Gentlemen, good day, and welcome to the Q2 FY 2025 earnings conference call of RR Kabel Limited. As a reminder, all participating clients 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 star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Jain from Orient Capital. Thank you, and over to you, sir.
Thank you. Good afternoon. On behalf of RR Kabel Limited, I extend a very warm welcome to all participants on Q2 FY 2025 earnings conference call. Today, on this call, we have Mr. Shreeg opal Kabra, Managing Director, and Mr. Rajesh Jain, Chief Financial Officer. Before we begin this call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our beliefs, opinions, and expectations as of today. These statements are not guarantees for our future performance and involve unforeseen risks and uncertainty. With this, I hand over the call to Shreegopa l Kabra. Sir, over to you, sir. Thank you.
Thank you. Hello, and good afternoon, everyone. On behalf of RR Kabel Limited, I wish you happy Diwali in advance, and extend a very warm welcome to all the participants on our Q2 FY 2025 financial results discussion call. On this call, I have with me Mr. Rajesh Jain, our CFO. Despite facing a few challenges and achieving moderate volume growth, we are pleased to report our highest ever quarterly and half yearly revenue. This growth was primarily driven by double-digit volume expansion in our domestic wires and cable business. Our FMEG segment also delivered a strong revenue performance, driven by robust volume growth and improved product mix, maintaining its status as the fastest growing player among peers. With current growth momentum and gross margin improvement, we expect to achieve breakeven in FMEG business by early FY 2026.
Our numerous strategic initiatives, including capacity expansion, the introduction of high-margin products, new launches with international approval, and the expansion of our distribution channels, continues to progress as planned. These initiatives are designed to enhance our performance with a major focus on achieving double-digit margin in the coming years. With that, I would like to hand over the call to Mr. Rajesh Jain to take this discussion forward.
Thanks, Shreeg opal Kabra. India's growth story remains intact, with its core drivers, consumption and investment demand, gaining strong momentum. This foundation, coupled with a buoyant real estate sector, is set to make a substantial impact on India's GDP, potentially contributing to double-digit growth. The resilience of the domestic environment has played a key role in supporting our volume growth in the Indian market, particularly in our cable and wire business. The export market, especially in Europe, has been impacted due to delay in ship times, impacting our export demand. The slightly sequential volume decline, along with the impact of a higher base, year -on -year, is something we are addressing with a strategic focus on strengthening our domestic growth and exploring new opportunities internationally.
Despite these short-term challenges, we are optimistic about our long-term prospects and remain confident that the momentum in the domestic market, along with our ongoing initiatives, will lead to a better performance ahead. Now, let's walk through the financial and operational highlights of Q2 FY 2025. We are pleased to report that in Q2 FY 2025, we achieved our highest ever quarterly revenue of approximately INR 1,810 crore, reflecting a strong year-on-year growth of 13%. Similarly, we also posted a 13% growth in the first half of FY 2025, marking our highest ever half yearly revenue over the same period last year. This growth was primarily driven by domestic volume expansion in our wire and cable segment, and more particularly in cable segment. Similarly, our FMEG top line has also grown by impressive 25%.
Our EBITDA for the quarter stood at INR 86 crore, while profit after tax was INR 60 crore. The reduction in EBITDA and PAT, PAT was largely influenced by a contraction in contribution margin, driven by heightened volatility in metal prices during the quarter. However, we remain optimistic about overcoming these temporary headwinds. Looking at the segment-wise performance, our wire and cable business recorded a revenue of INR 1,612 crore in Q2 of FY 2025, up from INR 1,450 crore in Q2 of FY 2024, marking a growth of approx 11%. On a half-yearly basis, we saw a similar 11% growth, with revenue reaching to INR 3,190 crore in H1 of FY 2025, compared to INR 2,874 crore in H1 FY 2024.
This growth is primarily attributed to volume expansion of approx 4% on YoY basis and 8% on half yearly basis. The EBIT margin for the segment stood at 5.1% impacted by copper price volatility and delay in passing the cost instantaneously. Our export market showed resilience, contributing around 27% of total revenue in Q2 of FY 2025, up from 24% in Q1 of FY 2025. Despite some challenges, we believe our ongoing efforts in both domestic and export markets position us well for sustained growth moving forward. When we talk about guidance of our wire and cable business, given the situation of high volatility in copper prices during the first half and the impact on demand due to shipping delays in export markets, we have revised our guidance to reflect a more measured outlook.
For the second half of FY 2025, we now expect a volume growth of approx 15%, which should help us to achieve an overall volume growth of 10%-12% in FY 2025. We anticipate a stronger performance in H2 FY 2025 and expect our EBIT margins in the wire and cable segment to improve back to the range of 8%-8.5% for second half of FY 2025. On the export front, while shipping delays may persist for a while, we are actively addressing these challenges. We are in process of getting key product approval in both the European and U.S. markets, which once restored in the near future, will enable us to introduce higher margin products to these regions. Despite short-term hurdles, these efforts are aimed at strengthening our position and drive sustainable growth in the long run.
We remain confident that the measures we are taking will set us up for an improved performance ahead. In the FMEG business segment, we are pleased to report a solid revenue of approximately INR 198 crore in Q2 FY 2025, reflecting an impressive growth of 25%. For the first half of FY 2025, we have delivered a remarkable revenue growth of approximately 29% over H1 FY 2024. This growth was driven by sustained volume increase across key product categories, such as fans and lighting. Our segment margin improved, benefiting from an enhanced contribution margin, driven by higher sales volumes and a favorable product mix. This performance has allowed us to maintain our position as the fastest growing player among our peers in FMEG segment.
Additionally, we have successfully maintained our working capital days at 63 as of September thirtieth, 2024, further underscoring our commitment to sound financial management and operational efficiency. Our strategic initiatives remain firmly on track, and we are on course to complete the current CapEx cycle, which will enable us to achieve our future growth. In parallel, we are actively working on our next CapEx cycle for the coming three years, and we look forward to updating you as we mark progress on this front. Our FMEG segment is also well on track with continuous initiatives such as new product launches, investment in brand transition, and increased advertising efforts. These steps will help us to move closer to breakeven in the near future. With these initiatives, we are confident that our strategy will drive long-term growth and profitability.
With this overview, I would like to open the floor for questions. Thank you for your attention and continued support.
Thank you so much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hand raised while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Praveen Sahay from PL India. Please go ahead.
Yeah, thank you for the opportunity. My first question is related to the volume growth. First can you explain, like, how is the volume is progressing now, as you had already given a guidance of 10%-12% for the year or a 15% for the next half? So how you are seeing from a soft volume in the Q2 to Q3 of October, how that's progressing? And what exactly the you know the confidence you are getting from the market for a 15% of growth for the next half?
Praveen, when we see our first half growth, like, our growth was around 8.5% in first half of this year. Based on our historical growth and looking to the market conditions, even in wire and especially in cable, where we are aiming to grow at a much higher pace. This gives us confidence that we can achieve a growth of 15% in second half, which will enable us to get the growth of 10%-12% on yearly basis. Even if we now also see, we are in spite of some challenges in export segment, still we were able to achieve this volume growth of 8.4% in first half.
If you can highlight, like, from where wires are doing well or expected to recover, or the cables growth to continue for you for the next half as well, looking at the. And also, if you can add that to the new capacity, which you had highlighted earlier, that is expected to come in the stages in the financial year FY 2025. How is the situation there for the cables next week?
So out of total CapEx plan for FY 2025 until March 2025, already some of the capacities are available for production. And that, based on that only, like, when I'm talking about approx 15% volume growth, with some rule, we understand that approx 10% growth can come from wire, and 25% growth can come from cable, and which will give us weighted growth of around 15%. More particularly, though our base is very small in cable, but looking to the industry side, looking to the demand cycle and the way we have orders in pipeline and even in the Indian infrastructure is working, we are expecting that we can achieve this growth of 15%.
Okay. So next question is related to the margin. Also in the margin part, you know, you had given some 8%-8.5% of margin guidance, whereas 6% of margin in the wire and cable with margin you had delivered in the first half. So, the contraction in the margin is only because of fluctuation in the raw material prices, or more to do with the product mix changes? How is that? Why that got impacted, and the 6%, and from where you are getting, you know, that 8%-8.5% of the margin to achieve actually?
So when we see a figure for our this quarter or even for this first half of this year, the major contraction has come at the gross margin level only. So it was impacted by two things. One, copper price volatility, and secondly, like, passing on this impact to consumers in timely fashion. So in this quarter, we were not able to completely pass on the impact of higher prices to consumers, and that is why our reduction is approx 4% when I compare to last year. But the same thing impacted our trends in EBIT level also. So the major difference was at gross margin level only. And at the same time, when we are talking about 8 %- 8.5% kind of EBIT level, which we have achieved in last year also.
So at same level, we are expecting that in H2 of this year, we'll be achieving the same, which are normal level for our business. EBIT margins of 8%-8.5% for wire and cable segment.
Okay, without considering any fluctuation in the RM prices?
Yeah. Yes.
The last question is related to the FMEG, because, from the last couple of quarters, you are delivering a very strong growth. So this quarter also, this 24% of the growth, if you can highlight, is that more to do with the value growth or the volume growth is also there? And if volume growth is there, from which segment you are, you know, getting this volume growth, if you can highlight the segment as well as geographical mix in that?
Praveen, in FMEG businesses, it is not exactly or directly linked with volume growth because you have different units, be it fan, lights or switches. Ultimately, if you see, we have achieved a very good growth in fan, appliances, and switches. Majority of the contribution were come in spite of the challenge in, like, price pressure or price correction in lighting. In spite of that, we will be able to... We were able to achieve this growth of 24%. It is mix of, like, shifting on sales from economic category to premium and mid-premium category, which are high-margin products, and even getting new price sales from new product launches, what we have done in last year.
Okay. Thank you, sir. I'll come in the queue. Thank you, and all the best.
Thank you.
Thank you very much. Our next question is from the line of Rahul Agarwal from Ikigai Asset Management. Please go ahead.
Yeah, hi, sir, good evening. And, to start with, did I get the volume growth correct? So on domestic cable and wire, you said the overall growth was 8.5%. Is that number correct ?
No, so my 8.5% is on H1 versus H1 of previous year. Well, my domestic volume growth is more than 10%, for if I just compare quarter -on- quarter basis.
10% volume growth for India business for the second quarter of fiscal 2025?
Yes. Yes, on YoY.
How much was international YoY for second quarter?
YoY, we were negative. Since our last year, base was at little bit higher side and, due to delay in shipment, it is almost negative by 9%.
Okay. Okay. Sir, one more question I had was that in case we were, you know, unable to pass on the price hike, my sense is, from a pricing perspective in India, our cable must be, you know, pretty competitive versus other brands in the quarter. So despite that, the volume growth looks like, you know, when we compare it to direct players, the data what we have right now with us looks like we are the lowest in that hierarchy, and which basically means that we have lost market share. So if our prices were lower, then we would have done better, right? What could be the reason? Was there a regional diversion in terms of how you performed and others performed, or could you elaborate a bit on this, please?
So, Rahul, as per my understanding, the impact on pricing was with all competition also. If you see, their margins have also reduced in the similar line, what we have done. But so the thing was that since the correction in copper prices or fluctuation in copper prices were very high, and whatever the approach we have to pass on this price in systematic manner with some lag impact to consumers, this time this cycle could not be completed as there were some delays in implementation of new prices or effect of giving new prices. So there was a reduction in at gross margin level, and I think it is similar with my peers also.
But peers have reported better gross margin, better volume growth, so I was just concerned with that. Margin I understand.
Yeah, no, I cannot. I do not have that data, but just by, just if I compare the gross margin level of peers and myself, then there is similar kind of contraction in gross margins.
Fine, sir. So moving ahead, one clarification I want to know the export business. Our margins when we export, you know, I think 70% is the mix between wire and cable being exported from. So your margins are better than India or lower than India?
So again, there are two segments. In wires, the margins are less when I compare with India, but in cables, margins are better in export market when I compare with Indian market. So it is both way. In cable, it weighs, it is higher, and the wire it is less in export market. But since we started our export journey from wire only, the still majority of our export is coming from wire only. But now, we are focusing on changing the product mix to have higher profitability, and our cable exports are increasing, as my capacity is also enhancing, and we are getting good demand from export market. But this is continuous process.
Thank you very much. The next question is from the line of Huseain Bharuchwala from Carnelian Capital . Please go ahead.
So just wanted to understand, from you. Basically, your competitor, the largest player in the segment, has said that his growth in the wire segment was towards that of cables. But, you being the largest player in terms of... You are the, you have a better mix of wires compared to cables, right? Your business, your top volume should have been better. So what went wrong in terms of the volume growth? Because I understand the margins, but what went wrong in the volume growth? Because the street was estimating much better numbers when it comes to demand, and real estate is in a good cycle. So I believe your volume growth should have been much higher.
So what happened, like, when copper prices were very volatile at the end of Q1, and that impacted the demand of June as well as July and till mid-August. So though at the end of this quarter there were good volume uphill also, it is still like the first initial first half of this quarter have impacted us to a large extent in terms of wire demand. But it has improved when I compare-
Sir, do you want-
Sorry, yeah, please.
So my point is, your volatility in copper prices, we understand, that is completely there. But what I understand, if your competitors are increasing, are able to grow much faster in the wires and, you are being the leader, so have you lost market share in terms of wires? That is one thing that we can understand, we can basically understand from you. Have you lost market share?
Since we do not have exact data of how much growth in wire and cable, but still we are getting the understanding what you are saying. If others have grown at higher in wire and we have almost flat in wire, so if by that logic, it seems there may be some impact in our market share, but we do not have exact data.
Got it. And then on the export side, can you give us some color how is it expanding out in the export market? Have you got any approvals or any registration there? How we are seeing the export market? What is the status in Europe? Is the demand better in Europe or things going better going forward? Can you give some color on that front?
So overall, see, we are very strong on export front. We have more than 42 international product approvals. Also, like our export market is established, we are largest exporter as well as the almost 25% of my revenue is coming from exports. So in that way, we are doing very good. At the same time, being Europe is my largest export market, and due to some delay in shipments, what happens, like, like earlier it was, it was taking 25 days, now it is taking 35-40 days. So this has delayed some shipments also, and even, some few parties, changed, their orders, from us to maybe some other suppliers also. So there was some impact from temporary impact on my wire demand from European market.
At the same time, like, we are in process to get approval of my cable product or some special cables in U.S. market also, which is in pipeline, and we are expecting that by this quarter end, we'll get those approvals, and slowly we'll get additional business from a new product line also.
Got it. So, U.S., what is the... If you can give us a ballpark, ballpark figure of your U.S. share in your total exports, if you can give some ballpark figure?
As of now, it is contributing almost 10% in my export. U.S. is export almost 10%, and Europe is maybe 50%-55%. In that way, we are very good in developed countries.
Got it. Got it. So, so do you think your U.S. share with time will go up? And pricing, I might, I suppose will be better in U.S. compared to Europe.
No, no, it is not about Europe and U.S., but it is related to product. If we are in cable exports or high specialized cable products. So in U.S., we are focusing only on high value-added products only. And same way, Europe also, our focus is increasing the cable segment where we have higher value additions. Overall, we are focusing on how we can increase our sales in high value-added products in export market.
Got it. And so in the domestic market, well, in the, in the overall segment, I think there are very small, there are a lot of small players who have also entered the market. So do you see, heightened competition in the segment, when it comes to wires and cables? Because new small players, a lot of players have got funding recently, so they have also, on some of the tenders. So is there something that, you are seeing?
So still, as per our understanding, like, 65%-70% market is only with organized player, and rest is with unorganized. Over the time, we have seen very good improvement in market share by organized player. And what we understand that every brand has their own strength, own, like, geographical, strong presence. So every company is doing, at their best, and the competition will always be there, but, every, we have our own strategy to expand my sales base and, getting higher volumes in wires also in domestic.
Got it. Just last thing on BharatNet. Basically, BharatNet tenders are supposed to announce, and a lot of players, a lot of your competitors are basically bidding for those BharatNet tenders. That is a sizable opportunity, a 2,000-3,000 crore sizable opportunity in cable. So are you bidding for some of those tenders, and what are you eyeing in that front? You can give us some color on that.
As of now, not on BharatNet, because we have very limited capacity in cable. But, still, we have already good demand from government as well as private sector. So we have sufficient demand, in current customer base only. As of now, we have not participated in those tenders.
Got it. Good, good. That was, that was the only point from my side. Thank you, sir.
Thank you very much. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Yeah, good evening, sir. Thank you for the opportunity. The two questions first is with respect to competition now, as we have seen margin impact as well, you know, has that continued in the month of October? Is this one-off interest, is new normal according to you? And, you know, in terms of the, pricing, how do we, how do we stack up against the peers in terms of pricing up to our RR Kabel? Are we at premium compared to the competitors? That's my first question, sir.
Okay. So if you see, it seems that Q2, which was extraordinary and one-off only in terms of reduction in profitability. But as a normal practice and based on historical data also, and based on our experience, it seems we will always keep on passing this price impact to our consumers in a systematic manner. There will be some lag impact, and there may be some impact when we see month-on-month pricing. But when we see at longer time horizon, then we will always be able to pass on this price. The effect in Q2 especially was like a one-time only, where the all of a sudden, the huge volatility, we're not able to pass on both the sides, like on the increase side also and on the reduction side also. So there was one-off effect.
But otherwise, you see, every company has their own brand positioning, brand pricing. So we are at par with competition, and the price movement is almost similar for all companies.
Got it. And second question I had, I missed that, you know, guidance. So you said you are looking for a 15% volume growth in the second half, and what margin guidance you have given, sir?
8%-8.5% EBIT margins for wire and cable for second half.
Okay and, you know, does that assume a lower pricing scenario, or it assumes a weak pricing scenario with respect to competition, you know, the aggressive pricing or anything like that?
It is based on current pricing scenario, like, not very strong or weak, but it is like what, how industry is behaving, currently. It is based on that scenario only, we are assuming.
Understood. And just one more question, sir, maybe with respect to the distribution. Can you help us understand what are our, you know, our targets we're looking at in terms of, you know, the distributor and the retail count for FY 2025 and FY 2026, and what it is currently? If you could spell that out.
So, for distributor and retail level, what we think that our current bandwidth is sufficient enough to serve the current my expansion plan also and growth also. The only thing now we want to increase the depth of my distribution, so our distributor sales should increase, and in that way we are working. At the same time, our focus on retail and electrician is a continuous progress, and we are working as we earlier also, we were always focused, like, we have more than 1.25 lakh retailers, or maybe more than 4.5 lakh electricians in our loyalty management program. So that focus will continue to be there. The only thing, distribution level, now we are focusing on increasing the depth of my distribution.
So you think the breadth is already there. We want to have more extraction out of the current setup in terms of the sales support. Is that right, sir?
Yeah, yeah, exactly, right.
Understood. Understood. Sure, and just last question, capacity utilization for cable and wires, for the second quarter?
It was similar to last time only, like, almost 90%-95% in cable and 65%-70% in wire.
Perfect. That's all from my side, sir. I'll thank you and wish you all the best.
Okay, thank you.
Thank you very much. Our next question is from the line of Venkat Samala from DSP Investment Managers. Please go ahead.
Hi, sir. Thank you for the opportunity. So earlier you used to guide about 20% volume growth, because, for the full year, right? Now we're talking about recovery in H2, but now we're talking about only 15% growth, right? So what has led to some moderation in our guidance versus the earlier expectations?
So, when I see the current H1 growth and some impact on my export market also, so like overnight, I don't want to overcommit that, our growth will be something. When we have achieved a growth of 8%, then, what we see, 15% is quite moderate growth, and, first we want to achieve this only, and then we'll see how market moves ahead.
Okay, okay. So the impact essentially is on the export side- versus the earlier expectation. Domestic side, you don't see a challenge?
No. See, competition is there, always it will be there. But, yeah, we see good growth of... Even 15% is good growth, although it is below our earlier guidance, but still, first we want to achieve this figure, and then we'll see.
Okay. I'm just saying, earlier expectation, what has changed? Domestic has changed or, or export?
No, export, export has changed. So, like, as you have seen, like, we have de-grown in, this quarter in export market, so ultimately it will have some impact in my export growth. So, domestically, things have not changed that much.
Understood. Understood. That is clear, sir. And, you know, in response to your previous question, you did mention about, you know, losing out, for some of your orders to another vendor. Can you elaborate that?
So what happened, like, earlier, we were exporting to Europe and, like, they were taking regularly from us, but when there were delays in shipment, so they might have changed, and they might have purchased some quantity from Turkey or similar places which are very nearer to them. So in that way, we might have lost some orders.
Okay, okay. And is it to an Indian guy or some other?
Turkey. I'm saying Turkey, because Turkey, you see, their transit time is hardly seven, eight days, while it is taking almost 35 days from here. So in that case, some of my orders, since they were delayed in shipment and, some customers might have shifted some orders to Turkey, nearby countries there. Not from me.
Essentially because of transit time. Okay. That is clear, sir. Thank you.
Okay, thank you.
Thank you very much. Our next question is from the line of Amol Rao from One Up Financial Consultants. Please go ahead.
Thank you, Mr. Jain, for all the information you have provided. Sir, could you be kind enough to tell us what could be the possible quantum of any inventory loss that we may have had? I mean, just because of the quarter-ending quarter price, what is the notional, not cash loss, notional loss that you could have incurred? Because this evened out over the course of the next few quarters, just to get a sense.
So it is not always possible to quantify that inventory loss. Because what happens here, price is moving on like fortnightly or monthly basis or sometimes even weekly basis, also it keeps changing. But yeah, if you see from notional level, there may be some impact. But again, this you cannot predict that on forward basis also it will be in the similar fashion. So since there were like very high volatility when I compare with just H1 of this year or even Q2 of this year, so there may be some impact that some prices we could not pass on to the whatever price we were having inventory and could not be passed on and converted into sales. So there may be some impact of this 15-20 crores in this quarter.
Okay, sir. That's about it. Okay. So that is, is that limited to INR 15 crore-INR 20 crore only? Okay. I just wanted to get a sense how much, because, I mean, volatility is... I mean, it's, it's been very rare to see such volatility. It's not happening so very frequently in the last 10 years.
Yes, yes.
Secondly, sir, just, I mean, just on, just curious on the profitability side, even though, sir, I mean, our FMEG sales, the losses have narrowed, so you attributed it to a product mix change. So sir, what products did we favor this quarter that we got, that we reduced the cash burn in this quarter, sir, if I may ask?
So, if you see, even within fan or maybe other products also, now what we are doing that we are focusing to have increased sales of premium and mid-premium category products. So like always, economy category have limited profits or higher competitions. So now we are focusing on how we can achieve higher valuation by focusing on premium and mid-premium category products or new products what we are launching in market. Even like if you see lights have a higher volatility in pricing also. In this quarter also, though it is off season for fan product, but still we could manage good growth in fan also. So in that way, it is like improving my gross margin and reducing the losses.
Got it. And so, I mean, this product optimization, I mean, is it going to be, I mean, obviously, we are going to take a tactical call every quarter, but do you see this to be a trend over the next few years that we lean more towards the mid-premium and premium side rather than the economy side? Or do we need to... I mean, what I'm trying to ask is, will economy still continue to be a big chunk of our FMEG thing because we need to have a whole, wholesome product cost?
So see, one thing is for sure, in FMEG, you have to focus on all the categories. If you have to make higher growth, then you have to focus on economy category also. But at the same time, if you have to become a premium consumer brand, then we have to add a few products in medium premium or mid-premium category also. So it will be always a mixed approach that at one side, we'll always focus to have increased sales of premium, mid-premium category. At the same time, to spread my market and to have a higher presence in market, we'll have a focus on mass sales also. So it will be always like doing good approach or equal approach on both sides.
Okay, sir, just to take that question one step forward, sir. We have got a good size, a decent size, and we have guided towards a breakeven in FY 2026 in this in the FMEG business. Is it safe to assume that INR 1500 crore of annual revenue could see the cash burn end? At that level, we stop burning cash because then our product portfolio is quite mature. It covers all the categories, and we are making enough money to cover up everything, all our expenses. Fifteen hundred-
We are expecting to achieve breakeven much before that, like at INR 1,100 crore level of top line. We are expecting to achieve this level, breakeven.
Okay, sir. That's very helpful, sir. Thank you so much, sir. Happy Diwali to you and the team, sir.
Yeah, same to you also.
Thank you very much. Our next question is from the line of Rahul Agarwal from Ikigai Asset Management. Please go ahead.
Yeah, hi. Thank you. I think I got dropped off when I was asking question last time. Sir, one question was on capacity expansion. If you could explain, you know, product-wise, what's really happening on the cable and wire side? How is that shaping up?
Yeah. So, like, if you see earlier also what we explained, we are doubling our power cable capacity, and at the same time, we are also increasing almost 20%-25%, my wire capacity. We are on track to enhance this capacity, and this CapEx cycle, major part will be completed by end of this financial year, and few power machineries are already operational out of that, so we have now, like, it will be ongoing process, like, whatever capacity we are enhancing, this will help us to achieve the growth of next two years.
Yeah, very clear of that. What I wanted to know is get more specific in terms of, you know, we were planning to launch power cables both for export markets as well as for Indian market. So is that already started?
No, no. Capacity, Rahul, full capacity has increased, but still the major part of power cables will start in April 2025 only.
Okay, got it, sir. And one last question, sir. From October, most of the October month is over, but copper has been acting funny. I don't think it's predictable even in this month. How are you seeing the channel behave for this month? Any color?
Like, this month is at the normal levels. What we have seen, a very good demand in September or very poor demand in July or June. But this is a normal month in terms of demand. Even at copper price, though, we have seen volatility on day-to-day basis, but on monthly average, if you see, like, copper is almost 3% up than September levels. In that way, it is like a normal month for us.
Which means that we are better off from September, right? September to October, is we are better off?
No, no. As I told, September was a really good month for us in terms of volume, and that could make the... whatever we could not do in the month of July or till mid-August also. But at the same time, if you see on average basis, yeah, we are doing better than previous quarters.
Okay, sir. Thank you so much for answering my questions, and wish everybody a very happy Diwali, sir.
Yeah. Thank you.
Thank you very much. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Our next question is from the line of Tanay Shah from the DAM Capital. Please go ahead.
Yeah. Hi, thanks for the opportunity. So I just wanted to understand as to, you know, the guidance which we are reiterating for FY 2025, how is the demand, which we're kind of looking at it, like, you know, what is the demand out of H2? Because-
Can you speak a bit loudly, please? Can you repeat?
... Yeah. Can you hear me now, sir?
Yeah, now it's better.
Yeah. So I just wanted to understand, given that, you know, H1 has relatively been weak versus our expectation, how are we kind of expecting the demand outlook for H2? You know, because the ask is fairly high for H2. And similarly, apart from the demand, how are we seeing the RM price volatility kind of faring out for us? Because, you know, even the margin ask per se for the EBIT margin is fairly high. So sir, if you could just guide on that, it would be great. Thank you.
Yeah, Tanay. So first, you have to see historically also or traditionally also, H2 is always better than H1. In this industry, what happens, like, majority of the products or real estate projects are get executed in H2 at a much higher volume in compared to H1. So one, one is that reason. And secondly, even, what when we are talking about margin improvement or margin, so we are what we are thinking, what we have achieved in last year, like our EBIT margins for wire and cable were in the range of 8.4%. So, we are expecting that range only. So we are think, like we are, on back to normal situation where we could achieve whatever margins we were historically achieving. So we are not expecting any much improved version or higher targets.
These are in line with our trend and industry figures only.
Sure, sir. So while it obviously is in line with what we kind of achieved last year, but given, you know, the other volatility which we've kind of seen, and obviously the increased competitive intensity as well. So is there any improvement on that front as to where we believe that this will kind of normalize going forward into the second half?
As per our understanding, Tanay, the impact in Q2 was abnormal. If you see normally, there is always price fluctuation or volatility was always there, and there were a good system also to pass on this price impact in systematic manner by changing your sales price, and passing on this price impact to our consumers. The only thing in this quarter we could not pass on that impact completely because there were high, high volatility, and with a very small span of time, there were both side movements. So that is one of the thing. Otherwise, normally, this normal price movement will always be there, and we will always, always be passing this impact to our consumers. So it will not impact my gross margin.
Sure, sir. Okay, that's it from my side. Thank you.
Thank you.
Thank you very much. The next question is from the line of Naushad Chaudhary from Birla. Please go ahead.
Thanks for the opportunity. Couple of quick question. Firstly, on the margin side, in terms of if I look at the nature of the business, one or two quarter here and there is fine, but if I look at your numbers from five quarters consistently-
Hey, hi . I think I'm not getting exactly. Can you repeat?
Yeah, hi. I think it's better now.
Now it's better, yeah.
Yeah. So, firstly, on the margin side, sir, one or two quarter volatility here and there is fine, but from last five, six quarters consistently, we are losing margin. And given the nature of the business, we have not experienced this kind of, you know, consistent decline in one direction of the margin. So is there anything else which we should understand from the business or mix point of view? Or is there any unfavorable contract which is sitting in our book, which is, you know, impacting this margin? Help us, you know, understand it more, what exactly is there apart from the raw material volatility, which we are not able to understand with this consistency in the margin decline?
So here I would like to clarify one thing, that we are not in the long-term contract kind of business, and, majority of our business, since it is more, B2C, so the current prices only impact or whatever long-term orders we have, that all are having PV clause, price variation clause. So frankly, the major impact is due to price volatility and time gap between the my purchase or my stock cost versus passing on the prices impact to consumers. When we see compared, on quarter -on- quarter basis, there are some variation, but if you see on yearly basis, like in last year, we have seen improvement of, margins by almost 1% in my wire and cable segment.
So this year again, first half of this year was off from our normal figure. But again, second half year having target of getting that normal EBIT level or margin level only, so we are on track on that, and there is no impact other than what the volatility.
I understand that. Help us understand, in terms of your overall length of the contract which you sign, what percentage of your business comes from the contractual business, and how often you change the price?
So hardly 5%-10% my business comes with that kind of long-term contract business. And there also we have like 100% business is with PV clause only. So PV means last month average, whatever last month raw material prices, it keeps changing on every next month supply. So we do not have any fixed term contract either for three months, six months, or one year.
No, but the nature of our export business, it takes 35 days to deliver the product, so somebody has to agree on some price. So if you are making the product, you taking 15, 20 days, then 35 days to deliver the product. So in a way, directly or indirectly, we get into 45-50 days of the contract, right?
... Yes, yes. So this is a very good question by you, but, just let me explain. In export, our prices are very transparent. At the time of placing the orders, we have in our pricing sheet, we have, like, three things are variable: my copper price, PVC price, and freight, while my conversion profitability is fixed. So whenever they are placing the order, they place their order either on month average basis or some average or some case, CS average. And whatever basis they're placing the order on me, I also cover back to back on my purchase side also. So copper, like my export business, has 0% risk in terms of price volatility as well as FOREX fluctuation also. Both ends, we are quite secure. I hope this will answer your query.
I'll take it offline. I just have one or two questions to clarify. In terms of your overall copper procurement policy, if you can help us understand what percentage of the requirement you import, and why do we import it? Is it because the price difference or availability, and do we hedge this position, overall, help us understand your procurement policy?
Yeah, this I will answer briefly. Maybe in detail we can later also. But right now, what I can say to you is that almost 30% of my copper procurement we are importing, and the reason being, since I'm exporting also and my exports are covered under Advance Authorization Scheme, where I can import duty-free material. So that is a good way to leverage my company, my import and export balancing.
Okay, and just lastly, then I'll come back in the queue. See, we have reduced our growth guidance, and we are giving, you know, some reasoning to the export market, so can we be a bit more specific here, when we were giving 20% growth guidance, what was the thought process there, and what has exactly changed here, you know, to reduce our growth guidance?
Historically also, we always were in the range of 20%. This first H1 was one-off, and where we could not achieve, and the major reason was export only. That's why we are just moderating for this half of our guidance, and later we'll see how things move. So since we are meeting every quarter, we'll keep updating you about our-
Yes, I take that point, sir, but can you not be more specific what exactly is changing there in the export market? Is there overall slowdown you are experiencing in the-
No, I think I have already answered this question, that there is no slowdown, but some impact due to delay in shipment. There were some orders shifted, and due to this shipping time changes, there is some impact, but it is not permanent kind of impact. It's still our business or demand is good, and there is good presence of our brand all over the Europe and particularly in more than eighty-five countries. Good thing that we export our products in our own brand, which is again, very big achievement for us.
So is it because of the high volatility in the copper prices, and nobody wants to take the open exposure in the copper, that's why they are preferring a nearby?
I think not that reason, but they don't want to have that kind of material in transit. See, when they are getting at eight days transit time, then why they will wait for 35-40 days? So this is just timing. Otherwise, normally, like-
But there was a case earlier also, sir, right?
There was a gap of two weeks only earlier, like eight days versus twenty-five days. Now it is eight days versus thirty-five to forty days. So... and plus, if you have seen, like, freight costs were also very high, and since this cost is variable, so everything they were bearing. So that was also one of the reasons.
Thank you so much, sir. I'll come back in the queue.
Thank you very much. The next question is from the line of Shrinidhi Karlekar from HSBC. Please go ahead.
Yeah, hi. Thank you for the opportunity. So you said 10% volume growth in the domestic cable and wire business. Would it be possible to further break down in how wire has grown and how cable has grown?
Yes. So, still, like in domestic also, we have grown at a much higher pace in cable compared to wire. In domestic, our wire business has grown by 2% only, while cable business has grown by 36%. I am talking this about quarter- on -quarter basis, on YoY basis, for Q2.
Right. Right. Okay. The 10% volume growth, particularly looks not only on absolute basis, but very weak compared to on a relative basis, compared to some of your peers. So anything that happened, like, what your growth, why your growth rate was just 2% in the domestic wire business, particularly given there was a lot of stocking that happened in the channel because copper was inflationary towards the end of September?
So we had a high impact of lower demand in the month of July and mid of August. So, like, my first 31 days of first half of this quarter was very badly impacted. Though we could make good progress in the last month of this quarter, like in September, but still, like, it was much lower than our expectations.
Great. And then my second question is on the margin front. So do we get to track your contribution margins and the EBIT margins by product category? Like, how much is it domestic wire, how much is domestic cable, how much is export cable? Like, do you like to track that, like, separately, both at contribution level and EBIT level?
... So to some extent, we have our MIS system where we track these margins, and whatever impact we are seeing in this quarter, mainly in reduction in my margins, or gross margins at wire level in domestic. So that was the big reason of sharp fall in our margins.
Right. And so how much would you like, there is a 400 basis points kind of a reduction. How much would you say is basically underlying margin decline at this wire segment? And how much is actually related to the cable business growing faster than wire, which actually comes at a lower margin? Is it possible to break down in mix versus underlying decline?
Not in that way, but what I can say, when we see 4% reduction in gross margin, and this was again, mix of both the things. One, we were not able to pass on the increased price, so then maybe I can say 1.2% impact on that side. At the same time, since my copper prices have also increased. So for example, if prices have increased by 2-4%, and I was able to pass on 2% only, and there was time impact also. Overall, this was mix of. Major impact was in wire only, and of course, cable also there. But cable was not that much impact because, there again, the effect was to the extent of orders what we were having in hand only.
Understood. Thank you for answering my questions, and all the very best.
Okay, thank you.
Thank you very much. The next question is from the line of Raman KV from Sequent Investments. Please go ahead.
Hello. Can you hear me, sir?
Yeah, yeah. Good evening, Raman.
Thank you. Good evening, sir. So, can you give the volume guidance for the FMEG business?
In FMEG, volume is very tough because all three lines, like switch, light, fan, have different kind of units. But still, when we talk about, like 25%, 20%-25% kind of revenue growth, we are expecting in FMEG business.
In next quarter or in the next half?
In the next half also.
Okay, 20%-25%.
Yeah.
Sir, and what is the CapEx you are planning to do in Q3 or in H2?
So overall, our CapEx plan was of INR 500 crore, which was spread over two years, which is like FY 2024 and 2025. Since we are executing that CapEx only, which. And this will be completed by, by March 2025. So this is like ongoing CapEx plan. So particularly for this quarter or half, it is not separate CapEx plan, but whatever we are executing is part of our master CapEx plan only.
Okay. Thank you, sir.
Yeah.
Thank you very much. In the interest of time, that was the last question. I would now like to hand the conference over to the management for closing comments.
Thank you everyone for joining this call. We appreciate your participation. If you have any questions or queries, please feel free to reach out to us directly or contact Orient Capital. We look forward to connecting with you again next quarter. Thank you. Once again, I wish you Happy Diwali, Happy New Year in advance.
Okay, Happy Diwali to everyone, and thanks for joining us.
Thank you so much, sir. On behalf of RR Kabel Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.