In conversation with Gandharv Tongia, CFO, Polycab India Limited

Given the improvement in consumer sentiment on account of the severity of the third wave of the pandemic now on the wane, Polycab India expects all its business channels to post impressive growth in the coming years, as shared by Chief Financial Officer Gandharv Tongia in this exclusive interview

Are you witnessing a shift in consumer behaviour trends in the domestic fast moving electrical goods (FMEG) market in the post-pandemic scenario? What are the macro drivers of the FMEG industry?

The pandemic brought about several shifts in the way companies, industries and trade operate along with changes in consumer behaviour. The adoption of the digital medium has significantly accelerated, leading to faster growth in categories like smart home automation as well as channels like e-commerce. Remote working coupled with increased savings is enabling consumers to invest in higher quality products which are energy-efficient and resonate better with their standards of living.

Focus on health and hygiene is also creating demand for innovative products like sensor-based panels, lights and anti-bacteria, anti-dust fans, etc. These evolving trends also promote innovation at the industry level, which is good for consumers and consumer-centric companies. In terms of macro drivers, I believe that favourable demographics, rising consumer awareness, increasing consumer incomes, nuclearisation, urbanisation and evolving regulations are likely to play a key role in driving the FMEG industry over the mid to long term.

Polycab India’s revenue from operations for Q3FY22 grew by 22.78 per cent to Rs 3,372 crore. This was the highest quarterly top-line in the history of the company for the second consecutive quarter. What factors have contributed the most to help you outperform?

Growth in Q3 has been healthy across categories. If we look at wires and cables, cables grew faster than wires supported by strong growth in institutional business which was nearly 2.5 times that of last year. The wires’ business was slightly impacted by high volatility in copper prices. However, overall, we were pleased to note that the volumes were higher than last year as well as pre-pandemic levels. FMEG also saw good momentum despite challenges. The business grew around 57 per cent on a two-year basis. I believe our growth initiatives like distribution expansion, go-to-market (GTM) strategy, product innovation and portfolio diversification along with a strong focus on execution is helping us outperform the market in most of the categories.

What are Polycab India’s growth plans for Q4FY22 and FY23 with respect to expansion of manufacturing capacity and distribution network, research and development as well as digitisation?

Our capital expansion in the first nine months of FY22 was about Rs 2.4 billion and for the full year the number should be around Rs 3 billion. We will continue to invest in augmenting our manufacturing capabilities which will enable us to offer several new products and enter new markets globally. Distribution expansion is one of the key focus areas of our transformation project – Project Leap. We are conducting a nationwide reach analysis to identify gaps and potential opportunities to augment our distribution infrastructure. We are currently connected to over 1,65,000 retail outlets across India directly and we aim to double this over the medium term.

We are also working on penetrating emerging India clusters including semi-urban and rural areas with distinct product portfolio. Research and development and digitalisation are areas where we have been consistently investing and will continue to do so. We believe these are our key competitive strengths which help us sustain and improve our market positioning. Overall, we have made significant progress in Project Leap in terms of on-boarding the best talent at various levels and businesses, optimising the product portfolio, revisiting brand architecture and reworking on the GTM approach, amongst other things. These initiatives will certainly help us in FY23 and beyond.

Could you throw some light on the concept of Polycab Galleria Knowledge Centre and its expansion plans across the country?

These centres are exclusive premium showrooms featuring the entire range of our offerings for customers, influencers and trade partners to experience them. The Polycab Galleria Knowledge Centre is our largest store format after Polycab Arena and Shoppee. These centres are equipped with audio-visual facilities for training electricians and retailers on safety, soft skills and IT as well as a virtual reality showcase for B2B buyers to experience the plants and facilities. It also functions as a small back-office set up for employees. We currently have around eight such gallerias nationally and we aim to progressively expand out footprint across many towns using a blend of multiple store formats.

What is your earnings outlook for the upcoming quarters?

It seems like the worst of the third wave is behind us. Daily new cases in many large metros have already peaked. We sense improving trade sentiments as dealers and distributors inch back to normalcy. Improving mobility is also helping consumer sentiment. So, overall if the situation continues to improve, we do expect better momentum in the coming quarters. That said, we are also mindful and effectively navigating through other challenges like volatility in raw material prices, global logistic issues, etc. But if we consider a longer timeframe, we believe several external demand drivers are falling in place.

This is so considering the government’s strong focus on structural growth and inclusive development over the next 25 years. Effective capital expenditure of over Rs 10 lakh crore, as announced in the Union Budget recently, is at a multi decade high. Apart from monetary stimulus, the government is also rightly focusing on improving productivity and speed of execution using technology, which will play a massive role in overall economic growth and kick-starting a capex cycle. Rapid shifts in themes like clean energy, electric mobility, nationwide digital connectivity, modern urbanisation, etc. will also be key growth engines and we are well-placed to benefit out of these developments.