are we likely to achieve that? That's my question number one. My question number two is in terms of cash conversion, right? We've done INR 1,200 crore of operating cash this year, and it's a stellar number. I just wanted to understand on a steady state basis over the next three to five years, what is the kind of cash conversion that we can expect? The third is, with INR 900 plus crores of cash on our sheet are we looking at any inorganic additions? Thanks, Aditya. Thanks a lot. I think these are very set of questions, and thanks for highlighting our performance. The first one, I believe the real growth drivers or growth engines between now and FY 2026 would be exports as well as B2C revenue. B2B will continue to play its role, but I think just think as a growth percentage, B2C will outshine B2B. There will be some element of adjacencies, but I think the core product categories where we are present, these categories will drive the most of the growth and road map to 2026, INR 20,000 crore. On the cash conversion, as I mentioned in one of the responses earlier, and I was trying to come back to you on a six-month basis because we are still very early to this particular initiative. We want to bake these numbers and decide what all we want to externally communicate and then commit ourselves to those numbers so that every quarter or every six months we can go back to the investors and update them on the actuals. I'll come back to you on that in October. I believe that cash conversion will continue to improve in the years to come. On M&A, we are actively involved in a few of these activities, including identification of the focused areas, zeroing on a few of the targets, and then doing the procedural aspect of it. I'm hopeful that we would be able to update you soon on a few of the M&A activities as well. Yeah, Gandharv. Two follow-up questions. One is, within our target of assuming INR 20,000 crore, we are looking at B2C, B2B kind of a split rather than cables and wires and FMEG, plus exports obviously. Is that a fair way of understanding things? Because then we would be also building in a fair bit of growth when it comes to housing wires and other B2C wire segments as well. Just trying to understand your thoughts on that. Absolutely. I think that's a way to review our performance. We have two growth engines. One is B2B, which has traditional cable business, and then we have B2C, which has retail wire as well as FMEG business, and then on top of it, we have the export business. That is how we are internally trying to improvise on our growth performance as well as that is how we review our performance as well. Perfect. Thank you. Just one last question. With regards to our INR 20,000 crore target, we've not built in any inorganic addition, right? I mean, we're talking about this on an organic plan. Yeah. As I mentioned, Aditya, I'll come back to you in the month of October, and to the extent possible, I'll give you additional color on this, and then from there, we can take it forward on a quarterly basis, we can update on actuals. Perfect. Thank you so much. Congratulations once again, and best of luck for the quarters to come. Thank you. Appreciate it. Thank you. Before we take the next question, a reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, you may be requested to rejoin the queue. The next question is from the line of Santosh Yellapu from Asian Markets Securities. Please go ahead. Thank you for the opportunity. Congrats on the good set of numbers. I have a couple of questions. When you're internally targeting for 12% EBITDA for the FMEG business by 2026, what would be the approximate top line that you're having internally in that thought process when you're building? What are the initiatives you are taking to reach that kind of milestone on the top line front as well as on the margin front? If you could give some color on it, that's the first question. The second question, from a long-term 3-5-year cycle point of view, what are the initiatives you are taking so that the exports distribution strategy pans out the way we are thinking? What specific geographies, any specific products you are targeting? Having won recently a few export orders from Australia to South America to North America. We are winning a lot of export orders. What is your thought process there? If you could give me some color on both the points, it'd be helpful. The first one, the growth will continue to come from B2C and exports, followed by B2B. As I mentioned to Aditya, allow us time till October where we can come back and give you more color on how this INR 20,000 crore will be achieved. On the exports, we have been able to improve our presence across the globe in the last around 24 months. We have additional approvals in place. For example, basic approvals or UL approvals and all that. If we just slice and dice our exports, I would say that almost 50% or thereabout is coming from U.S., followed by Asia and Australia, and then rest of the world. We believe that having this twin approach of going after a few identified sectors, as well as having local presence in identified geographies would help us in improving our top line. That is why we believe that export will be a key contributor to our INR 20,000 crore top line target by fiscal 2026. Sir, one follow-up question, if I may. What is the timeline have you put to the top 3 new cities you want to penetrate? There is still some way to go ahead and penetrate the top 3 new cities. Any timelines, any targets, and how would it contribute to your growth? If you could just give some color or some numbers, that will be very insightful. As I stated, as a quantified target, I would be able to give you a top-line target of INR 20,000 crore by FY 2026. Within that, the breakup, it would be difficult for me to give you because we have just embarked on this particular journey. If you just allow me time till October, I'll come back to you on the target, which we will be able to talk about externally and along with the investors. After that, we can then do a follow-up every six months, therefore. Okay. Understood. Thank you for your time. Thank you for your questions and time. Thank you. The next question is from the line of Chetan Gindodia from AlfAccurate Advisors. Please go ahead. Hello, Gandhar and team, and congratulations on a great set of numbers. I have just one question. Can you give us a sense of the volume growth and the pricing growth for FY 2021 for the wires and cable segment? Thanks for your kind words. You know this industry already. It's a bit difficult to give volume data, and that is why most of the large players don't give it. I tell you why this is difficult, because if I sell copper cable of length of, say, one kilometer vis-a-vis an aluminum cable of the same length, the pricing will be significantly different. I think the best way to analyze, from your perspective, a particular company's performance is to compare it with peers' performance. If its growth rate is slightly better or worse than its peers, that is where you can rate the company, because the quantitative information is not necessarily going to add any value. Okay. Still, if you can give me some sense on whether the volume growth in this quarter was in double digits or at least something that would help us analyze what is the underlying growth? Most of the growth has come predominantly from the B2C business categories, both from FMEG as well as retail wire. FMEG has already touched or crossed INR 1,000 crore club, and retail wire continues to grow at a rapid rate. Outside that, the LT cable business is growing significantly. On the core cable side, there is some sort of sluggishness on the institutional, but overall, the trend order is like this, that B2C followed by B2B. Okay. Just a clarification, you said that B2C business contribution is currently 40.2% in FY 2021. This is for the overall revenue, including FMEG, or this is just a breakup of wire and cable segment? This is overall, including FMEG, which is B2C, plus wire business, retail wire business, which is also B2C. FMEG plus retail wire, both put together is almost 40.2%. Okay. Thank you. Thank you, Gandhar. All the best to the entity. Thank you. Thanks a lot. Thank you. The next question is from the line of Manoj Gori from Equirus Securities. Please go ahead. Yeah, thanks for the opportunity, Gandharv. I'm glad to see you back in action. A couple of things. One would be on the cable front. If you look at in the current system, we witnessed strong traction for the wires business. However, the institutional business was relatively lagging. The industry was able to see some green shoots during February and March. Because of the second COVID-19 wave, do you feel like this business is back on track or there would be some delay for this business to be normal? The cable one, the distribution one anyways was back to almost pre-COVID levels after the wave 2. The challenge was on the institutional side. There also we have seen some bit of traction in the fourth quarter, I think we'll have to wait for a month or 2 before we finally decide and conclude whether we are back to the pre-COVID levels on the cable this thing. Directionally, I believe that second half of the year, of the current year should be better, both for institutional as well as distribution business. Right. Also, does it indicate that, suppose of last year, whatever institutional business that has been lost for the industry? There might be some pent-up demand when the situation normalizes and move back to the pre-COVID level in volume terms. I think the element of pent-up demand is expected to be there, both in distribution as well as cable. Whether the pent-up demand will take us back to the pre-COVID levels or not, that would be difficult for us to comment at this stage. I think directionally, we should be able to move towards normalcy pretty soon after the first quarter. Right. Lastly, on exports, I think overall on the call, you have explained very well, especially about the long-term strategies and everything. On the exports, you have been focusing a lot on the U.S. market. How are things shaping up over there, and what's the overall outlook? In terms of your distribution model over there. Can you throw some light over, please? That will be helpful. There is no change in the distribution model as such. We have only established a distribution model there. What now we are trying to do is further penetrate the market, and see if we can introduce additional product categories. This will continue to be a continuous process of penetrating all the overseas geographies, including U.S. Why U.S. is top on our priority is because as of today, U.S. contributes almost 50% to our export top line. Outside the U.S. as well, there are geographies, for example, just to list Australia, part of Asia, where we can further augment our top line through exports. Right. That was very useful, and I wish you and the entire team all the best. Thank you, bro. Thanks a lot for your kind words. Appreciate it. Thank you. The next question is from the line of Sanjay Sardeshmukh from Ampersand. Please go ahead. Yeah. Hi, sir. Congratulations once again on a good set of numbers. Just if you can share with us the gross margin of your FMEG business. The main reason why I'm asking it is that, how do you compare in terms of your profitability at gross level to your peers, both in terms of pricing as well as product mix point of view? In the mature product categories within FMEG, we have already reached to the industry-level gross margin, which are give or take few percentage points here and there, around 50% or thereabout. In the product categories which are comparatively smaller within the FMEG market, there is some scope for improvement in margins. As far as EBIT margins are concerned, those you would have already seen have improved in the period to come. That's mainly because we have slightly higher cost base, which will get optimized with increase in the top line. These projects like Project Udaan, which is a cost optimization project, as well as Project LEAP, would also help us in improving these margins. Understood. Thank you. Mr. Sardeshmukh? Yeah, I already got it, but I want to understand what is going on. I think you're a little mute for someone. I think there's disturbance coming from one of the lines. Checking, sir. We take the next question from the line of Rajesh Kothari from AlfAccurate Advisors. Please go ahead. Good afternoon, sir. Congrats for the good set of numbers. Sir, since you talked about next five-year vision. In the FMEG segment, are you planning to enter into the new product categories in that segment? Whether it will be existing segment or it will be complete new segments? At this stage, Rajesh Kothari, we are at growing stage, build stage. Theoretically, it is possible, but we have not closed our thought process there. The focus remains that we continue to grow the existing product categories. For example, Fans, lighting, looms, switchgear, conduit pipes, agro. As I mentioned in the response to one of the earlier questions, allow us time till October by when we'll come back to you in case we have any mature thought process. Within FMEG, I would like to call out one specific thing that you would have noticed already, that we are trying to play a level up as well as level down in the aggregation pricing portfolio. For example, we introduced home automation around a quarter back, which is a premium category, which will be revenue accretive as well as will help us in augmenting our top line. Theoretically, it is slightly different from the existing product category because it's on automation side, but this would help us in giving a boutique product or a premium product to our customer. Okay. My second question is, since the company has drawn a very ambitious plan for next five years, are there any major new recruitment at the senior leadership level? If yes, if you can disclose the same, that would be great. Absolutely. We can't reach top line of INR 20,000 crore without having right set of people, processes, and capital. Processes I've already talked about when I was explaining the LEAP. I touched upon the fact that we have reshuffled the board, and we have younger and high energy individuals who are going to lead us from the board. We have independent director like Sutapa Banerjee. She has significant amount of experience, and she's comparatively younger. On the management team, there are a couple of changes. We have recently hired Mr. Rajesh Nair as our CHRO. He was with Tata Motors for almost 28 odd years, and I'm very confident that he will be able to help us in improving our HR practices and people management practices. When we are thinking about ambitious target, we have to ensure that these ambitious targets are well linked with the PMS and KRAs of the business and function head, and that is where someone who is joining us from Tata Group would help us immensely. Nilesh joined us almost a year back as head of marketing. He was instrumental in shaping the brand architecture as well as marketing plan at years of this field. He is doing tremendous work on the marketing roadmap and brand architecture for Polycab. I'm expecting results of that would start reflecting in the quarters to come. We continue to augment our senior management team, and we have a very attractive compensation strategy, both in cash as well as through stocks, and we are very confident that we'll continue to do that. As a matter of fact, if I'm not wrong, we would have almost 25 odd individuals who would be drawing more than INR 1 crore of package on an annual basis, excluding the stock compensation. That shows the quality of manpower which we have assembled over the period. These high energy, highly driven individuals would help us in implementing the Project LEAP and other projects which I talked about. Great, sir. Thank you, sir. Wish you all the best. Thank you very much for your kind word. Thank you. Ladies and gentlemen, due to time constraint, we take the last question from the line of Vikas Mistry from Moonshot Ventures. Please go ahead. Hello. Hello, am I audible? You are. Please go ahead. Gandharv Tongia, my question is that we will be looking for the new product line, like micro inverters and something software IoT based automation system, as you mentioned. We are also looking towards energy efficient home solutions to the customers and all that. Yeah, I think your question is around whether are we going to get into home automation, IoT and all that. Answer is yes. We have already taken a big step by launching home, and we'll continue to take steps to expand on this side of FMEG business. We believe that the consumer business will get significant amount of traction through this IoT automation route and will continue to make investment accordingly. My question is mainly pertains towards software side. Are we looking at strategically thinking about giving customers better energy efficient solutions in form of software and coupled with the hardware so that they could save energy on account of doing that? Absolutely. In fact, that is the key differentiator for us. Most of our products come with energy efficiency, and if I may say, we can easily be considered as the industry leader on that aspect. We recently launched a BLDC fan, which would be energy efficient product, and there are several other products in pipeline. We'll continue to do that, and so that our consumer continue to get energy efficient products, and they get best of Polycab experience. Okay. My follow-up question is to same is that how many workforce is in innovation and new product development, and how we are looking to ramp up these human resource capabilities to make sure that we come up with cutting-edge new innovative products. Yeah. It's a combination of both internal team as well as external team. Externally, we partner with several industry leaders and consultancy organization. Internally, we have around 100 to 150 manpower team for doing only R&D throughout the year. Very recently, we've picked up a large team from an Registering Indian arm of a large German player. That team will also continue to help us in improving our R&D as well as innovation aspects of our business. It's good to hear, Gandharv Tongia, and we hope that you keep on driving the innovation thereon. Thank you. Thanks a lot for your kind word and wishes. Thank you. I would now like to hand the conference over to the management for closing comments. Over to you, sir. Thank you everyone for your time. In case if you have any follow-up questions, please write to us at investorrelations@polycab.com. Stay safe and take care, and follow social distancing norms. Thank you, operator. Thank you. Ladies and gentlemen, on behalf of Polycab India, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.