Q2 21/22

Oct 25, 2021

Ladies and gentlemen, good day and welcome to Polytap India's Q2 FY 2022 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. 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 number of factors affecting the business, please refer to the Safe Harbor disclosure in the presentation. Please note that this conference is being recorded. I now hand the conference over to Mr. Gandhav Tongyan. Thank you and over to you, sir. Thank you, operator. Hello, everyone, and thank you for joining us today. I am Danthav Tungia, CFO at PolyCare India Limited. On this call, we shall discuss the Q2 results, which was approved in the Board meeting held on Friday. We will be referring to the earnings presentation, financial results International statements, which are available on the stock exchanges as well as Investor Relations page of our website. It can also be downloaded through the link or QR code on Slide 9 of Andy's presentation. Joining me today From the management team, we have our Chairman and Main Director, Mr. Inder Jayasingani on the conference call. As always, I will request Inderbai to share his thoughts before moving on to the presentation. Over to you, Inderbai. Good afternoon, everybody. We have a healthy Q1. Our robust sales growth was underpinned by the market share gains across category. During the strengthening macroeconomic fundamentals, we see a massive opportunity to spread over our wings across B2B as well as B2C categories by leveraging on our strong brand equity An increased consumer friendly farmer product structure reforms focus on infrastructure Development, Agaj, will be for most of the product category. We are also in the process of building body caps of future. The company with robust governance practice, top talent and a strong business model, a customer centric culture and a purpose to serve the community, We will strive to continue the path of profitable and sustainable growth and contribute to success all our stakeholders. I now request Dandar to take you through our earnings presentation. Thank you, Inderbai. Looking at the economic and demand environment, Q2 has been reasonably good. The sequential improvement we saw since unlocking last quarter has largely persisted. Overall demand in B2C categories like wires and FMEG remain upbeat in line with improving consumer sentiment. However, Increasing retail prices has been a slight hindrance, but these are also the times which breathe the best of innovation. Our cables business is seeing higher competitive intensity as the demand environment, though improving, continues to remain a bit suboptimal. Having said that, increasing government focus on import activities, strong real estate demand and core demand visibility Across various end user industries will likely improve the sales momentum further in coming quarters. We have noted Relatively better levels of new CapEx announcement in past 3 quarters, more so from the private side. As these projects come under execution phase, We do expect it to provide a flip to cable and wireless demand. Also, we are quite optimistic about structural reforms Like the recent Gashi Shakti National Master Plan, our National Infrastructure Pipeline, revamp distribution, sector scheme, etcetera, We believe it is likely to create a very conducive environment for infra activity over the medium term. Inflation is a word we have been hearing quite often of lately and rightly so because we have seen unprecedented levels Of commodity price volatility in the recent past, most of our key raw materials like copper, ammonia and PVC This will continue to trend up. While it is difficult to provide an outlook on inflation, we are certainly P. Vijay Kumar:] We are trying to cut a fine balance between managing profitability and customer affordability. But overall, for this year, we believe our main priority will be aggressive market share gains as against margin improvement. This will also be supported by our Moving on to presentation with Slide 4. For the quarter ended 30 September 2021, Our consolidated revenue grew by 48% year on year. On quarter on quarter basis, our consolidated revenue grew by 66% While KP was to compare it with pre pandemic Q2, we have realized a 40% growth. For us, it is the highest Q2 number we have ever recorded and even higher than March total, which typically tends to be seasonally advantageous. These numbers really reflect our acute focus on driving top line Supported by distribution expansion initiatives, EBITDA declined by 3% year on year on a relatively stronger basis. Margins, though lower on a year on basis, has improved by BKK237 bps compared to last quarter with favorable operating leverage. E and P spend were broadly stable while our staff costs at INR1 1,000,000,000 or 3.4 percent of sales were lower due to higher top line performance. Other expenses were lower on account of cost savings and better absorption of fixed costs. Overall, finance costs At rupees 88,000,000 were lower versus Q1, while other income at rupees 264,000,000 was largely stable. A detailed recap of our other income And finance calls have been provided on Slide 13 of our earnings presentation. Our profit before tax at rupees 2,600,000,000 And profit after tax at rupees 2,000,000,000 decreased by 7% and 9% year on year, respectively. On Slide 5, In the 1st 6 months ended September 2021, our revenue grew strongly by 52% year on year. EBITDA was up by 19% with 8.8% margin despite adverse operating leverage seen in 1st quarter. PAD was down by 19% due to few one off gains in Q1 FY 2021 as highlighted on Slide 10. Moving on to segments on Slide 6. Our wireless and cable business grew 46% year on year and 35% on pre pandemic Q2. Overall demand environment continued to stage a sequential recovery and is inching toward normalization. In terms of products, growth was broadly uniform on a year on year basis across cable and wireless. From a channel perspective, domestic distribution driven business sustained its healthy growth momentum. Institutional business continues to remain subdued. However, green shoots were seen in the month of September. Improving investment in infra and construction projects Along with our business development initiative under Project LEAP gave us some optimism to believe that the strategic use of business will improve over the Near to midterm. Exports business grew 12% year on year, contributing 8% to overall revenue in the Q2 of this fiscal. Excluding a large order in the base period, growth was healthy at about 50% year on year led by USA, Australia and Africa. Logistics challenges related to unavailability of containers continue resulting in higher cost and execution delays. We remain committed to double digit sales contribution target for the medium term for this business. During the quarter, overall inflation in our raw material basket was in mid single digit, largely emanating from aluminum and PVC, While our blended price hikes were in low single digit. Despite that, profitability has improved on a sequential basis On account of better operating leverage, we are facing tremendous amount of volatility in most of our key inputs, Something that we haven't seen in a long time. This coupled with deleveraging on account of lower sales during lockdown we have which has led to a total EBITDA margin of 8.8% in the first half of the current year. This is, of course, lower than what we believe is a sustainable range. However, with improving demand environment, we are hopeful of a better second half for both top line as well as bottom line. For the full year, we may be around the lower end of the normalized range. Having said that, as sales normalized towards The end of this year, we do believe there is a potential upside to improve margins in the coming years. On Slide 7, Growth momentum in SIEG business improves further. On a year on year basis, the business grew at 41%. On a biannual basis, it posted a Strong 75% growth. While improving consumer sentiment helps, the strong performance caused amidst an otherwise challenging environment Marked by raw material inflation and seasonality. Our strategic intervention to unlock latent synergies has been playing out well, And we saw good bounce back in switches and switch gears. France, which is our larger business, was affected during the Quarter on account of easelinity, Light, Conduit Pipes and Pump business posted healthy growth, while other businesses including switchgear, Solar and water heaters were about 2x on last year's base. Customer centricity and proactively engaging with influencers Remains an important focal point to drive long term saliency of projects of Polycap brand. CRM tools are augmented to increase GTM efficiency, Improved data analytical capabilities and drive meaningful innovations in the market. Profitability has improved sequentially on account of improved operating leverage, Pricing actions and premiumization despite severe input cost inflation and higher A and P spend. On Slide 8, other segments which largely comprise of our strategic key businesses witnessed a 37% year on year increase In revenue, INR796 million. EBIT stood at INR145 million, up by 58% on a year over year basis. The copper segment has disclosed its initial results largely reflect Ryker Bay, which is our only home subsidy. While the revenue grew by 83% year on year, the utilization levels of our Ryker plant continues to remain relatively low as the capacity is higher than our internal consumption. Having said that, we'll continue to explore various options In terms of increasing external sales, strategic partnership, etcetera, to optimize production costs and improve operational efficiency and thereby improving our returns. On to balance sheet side, our fundamentals continue to remain strong. Net cash position has increased sequentially to INR8.7 billion. Debt to equity ratio is comfortable at 0.05x. Working capital days have improved compared to March June. We will continue to calibrate this going forward. On Slide 16 and 17, we had introduced Project LEAP in our Q4 results around mid May and are happy to share some more progress updates today. For the benefit of everyone, Project LEAP is a multiyear program that includes a range of strategic themes and initiatives Focus on growth, profitability and long term capability building for the organization across B2B and B2C businesses with a Goals of achieving greater than INR 200,000,000,000 or INR 20,000 crores sales by fiscal 'twenty six. We have partnered with Global Management Consulting from BCG who will help us drive this transformation. We are about 6 months into the project and Things are progressing well. In order to build off this early momentum and set up for long term success as our program brought in In scope and execution, we have set up a Transformation Management Office comprising people with diverse knowledge and capabilities across our business and functions and who will be fully dedicated to and accountable for the success of this progress. We are creating internal KPI dashboards that start from the top and cascade down the organization. Putting in place the structured and rigorous system to measure And fresh progress will allow us to provide you with regular updates on actual performance of the program's initiative versus our target. This will also enable us to be agile as we execute continuous measuring impact evaluating performance And repowering early as and when appropriate. While we are still in the very early stage of the program and a number of Things are in planning stage. We have launched execution for some key worksheet and are already seeing quick wins being realized That put us in a strong position for the months ahead. We are excited to share some specific details on some key themes of the transformation program And our progress to date are as follows. Firstly, on organization structure. We have identified A set of mission critical organizational enablers that will be core to successfully executing these initiatives and delivering our goals over the long term. Valovant is recruiting and retaining best in class talent. We have recently hired for several senior positions in the digital, Supply Chain, HR and Businesses. We are delighted to have Vivek on board as Deputy Managing Director. He is an industry veteran with over 35 years of his corporate experience and extensive knowledge spanning across consumer, electrical and durable sectors. We also have Vipul Agrawal joining us, an Executive Vice President, Supply Chain. We are excited to have these new members of the team onboard We have raised this exciting upcoming journey for Polycap and extend our work to share through them. To sum it, We have started investing and aligning our organization structure, which will enable us to realize our aspiration with robust governance and clear accountabilities. The second area is go to market. We are currently conducting a nationwide reach analysis having already mapped over 600 districts To identify gaps and potential opportunities to expand our distribution reach and drive growth for our business. Distributors and dealers are being appointed in Newtown as we significantly step up the pedal on expanding our distribution infrastructure. For example, in our wire business, if we just look at the last three months versus the second half of the last year, the average pace of new dealers and retailers addition Every month has doubled. But we are not just focusing on a numeric increase in distribution. We are also putting in a lot of effort And building capabilities to fundamentally change the way we use to operate. We are doing this by focusing on secondary sales rather than conventional primary sales driven At this point, despite being a distributor driven sales model, we have reached a State, where we are able to track over 60% of second year sales in B2C business and nearly 40% in B2B business, We are also strategically reorganizing sales team in every cluster as well as bolstering them with new business development support teams In order to improve our connect with end users and know the customer needs better, this will certainly provide long term tangible benefits as we Equivalent our customer centric approach throughout the hierarchy. Our dealers and distributors are one of the crucial enablers of our growth. We have always believed in growing together and for multi generations. Along these lines, we have now created a robust process framework That will help us identify the right partnership with common goals. It will also ensure these partners can earn optimal returns on their investments. 3rd priority is portfolio optimization. We are conducting an important exercise to map our portfolio versus customer needs as well as current market offerings. The insights from this exercise are providing us strong clarity and focus on where to play and what to offer Right portfolio line structure. In order to deliver on our growth ambitions, we have identified several white spaces in the economy as well as premium segment that needs to be addressed. This is more relevant in current times when inflation has shifted price bracket and changing dynamics of customer affordability. Accordingly, we have done the background work at design and production level and we will be launching several new products at distinct price points in coming quarters. Augmenting our brand architecture in B2C business goes in parallel to this exercise. Currently, the focus is on improving brand appeal Through targeted branding initiatives, but we will also introduce new sub brands in select segments during the current year. We have also commissioned multi year brand intelligence studies, which will help us shape our brand architecture and energize new product innovation. Lastly, on digitalization. Currently, our key focus is to augment customer relationship management or CRM architecture. Data analytics will play a vital role in our journey and hence we are revamping processes and software which will help us improve data management Maintain them for better assessment of competition, improve our win ratios and enhance overall sales force productivity. We are also delivering IT services in B2C business for seamless integration for primary and secondary, which will enable better servicing of customers and outlet and provide increased demand visibility. Project LEAP is a long term transformational program [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And the initiatives we have designed will take some time to deliver results, but we are excited by the strong and sustainable value They can create in the long term for our shareholders and broader set of stakeholders. We look forward to engaging with you along this journey and will aim to Thank you very much. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ravi Swaminathan from Spark Capital. Please go ahead. Hi, sir. Good afternoon. Thanks for taking my question. My first question is with respect to the if we can give a broad volumevalue breakup of the wires and cable segment, so basically we have seen some 45% growth. So how much would be led by price increase? How much would be led by volume growth? I know a lot of sub products are there within license cables. If you can give us ballpark number, it would be great. Thanks, Aviv. Thanks a lot for asking that question. So if we go business by business, I think in SMEG, it's a fair balance of volume and value, whereas in the case of cable and wire business, The overall growth, most of it is coming because of the value, because of the increase in the underlying cost, and a part of it is only because of volume. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] But within the businesses, the overall underlying number could vary. For example, LDC and Viator Group is slightly different from HBC because HBC is slightly dependent more on institutional business, which still remains slightly But overall, FMEG, I think, is a fair balance of volume and value. In the case of cable and wire, most of it is because of value. So, SMEG would be like fifty-fifty volume. That proportion would be something closer to the reality? Yes, it would differ from business to business, but broadly, yes, that would be the range. Sure, sir. And second question is, I mean, copper prices continue to trend up over the past few days also or weeks. So just wanted your sense as to what kind of margins, EBITDA margin that we might It will affect for this year given the fact that commodity pressures are not relenting. So is there any Chance of going back to 13% margin, which we had done last couple of years or we are likely to settle somewhere between This quarter's margins and 13% back? You're absolutely correct, Ravi. Traditionally, in Cable and Wire Business, we have seen an EBITDA range of between 11% to 13%. As of now, considering the input cost pressure, it seems that we would probably exit towards the lower end of this particular day as far as This fiscal is concerned. But over the mid term to long term, we believe that Cable and Buyer margins will bounce back. Having said that, in SMEG, any which where things are improving. In the last quarter, FMEG recorded a loss. In the current quarter, FMEG has done almost 5% of EBIT. And we believe that as we progress, we would be able to further improve on FMEG EBITDA and EBITDA margin. Profitability is a focus agenda as part of Project LEAP. But as of now, because of the pandemic, we are trying to [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Maintain a fine balance and equivalent between the top line growth utilization and bottom line. And that is why you would see That our second quarter revenue is higher than the entire first half revenue of the last year. Got it. Got it. Got it. Thanks a lot, sir. Thank you, Ravi. Thank you. The next question is from the line of Naval from MK Global. Please go ahead. Yes. Thank you for the opportunity. Gander, I have two questions. First On the competitive intensity what you alluded to in Cable segment, now what is your view? Is it short lived? Can this Extended to next year also. So any thoughts there because that will also define your margin improvement trajectory as well. Broadly, Nabil, it seems that this year, because of the inflation levels at the industry level And the pressure of raw material cost, copper, aluminum, PVC and steel, The our company's EBITDA margins would be towards the lower end of the historical EBITDA margins of 11% to 13%. But I think from next year onwards, things will start improving, and we should be able to go back to the conventionally level to 13% EBITDA margin bridge. And the recent new projects which have been announced more particularly from the private side Would also help us in improving the execution and profitability both at the industry level as well as at the company level. And this competition is from small regional players or from larger players? Because if capacity utilization is low, commodity is king. So I would imply that your smaller players in the industry will get evaporated. I mean, they cannot manage this Kind of cost inflation unlike what a company at your level can? Absolutely. I think it's a fair observation. I think the largest player are able to improve their performance in these challenging The unorganized players are generally finding it difficult to survive, more particularly because of availability of credit and higher input costs. So preloaded competition among the large organized players. The unorganized players are not necessarily are able to play any active role At least in the current times. Sure. And second question is on supply chainprocurement. Have you made any changes For procuring future copper in order to safeguard yourself with continuing inflation Or everything remains unchanged as we are operating right now? So on supply chain, there are 2 aspects. 1 is availability and second is pricing. Because of our long term association with our vendors, predominantly the international one, we don't necessarily See any major challenge in terms of availability, and we remain probably number 1 customer for most of our vendors and the largest customer as On pricing, any which way the industry has evolved over the period and there are standard processes which have been put in place at the industry level. Most of these are linked with the international indexes. For example, in the case of copper, it is linked with LME. And I think most of the players are continuing to get Again, I got established mechanism of pricing. Sure. And last question is on FMEG. Now there's an increased focus on Premiumization as well. So any target on what can be the revenue contribution like you always give on exports? Anything on premiumization in terms of FMCG? What can be the total eventual contribution to revenue, say, if not in a year's time, but 2 to 3 years down the line? And this is a great question. We are also internally deliberating and discussing about it. We are clear that premiumization is going to be one of the strategic levers To improve, 1 is our presence. 2nd is improve profitability. But I would probably like to pass this particular question For the year end, by then, we would have net your thought process in place under Project LEAP. And then hopefully, I would be able to give quantified But this remain a very specific target and focus area for us at Polychem. Sure. Thank you and all the best. Thank you, Naved. Thank you. The next question is from the line of Chintan Cheit from Samiksha Capital. Please go ahead. Thanks, Dada, for the opportunity and congrats in the recent numbers given the circumstances. One question is on the current demand environment given the festive season is on play, what kind of Pricing pressure or competition we are looking at specifically on the distribution V2C side of the business. So overall, the environment has improved. The customer sentiment are positive because of acceleration drive unlocking and festival season. On the B2B side, I think government focus on infra plus special reforms are helping. In terms of B2C business, we have been able to pass on almost all the cost increases. Indeed, in the traditional cable and wire business, we had not been able to do that. But it seems that as We proceed in this year, we should be able to pass on most of the increases. You know this business model already. Generally, for the distribution business, The list price is revised once in a month to generally the 1st week of the month on the basis of copper LME and foreign exchange rate between U. S. E. A. And of the previous month. And most of the players are following that. At times, there is a bit of a lag or at times because of competitive intensity, you are not able to take the complete price, right? But over the period, generally, the companies are able to pass on the cost increase or decrease to the customer. But are we seeing any demand pressure because of the So then continuous price hikes in the distribution side, are we seeing end consumer demand to getting better because of the increase in prices? So in the event of the sentiment and the perception, at times the customer feel or the end customer feel that the copper price It will go up in the next month, and that is where they'll probably pre form the procurement. Or if their view is vice versa, then they'll postpone the procurement. Generally, on an annualized basis, it doesn't have any significant impact. As of now, it seems that it will not impact the larger players like us, But the smaller players probably will struggle to maintain their profitability in top line. And lastly, on the Silvan Saiid, any update you want to provide how things are scaling up there after the acquisition? So we have formed a great team to integrate Silvern with our IoT offering. We have Already completed our 100 days execution of the plan. Now between now and the year end, our objective is to integrate the traditional FMEG business We're the Silvan IoT business so that we can provide it to our customers as a service and home brand will be a Key aspect of this overall offering. I think from the next year onwards, we should start getting some visibility on the business in terms of This year will be probably more on preparing for the growth and finalizing our GTN and related activities. Right. And lastly, if I can kick in, the copper segment, because it's very difficult to Will it, the quarterly numbers, if you can just guide us how should we look at both on revenue and profitability contribution? Ryker is our wholly owned subsidiary. And what they do is just tow the copper Kaptor into copper rods. And copper rod is of course used for manufacturing of cables and wire itself. As of We are using broadly onethree of the installed capacity, and that is where this particular capacity is underutilized. We are exploring ways and means To either improve the capacity duration by improving the internal consumption or looking for 3rd party tie ups through job work for other arrangement To improve the margins and cost of operations there. And we should look at it like a natural extension Of our Cable and Wire business, we are instead of procuring copper rolls, we have decided to procure copper cathode and we are trying to convert it in an Right, right. But no broad guidance, how should we look at for the full year in terms of run rate on revenue side? I think difficult to comment because its utilization is significantly lesser than what otherwise we would expect considering the installed capacity. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] But as I mentioned in my opening remarks, we'll continue to explore ways and means to improve the profitability. We as a business, what we need is a good quality [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Copper rod, and that is where this particular unit is helping us, but we'll continue to explore ways and means to improve utilization and improve the return ratios I'm meaning from this particular unit and the copper segment. Sure, Ghanda. Thanks and all the best. Thank you. Thank you very much. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, The next question is from the line of Pratesh Shera from Lucky Investment. Please go ahead. Sir, I have one question. With respect to this 600 basis points, 700 basis points erosion in gross margin that we see, just wanted to understand What is the lag in terms of the price increases that we have taken and what are they in the wires and cable side? And what is the extent of the raw material price inflation for you, if you could give us maybe on an overall basis? And we in our past instructions or communications, we always mentioned that The copper and the pricing is back to back. So just wanted to reassess why this 600 basis points, 700 basis points of Deviation. And is it that we need to take another 7% price hike to offset it? Or where are we on that cost curve visavis the price Thank you. Thanks a lot for asking this and highlighting. As I mentioned in my opening remarks at the Product cost, basket label, the increase in raw material cost between Q2 as a as Q1 is in mid single digit. The price hike which we have been able to take is in lower single digit. And that is where you would see Contribution contraction between Q2 and Q1. Q2 of last year, we were sitting in a better pace, and that is where it slightly different set of numbers. But the other thing which I would like to highlight is copper and ForEx is what is generally P. Vijay Kumar:] Vijay Kumar:] At the industry level as well as at the company level for the purpose of revising the list price. But this time around, since last few months, we have seen Price hikes across or cost increase across all the commodities. So for example, you take steel, aluminum, PVC, And that is where it becomes a bit of a difficult thing to increase prices on account of all increases in key raw material. The other thing is we have to balance what is called top line and bottom line utilization, and that is where strategically We are trying to maintain an equilibrium between the 3. If you see last year's first half revenue, It is lesser than the 2nd quarter of this year's revenue, and that is where we are trying to manage that. Having said that, historically, we have played in 11% to 13% of EBITDA margin in Cable and Wire Business. It seems that as of now, we would exit this year towards the lower end of that particular range. But SME's business has already started recovering from last year last quarter's loss to this particular quarter, 5% EBIT margin. So over the Mid to long term, we should be able to bounce back to our regular margins. And from there, under project lease, we should be able to further improve. Okay. So just clarifying here, which means if it was for copper, it is usually back to back and there is not much of a lag in your opinion. But because the installation is flowing through other materials as well, we are seeing this gap between the price increases and The cost increases, is that assessment? Yes, that's the correct understanding for the second quarter. Is there any inventory loss In the quarter by any chance, which also takes up the gross margin brings down the gross margin number by any chance? No. Because as you know, this is already when you procure copper, that is the way at that stage, you don't price the inventory. So there is no price risk which you carry when you have any inventory, which is there in your system. Okay. Thank you very much and all the best to you. Thank you. Thank you very much. Thank you. The next question is from the line of Atul Dewari from Citigroup. Please go ahead. Yes. So actually my question was on the similar line. So I mean to your mind, how many quarters it For the key volume wire business, margins will revert back to the normal range of the negative 30. I mean, I understand market dynamics are complicated And the commodity prices are also volatile. So the situation is dynamic. But as things stand today taking everything into account, how many quarters it will take? If you could take some more Yes. You know this industry, Atul, Whenever there is an increase in trend in commodity prices, that is where at times there is slight impact on the EBITDA contribution margin. And when [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Whether it's a decreasing trend, it positively contributes to contribute contribution margin and EBITDA margin. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Having said that, I think I would like to reiterate that this year we will probably exit towards the lower end of the traditional cable and wire EBITDA margin of 11% to 13%. But over the Mid to long term, we should be able to bounce back to historical margins and from there we should be able to improve with the help of Projektiv. Okay. Thanks. Thank you. Thank you. The next question is from the line of Manoj Gouri from Equis Securities. Please go ahead. Mr. Guri, your line is in talk mode. Kindly go ahead with your question please. Hello. Yes, sir. Please proceed with your question. Yes. So sir, First of all, congratulations on good top line performance during the quarter. Secondly, if you look at what I'm trying to understand is what's happening on Cable side. And obviously, in the opening remarks, you sounded very optimist on the mid- to long term growth prospects. But when do you see the demand to normalize in volume terms and how do we see from next 3 to 4 quarters point of view? Thanks, Manoj. Thanks for highlighting and complementing us on our performance. I think as of now, give and take few Here and there, we are already at pre pandemic levels for most of our businesses. And we believe that because of positivity In the customer sentiment unlocking festive season and post by the government and increasing private CapEx, The second half is going to be better than the first half, both in terms of top line performance as well as bottom line performance. Right, right. So in this case, when you say like you would be delivering somewhere around 11% 11% to 13% lower end of the range, So by and large, we should be back to normalized margin level. Is this assumption right? Yes. We should be able to touch That in the mix up. And from there, we should be able to improve under Project Link. Right. And sir, can you throw some light like any developments Or any progress on the export side like how things are panning in U. S. And the other markets where you are trying to set up the similar kind of distribution model? That would be my last question. Thanks, Manoj. So export, as you know, remain our focus initiative. We have been able to develop several products, which comply with the local judicial requirement, for example, for U. S, for Australia, In certain cases, they are for EU. We have also identified dealers and distributors in few geographies, and they would help us in expanding our local presence. We believe that exports will continue to increase in the near to mid term, and we should be able to get at least double digit contribution from Expose to our top line. Thank you. The next question is from the line of Charanjit Singh from DSP Mutual Fund. Please go ahead. Hello, sir. Sir, my question is in terms of the price hikes versus the market, How much there has been a gap what we have taken up price hikes in Cables and Wire segment versus what Street would have taken? And also, you've also touched on the competitive intensity. If you can touch on the market share, what it is right now And this competition we are facing is from what kind of players which is driven up? That's my first question. Great. Thanks, Harajeet. So on the market share, we believe we would have gained market share. But I think to assess it in a quantified manner, I think we should wait the year end because that is when we'll have visibility of data of all the large players. On the pricing, as I explained to other participants, Yes. At the input cost level, if we see the product portfolio, I think the cost increased by mid single digit, and we have been able to take price hike in lower single digit. And that is where there is a contraction in contribution margin. This is because we wanted to balance Top line growth, utilization as well as bottom line. And as a result of which, our second quarter top line is greater than the top line of the first half The last fiscal. And it seems as of now that we should be able to have significantly better second half than the first half in terms of end performance as well as bottom end performance. Okay. So my next question is on the SMEG segment. In terms of the piezoids, 15 SMEG, what's the quantum there you would have taken? And secondly, in terms of scale up in the brands category? Sorry, Jainjeet. Operator, I think we lost Sharanjit. Mr. Singh, if you can please repeat your question. Hello, can you hear me, sir? Yes, please go ahead. I would just request you to repeat your question. Yes. So on the SMEG segment, if you can highlight what are the price hikes you have taken on that front in different categories? And in terms of our capability of new manufacturing plan for fans coming up, how that can help us scale up in the fans market maybe especially catering to the southern market? So in the case of SMET, we have been able to increase our prices in line with Increase in the input cost. And partly, we got benefit from operational efficiencies, which we have unlocked as part of Project EAP as well as Project Uran. The new capacity which is expected to commission in the current year would help us in improving our reach. We completely believe that we can be top 3 player in the fan business and that is where this new facility will help us And getting into the top three positions. Okay. So just lastly on this INR 20,000 crores of target by FY26, if you can just give us a little bit more Granular picture into what is our expectation on domestic. And I think sports is also one of the very important pillar for this growth. So what's the kind of scale up which you're looking in exports? And how we are preparing ourselves for that export opportunity? Yes. So it's a great question, Sharanjit. Thanks for asking. I think other participants would also have similar thoughts. I mean these are early days. We have a broad roadmap for INR 20,000 crores available as of now. But What we are trying to do now is challenge that internally and ensure that all the teams at the corporate level as well as the business level Totally aligned. I think there are few product categories where we don't necessarily have single presence to illustrate, say for example, spatial cables or import substitutes or EHV Where we can see exponential growth. And there are few product categories where we would see better than industry growth. But if you are okay, Ajay, I will probably pass For the year end and then we'll come back to you and give you more credible information. Okay. No problem, Nandan. Thanks for taking my questions. Thank you very much. Thank you. The next question is from the line of Abhishek Puri from AXIS Capital. Please go ahead. Yes, sir. Thank you for the opportunity. Just wanted to ask regarding this $200,000,000,000 revenue target. How much could be the contribution you're looking from SMEG, if you can specifically mention that? And secondly, You have actually delivered industry leading growth in SMEG as well as in cables and wires over the last 2 year categories, if you see that as well, only 1 year growth. But the margin performance has been weaker than peers. So are we taking a strategic approach of You're not focusing more on growth and gaining market share currently and then using the operating leverage in future to Bounce back on profitability, what is the approach in has there been a change in approach for us? Yes. As far as SMG contribution To your top line target of INR 20,000 crores concerned, I think broadly the B2C business is a priority. We ventured into SMEG business almost 5, 7 years back, and we have already delivered industry leading growth both at the top line level as well as at the bottom line level, and we believe that we be able to further unlock value there. As I mentioned, Sharanjit, please give us time till the year end, and we would like to then give you more granular information In terms of the breakup of INR24, on the profitability, I think what we're trying to do in the current year particularly is Maintain a fine balance between the top line utilization and bottom line. As far as Midterm outlook is concerned, we believe we would be able to go back to traditional historical 11% to 13% Capal and Virebitda margin. In the case of FMEG, we should be able to further unlock the value. And I think by fiscal 'twenty six, you should be able to reach to 10%, 12% type of In SME Business. So margin guidance you have already given. Just wanted to guys, I just wanted to check your Strategy basically, are we looking at gaining market share or we are good to increase prices and sacrifice A little bit of top line growth for second half or for next year, how are we thinking about it? Over the mid number, the objective is to ensure that we get industry leading growth [SPEAKER SRINIVASAN VENKATAKRISHNAN:] While maintaining the margins in Cable and Wire Business, as far as SMG is concerned, we should be able to expand our margin. And on the Project Lead, this is one of the important agenda item where we want to ensure that we have healthy market share gains While maintaining and improving margins in all the business categories where we have present. And we stand by 12% guidance of Margins in SMEG over the next 3 years, right? Yes. All right. Great. Thank you so much for moderating that. 3 5 years under project leak. Thank you. The next question is from the line of Srini De Karlekar from HSBC. Please go ahead. Yes, hi. Thank you for opportunity and congratulations On top line and working capital. Benoit, I just have one clarification question. In terms of margins, are you guiding that the full year FY 2022, company should be able to meet lower end of EBITDA margin guidance of 11% to 13%, which itself imply Kind of a 12% to 13% margin in H2, just clarification on that? So the guidance is for the second half that we should be On the lower end of the margin, it's quite possible the aggregated 12 month number is slightly lower than this. But these are Thanks. We will try our level best to improve on margins. But as of now, if you go to give guidance, my guidance is that second half, we would be more towards the lower end of the margin. Fair enough. And mid term guidance doesn't change at all, right? Whatever you endeavor under your long term planning as well as Short term, that doesn't change with what commodities have changed, right? Yes, absolutely. Okay. And then the last one, if I may. There's a very good improvement on inventory. Just want to know, is it a structural improvement that you wanted to do? Or is it just The growth at the latter end of the quarter surprised and that's why it is lower than optimum. How should one read that? It just appears like a very good improvement on inventory side. Is it something you targeted or it's just an outcome of growth latter half of the quarter? Invent is a focus, Inda, and we are trying to optimize. We have to do 2 things. 1 is we have to ensure that for the purpose of growth, Our channel partners are able to get our supplies almost immediately, and that is where we have to maintain finished goods inventory at the right places across the country, Whether it's before or digital warehouse or the manufacturing location. The second aspect of it is optimized so that our inventory carrying cost can be Reduced or it can be within the exceptional notes. And this is what we are trying to do throughout the year. Recently, we have strengthened the team. We have higher resources from leading companies in our supply chain. And And we believe that there is a scope for improvement on inventory, more particularly on RM and semi finished goods label. If I finish goods are concerned, we'll probably have to continue to carry inventory to ensure that we are able to meet our expectation in terms of availability. And this is the result which you can see in the Q2 where the inventory levels have significantly reduced from the Q1. Yes, great. And Ghandav, is it fair to say that relatively higher inventory on the raw material as well as semi finished goods is in a way Because of relatively higher volatility on margin, is that fair to say? If your raw material and semi finished goods inventory comes down with your Targeted programs, is it fair to assume that your probability your margin would be less volatile? So generally speaking, there is no correlation between Because as you know, this industry, the commodity is procured at provisional price, and it doesn't have any P and L implication. Whenever you price inventory and generally you do that when you have visibility on the selling price, it becomes are pass through. And that is why inventory levels at RM or SFG level has there is no bearing on the profitability or contribution Of that particular period. Fair enough. Thank you, Gandhav, and all the very best. Thank you very much. Thank you. The next question is from the line of Rahul Agarwal from INGRED Capital. Please go ahead. Yes. Hi, good afternoon, Gander and team. Just a couple of questions. Firstly, under FMEG, what feedback we are getting and collecting information from other companies That entry level competition under FMEGs increased and generally premium has done better, that demand is quite steady, but entry level competition under fans and SMG categories are quite high. Would you agree to this and what's your analysis of competition behavior and going ahead does it Does it really impact our own new product launches here? That's first question. So this is true for all the businesses, Particularly after the pandemic because most of the businesses are trying to balance utilization top line and bottom line. We have seen in few pockets the competitive intensity has gone up, including F and WG businesses. But you would have noticed that in the In quarter, we have been able to improve on margins, and we are maintaining our pricing points. Premiumization will probably help us in improving Performance, but we want to from a customer's point of view, we want to provide him better product At a price which is competitive. Got it. So Essentially in terms of FMEG margin, it will still continue to go up, right, even though the competition on entry level is higher? Yes. Okay, got it. And secondly, any update on the channel financing for cable and wire and SMEG sectors? How is that progressing and what are your targets for this year, next year? Thank you. In Cable and Wire, we are hovering between 60% to 70%. This can slightly go up. As far as SMEG is concerned, we are depending on the business, we are between early 30s to late 30s, and we can take it up at least to 50%, and we were hoping that we should be able to do that by the end of the current fiscal. Okay, Perfect. All the best. Thank you so much for answering my questions. Thank you, Rahul. Thank you. The next question is from the line of Venkat from 3 Sigma Financials. Please go ahead. Thanks for This is taking my question and congratulations on good set of numbers in a challenging time. The first question I wanted to ask As you know, are we having e commerce sales and if you are having e commerce sales, are the margins very different? We don't have traditional e commerce presence as of now. So for example, we have the online E commerce players who there, we don't have any significant presence. We have taken some baby steps in last 10, 12 weeks, but it will take a while to Reached to a level which is acceptable from a brand and a company like us. But having said that, in our traditional Cable and Wire business, 70% to 80% of our dealers and distributors place orders through our and distributors placed orders through our dedicated app. And to that extent, we have Online channel, available for them. On the e commerce business, the way it is generally construed And understood. We believe that we should be able to make a significant growth in next 5 years under Project LEAP. And most from SMEG actually. Yes, yes. Our target is to get to 10% e commerce P. Vijay Kumar:] Contribution to our top line on the project team. And you are absolutely right that [SPEAKER SRINIVASAN VENKATAKRISHNAN:] It has more meaning associated with B2C business, and that is where in the past, not necessarily a good amount of steps, but in the last few months, we have done a bit of work. We have hired resources with the right set of talent. We have invested in technology and having the right So our top 80 enabler, and we expect that from next year onwards, we should be able to get some results out of it, which are meaningful. Seems like we lost the connection for the current participant. We move to the next question the line of Divansh Negotia from SI MPL. Please go ahead. Yes. Hello. Hello. Hello. Please go ahead. Thanks for the opportunity. Sir, in SMEG, if you can just highlight on The premium portfolio because I mean there have been new launches in last quite a lot of new launches in last 3, 4 months. So how has that trend been and the product acceptance and the learning from it? Because Premiumized category was I think you've largely launched in last 3, 4 months. Yes, absolutely. Premium is a focus agenda within the fan business. As I mentioned to one of the participants that by end of this year, we should be able to give you a Target number of premium business contribution to FMED business. But if I just want to get More color to you. Within Span, I think we are in 20s or just about 30s as well as premium contribution is concerned, which can go up. The recent acquisition in the form of Silburn and launch of Home would help us in improving premiumization. And as the last participant was inquiring about e commerce, e P. Vijay Kumar:] So, as of now, there are Some products where we have good presence, but I think as we go along, we should be able to improve on premiumization across all the B2C categories. Okay. And in case of fans, I mean, I just wanted to re clarify the new capacity was supposed to come up. So In that case, the margins the target margin that we've guided for 10% in FY 2020 6, isn't it too conservative? Or If you can just throw some light there. Yes. So Span capacity will be operational in the current system in the second half of this year. And as far as margins are concerned, the guidance is that we should be able to touch almost 10%, 12% in 5 years from now. And that is where you would have seen that the second quarter Of this year, our EBIT margins are significantly better than the Q1. Okay. And directionally, if you can just throw some light on other media products other than fans, how things have been in lights and smaller products like appliances and pumps also? So as of all business categories, we have been able to record a decent amount of growth. Fan was slightly impacted because of seasonality, But Light, Compute Pipes and Pumps recorded a healthy growth. And if I talk about the smaller businesses, for example, switchgear, solar and water heater, They were on they were almost 2x of the last year's base. Okay. Okay. Thanks a lot, sir. Thank you very much. Thank you. Next question is from the line of Sandeep Jain from Aditya Birla Capital. Please go ahead. Mr. Jain, please proceed with your question. As there is no reply from the current participant. Thank you. I now hand the conference over to the management for their closing comments. Thank you for taking our time and attending this call. In case if you have any follow-up questions, please feel free to reach out to us at investors. Relationspholicab.com. We would be pleased to attend your question and provide you additional clarification and input. With that note, wish you a very happy Diwali, And please stay safe and healthy. Thank you. Bye bye. Thank you. Ladies and gentlemen, on behalf of Polycab India, That concludes this conference. Thank you all for joining us and you may now disconnect your lines.