Motilal Oswal Financial Services

Cables and Wires: Powering the Indian growth story

Summary

Pg3

Higher infrastructure

spending to drive

industry growth

Pg15

Overview of Polycab,

KEI and RRKABEL

Pg23

Story in Charts

Pg5

Rising cables & wires

export bode well for

domestic players

Pg19

Outlook & Valuation

Pg26

Indian electrical

industry likely to post

broad-based growth

Pg9

Copper – key material

across cables & wires

Pg21

Key risks and

concerns

Pg28

Companies covered in the report

POLYCAB INDIA

Summary

...................................................................................................................................................Pg30

Leadership in cables and wires industry

..................................................................................................Pg34

Strengthening FMEG business

..................................................................................................................Pg36

Enhancing brand and distribution network; high ad spending to benefit

.............................................Pg37

Financial Outlook

......................................................................................................................................Pg39

Valuation and view

...................................................................................................................................Pg44

SWOT analysis/ Bull and Bear Case

...................................................................................................

Pg46/47

Financials and valuations (Consolidated)

................................................................................................Pg49

KEI INDUSTRIES

Summary

...................................................................................................................................................Pg51

Second largest player with a varied product portfolio

...........................................................................Pg55

Empowering retail and exports segments for accelerated growth

........................................................Pg58

Financial Outlook

......................................................................................................................................Pg60

Earnings growth and strong sector dynamics to help sustain rerating; initiate with BUY

....................Pg66

SWOT analysis/ Bull and Bear Case

...................................................................................................

Pg68/69

Financials and valuations (Consolidated)

................................................................................................Pg71

R R KABEL

Summary

...................................................................................................................................................Pg73

Delivering industry-leading growth in cables and wires

.........................................................................Pg77

Targets to accelerate growth of FMEG business

.....................................................................................Pg81

Increasing dealer network led to market share gains

.............................................................................Pg83

Financial Outlook

......................................................................................................................................Pg86

Valuation and view

...................................................................................................................................Pg90

SWOT analysis/ Bull and Bear Case

...................................................................................................

Pg93/94

Financials and valuations (Consolidated)

................................................................................................Pg96

Cables and Wires: Thematic

Cables and Wires

Powering the Indian growth story

Strong demand prospects to boost earnings momentum



Cables & wires market is likely to

post 12-14% CAGR over FY23-27

Wires & Cables (INR b)

YoY chg (%)



The Indian electrical industry (at ~INR1.8t in FY23) likely to post 10% CAGR:

The Indian

cables & wires industry, along with FMEG products, is estimated to be ~INR1.8t in FY23.

The industry offers huge growth potential and is estimated to report ~10% CAGR over

the next few years, led by increased traction in the infrastructure and real estate

sectors. The cables & wires industry constitutes ~39% of the electrical industry and

forms a crucial part of construction and infrastructure activities.

Higher exports and market share gains to support organized players:

The industry

should benefit from the rising exports of cables from India, as exports have clocked a

16% CAGR vs. ~8% CAGR for imports over FY17-23 (~15% YoY growth during 9MFY24).

The organized players are also anticipated to benefit from the rising demand for

branded products due to their safety features and quality. As per industry estimates,

branded players currently constitute ~74% of the industry (vs. 61% in FY14), which is

expected to improve to 80% by FY27.

Polycab, KEI, and RRKABEL, among the leading players in cables & wires:

Polycab, KEI,

and RRKABEL are the leading players in the cables & wires industry, with a combined

market share of ~50% among the organized players (35% of the entire industry). They

are favorably placed to gain from the rising infrastructure spending. A strong

distribution network and higher capex, with a focus on backward integration, will

drive growth for these companies.

Initiate coverage with a BUY rating:

We initiate coverage on Polycab, KEI, and

RRKABEL with a BUY rating as we expect them to benefit from the favorable industry

trends and report healthy earnings growth over FY24-26. We believe these companies

will maintain their premium valuations. We value: Polycab at 50x FY26E EPS to arrive

at our TP of INR7,500, KEI at 50x FY26E EPS to arrive at our TP of INR5,000, and

RRKABEL at 40x FY26E EPS to arrive at our TP of INR2,200.

Key downside risks:

a) a rise in commodity prices; b) higher competitive intensity in

the sector; and c) demand impact due to an economic slowdown.

Infra/real estate spending, rising exports, & market share gains to drive growth



Increase in exports of cables &

wires higher than the imports in last

few years

Export (USD m)

Import (USD m)

Export surplus (%)



The Indian cables & wires industry, along with FMEG products, is estimated to

be ~INR1.8t in FY23. Strong traction in the real estate and infrastructure sectors

would drive higher growth for the industry, and we estimate the industry to

record ~10% CAGR.

The cables & wires industry constitutes ~39% of the electrical industry and

forms a crucial part of the construction and infrastructure activities of the

government and private players. Intensifying focus on infrastructure, a strong

traction in the real estate sector, an increase in electrification of villages, and

rising nuclear families are expected to spur cables & wires industry growth.

The cables & wires market reported ~8% CAGR over FY14-23 and it is estimated

to clock 12-14% CAGR over FY23-27 (INR1.2-1.3t). Our analyzed companies have

seen a combined revenue

CAGR of ~13% over this period,

which should continue

over FY23-26E. The share of branded players has increased to ~74% in FY23

from 61% in FY14 and is expected to improve to 80% by FY25.

Exports of cables & wires have been on a rising trend, and companies such as

KEI, RRKABEL and Polycab have increased their export revenues over the years.

Exports clocked a 16% CAGR over FY17-23; whereas, imports posted an ~8%

CAGR over the same period. During FY21-23, exports delivered a 36% CAGR as

against 15% CAGR for imports. India is now a net exporter of cables & wires.

April 2024

Cables and Wires: Thematic



Exports revenue of Polycab, KEI and RRKABEL delivered a CAGR of 54%, 7% and

25%, respectively, during FY19-23.

Exports contributed 9.8%/8.1% to Polycab’s

total revenue in FY23/9MFY24. For KEI, exports contributed 10.3%/14.5% to the

revenue in FY23/9MFY24. For RRKABEL, exports contributed 22.5%/27.1% to the

revenue in FY23/9MFY24.

Polycab, KEI and RRKABEL are the leading players in the cables & wires segment,

with an industry market share of 18%, 9% and 7%, respectively. These

companies command 31%, 16% and 12% market share among our analyzed

companies, respectively, which represents 58%/83% of the industry/organized

market.

Polycab has gained market share by 150bp over FY14-23 among the companies

that we have analyzed. KEI gained 330bp market share over FY14-23 within our

analyzed companies, which was primarily due to the start of cable production

above 220KV+ (among the three players in the industry with the capability to

manufacture cables above 220KV). RRKABEL also gained market share by 500bp

over FY14-23 within our analyzed companies.

Polycab has been on an expansion spree and cumulatively spent INR22.3b (for

cables & wires) over FY14-23. This was ~3.9x higher than the nearest

competitor, KEI, which spent INR5.6b over this period. Polycab has plans to

commence manufacturing EHC cables above 220KV+ by FY26E and it has

entered into an agreement with a leading Swiss cable manufacturer, Brugg

Cables, for this purpose. KEI will spend ~INR13b over the next 3-4 years on its

capex plans. RRKABEL has planned a capex of INR5b each year over the next two

years which will help it to increase capacities for both cables & wires.

Polycab has 4,300+ authorized distributors and more than 0.2m retail touchpoints.

KEI expanded its dealer network to 1,975 as of Dec’23. RRKABEL has a pan-India

distribution network consisting of 3,598 distributors and 3,781 dealers.

We initiate coverage on Polycab, KEI and RRKABEL with a BUY rating

as we

believe these companies will benefit from favorable industry trends and report

healthy earnings growth over FY24-26E.

We expect Polycab’s EBITDA and EPS to post a CAGR of 14% and 15%,

respectively, over FY24-26. We expect KEI’s EBITDA and EPS to clock a CAGR of

25% (each), over FY24-26. We expect RRKABEL’s EBITDA and EPS to clock a

CAGR of 39% and 43%, respectively, over FY24-26.

We estimate Polycab’s RoE/RoCE to be 20%/21% in FY26 vs. ~19% in FY23. Its

RoIC would be 27% in FY26E vs. 26% in FY23. We estimate KEI’s RoE/RoCE to be

~19%/20% in FY26 vs. ~18% in FY23. Investments in the new Greenfield unit will

restrict a significant improvement in RoE for KEI. We estimate RRKABEL’s

RoE/RoCE to be ~25%/24% in FY26 vs. ~14%/12% in FY23.

We expect these companies to retain their premium valuations.

We value

Polycab at 50x FY26E EPS to arrive at our TP of INR7,500. We value: KEI at 50x

FY26E EPS to arrive at our TP of INR5,000, and RRKABEL at 40x FY26E EPS to

arrive at our TP of INR2,200.

Cumulative capex of key players in

the cables & wires segment over

FY14-23 (INR m)

Polycab, KEI & RRKABEL – leading companies in the cables & wires segment



Initiate coverage with a BUY rating on Polycab, KEI and RRKABEL



April 2024

Cables and Wires: Thematic

Valuation summary

Company

POLYCAB

KEI

RRKABEL

HAVL

VOLT

KJC

Mcap CMP

INR b (INR)

794

359

180

946

434

195

5,300

3,980

1,598

1,510

1,311

1,226

INR

7,500

5,000

2,200

1,690

1,410

1,610

Rating

BUY

P/E (x)

RoE (%)

RoIC (%)

EPS CAGR

FY24E FY25E FY26E (FY24-26E) FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E

114

125

150

100

15%

25%

43%

26%

79%

20%

141

21.3

18.5

18.6

16.3

5.5

18.2

19.8

19.2

22.5

18.7

10.1

20.4

20.0 26.6 25.6 27.4

19.3 20.2 20.6 21.2

24.8 16.4 19.9 23.2

19.9 21.2 26.4 31.9

14.1 11.1 17.8 25.1

22.0 25.3 28.6 30.7

Source: MOFSL, Company

EPS (INR)

STORY IN CHARTS

Growth drivers

Infrastructure

development,

urbanization,

smart cities,

growth of

residential and

commercial real

estate, rural

electrification,

and the move

towards

renewable

energy.

Polycab’s CAGR trend

FY24-26E

Exports of

cables & wires

have been on

an increasing

trend from

India. India is

now a net

exporter of

cables & wires.

Cable & wires is

estimated to report

12-14%

CAGR over

FY23-27 to reach

INR1.2-1.3t

14.4

FY20-23

18.7

14.5

14.8

Polycab has the second

highest TAM of

INR1.4t

among listed

companies in the consumer

durable space

17.7

16.9

Revenue

EBITDA

PAT

Revenue

EBITDA

PAT

KEI’s CAGR trend

FY24-26E

24.6

FY20-23

22.7

12.2

16.5

24.7

Focused on improving its

retail sales to

from

44% in FY23 in the next two

years

EBITDA

PAT

50%

Revenue

EBITDA

PAT

Revenue

April 2024

Cables and Wires: Thematic

RRKABEL’s CAGR trend

FY24-26E

42.5

38.6

31.2

FY20-23

21.5

16.3

15.8

RRKABEL has the highest

business-to-consumer

(B2C) sales channel

among peers accounting

for

~77%

of revenue

in FY23

Revenue

EBITDA

PAT

Revenue

EBITDA

PAT

Market size of different segments of the Indian electrical industry (INR b)

25 18

120

50 6

130

140

225

239

250

Cables & Wires

Refrigerators

700

Switchgear

Fans

DUPS & Battery

Pumps

Air Coolers

Stabilizers

ACs

Lighting

Kitchen Appliances

Washing Machines

Modular Switches

Motors

Water Heaters

Solar Water Heaters

250

Source: MOFSL, Industry

Cables & wires market to post 12-14% CAGR over FY23-27

Wires & Cables (INR b)

19.6

12.5 13.4 13.2

0.5

-5.0

0.9

13.0

7.7

1,200 -

1,300

YoY chg (%)

Market share of key players in value terms (FY23)*

Polycab

KEI

30%

18%

Havells

RR Kabel

Gupta Power Infra

Finolex

Universal cable

Others

Unorganized

346 414 416 467 530 600 570 575 650 700

43%

Source: MOFSL, Company, Industry

Source: MOFSL, Companies, Industry, *based on total segmental

revenues

April 2024

Cables and Wires: Thematic

Organized players’ share would continue to rise

Branded players

Unbranded players

26%

20%

Capex of key players in the cables & wires segment

22,265

FY14-23

39%

34%

29%

30%

61%

66%

71%

70%

74%

80%

5,646

5,344

4,545

4,518

2,587

FY14

FY18

FY21

FY22

FY23

FY27E

Polycab

KEI

RR Kabel

Havells

Finolex Universal

cables

Source: MOFSL, Companies

Source: MOFSL, Company

Rise in exports of cables & wires higher than the imports

Export (USD m)

Import (USD m)

Export surplus (%)

54.9

Polycab’s export revenue share declined in 9MFY24

Polycab export revenue (INR m)

Exports as % of total sales (%)

12.4

8.5

9.8

7.6

8.1

47.4

16.5

-6.1

-14.4

-18.4

26.8

6.3

3.1

2,482

10,955

FY20

7,589

FY21

9,229

FY22

13,835

FY23

10,069

9MFY24

FY17

FY18

FY19

FY20

FY21

FY22

FY23 9MFY24

FY19

Source: MOFSL, Company

KEI’s export revenue share increased in 9MFY24

KEI export revenue (INR m)

18.4

14.5

12.7

10.3

14.5

Exports as % of total sales

RRKABEL’s export share of ~27% is the highest among peers

RRKABEL export revenue (INR m)

Exports as % of total sales

27.1

23.0

22.7

22.0

20.4

21.5

5,365

FY19

8,991

FY20

6,083

FY21

5,892

FY22

7,128

FY23

8,400

9MFY24

5,250

FY19

5,063

FY20

5,868

FY21

10,076

FY22

12,702

FY23

13,131

9MFY24

Source: MOFSL, Companies

April 2024

Cables and Wires: Thematic

KEI delivered better PBT CAGR over FY14-23

FY14-23 KEI

FY14-23 Polycab

FY14-23 RR KABEL

Higher revenue/PBT growth for RRKABEL over FY24-26E

FY24-26E KEI

FY24-26E Polycab FY24-26E RR KABEL

45.6

31.8

17.5

19.3

18.5

22.5

15.9

20.3

21.5

16.5

14.4

38.6

24.6

14.5

24.7

14.7

42.6

15.1

Revenue CAGR (%)

EBITDA CAGR (%)

PBT CAGR (%)

Revenue CAGR (%)

EBITDA CAGR (%)

PBT CAGR (%)

Source: MOFSL, Companies

Polycab’s cumulative FCF to be INR24.7b over FY24-26E

OCF (INR b)

30.0

20.0

10.0

0.0

-10.0

0.0

Capex (INR b)

FCF (INR b)

16.0

KEI to generate cumulative FCF of INR1.9b over FY24-26E

OCF (INR b)

12.0

7.0

2.0

-3.0

-8.0

Capex (INR b)

FCF (INR b)

7.0

4.0

1.0

-2.0

-5.0

8.0

-8.0

Source: MOFSL, Company

RRKABEL’s FCF to improve post completion of expansions

OFC (INR b)

5.0

3.0

1.0

0.0

-1.0

-3.0

FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: MOFSL, Company

-1.4

-2.7

Capex (INR b)

FCF (INR b)

4.1

2.7

Polycab and RRKABEL’s RoIC to improve over FY25-26E

36.0

28.0

20.0

12.0

Polycab

KEI

RRKABEL

1.4

4.0

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

The Indian electrical industry to post broad-based growth

To report ~10% CAGR over the next few years



The Indian cables & wires industry, along with FMEG products, is estimated to be

~INR1.8t in FY23. Intensifying focus on infrastructure and strong traction in the real

estate sector are expected to spur growth for this industry. We estimate the industry

to record ~10% CAGR over the next few years.

The cables & wires industry constitutes ~39% of the electrical industry and forms a

crucial part in the construction and infrastructure activities of the government and

private players.

Polycab, with its presence in cables & wires, switches & switchgears and FMEG (fans,

appliances, lights and luminaries) segments, has the second-highest total addressable

market (TAM) among the listed companies (including consumer durable players).

The Indian consumer

electrical industry’s market

recorded a CAGR of 9-10%

over FY16-23 and stood at

INR1.8t as of FY23

The Indian consumer electrical industry’s market size stood at INR1.8t as of FY23.

The industry recorded a CAGR of 9-10% over FY16-23. The industry growth has been

fueled by strong government focus on infrastructure development, rising trend of

nuclear families, increase in electrification in rural areas, increase in exports of

cables & wires, etc.

Exhibit 1: Market size of different segments of the Indian electrical industry (INR b)

25 18

120

50 6

130

Cables & Wires

Refrigerators

700

Switchgear

Fans

DUPS & Battery

250

225

239

Pumps

Air Coolers

Stabilizers

ACs

Lighting

Kitchen Appliances

Washing Machines

Modular Switches

Motors

Water Heaters

Solar Water Heaters

140

250

Source: MOFSL, Industry

Industry growth is

estimated to be at ~10%

over the next few years;

cables & wires to grow

higher

According to our estimates, the industry should clock ~10% CAGR over the next few

years, with higher growth estimated for cables & wires (12-14% CAGR until FY27E),

water heaters, fans, etc. The industry would also benefit from the government

policies, e.g., encouraging domestic manufacturing and PLI incentives for

components. There could also be a shift to organized players from unorganized

ones, which has historically been the case. This possible shift would further benefit

the bigger players going forward.

April 2024

Cables and Wires: Thematic

Exhibit 2: Analysis of the Indian consumer electrical industry

Industry

Switchgear

Motors

Pumps

Cables & Wires

Modular Switches

Water Heaters

Fans

Kitchen Appliances (Mixers,

Grinders, Gas stoves, Water

Purifiers, Others)

Lighting

Stabilizers

DUPS & Battery

Air Coolers

Solar Water Heaters

Market Size

(INR b)

225

700

130

Growth

rate (%)

7-8

8-9

12-14

8-10

10-11

8-9

Organized

market share (%)

80-85

60-65

74-75

70-75

65-70

75-80

Major Players



Havells, Legrand, Schneider, ABB

Crompton, Kirloskar, CRI

Polycab, Finolex, Havells, KEI

Anchor, Legrand, Havells

Havells, Bajaj, Crompton, Racold

Crompton, Usha, Havells, Orient, Bajaj

Mixer Grinders - Bajaj, Preethi, Prestige

Gas Stoves - Stovekraft, Sunflame,

Butterfly

Water Purifiers - Eureka Forbes, Kent RO,

HUL Pureit

Others - Faber, Bajaj, Havells

Signify, Havells, Wipro, Crompton

Microtek, Livguard, Bluebird

Luminous, Microtek, Exide

Symphony, Bajaj, Voltas

Sudarshan Saur, Supreme Solar

Source: MOFSL, Industry

140

10-12

65-75



239

120

11-12

7-8

8-10

15-20

6-8

65-70

55-60

65-70

30-35

60-65

Cables & wires – a key beneficiary of infrastructure growth

Cables & wires’ market size

is estimated to report 12-

14% CAGR over FY23-27 to

reach INR1.2-1.3t

As a result of infrastructure development, urbanization, smart cities, the growth of

residential and commercial real estate, rural electrification, and the move towards

renewable energy, the cables & wires segment is expected to experience significant

growth. The cables & wires market reported ~8% CAGR over FY14-23 to reach

INR700b and it is estimated to clock 12-14% CAGR over FY23-27 (INR1.2-1.3t). The

industry growth rate was hit by the challenges associated with Covid-19 in FY20-21

and it recorded a CAGR of mere 2.7% during FY19-22.

Exhibit 3: Cables & wires market is likely to report a 12-14% CAGR over FY23-27

Wires & Cables (INR b)

19.6

12.5

0.5

-5.0

13.4

13.2

0.9

13.0

7.7

1,200 - 1,300

YoY chg (%)

346

414

416

467

530

600

570

575

650

700

Source: MOFSL, Industry

The cables & wires industry can be split into five categories with housing wire having

the largest share; it is anticipated to post a 16% CAGR between FY23 and FY27. The

power cable and flexible & specialty cable category is projected to report a 14%

CAGR and maintain its market share during the same period. Lastly, control &

instrumentation and communication cable categories would register a CAGR of 11%

and 15%, respectively, over FY23-27.

April 2024

Cables and Wires: Thematic

Exhibit 4: Share of different products within the cables & wires market (FY23)

In cables & wires industry,

housing wire has the largest

share at ~33%

25%

33%

15%

25%

Housing wires

Power Cables (LT / HT / EHV)

Control and Instrumentation Cable

Communication Cable

Flexible & Specialty cables

Source: MOFSL, Industry

The domestic cables & wires market has steadily moved to an organized play from a

largely unorganized play, including regional/national players. The shift was led by rising

awareness among consumers towards safety and quality, the advent of GST regime,

technological innovation, brand building, and technical & regulatory compliance.

Exhibit 5: Organized players’ share would continue to rise

Branded players

Unbranded players

26%

20%

30%

18%

61%

66%

71%

70%

74%

80%

43%

FY14

FY18

FY21

FY22

FY23

FY27E

Exhibit 6: Market share of key players in value terms (FY23)*

Polycab

KEI

Havells

RR Kabel

Gupta Power Infra

Finolex

Universal cable

Others

Unorganized

Source: MOFSL, Companies, Industry, *based on total segmental

revenues

39%

34%

29%

30%

Source: MOFSL, Industry, RR Kabel DRHP

Exhibit 7: Key factors driving growth in the cables & wires segment

Segments

Power cables

Factors driving growth in Cables segment



Investments in power transmission and distribution



Capacity addition in solar and wind energy



Smart Cities Mission



Affordable housing scheme



A spike in nuclear families



Investments in commercial and residential infrastructure



Automobile industry growth and increasing investments in Railways for electrification



Growing demand for household appliances and automobiles due to revival in per capita income



Increased construction activity supported by growing infrastructure projects



Capex rising across industries such as Auto, Steel, Oil and Gas, and Power



Investment expenditure by Indian Railways and in other mass transit systems



Increased focus on automation in ‘manufacturing and processing’ to monitor and control

quality



Service and industrial sector growth increasing the need for data cables



Intercom and security system penetration in residential buildings



Smart cities project



Surge in internet users with rising internet penetration as a percentage of total households

Source: MOFSL, Industry report

Building wires

Elastometric and Flexible cables/wires

Control and instrumentation cables

Switchboard and telecom cables

April 2024

Cables and Wires: Thematic

The Fan industry – hit in CY22/23 by a transition towards energy-efficient

fans; likely to report ~9% CAGR until FY27E though

In the Fan industry, the

premium category market

share increased to 20%+ in

FY23 from 5% in FY15



The fan market in India was estimated at INR130b in FY23, with ceiling fans

dominating (~72% by value) the market. It has grown steadily over the years,

driven by population growth, urbanization, rising disposable incomes, and

improved consumer knowledge of energy-efficient products. The industry was,

however, hit in CY22/23 by the transition towards mandatory Star ratings

introduced by The Bureau of Energy Efficiency (BEE) for ceiling fans w.e.f. 1

Jan’23. Uncertainties about this transition and significant channel destocking in

CY22 hurt the performances of manufacturing companies in FY23.

The fan industry has seen significant growth in the premium category, with a

20%+ market share in FY23 up from 5% in FY15. Manufacturing of smart and

IoT-enabled ceiling fans with enhanced design and features (decorative, anti-

dust, bladeless, etc.) has driven premiumization in the domestic fan market. The

premium segment is anticipated to garner ~28% market share by FY27.

Exhibit 9: Share of organized players to increase further

Organized

185

Unorganized

Exhibit 8: Indian fan market is likely to post a CAGR of ~9%

India's fan market size (INR b)

130

FY15

FY23

FY27E

Source: MOFSL, Industry

FY15

FY23

FY27E

Source: MOFSL, Industry

Energy consumption of

BLDC fans is lower than that

of induction motor fans;

share of star- rated fans to

increase to 90% by FY27E

vs. 50% in FY23

Demand for energy-efficient fans has been rising as consumers become increasingly

aware of the advantages of owning energy-efficient appliances. On an average,

ceiling fans account for 20% of the electricity consumed by an Indian household. The

Brushless Direct Current (BLDC) technology makes ceiling fans highly energy efficient

by reducing the energy consumption to almost one-third of that of a regular

induction motor fan. These fans are rated as 5-star energy-efficient fans. The cost of

BLDC fans is typically on the higher side because of the complex technology and

electronics involved. Companies like Crompton Greaves, Orient Electric, and the new

entrants such as Atom Berg and Halonix Technologies have increased the

manufacturing of BLDC fans over the past few years. Voluntary star labeling for

ceiling fans was introduced by BEE in CY19 and the labeling has been mandated in

CY23. Due to this transition, the share of star-rated fans is estimated to increase to

90% by FY27E from 50% in FY23.

April 2024

Cables and Wires: Thematic

Exhibit 10: Share of star-rated ceiling fans should increase

Star rated

Non-star rated

Exhibit 11: Star labeling of fans became mandatory in 2023

Bee was set up under the provisions of the

Energy Conservation Act, 2001

2002

2019

Voluntary star labelling program was

introduced for Ceiling fans

FY15

FY22

FY27E

2023

Revised BEE norms mandating star labelling for

Ceiling fans

Source: MOFSL, Industry, RR Kabel DRHP

The Lighting industry – estimated to clock ~12% CAGR over FY23-26

LED market share increased

to 80% in FY23 vs. 20% in

FY15

The total lighting market in India reported a CAGR of 12% to reach INR239b in FY23

from INR136b in FY18. The industry is further expected to clock a 12% CAGR to

reach INR338b over FY23-26. The LED market as of FY23 was ~80% of the industry,

up from 20% in FY15. The shift from conventional lighting is due to the consumers’

awareness of energy efficiency, the longer life span of LEDs, and reliability. LED is

expected to completely replace conventional lighting going forward.

The lighting industry in India is steadily shifting towards the premium category, with

~45% market share in FY22 vs. ~35% in FY15. The premium category is likely to

contribute ~60% to the lighting market by FY27. As of FY23, organized players

contributed 65% of the industry vs. 45% in FY15, and their share is estimated to

increase further to 75% in FY27.

Exhibit 12: Lighting market CAGR to be ~12% over FY23-26E

Indian lighting market size (INR b)

40.5

217

239

264

294

YoY change (%)

338

Exhibit 13: Organized players’ market share should improve

Organized

Unorganized

191

136

184

198

7.7

9.7

10.2

11.5

15.0

-3.7

Source: MOFSL, Ikio DRHP

Source: MOFSL, Industry, RR Kabel DRHP

April 2024

Cables and Wires: Thematic

Switch and Switchgear industry – infrastructure and real estate sector to

aid growth

Switch and Switchgear

industry collectively is likely

to post 8% CAGR until FY27

to reach INR400b

The total market size of the switch and switchgear industry in India reported an 8%

CAGR to reach INR293b over FY15-23. The collective market is estimated to post

~8% CAGR until FY27 to reach INR400b. The switch industry consists of two key

segments – traditional switches, comprising 40% of the market and modular

switches, comprising 60% of the market in FY22. The switchgear industry consists of

three key segments - low voltage (LV), which accounted for 70% of the market, and

medium voltage (MV) and high voltage (HV) that combined accounted for the

balance 30% of the market in FY22.

Exhibit 15: Indian Switchgear – market growth (INR b)

Indian switchgear market (INR b)

305

225

Exhibit 14: Indian Switch – market growth (INR b)

Indian switch market (INR b)

120

FY15

FY23

FY27E

Source: MOFSL, Industry

FY15

FY23

FY27E

Source: MOFSL, Industry

Exhibit 16: Traditional and modular switches market size

Modular

Traditional

Exhibit 17: Switchgear’s different segments’ market size

MV/HV

220

FY15

FY22

FY27E

147

FY15

FY22

FY27E

Source: MOFSL, Industry, RR Kabel DRHP

April 2024

Cables and Wires: Thematic

Higher infrastructure

spending

to drive industry growth

As per industry estimates;

the consumer electrical

industry contributes 1.5% of

India’s GDP

According to industry estimates, the consumer electrical industry contributes ~1.5%

of India’s GDP and it would benefit from the government impetus on infrastructure

development. The Central government’s capex increased at a 30% CAGR over FY20-

24 to reach INR9.5t and this is likely to touch INR11.1t in FY25 (up 17% YoY). The

government’s increasing focus on infrastructure development would facilitate the

cost-efficient movement of goods and people, which would spur economic growth.

Exhibit 18: Central government’s capex trend

Central government capex (INR t)

39.1

YoY growth (%)

27.0

16.9

9.1

3.1

FY19

3.4

FY20

4.3

FY21

5.9

FY22

24.8

28.4

16.9

7.4

FY23

9.5

FY24RE

11.1

FY25BE

Source: MOFSL, Union Budget Documents

India is planning to install

500GW of renewable

energy capacity by CY30 at

an investment of INR2.4t

As a part of the Paris agreement, the Indian government has announced its target to

achieve net zero emissions by CY70. India is planning to install 500GW of renewable

energy capacity by CY30, which is likely to involve a massive investment of ~INR2.4t.

India’s energy demand too is expected to surge over the years led by rising

nuclearization, higher disposable income, a rise in industrial activities, etc. The

government’s initiatives such as power for all, integrated power development

scheme, etc. should help demand growth for cables & wires.

Exhibit 19: Energy generation through solar is set to increase

Solar energy production (b kwh)

52.7

49.4

46.1

43.0

40.5

39.2

FY22

FY23P

FY24P

FY25P

FY26P

FY27P

Source: MOFSL, Polycab

Area of total data centers is

estimated to increase to

24m sq. ft. by CY25 v/s 11m

sq. ft. in Mar’22

The surge in data demand from consumers has led to increased demand for data

centers. The number of data centers is expected to increase to 183 with 24m sq. ft.

area by CY25 from 138 data centers with 11m sq. ft. area as of Mar’22. The data

center market size has jumped to USD5.0b in CY22 from USD0.4b in CY15 and is

likely to reach USD10.1b in CY27. With the increase in usage of data centers, the

demand for cables & wires is going to improve as well.

April 2024

Cables and Wires: Thematic

Exhibit 20: Estimated market size of data centers in India

Market size (US$b)

10.1

24.0

Exhibit 21: Area CAGR to be 30% over CY22-25E

Number of data centres

Total area of data centres (m sq. ft.)

4.4

11.0

183

0.4

CY14

CY21

CY22

CY27E

138

CY22

CY25

Source: MOFSL, RR Kabel DRHP

GOI has a target to achieve

30% electrification of the

entire India’s vehicle fleet,

which will drive growth for

cables & wires

The Government of India (GoI) has a target to achieve 30% electrification of the

entire India’s vehicle fleet, and consequently, the sales of Electric Vehicles (EVs) are

expected to reach 10m units by CY30 from a mere 0.45m in CY22. The domestic EV

market is anticipated to post a CAGR of 47% over CY22-30. The GoI announced: 1) a

battery swapping policy during the FY23 Union Budget, 2) tax exemption of

INR1,50,000 while purchasing an EV, 3) PLI schemes and 4) an extension of the

FAME – faster adoption and manufacturing of (hybrid and) EV scheme – until CY24.

The repercussions of the EV boom will be seen on the EV infrastructure too, which

will further boost demand for cables & wires. By CY30, India will require a 2.05m

charging infrastructure.

Exhibit 23: …that will require an increase in charging points

EV charging infrastructure (m)

10.0

2.05

Exhibit 22: Demand for EVs set to improve…

EV units (m)

0.1

CY18

0.1

CY19

0.2

CY20

0.1

CY21

0.5

CY22

1.2

1.6

0.00

0.02

CY25

0.10

CY27

CY30

CY23E CY25E CY30E

CY22

Source: MOFSL, RR Kabel DRHP

The number of electrified villages has kept on increasing and reached ~0.6m in CY22.

Several government initiatives, such as The Deendayal Upadhyaya Gram Jyoti

Yojana, the Pradhan Mantri Sahaj Bijli Har Ghar Yojana – Saubhagya (“Saubhagya”),

etc. have boosted electrification. Currently, 1.18m households still remain to be

electrified and the process is likely to be completed in the next few years. This

reflects the huge scope of the cables & wires industry.

April 2024

Cables and Wires: Thematic

Exhibit 24: Continuous expansion in electrification of villages

Number of villages elctrified

4,70,838

5,12,153

5,97,464

2,49,799

73,739

3,061

CY1950

21,754

CY1961

CY1969

CY1980

CY1990

CY2002

CY2022

Source: MOFSL, RR Kabel DRHP

India’s per capita power

consumption reported a 4%

CAGR over FY10-23

India’s per capita power consumption and requirement have reported a CAGR of 4%

over FY10-23. Better availability of energy, an increasing number of households,

increase in the usage of electrical appliances, etc. have led to an improvement in

power demand. Still, India lags behind the global average electricity consumption of

3,700 units+. A rising number of households along with an increase in earnings levels

would drive the cables & wires and FMEG products.

Exhibit 26: Per capita electricity consumption has steadily

risen over time

Per capita electricity consumption (kwh)

6.5 6.7

2.2

6.3 5.1

7.9

3.4

6.4

4.7 5.5

4.4

YoY change (%)

7.7

2.4 2.8 2.3

-3.9

6.2

Exhibit 25: Rising electricity demand augurs well for cables

& wires

India's power requirement (b units)

Source: MOFSL, CEA

India’s power transmission

and distribution loss is

highest in the world, and

this issue can be addressed

by underground cabling

Underground cables (UG) are generally used in densely populated areas such as

cities and metros, where there is a high density of automobiles, high-rise

commercial & residential buildings, and places with vital installations of

uninterrupted power supply (such as water supply system, hospitals, IT services,

etc.). UG cables help in ensuring uninterrupted power supply, which is uncommon in

the overhead (OH) system.

Though transmission and distribution losses have reduced over the years, India’s

power transmission and distribution loss of ~16% is still one of the highest in the

world. This issue can be addressed via underground cabling. Hence, with increasing

urbanization, we may see rising adoption of underground cables in metros and cities

in the near future.

April 2024

Cables and Wires: Thematic

Exhibit 27: Urban population in India is below global avg.

Urban Population as % of Total Population (CY 2021)

Exhibit 28: India’s urban population share is rising

India's Urban Population as % of Total Population

World

India

China

USA

Russia

CY10

CY15

CY20

CY21

CY22 CY25E CY30E CY50E

Source: MOFSL, Industry, RR Kabel DRHP

India’s population stood at ~1.39b with ~317m households as per Census 2021. The

growth in the number of households (CAGR of 2.5% over FY11-21) exceeds

population growth (CAGR of 1.5% over FY11-21), which indicates a rising trend of

nuclear families in India. Growth in the number of nuclear families in India is leading

to an increase in the number of households, thereby creating a strong demand for

housing units and discretionary items including consumer electrical products.

Exhibit 29: Households with annual earnings of USD10,000

to USD50,000 rising in India

<USD5000

USD10000 - USD50000

USD5000 - USD10000

>USD50000

1.3

30.6

3.0

386

317

248

37.0

18.0

FY30E

FY01

FY11

FY21E

FY30E

192

Exhibit 30: Total number of households in a rising trend; this

indicates an increase in nuclearization

Total number of households in India (in m)

0.5

5.8

17.9

42.0

75.8

42.5

25.6

FY10

FY20

Source: MOFSL, Industry, RR Kabel DRHP

Exhibit 31: Supply of residential houses increased in top

seven cities in CY22/23

New Launches

Units Sold

0.31

0.23

0.24

0.25

0.15

0.23

0.33

0.23

0.15

0.33

Exhibit 32: Supply and absorption rates increased for Indian

office spaces

New supply

Absorption

54.7

41.2

60.2

45.6

45.7

33.9

35.5

0.35

28.8

41.8

0.18

0.10

CY17

CY18

0.22

23.9

CY21

CY22

CY23

26.7

31.3

15.9

18.8

37.5

42.1

40.4

CY19

CY20

CY17 CY18 CY19 CY20 CY21 CY22 CY23 CY24E CY25E

Source: MOFSL, Industry, Cushman & Weikfield

Source: MOFSL, Industry, Knight Frank

April 2024

Cables and Wires: Thematic

Rising cables & wires export bode well for domestic players

Export of cables & wires has

posted ~16% CAGR over

FY17-23; whereas, imports

exhibited a CAGR of ~8%

over the same period

Exports of cables & wires have been on an increasing trend from India and

companies like RRKABEL, KEI and Polycab have increased their export revenues over

the years. Export of cables & wires has posted 16% CAGR over FY17-23; whereas,

imports exhibited a CAGR of ~8% over the same period. More so, during FY21-23,

exports have delivered a CAGR of 36% vs. 15% CAGR for imports during the same

period. During 9MFY24, exports grew ~15.0% YoY vs. 7.5% YoY growth of imports.

India is now a net exporter of cables & wires.

Favorable government policies such as PLI schemes, development of ecosystems for

component manufacturing, import substitution as well as China+1 strategy will aid

domestic companies in increasing their production as well as help them find new

geographies to increase revenue.

Exhibit 33: Increase in exports of cables & wires higher than that of imports

Export (USD m)

Import (USD m)

Export surplus (%)

47.4

16.5

-6.1

-14.4

-18.4

26.8

6.3

54.9

FY17

FY18

FY19

FY20

FY21

FY22

FY23

9MFY24

Source: MOFSL, Industry

Export revenues of Polycab, KEI and RRKABEL displayed a CAGR of 54%, 7% and 25%

respectively, during FY19-23. Exports contributed 9.8%/8.1% to Polycab’s total

revenue in FY23/9MFY24 vs. 3.1% in FY19. For KEI, exports contributed 10.3%/14.5%

to the revenue in FY23/9MFY24 vs. 12.7% in FY19. For RRKABEL, exports contributed

22.5%/27.1% to the revenue in FY23/9MFY24 vs. ~22% in FY19. During FY20, export

revenues of KEI and Polycab surged 68% and 4.4x YoY, respectively, fueled by the

execution of a single large order of Dangote Oil Refining Company, Nigeria.

Exhibit 34: Polycab’s export revenue contribution declined in 9MFY24

Polycab export revenue (INR m)

12.4

8.5

9.8

7.6

8.1

Exports as % of total sales (%)

3.1

2,482

FY19

10,955

FY20

7,589

FY21

9,229

FY22

13,835

FY23

10,069

9MFY24

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Exhibit 35: KEI’s export revenue contribution increased in 9MFY24

KEI export revenue (INR m)

18.4

12.7

14.5

10.3

14.5

Exports as % of total sales

5,365

FY19

8,991

FY20

6,083

FY21

5,892

FY22

7,128

FY23

8,400

9MFY24

Source: MOFSL, Company

Exhibit 36: RRKABEL’s export revenue contribution increased in 9MFY24

RRKABEL export revenue (INR m)

Exports as % of total sales

27.1

22.0

20.4

23.0

21.5

22.7

5,250

FY19

5,063

FY20

5,868

FY21

10,076

FY22

12,702

FY23

13,131

9MFY24

Source: MOFSL, Company

Exhibit 37: RRKABEL’s export contribution is highest (based on FY23 data)

22.7

FY23 (% of revenues)

10.3

9.8

4.3

0.9

RR Kabel

KEI

Polycab

Universal cables

Finolex cables

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Copper – key

material

across cables & wires

Copper forms ~55-60% and

Aluminum forms ~15-20%

of the raw material cost in

cables & wires

Copper and aluminum are the key raw materials used in cables & wires and form a

major chunk of the raw material costs. The cost fluctuations in these materials

define the margins of cables & wires for the company. Most companies typically

have a 90-day window from the raw material procurement date wherein they can fix

the price of cables & wires based on fluctuations in copper and aluminum rates. This

allows manufacturers to factor in any increase in the raw material cost during the

sale of products, which is then passed on to consumers and vice versa. Most cables

& wires’ manufacturers enter into short contracts with their respective metal

suppliers.



Copper:

Typically, copper forms ~55-60% of the raw material cost in cables &

wires. Hence, cables & wires are highly sensitive to any fluctuations in the cost

of copper.



Aluminum:

Aluminum also forms a substantial part in the raw material cost of

cables & wires, ranging from 15-20%. Combined, copper and aluminum almost

account for ~75% of the total raw material cost of cables & wires.

Exhibit 39: Break-up of RM cost (%) for KEI

Copper Wire & Rod

Plastic compounds

Stainless Steel Rod

120

FY22

Aluminium wire & rod

G.I. Wire

Others

Steel

Others

Exhibit 38: Break-up of RM cost (%) for Polycab

Copper

Plastic compounds

120

FY21

FY22

FY23

Source: MOFSL, Company

Aluminium

Packing Materials

FY21

FY23

Source: MOFSL, Company

Copper and Aluminum prices remained volatile in FY21/22 and average copper

prices (considering a consumption lag of three months and in INR terms) increased

11% and 45% over this period, respectively. Aluminum price too increased 52%/8%

in FY22/23.

Exhibit 40: Revenue movement of the industry in line with

changes in copper prices…

Revenue growth (%)

60%

40%

20%

Copper price movement (%)*

60%

40%

20%

-20%

Exhibit 41: … so is the trend with aluminum prices; steep

increase in RM prices helped strong growth in FY22

Revenue growth (%)

Aluminium price movement (%)*

-20%

Source: MOFSL, Bloomberg, Companies; * impact considered with 3

months’ lag

Source: MOFSL, Bloomberg, Companies; * impact considered with 3

months’ lag

April 2024

Cables and Wires: Thematic

Exhibit 42: Decline in copper prices helped margin

improvement during FY18-21…

EBIT margin (%)

12.0

11.0

10.0

9.0

8.0

Copper price movement (%)*

60%

40%

20%

-20%

12.0

11.0

10.0

9.0

8.0

Exhibit 43: … lower aluminum prices too helped margin

improvement during FY18-21

EBIT margin (%)

Aluminum price movement (%)*

75%

50%

25%

-25%

Source: MOFSL, Bloomberg, Companies; * impact considered with 3

months’ lag

Source: MOFSL, Bloomberg, Companies; * impact considered with 3

months’ lag

Average copper price (LME price converted in INR) increased ~2% YoY in FY24, while

the current spot price is ~6%/10% higher than the Mar’24/4QFY24 average.

Conversely, average aluminum price (LME price converted in INR) declined ~8% YoY

in FY24, while the current spot price is ~8%/10% above the Mar’24/4QFY24 average.

This could lead to short-term volatility in margins; albeit, companies have been able

to pass on the impact of fluctuation in RM costs with a lag.

Exhibit 44: Copper prices increased in the past couple of months

Movement in Copper prices (QoQ)

30.0%

15.0%

0.0%

-15.0%

-30.0%

Source: Source: MOFSL, Bloomberg; Note: Apr’24 spot price is compared with Mar’24 average price

Exhibit 45: Aluminum prices also rose recently

Movement in Alumium prices (QoQ)

40.0%

20.0%

0.0%

-20.0%

-40.0%

Source: Source: MOFSL, Bloomberg; Note: Apr’24 spot price is compared with Mar’24 average price

April 2024

Cables and Wires: Thematic

Overview of Polycab,

KEI

and RRKABEL

Polycab India

Polycab is the largest cables & wires company in India, with a market share of ~18%

in FY23. It caters to a host of cables & wires in the 0.2KV to 220KV range, and has

12,000+ SKUs in this segment. Its offerings include EHV cables, optical fiber cables,

HV cables, LAN cables, power & control cables, instrumentation cables, housing

wires, and industrial flexible wires, which are used across chemicals, consumer

durables, defense, energy, infrastructure, manufacturing, metals, oil & gas, real

estate, and telecom sectors. In 2014, the company entered the FMEG segment via

fans, appliances, led lighting & luminaries, switches & switchgears, and pumps. The

company offers 7,000+ SKUs in the FMEG segment. It has 25 manufacturing facilities

spread across Halol, Daman, Waghodia, Roorkee, Nashik, and Chennai. The company

has 4,300+ authorized distributors and more than 0.2m retail touchpoints. Polycab

has been on an expansion spree and cumulatively spent INR22.3b (for cables &

wires) over FY14-23. This was ~3.9x higher than the nearest competitor KEI.

Exhibit 46: Polycab’s capex over FY14-23 has been significantly higher than peers

FY14-23

22,265

5,646

5,344

4,545

4,518

2,587

Universal

cables

Polycab

KEI

RR Kabel

Havells

Finolex

Source: MOFSL, Companies; * data for cables & wires segment only

KEI Industries

KEI is the second-largest player in the cables & wires segment, with a market share

of ~9% as of FY23. It manufactures high and low tension cables (HT, LT, EHV), control

& instrumentation cables, house wires (HW), power cables, stainless steel wires

(SSW) and electrical cables. KEI is also engaged in the EPC business. It is also one of

the few players globally to manufacture the 400kV EHV cables. It has five

manufacturing facilities located across Bhiwadi, Rakholi, Chopanki, Pathredi, and

Chinchpada. KEI exports to over 60 countries, with exports contributing 10% to its

revenue in FY23. KEI has set up overseas marketing offices in five countries to drive

customer outreach efforts and build on global relationships. Australia, Kuwait and

Abu Dhabi (in the Middle East), Nigeria and Ghana (in Africa) are the major export

destinations for the company. KEI expects to increase its export contribution and

gain a strong foothold in the US with export approval for its products.

April 2024

Cables and Wires: Thematic

RR Kabel

RR Kabel started its cables & wires (C&W) business in FY99. It had set up its first

plant in Silvassa. The company started export of its products in FY01 to UAE and has

become one of the leading exporters of cables & wires. It exports its products to

more than 60 countries spread across North America, Asia Pacific, Europe and

Middle East. The company later diversified and expanded its product portfolio to

FMEG segment, both organically and inorganically. The company has five

manufacturing facilities spread across Waghodia (Gujarat), Silvassa (Dadra and

Nagar Haveli and Daman and Diu), Roorkee (Uttarakhand), Bengaluru (Karnataka)

and Gagret (Himachal Pradesh). It has a Pan-India distribution network which

consists of 3,598 distributors and 3,781 dealers as of Sep ‘23. Its products are

available at ~0.124m retail touchpoints and it has connects with ~0.33m electricians.

Exhibit 47: Growth and margin profiles of the cables & wires segment of key players

(INR b)

Polycab

EBIT

EBIT m (%)

KEI

EBIT

EBIT m (%)

Havells^

EBIT

EBIT m (%)

RR Kabel#

EBIT

EBIT m (%)

Gupta Power & Infra*

EBIT

EBIT m (%)

Finolex

EBIT

EBIT m (%)

Universal cables

EBIT

EBIT m (%)

Total revenue

FY14

6.2

11.1

11.0

6.8

6.1

12.9

-0

-1.8

131

FY15

7.6

10.7

12.1

7.9

5.4

13.0

2.3

150

FY16

6.7

10.8

14.0

9.8

5.0

16.2

9.1

169

FY17

7.1

11.7

13.7

9.5

4.8

14.3

8.3

185

FY18

10.3

10.8

16.8

10.7

4.9

15.2

8.2

208

FY19

12.1

11.0

16.1

8.8

5.1

15.0

11.7

237

FY20

12.6

11.1

7.3

5.5

14.6

10.1

242

FY21

12.8

11.6

12.7

9.0

6.5

15.3

6.1

233

FY22

106

9.9

9.5

11.6

7.8

5.9

11.0

6.5

336

FY23

123

13.6

9.1

9.5

6.7

5.0

11.0

8.2

400

CAGR

FY14-23 FY20-23

(%)

13.9

18.7

24.3

21.6

16.5

14.0

12.4

10.7

17.7

17.6

10.5

8.1

7.5

5.7

15.2

n/m

13.2

16.2

8.9

22.7

16.5

29.2

25.2

11.0

7.8

15.5

5.3

12.0

4.5

18.1

Source: MOFSL, Companies, *FY23 estimated revenue and EBIT, ^segmental reporting changed from FY20;

#only cables & wires revenues/EBIT from FY19

Exhibit 48: Product offerings of various players in the market

Players

KEI

Havells

Finolex

Polycab

RR Kabel

Power Cable

(LT/HT/EHV)

✓✓

✓

✓✓

✓*

Control and

Instrumentation

Cable

✓

Communication

Cable

✓

Housing Wires

✓

✓✓

✓

✓✓

Flexible and Specialty

cables

✓

✓✓

✓

Source: MOFSL, RR Kabel DRHP; * RR Kabel does not manufacture EHV cables

April 2024

Cables and Wires: Thematic

Exhibit 49: Manufacturing capabilities and plants of Polycab, KEI and RRKABEL

Players

Manufacturing facilities

Category

Cables & Wires

Switchgears

Polycab

25 plants across Gujarat (cables & wires), Maharashtra

(Switchgears), Uttarakhand (Fans), Daman (cables & wires)

Switches

Pipes & Conduits

Fans

Cables

House Wires

Communication Cables

Stainless Steel Wire

Cables & Wires

RRKABEL

Waghodia and Silvass (cables & wires), Waghodia (Switches),

Roorkee (Fans and Lights), Gagret (Fans), Bangalore (Light)

Various types of compounds

Switch

Fans

Lights

Units

m Kms

Kms

m Kms

Capacity

(per annum FY23)

5.4

29,800

10.2

0.13

1.3

28,800

9000

4.2

53,600

9.9

3.2

KEI

Bhiwadi, Chopanki, Pathredi, Rakholi, Chinchpada

1.9

Source: MOFSL, Companies

Exhibit 50: Key partnerships and M&A by players in the electrical segment

Players

Key acquisitions

Home-electrical division of

Luminous from Schneider Electric

Acquired Arraystorm from Kores (India)

Ram Ratna Electricals Limited

Finolex cables

Alpha Rubber Co.

Silvan Innovation Labs

Polycab

Havells

JV with Techno

JV with Trafigura

Promptec Renewable Energy Solutions

My Lloyd

Nirlep Appliances Pvt Ltd

Bajaj Electricals

Starlight Lighting

Trilux Lenze

Crompton

V-Guard

Butterfly Gandhimathi Appliances

Simon Electric Pvt Ltd

Copper Wire Rod

LED & Solar lighting

Air Conditioners

Home Appliances

CFLs & LEDs

Luminaires

Kitchen Appliances

Switches & Switchgears, Fan regulators, home automation

2015

2017

2021

2005

2022

2021

Expansion

Lights & Fans

LED Lights

FMEG

Cables & Wires

IoT bases home automation

2022

2020

2019

1972

2005

RR Kabel

Source: MOFSL, RR Kabel DRHP

April 2024

Cables and Wires: Thematic

Outlook & Valuation

Polycab and KEI have both significantly outperformed the broader indices, and BSE

Sensex, over the last few years, which we believe has been driven by strong earnings

delivery over the years, an improvement in the balance sheet as both companies

turned net cash positive, an improvement in return ratios compared to historical

levels, a continued government focus on infrastructure development, and strong

traction in the real estate segment. Polycab has a short trading history and got listed

on stock exchanges on 16

Apr’19.

Exhibit 51: Polycab and KEI’s stock performances vs. Sensex

KEI

1,000

24.8

750

500

250

Revenue CAGR (%)

Source: MOFSL, Bloomberg; Note: Rebased

EBITDA CAGR (%)

PBT CAGR (%)

12.2

16.9

12.2

17.7

19.1

Polycab

Sensex

Exhibit 52: Polycab delivered better EBITDA growth

FY20-23 KEI

FY20-23 Polycab

Source: MOFSL, Companies

Polycab, KEI, and RRKABEL

command market share of

18%, 9%, and 8%

respectively, in the cables &

wires industry

Polycab, KEI and RRKABEL are the leading players in the cables & wires segment,

with an industry market share of 18%, 9% and 8% respectively. These companies

command 31%, 15% and 14% market share among our analyzed companies (forming

58% of the industry and 83% of the organized market). Polycab has gained market

share by 150bp over FY14-23 among the companies that we have analyzed. KEI

gained 330bp market share over FY14-23 within our analyzed companies, which was

primarily due to the start of cables production above 220KV+. KEI is amongst the

few companies in India to manufacture cables above 220KV.

RRKABEL also gained

market share by ~500bp over FY14-23

within our analyzed companies.

Polycab delivered ~20% EBITDA CAGR over FY15-23, with a margin expansion of

370bp over the same period. This was aided by an improvement in the margin of

cables & wires segment. Going forward, we expect EBITDA and EPS to report a CAGR

of ~14% and 15%, respectively, during FY24-26. We expect Polycab to generate an

FCF of INR24.7b over FY24-26, despite a capex of INR21.5b during this period.

We like Polycab due to its leadership position in the cables & wires segment, strong

earnings trajectory, and return ratios. We estimate Polycab’s RoE/RoCE to be at

20%/21% in FY26 vs. ~19% in FY23. RoIC would be at 27% in FY26 vs. 26% in FY23.

We expect the company to maintain its premium valuations.

We value the stock at

50x FY26E EPS to arrive at our TP of INR7,500. We initiate coverage on the stock

with a BUY rating.

April 2024

Cables and Wires: Thematic

Exhibit 53: 1-year forward P/E chart of Polycab

P/E (x)

Min (x)

52.0

40.0

28.0

16.0

4.0

Avg (x)

+1SD

Max (x)

-1SD

36.0

28.0

20.0

12.0

4.0

Exhibit 54: 1-year forward EV/EBITDA chart of Polycab

EV/EBITDA (x)

Min (x)

Avg (x)

+1SD

Max (x)

-1SD

Source: MOFSL, Company, Bloomberg

KEI’s reported ~18%/40% CAGR in EBITDA/Adj. PAT over FY15-23, despite margin

pressure in the cables & wires segment during FY22-23 led by RM cost inflation.

Going forward, we expect its EBITDA and EPS to exhibit a CAGR of ~25% (each) over

FY24-26. Its FCF generation over FY24-26E would be INR1.9b, given the higher capex

of INR14.5b during this period.

We estimate KEI’s RoE/RoCE to be ~19%/20% in FY26 vs. ~18% in FY23. Investment

in a new Greenfield unit would restrict its RoE improvement, in our view.

We value

the stock at 50x FY26E EPS to arrive at our TP of INR5,000. We initiate coverage on

the stock with a BUY rating.

Exhibit 55: 1-year forward P/E chart of KEI

P/E (x)

Min (x)

60.0

45.0

30.0

15.0

0.0

Avg (x)

+1SD

Max (x)

-1SD

40.0

30.0

20.0

10.0

Exhibit 56: 1-year forward EV/EBITDA chart of KEI

EV/EBITDA (x)

Min (x)

Avg (x)

+1SD

Max (x)

-1SD

0.0

Source: MOFSL, Company, Bloomberg

RRKABEL reported ~16%/22% CAGR in EBITDA/Adj. PAT over FY19-23, despite

margin pressure in the cables & wires segment during FY22/FY23 due to high RM

cost. Going forward, we expect its EBITDA and EPS to exhibit a CAGR of 39% and

43%, respectively, over FY24-26. Its FCF generation over FY24-26E would be

INR3.5b, despite a capex of INR7.0b during this period.

We estimate RRKABEL’s RoE/RoCE to be 25%/24% in FY26 vs. 14%/12% in FY23.

Valuation multiples of cables and wires companies have rerated significantly in the

last two years, driven by strong earnings growth, which we expect will continue on

the back of government capex and strong traction in the real estate segment. We

expect the company to trade at premium valuations.

We value it at 40x FY26E EPS

to arrive at a TP of INR2,200. We initiate coverage on the company with a BUY

rating.

April 2024

Cables and Wires: Thematic

Key risks and concerns



Fluctuation in commodity prices:

A spike in commodity prices could lead to an

increase in the cost of finished goods and can hurt the industry’s ability to pass

on the cost hikes to consumers. Prices of key commodities, i.e. copper and

aluminum, surged in FY21-FY22 and thereafter remained volatile in FY23, which

in turn adversely impacted the gross margin of the company.

Exhibit 58: Aluminum price also increased (%) recently

Movement in Alumium prices (QoQ)

Exhibit 57: Copper price has increase (%) in couple months

Movement in Copper prices (QoQ)

Source: MOFSL, Bloomberg



Source: MOFSL, Bloomberg



Slower-than-expected pick-up in housing and infrastructure activities:

Demand

for new housing has improved during the last two years after remaining

subdued over the past several years. Further, the government has put a lot of

focus on infrastructure development. This has helped growth in the cables &

wires and switchgear segments. A slowdown in housing and infrastructure

activities may hurt the performance of the company.

Increase in competition:

Demand for FMEG products has been subdued for the

last few quarters due to the inflationary impact, which has hit rural demand.

This may create pressure on the industry’s pricing power, and in turn can hurt

profitability.

Non-availability of regular and quality power:

Availability of quality electricity is

the key to demand for electrical products. Any substantial shortfall in the supply

of electricity may hamper growth prospects for the industry.

April 2024

COMPANIES COVERED IN THE REPORT

Polycab India

Cables and Wires: Thematic

Summary ........................................................................................................................Pg30

Leadership in cables and wires industry ...........................................................................Pg34

Strengthening FMEG business .........................................................................................Pg36

Enhancing brand and distribution network; high ad spending to benefit ...........................Pg37

Financial Outlook ............................................................................................................Pg39

Valuation and view .........................................................................................................Pg44

SWOT analysis/ Bull and Bear Case ............................................................................ Pg46/47

Financials and valuations (Consolidated) .........................................................................Pg49

KEI Industries

Summary ........................................................................................................................Pg51

Second largest player with a varied product portfolio ......................................................Pg55

Empowering retail and exports segments for accelerated growth .....................................Pg58

Financial Outlook ............................................................................................................Pg60

Earnings growth and strong sector dynamics to help sustain rerating; initiate with BUY....Pg66

SWOT analysis/ Bull and Bear Case ............................................................................ Pg68/69

Financials and valuations (Consolidated) .........................................................................Pg71

RR Kabel

Summary ........................................................................................................................Pg73

Delivering industry-leading growth in cables and wires ....................................................Pg77

Targets to accelerate growth of FMEG business ...............................................................Pg81

Increasing dealer network led to market share gains........................................................Pg83

Financial Outlook ............................................................................................................Pg86

Valuation and view .........................................................................................................Pg90

SWOT analysis/ Bull and Bear Case ............................................................................ Pg93/94

Financials and valuations (Consolidated) .........................................................................Pg96

April 2024

Initiating Coverage | Sector: Cables and Wires

Polycab India

BSE Sensex

74,245

S&P CNX

22,519

CMP: INR5,300

TP: INR7,500 (+42% )

Buy

Consolidating its strength in cables & wires

Strong growth and FCF generation to help sustain premium multiples

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

POLYCAB IN

150

796.6 / 9.5

5733 / 3016

8/-13/47

3476

34.2



Financial Snapshot (INR b)

Y/E Mar

FY24E FY25E FY26E

Sales

174.1 199.2 227.9

EBITDA

23.7

26.2

31.1

PAT

17.0

18.7

22.4

EBITDA (%)

13.6

13.1

13.7

EPS (INR)

113.7 124.9 149.7

EPS Gr. (%)

34.0

9.9

19.9

BV/Sh. (INR)

532.7 629.9 747.2

Ratios

Net D/E

(0.1)

(0.2)

RoE (%)

21.3

19.8

20.0

RoCE (%)

22.1

20.6

20.8

Payout (%)

20.9

22.2

21.6

Valuations

P/E (x)

46.6

42.4

35.4

P/BV (x)

10.0

8.4

7.1

EV/EBITDA (x) 33.1

29.8

24.8

Div Yield (%)

0.4

0.5

0.6

FCF Yield (%)

0.4

1.1

1.6

Shareholding pattern (%)

As On

Dec-23 Sep-23 Dec-22

Promoter

65.8

65.9

66.6

Public

7.6

8.1

10.1

Others

13.4

12.4

8.1

FII Includes depository receipts

Stock Performance (1-year)



Market leader in the cables & wires segment:

Polycab is a market leader in the

cables & wires sector, with a ~26% share in the organized market and an ~18%

share in the overall market. It focuses on in-house manufacturing with a high

degree of backward integration and has 25 manufacturing facilities. We believe

that the company’s market share has increased 150bp over FY14-23 among the

companies we have analyzed (~58% of the industry size).

Strengthening presence in the FMEG segment:

Polycab commenced its FMEG

business in FY14 and recorded a revenue CAGR of 39% over FY15-22. Revenue

growth has been muted in FY23/FY24E due to subdued demand and the

restructuring of its distribution channel. We estimate a revenue CAGR of 10% over

FY24-26 and expect EBIT margin to improve to 2% by FY26 vs. losses in

FY23/FY24E. Polycab’s entry into the FMEG business helped to improve its total

addressable market (TAM) to INR1.4t, the second highest among listed companies

(including consumer durable space).

Focusing on increasing exports, capacity expansion, in-house manufacturing, and

building distribution channels:

Polycab clocked a 31% CAGR in export revenue

over FY18-23, and export contribution to total revenue stood at ~10% in FY23.

Export contribution declined to 8% in 9MFY24, mainly due to its transition to the

distribution model in the US and the impact of the Israel-Hamas conflict on EU

trade routes. However, the management is confident about a recovery in its

international business going forward. Its capex has been much higher than peers’

(cables & wires capex over FY14-23 was 3.9x/4.9x higher than that of KEI/HAVL) as

Polycab is focusing on expanding capacity and increasing in-house manufacturing.

Ad spending has increased over the years due to its foray into the FMEG business,

and it spent 0.9% of its revenues (2.7% of B2C sales) in FY23. It has increased its

dealer count by a CAGR of 5% over FY18-23 and it has now 0.2m+ retail

touchpoints. Dealers and distributors contributed about 83% to its FY23 revenue.

Earnings to improve; initiate with BUY:

Polycab delivered a 34% profit CAGR over

FY14-23 and we expect an EPS CAGR of 15% over FY24-26. We initiate coverage on

Polycab with a BUY rating and a TP of INR7,500 (based on 50x FY26E EPS),

considering strong earnings delivery and higher return ratios - RoCE/RoIC of

~21%/~27% in FY26E.

Key downside risks:

a) rise in commodity prices, b) higher competitive intensity in

the sector, and c) demand impact due to economic slowdown.

Market leader in cables & wires with a focus on capacity additions



Polycab is a market leader in the cables & wires industry, with ~18% share in

FY23. Its market share among organized players/our analyzed companies

forming 58% of the industry is estimated to be ~26%/~31%. It has gained

market share by 150bp over FY14-23 among our analyzed companies.

Polycab has been consistent in capacity additions and its cables & wires

segment’s capex over FY14-23 was 3.9x/4.9x higher than that of KEI/HAVL.

Polycab’s cables & wires capacity of 5.4m km is 2.5x higher than that of KEI

(1.54m km). We expect Polycab to incur a capex of INR7.2b p.a. during FY24-

26, which should help it maintain growth momentum.

April 2024

Cables and Wires: Thematic



Its Greenfield unit in Gujarat (production expected in FY26E) will enable it to

enter into extra high-voltage cable manufacturing (up to 550kv).

Polycab has the second highest TAM of INR1.4t among listed companies in the

consumer durable space. Its entry into the FMEG segment with a diversified

product portfolio led to an increase in its TAM.

Focus on improving its FMEG business; margins expected to improve



Polycab started its FMEG business in FY14 and now has 10+ product ranges in

the segment. It has been able to make a mark in this highly competitive

business. It recorded a revenue CAGR of 39% over FY14-22 in the segment and

touched the revenue mark of INR12.4b (~9% of total revenues).

Revenue of the segment was impacted in FY23/FY24E by subdued consumer

sentiment and the company’s efforts to reorganize its distribution channel. We

expect revenue CAGR of 10% YoY in this segment over FY24-26 and expect EBIT

margin to reach to 2% in FY26 vs. losses in FY23/FY24E.

Polycab focuses on in-house manufacturing and ~94% of its revenue in FY23

came via in-house manufactured products. It has a network of over 4,300

dealers (4,600+ in FY22), which increased at a CAGR of ~5% over FY18-23. Its

retail touchpoints stand at 0.2m+ vs. 0.1m in FY18.

Its advertising and promotion spending increased by 51% YoY to INR1.2b in FY23

mainly due to the low base effect as brand spending was muted in FY21/FY22.

However, AD spending increased at a CAGR of 14% over FY17-23 (0.9%/1.3% of

revenues in FY23/9MFY24). We estimate ad spending to at 1.1-1.3% of revenues

over FY24-26. Ad spending as % of B2C sales stood at 2.7%/4.2% in

FY23/9MFY24 and the company expects to keep it in the range of ~3%-5% of

B2C sales in the future.

It has tied up with advertising firm Ogilvy and brand consultancy firm Interbrand

to establish its brand among consumers. It became the official sponsor of three

major cricket events, ICC World Test Championship Final, ICC Women’s T20

World Cup, and the ICC Men’s ODI Cricket World, in CY23.

We expect Polycab to report a ~14% revenue CAGR over FY24-26, led by

15%/10% growth in cables & wires/FMEG segments. Revenue of cables & wires

is estimated to grow 26% YoY in FY24 as its peers are facing capacity constraints

in cables (e.g., 91% capacity utilization for KEI in FY23).

We estimate a CAGR of 14.5%/15% in EBITDA/profit over FY24-26. We estimate

EBITDA margin to be at 13.6%/13.1%/13.7% in FY24/FY25/FY26 vs. 13.1% in

FY23 (average 12% over FY18-23).

The company has been generating free cash flows for most of the years and its

cumulative FCF over FY15-23 was INR32b (cumulative capex of INR27.7b in this

period). We expect cumulative FCF of INR24.7b during FY24-26E. RoE and RoCE

are expected to be at 20% and 21%, respectively, in FY26 vs. an average of ~15%

(each) over FY15-23.

We initiate coverage on Polycab with a BUY rating and a TP of INR7,500 (based

on 50x FY26E EPS), considering a strong earnings CAGR, better return ratios and

strong balance sheet (net cash of INR18.9b in FY23, which will increase to

INR36b in FY26E).

In-house manufacturing; dealer network and improved visibility to benefit



Expect EBITDA and PAT CAGR of 14% (each) over FY24-26



Earnings and return ratios to improve; initiate with BUY



April 2024

Cables and Wires: Thematic

STORY IN CHARTS

Polycab is the market leader in cables & wires (FY23)

Polycab’s market share trend among analyzed companies

Market share (%)

31.2%

30.3%

29.9%

29.2% 29.2%

28.9%

31.4%

30.5%

30.6%

18%

30%

Polycab

KEI

Havells

RR Kabel

Gupta Power Infra

Finolex

Universal cable

Others

Unorganized

Source: MOFSL, Company, Industry

30.2%

43%

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23

Source: MOFSL, Companies

Cumulative capex of cables & wires segment over FY14-23

22,265

FY14-23

Higher capex to continue during FY24-26E

Total capex (INR b)

Cables & wires capex (INR b)

5,646

5,344

4,545

4,518

2,587

Polycab

KEI

RR Kabel

Havells

Finolex Universal

cables

Source: MOFSL, Company

Source: MOFSL, Companies

Estimate 10% revenue CAGR in FMEG segment over FY24-26E

FMEG (INR b)

70.8

YoY (%)

FMEG segment to break-even in FY25E

8.1

EBIT margin (%)

5.5

61.2

43.4

32.2 30.2

23.7 21.0

(0.8) 2.0

10.0 10.0

1.0

1.8

1.2

2.0

1.6

(0.5)

(5.0)

2.0

1.2 2.0 3.4 4.9 6.4 8.4 10.3 12.5 12.4 12.7 13.9 15.3

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

STORY IN CHARTS

Expect ~14% revenue CAGR over FY24-26E

FY15-23

33.5

21.5

13.8

15.0

10.0

8.0

14.7

14.4

Gross margins to improve over FY24-26E

Gross margin (%)

26.3 26.8

27.9

24.9

FY24-26E

25.3

23.1

25.9

22.4

25.5 25.9 25.8

26.7

Cables

FMEG

EPC

Total revenue

Source: MOFSL, Company

Estimate EBITDA CAGR of 14.5% over FY24-26E

EBITDA (INR b)

10.8

EBITDA (%)

13.1 13.6 13.1 13.7

10.4

Estimate PAT CAGR of 15% over FY24-26E

PAT (INR b)

YoY (%)

11.9

12.9 12.6

9.4 9.4 8.7

4.4 4.9 4.8 7.3 9.5 11.4 11.1 12.7 18.5 23.7 26.2 31.1

1.6 1.8 2.3 3.6 5.0 7.6 7.4 8.4 12.7 17.0 18.7 22.4

Source: MOFSL, Company

Generating free cash despite higher capex over FY24-26E

OCF (INR b)

22.0

14.0

Capex (INR b)

FCF (INR b)

14.0

9.0

RoE/RoCE should remain higher than historical levels

RoE (%)

RoCE (%)

6.0

-2.0

-10.0

4.0

-1.0

-6.0

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Leadership in cables & wires industry

Greenfield plant in Gujarat will help to enter into EHV segment

Polycab has over four decades of experience in the cables & wires industry and is

the largest manufacturer in India. Polycab manufactures a diverse range of cables &

wires such as power cables, control cables, instrumentation cables, solar cables,

building wires, flexible cables, multi-core cables, communication cables, submersible

flat and round cables, rubber cables, overhead conductors, railway signaling cables,

specialty cables and green wires.

Leveraging its brand name, Polycab entered FMEG, the other electrical product

market in FY14. The company manufactures and sells products such as fans, LED

lighting and luminaires, switches and switchgears, solar products and conduits and

accessories. Polycab has 25 manufacturing plants, including two JVs: 1) 50:50 JV

with Techno, a Gujarat-based manufacturer of LED products; and 2) In 2016, it

formed a 50:50 JV with Trafigura, a commodity trading company, to set up a

manufacturing facility in Halol, Gujarat, to produce copper wire rods (Ryker Plant).

Exhibit 1: Product range across different segments

Cables

EHV cables

Fire survival cables

Optical fibre cables (OFC)

Jelly filled telephone cables

High voltage cables

LAN cables

Power and control cables

Instrumentation cables

Co-axial cables

Solar cables

Railway signalling cables

Wires

House wires

Green wires

Industrial flexible wires

Speaker wires

FMEG

Fans

Water heaters

Switches

Switchgears

LED Lighting and luminaires

Pumps

Solar products

Source: MOFSL, Company

The company has a leadership position in India with a market share of ~26% in the

organized cables & wires industry and ~18% in the overall market. Its market share

among our analyzed companies stands at ~31% and our analysis indicates that it has

gained market share by 150bp over FY14-23 among these players.

Exhibit 2: Polycab is the market leader in cables & wires with

18% market share (FY23)

Exhibit 3: Polycab’s market share trend among analyzed

companies

31.2%

30.3%

29.9%

29.2% 29.2%

28.9%

30.2%

30.5%

31.4%

30.6%

18%

30%

Polycab

KEI

Havells

RR Kabel

Gupta Power Infra

Finolex

Universal cable

Others

Unorganized

Source: MOFSL, Company, Industry

43%

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23

Source: MOFSL, Companies

April 2024

Cables and Wires: Thematic

Polycab has been consistent in capacity additions and its cables & wires segment’s

capex over FY14-23 has been 3.9x/4.9x higher than that of KEI/HAVL. Polycab’s

cables & wires capacity of 5.4m km is 2.5x higher than that of KEI (1.54m km). The

company will continue to invest in capacity expansion and we expect it to incur a

total capex of INR7.2b p.a. (cables & wires capex to be INR4.5b every year) during

FY24-26E, which will help it to maintain growth momentum.

Its Greenfield unit in Gujarat (production expected in FY26) will enable it to

manufacture extra high-voltage cable (up to 550kv). The management believes that

India's growing power demand will create higher demand for high-voltage (HV) and

extra-high-voltage (EHV) cables and there will be a replacement of 220 KV

transmission lines with 400 KV gradually (even for 550 KV). The company has

partnered with a leading Swiss cable manufacturer, Brugg Cables, to procure the

high-end technology required for EHV production. The industry size for EHV cable

above 220KV+ is estimated to be INR25-30b. The market size is estimated to achieve

a CAGR of 13-14% over FY23-27E.

Exhibit 4: Cumulative capex of cables & wires segment over

FY14-23 (INR m)

22,265

Exhibit 5: Polycab will continue higher capex during FY24-

26E

Total capex (INR b)

Cables & wires capex (INR b)

5,646

5,344

4,545

4,518

2,587

Polycab

KEI

RR Kabel

Havells

Finolex

Universal

cables

Source: MOFSL, Company

Source: MOFSL, Companies

April 2024

Cables and Wires: Thematic

Strengthening the FMEG business

Likely to break-even in FY25 and EBIT margin to improve to 2% by FY26E

Polycab entered the FMEG business in FY14 and has expanded its product portfolio

to 10+ categories. The segment posted a revenue CAGR of 39% over FY15-22

(INR12.5b in FY22). However, subdued consumer sentiment and its efforts to

reorganize the distribution channel affected FY23/FY24E revenue (muted CAGR of

0.6% over FY22-24E).

Exhibit 6: Product portfolio of the company

Exhibit 7: Switchgear product portfolio

Source: MOFSL, Company

The company moved on to a large distributor model of operations, in which a large

distributor supported by 8-10 sub-distributors will cater to demand from a cluster of

towns. This will increase the availability of the company's products in a wider

geography and at more retail outlets.

The company also increased its investment in brand building through high spending

on marketing activities. It expanded its influencer management program to more

cities, which will further improve its brand image. R&D efforts have improved after

the acquisition of Silvan in FY22 and the company intends to offer products across

price points, which will help customers. It launched ~40 new models of star-rated

ceiling fans in the designer, celebration, and tech series in FY23.

Exhibit 8: Estimate ~10% revenue CAGR in FMEG over FY24-26

FMEG (INR b)

70.8

61.2

43.4

32.2 30.2

23.7 21.0

(0.8) 2.0

10.0 10.0

1.0

YoY (%)

8.1

Exhibit 9: FMEG segment to break-even in FY25E

EBIT margin (%)

5.5

1.8

1.2

2.0

1.6

(0.5)

(5.0)

2.0

1.2 2.0 3.4 4.9 6.4 8.4 10.3 12.5 12.4 12.7 13.9 15.3

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Enhancing brand and distribution network; high ad

spending to benefit

High ad spending and strengthening distribution network will boost growth

Being a leader in the cables & wires segment, Polycab is a well-known brand and has

a strong brand recall. It has customers across major power utilities, oil and gas, IT

parks, metro rail, infrastructure, metal and non-metal, cement and EPC companies

in India and abroad. The company has strengthened brand recognition by increasing

brand awareness and customer loyalty through promotions and marketing. It has

tied up with advertising firm, Ogilvy, and brand consultancy firm, Interbrand, which

will help to establish its brand among consumers. It was the official sponsor of three

major cricket events, ICC Women’s T20 World Cup, ICC World Test Championship

Final and the ICC Men’s ODI Cricket World in CY23.

Its advertising and promotion spending increased by 51% YoY to INR1.2b in FY23

mainly due to the low base effect as brand spending was muted in FY21/22.

However, ad spending increased by a CAGR of 14% over FY17-23 (0.9%/1.3% of

revenue in FY23/9MFY24). Ad spending increased ~61% YoY in 9MFY24, as the

company partnered with ICC to be the official Partner of the ODI Cricket World Cup

2023, launched diverse branding campaigns across multiple media platforms and

engaged with influencers. Ad spending as % of B2C sales stood at 2.7%/4.2% in

FY23/9MFY24. The company expects to maintain it in the range of ~3%-5% of B2C

sales in the future. We estimate ad spending to be maintained at 1.1-1.3% of

revenues over FY24-26E.

Exhibit 10: Ad spending as % of total sales

Ad-spend (INR m)

1.4 1.5

1.0 1.0

0.9

1.2

0.8

0.9

0.7

as a % of sales

1.3

1.2

Exhibit 11: Ad spending as % of B2C sales

Ad-spend as a % of B2C sales

3.8

4.2

1.1

2.0

1.8

2.7

2.6

Source: MOFSL, Company

Strong distribution network

Polycab has a strong distribution network, with more than 4,300 dealers as of FY23,

up from 3,372 dealers in FY18. In FY23, a rejig of its distribution channel led to a

decline in the dealers count by ~300. In FY23, the company added 317 new

distributors in the retail wire business and 371 new distributors in the FMEG

business. The company has 23 warehouses across 22 states, which help to deliver to

its over 205,000 retailer touchpoints. To increase its presence further across the

country, it has identified 122 districts with untapped potential. About 83% of the

company’s revenue in FY23 was generated by distributors & dealers. Fully digitalized

April 2024

Cables and Wires: Thematic

end-to-end sales help the company deliver its products to any distributor within

24 hours of order placement.

Exhibit 12: Dealers count declined in FY23 due to rejig in

FMEG distribution channel

Dealers and distributors

Exhibit 13: Large retail touchpoints help to meet demand

Retailers

1,65,000

1,25,000

1,00,000 1,00,000

2,05,000 2,05,000

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23

Source: MOFSL, Company

Various initiatives to strengthen its brand and distribution network

Polycab, over the years, has taken several initiatives to strengthen its brand and

distribution network. It launched ‘Project Josh’ aimed at increasing its market share

in the retail wires and FMEG segments. This program helped to increase the number

of distributors and retailers in different locations. Bandhan, a pan-India customer

relationship management program, was launched to provide sales incentives to

retailers and electricians. In FY21, Polycab launched a strategic cost optimization

initiative, Project Udaan, for cost savings of 80bp over the next two years. It also

initiated ‘Project Shikhar’ in FY21 to strengthen engagements with key influencers

like retailers, electricians and small contractors. This program was aimed at

expanding its retail reach in 300 high potential cities across India in the next two

years. It also launched ‘Project Leap’ in FY21, a multi-year transformational journey

with an aim to cross INR200b revenue in FY26. We believe that the company will be

able to achieve its revenue milestone in FY25E. Apart from setting targets in its B2B

and B2C business, the company aims to grow sustainably and leverage on digital and

analytics to transform its business model.

Exhibit 14: Project Leap – aims to achieve higher growth

Parameters

Market growth in core segments

Market growth in emerging segments

Contribution from adjacencies

Contribution from exports

Target

1.5x

>5%

>10%

Source: MOFSL, Company

Exhibit 15: Project Leap – targets to improve B2C margins

Parameters

Market growth in retail wires

Market growth in FMEG

EBITDA margin in FMEG

Contribution from Online for specific categories

Target

1.5x

10-12%

>10%

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Financial Outlook

Expect revenue CAGR of ~14% over FY24-26E



Overall, revenue grew at a combined annual rate of ~15% over FY15-FY23,

driven by double-digit growth in the cables & wires segment (~14% CAGR) and

accelerated growth in the FMEG segment (~34% CAGR), albeit on a small base.

The company also began EPC work related to cables & wires, which saw ~8%

CAGR over FY15-FY23 and complements the company’s largest segment.

We expect a revenue CAGR of 14% over FY24-26E, driven by the company’s

leadership position in the cables & wires segment and the rising share of the

FMEG segment. The cables & wires segment’s revenue is estimated to rise 26%

YoY in FY24 as its peers are facing capacity constraints in cables (e.g., 91%

capacity utilization for KEI in FY23). Polycab will also benefit from its Greenfield

capex in the EHV segment, which is expected to commence production in FY26.

Exhibit 16: Revenue expected to clock 14% CAGR over FY24-26E

Total revenue (INR b)

21.4

14.4

5.8

15.5

10.6

(0.4)

YoY (%)

38.8

23.4

15.6

14.4

18.1

FY15

FY16

FY17

FY18

FY19

FY20

FY21

122

FY22

141

FY23

174

199

228

FY24E FY25E FY26E

Source: MOFSL, Company

Exhibit 17: Expect cables & wires revenues to see a 15%

CAGR over FY24-26

Cables and wires (INR b)

42.6

14.3

20.2

11.0 7.1

6.5 10.6

1.2

26.0

15.9

15.0 15.0

YoY (%)

Exhibit 18: Expect FMEG revenues to remain muted in

FY24E; 10% CAGR expected over FY24-26E

FMEG (INR b)

61.2

YoY (%)

70.8

43.4

32.2 30.2

23.7 21.0

(0.8) 2.0

10.0 10.0

75 106 123 155 179 205

1.2 2.0 3.4 4.9 6.4 8.4 10.3 12.5 12.4 12.7 13.9 15.3

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Exhibit 19: Expect revenue contribution from cables & wires to be at 89-90%

Cables and wires

FMEG

EPC

Copper

Others

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23 FY24E FY25E FY26E

Source: MOFSL, Company

Gross margin to improve going forward



High copper and aluminum prices hit gross margin in FY21/FY22; however, lower

RM prices in 1HFY23 helped improve gross margin to 25.5% in FY23.

The purchase of traded goods increased in FY21 due to increased traction in the

FMEG segment. Its focus on in-hose manufacturing will restrict the increase in

the purchase of traded goods. During FY23, the company established a switch

manufacturing plant in Daman and a new fan manufacturing plant in Halol.

We expect gross margins to revert to 26-27% during FY24-26E, as its focus on

backward integration in cables & wires and increasing capacity in FMEG

categories are expected to act as favorable catalysts going ahead.

Exhibit 20: Gross margins to improve to 26-27% during FY24-26E

Gross margin (%)

26.3

21.5

26.8

27.9

24.9

25.3

23.1

25.9

22.4

25.5

25.9

25.8

26.7

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23 FY24E FY25E FY26E

Source: MOFSL, Company

Exhibit 21: Focus on in-house manufacturing to restrict higher purchase of traded goods

Purchase of traded goods as % of sales

8.1

6.2

4.7

2.9

2.3

FY14

4.6

FY15

5.4

FY16

3.2

FY17

3.6

FY18

4.2

FY19

4.8

FY20

7.3

FY21

5.3

FY22

4.0

FY23

4.7

5.6

6.7

6.8

5.4

Purchase of traded goods as % of RM cost

9.8

April 2024

Cables and Wires: Thematic

Employee costs continue to increase



Employee costs have risen in double digits over FY15-23 (except in FY21 due to

Covid-19) as the company diversified into the FMEG segment and strengthened

its capabilities in the cables & wires segment.

The permanent employee count has been rationalized over the years and stood

at 4,485 in FY23 vs. 5,168 in FY16. However, per employee cost steadily rose in

double digits over FY16-23 and remained flat in FY21.

Exhibit 22: Employee costs increased in double digits over FY15-23

Employee cost (INR b)

23.4

YoY (%)

30.0

21.8

11.2

13.2

15.8

(3.3)

15.0

20.0

27.3

12.3

15.0

1.3

FY14

1.6

FY15

2.1

FY16

2.3

FY17

2.6

FY18

3.0

FY19

3.7

FY20

3.5

FY21

4.1

FY22

4.6

5.9

6.8

8.2

FY23 FY24E FY25E FY26E

Source: MOFSL, Company

Exhibit 23: Number of employees declined sharply in FY22

No of employees

(0.4)

(8.3)

(1.3)

0.8

YoY (%)

(0.9)

(4.7)

1.2

Exhibit 24: Per employee cost increased over FY16-23

Per employee cost (INR m)

21.2

13.7

17.3

20.9

YoY (%)

20.7

11.0

(2.4)

5,168

FY16

4,740

FY17

4,719

FY18

4,659

FY19

4,695

FY20

4,651

FY21

4,431

FY22

4,485

FY23

0.4

FY16

0.5

FY17

0.5

FY18

0.6

FY19

0.8

FY20

0.8

FY21

0.9

FY22

1.0

FY23

Source: MOFSL, Company

Estimate EBITDA CAGR of 14.5% over FY24-26



EBITDA saw a ~20% CAGR over FY15-23, with margin expansion of 370bp, aided

by margin improvement in the cables & wires segment. With lower commodity

inflation in FY23, Polycab recorded strong 46% YoY EBITDA growth in the year.

Polycab has benefitted in the cables segment due to capacity constraints at peer

companies and its margin of cables & wires segment improved to 13.6%/14.4%

in FY23/9MFY24 v/s 9.9% in FY22. We expect EBIT margin of this segment to be

at 13.5%/13.8% in FY25/FY26E. The FMEG segment’s loss is estimated to

increase in FY24 due to a slowdown in consumer demand, higher ad/promotion

spending and higher fixed overhead. We estimate the FMEG segment to break-

even in FY25 and EBIT margin to increase to ~2% in FY26.

We estimate a CAGR of 14.5% in EBITDA over FY24-26, with OPM of 13.6%/

13.1%/13.7% in FY24/FY25/26 vs. 13.1% in FY23.

April 2024

Cables and Wires: Thematic

Exhibit 25: Expect EBITDA margin to be stable over FY24-26E

EBITDA (INR b)

12.9

11.9

10.8

9.4

8.7

12.6

10.4

EBITDA (%)

13.1

13.6

13.1

13.7

4.4

FY15

4.9

FY16

4.8

FY17

7.3

FY18

9.5

FY19

11.4

FY20

11.1

FY21

12.7

FY22

18.5

FY23

23.7

26.2

31.1

FY24E FY25E FY26E

Source: MOFSL, Company

Adj. PAT CAGR expected at ~15% over FY24-26E



Over FY15-23, adj. PAT CAGR stood at 29%, aided by lower interest expenses

(declined at 7% compounded rate in this period), higher other income (~51%

CAGR), and lower tax rate (24.9% in FY23 vs. 31.7% in FY15). Adj. PAT increased

52%/34% YoY in FY23/FY24E, led by a strong operating performance.

We expect adj. PAT CAGR at ~15% over FY24-26. We estimate higher other

income will be offset by higher depreciation and interest expenses. We believe

that the increase in LC (letter of credit) acceptances will lead to higher interest

expenses (CAGR of ~15% over FY24-26E).

Exhibit 26: Expect Adj. PAT CAGR at ~15% over FY24-26E

84.0

54.0

39.6

25.8

12.5

(2.8)

13.4

PAT (INR b)

51.9

YoY (%)

51.8

34.0

9.9

19.9

1.6

FY15

1.8

FY16

2.3

FY17

3.6

FY18

5.0

FY19

7.6

FY20

7.4

FY21

8.4

FY22

12.7

FY23

17.0

18.7

22.4

FY24E FY25E FY26E

Source: MOFSL, Company

Working capital cycle to remain at 65 days going forward; working capital

excluding acceptances to be at 106 days



Polycab’s working capital cycle has improved over the years (FY18-23), led by a

significant decline in receivables days (34 days in FY23 vs. 74 days in FY18).

Given that the revenue contribution of the B2B business is expected to remain

significant, we expect working capital cycle to remain 65 days over FY23-26.

It has entered into arrangements for purchase under issuance of Letter of Credit

by banks under its non-fund based working capital limits. These arrangements

are majorly for raw materials with a maturity of up to 12 months and are

recognized as Acceptances under Trade and other payables.

Considering these acceptances as short-term loans, working capital was at 96

days in FY23 and we estimate it to be at 106 days during FY24-26E.

April 2024

Cables and Wires: Thematic

Exhibit 27: Working capital to be at 65days over FY24-26E

Working capital (in days)

124

117

Working capital without acceptances (days)

106

107

FY18

FY19

FY20

FY21

FY22

FY23

FY24E

FY25E

FY26E

Source: MOFSL, Company

Healthy operating cash and free cash flow

The company has been investing heavily in building in-house manufacturing

capabilities and despite this, it has generated healthy free cash flows over the years.

We expect free cash flow generation to accelerate in the coming years, aided by

increasing profitability. Cumulative OCF is expected to be at INR46.2b over FY24-26,

whereas cumulative capex over FY24-26E should be at INR21.5b. FCF generation

over FY24-26E will be at INR24.7b, which will further improve its liquidity position.

Exhibit 28: OCF/EBITDA conversion of 50-60% over FY24-26E

OCF/EBITDA (%)

Exhibit 29: Free cash flows to increase with robust OCF

OCF (INR b)

22.0

Capex (INR b)

FCF (INR b)

14.0

9.0

4.0

-1.0

-6.0

129

113

14.0

6.0

-2.0

-10.0

Source: MOFSL, Company

Return ratios to improve

We estimate Polycab’s RoE/ROCE to increase to 20%/21% in FY26 vs. ~19% in FY23.

RoIC will be at 27.4% in FY26 vs. 25.6% in FY23. Continued capacity addition will

keep the asset turnover lower vs. KEI (2.0x in FY26E vs. 2.3x for KEI).

Exhibit 30: RoE/RoCE to remain above historical levels

RoE (%)

RoCE (%)

Exhibit 31: RoIC to remain strong

RoIC (%)

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Valuation and view

Earnings to improve; initiate with BUY



Polycab has a leadership position in India with a market share of ~26% in the

organized cables & wires industry and 18% in the overall market. Its market

share among our analyzed companies stands at ~31% and our analysis indicates

that it has gained market share by 150bp over FY14-23 among these players.

Polycab has been consistent in capacity additions and its cables & wires

segment’s capex over FY14-23 has been 3.9x/4.9x higher than that of KEI/HAVL.

Polycab’s cables & wires capacity of 5.4m km is 2.5x larger than that of KEI

(1.54m km).

Polycab reported a ~20% CAGR in EBITDA over FY15-23, with margin expansion

of 370bp, aided by improvements in the cables & wires segment’s margin. We

estimate a CAGR of 14.5%/15% in EBITDA/EPS over FY24-26. Polycab benefitted

in the cables segment due to capacity constraints at peer companies and its

margin of cables & wires segment improved to 13.6%/14.4% in FY23/9MFY24

v/s 9.9% in FY22. We expect EBIT margin of this segment to be at 13.5%/13.8%

in FY25/FY26. We estimate the FMEG segment to break-even in FY25 and expect

EBIT margin to increase to ~2% in FY26 vs. a loss in FY23/FY24E.

The company has been generating free cash flows for most of the years despite

higher capex (due to focus on in-house manufacturing). Its cumulative OCF is

expected to be at INR46.2b over FY24-26E, whereas cumulative capex over

FY24-26E should be at INR21.5b. FCF generation over FY24-26E will be at

INR24.7b, which will further improve its liquidity position.

We like Polycab due to its leadership position in the cables & wires segment, a

strong earnings trajectory and healthy return ratios. We estimate Polycab’s

RoE/ROCE to increase to ~20%/21% in FY26E from ~19% in FY23. RoIC will grow

to ~27% in FY26 vs. 25.6% in FY23. The stock has a short trading history and its

multiples have rerated significantly owing to strong earnings delivery. We

expect the company to maintain its premium valuations and value it at 50x

FY26E EPS to arrive at our TP of INR7,500. We initiate coverage on the company

with a BUY rating.

Exhibit 33: 1-year forward EV/EBITDA chart

Max (x)

-1SD

EV/EBITDA (x)

Min (x)

Avg (x)

+1SD

Max (x)

-1SD

Exhibit 32: 1-year forward P/E chart

P/E (x)

Min (x)

Avg (x)

+1SD

52.0

40.0

28.0

16.0

4.0

36.0

28.0

20.0

12.0

4.0

Source: MOFSL, Company, Bloomberg

April 2024

Cables and Wires: Thematic

Company overview

Polycab’s journey began in 1964 under the name Sind Electric Stores, dealing in

various electrical products including fans, lighting, switches and wires. The promoter

family founded a partnership firm in the name of Thakur Industries in 1968. Thakur

Industries entered into a lease agreement with MIDC in 1975 for a parcel of land at

Andheri, Mumbai, to set up a factory of manufacturing cables & wires, which was in

operation until 1984. In 1983, the promoters founded another partnership firm

called ‘Polycab Industries’ and opened a factory in Halol, Gujarat, for manufacturing

and processing activity of PVC-insulated cables & wires, copper and aluminum and

bare copper wires. In 1996, the company was incorporated as Polycab Wires Private

Limited in Mumbai. In 2000, the company became a deemed public limited

company. Polycab India Limited was listed on the bourses in Apr’19.

As on date, the company has 25 manufacturing facilities spread across five locations:

Gujarat, Maharashtra, Uttarakhand, Tamil Nadu and the Union territory of Daman. It

has 23 warehouses and depots and has opened 17 experience centers. The company

has more than 12,000 SKUs in the cables & wires segment and 7,000+ SKUs in the

FMEG segment. Its product ranges in the cables & wires segment are of 0.2 KV to

220 KV and it is in the process of setting up a Greenfield unit in Halol, which will help

it manufacture extra-high-voltage cables of up to 550 KV.

Exhibit 34: Manufacturing facilities of the company

Product

Cables & wires (m km)

Copper rods (k tons)

Fans (m units)

Switchgears (m units)

Pipes & Conduits (mt)

Switches (m units)

FY23

5.4

225

10.2

12.0

29,800

12.0

Location

Halol and Daman, Gujarat

Waghodia, Gujarat

Roorkee, Uttarakhand and Halol & Daman

Nashik, Maharashtra

Chennai

Halol and Daman, Gujarat

Source: MOFSL, Company

In FY23, the company generated 9.8% of its revenues from international markets,

with 46% from North America markets.

Exhibit 35: Break-up of international revenue of the company

South America,

11%

Australia,

Asia, 14%

North America,

46%

Europe, 20%

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

SWOT analysis



Leading player in cables

& wires with the second

largest player far behind

in revenue

Strong backward

integrated facility leads

to higher cost control

and better supply chain

management

Economies of scale lead

to better negotiation

power for RM



Higher dependence on

cables & wires (>85% of

sales); Lower

construction activity

and subdued real estate

could negatively impact

the segment

Elevated working capital

(vs. other electrical

categories) owing to

higher proportion of

B2B sales (~65%)



Scope of increasing its

geographical reach; the

company has yet to

enter several markets

Government’s focus on

construction and uptick

in real estate could lead

to favorable tailwinds

for cables, wires and

FMEG products

Fragmentation in the

industry may create

scope for consolidation



High dependence on

raw materials like

copper/aluminium.

Any disruption in

supply of these

materials could lead

to loss of sale

Growing competitive

intensity in FMEG

segment could lead

to lower margins in

this segment.



April 2024

Cables and Wires: Thematic

Bull and Bear Case

Bull Case

Owing to higher off-take via key infrastructure projects and exports in new

geographies, we assume a higher revenue/EBITDA/PAT CAGR of 15%/18%/19%

over FY24-26E.



We estimate EBITDA margin expansion of 70bp over FY24-26E, aided by positive

operating leverage.



Assuming a target P/E multiple of 55x, we arrive at a TP of INR8,800 per share,

~66% upside from CMP.



Bear Case



With muted construction, we assume a slower off-take in cables, housing wires

and other appliances. With elevated commodity prices and lower operating

leverage, we factor in a decline in EBITDA margin to 13% in FY25/FY26E.



We estimate a revenue/EBITDA/PAT CAGR of 11%/9%/9% over FY24-26E.



Assuming a target P/E multiple of 40x, we arrive at a TP of INR5,400 per share,

~2% upside from CMP.

Scenario analysis - Bull Case

FY23

Revenue (INR b)

Growth (%)

EBITDA (INR b)

YoY growth (%)

EBITDA Margin (%)

PAT (INR b)

EPS (INR)

P/E multiple (implied)

Target price (INR)

Upside/ (downside) (%)

141.1

15.6

18.5

46.4

13.1

12.8

84.8

FY24E

174.1

23.4

23.7

28.2

13.6

17.1

113.7

FY25E

201.9

16.0

28.3

19.1

14.0

20.4

135.4

FY26E

232.2

15.0

33.2

17.5

14.3

24.1

160.1

8,800

66.0

Source: Company, MOFSL

Revenue

(INR b)

Growth (%)

EBITDA (INR m)

YoY growth (%)

EBITDA Margin (%)

PAT (INR m)

EPS (INR)

P/E multiple

Target price (INR)

Upside/ (downside) (%)

Scenario analysis – Bear Case

FY23

141.1

15.6

18.5

46.4

13.1

12.8

84.8

FY24E

174.1

23.4

23.7

28.2

13.6

17.1

113.7

FY25E

193.2

11.0

24.7

4.2

12.8

17.7

117.7

FY26E

216.4

12.0

28.1

13.8

13.0

20.3

134.9

5,400

2.0

Source: Company, MOFSL

April 2024

Cables and Wires: Thematic

Key management personnel

Mr. Inder T. Jaisinghani, Chairman and Managing Director

Mr. Inder has been working with the company since its inception. He has completed

his education up to the secondary school certificate level. He was appointed as

Chairman and Director of Polycab in Dec’97 and was subsequently reappointed as

Chairman and Managing Director with effect from Augt’14. He has worked in

different areas of sales, marketing, production and other support services and has

played a major role in leadership of Polycab.

Mr.

Bharat A. Jaisinghani,

Executive Director

Mr. Bharat joined the company in 2012 and was appointed Director – FMEG

Business (non-board member) in 2018. He holds a Master’s degree in Operations

Management (University of Manchester) and has completed Program for Leadership

Development from Harvard Business School. He was appointed Executive Director

(board member) in May’21.

Mr.

Nikhil R. Jaisinghani,

Executive Director

Mr. Nikhil joined the company in 2012 and was designated as Director - LDC

Business (non-board member) in 2018. He holds a Master’s degree in Business

Administration (MBA) from Kellogg School of Management, Illinois, USA. He was

appointed Executive Director (Board member) in May’21.

Mr.

Rakesh Talati,

Executive Director

Mr. Talati has been associated with the company since 2014 and was appointed

Director (non-board member) in 2018, working as Location Head (Halol). He holds a

Diploma in Civil Engineering from the Maharaja Sayajirao University of Baroda. He

was appointed Executive Director (board member) in May’21.

Mr.

Gandharv Tongia,

Executive Director and Chief Finance Officer

Mr. Tongia, Executive Director and CFO of Polycab India, has been associated with

the company since 2018. In his current role, he is responsible for all aspects of the

company’s strategy, financial and information technology functions. He has been

instrumental in the company’s ongoing transformational journey, including ‘Project

Leap’. He is a fellow member of the Institute of Chartered Accountants of India.

April 2024

Cables and Wires: Thematic

Financials and valuations (Consolidated)

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

% of Net Sales

Depreciation

Interest

Other Income

Profit of share of associates/JVs

PBT

Tax

Rate (%)

Extra-ordinary Inc.(net)

Reported PAT

Change (%)

Adjusted PAT

Change (%)

Balance Sheet (Consolidated)

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Minority Interest

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Current Assets

Current Liab. & Prov.

Creditors

Other Liabilities

Provisions

Net Current Assets

Application of Funds

FY19

79,856

17.9

9,528

11.9

1,414

1,167

638

(23)

7,561

2,558

33.8

4,997

39.6

4,997

39.6

FY20

88,300

10.6

11,350

12.9

1,609

495

928

(74)

10,100

2,444

24.2

7,591

51.9

7,591

51.9

FY21

87,922

(0.4)

11,111

12.6

1,762

427

1,193

10,122

2,703

26.7

(1,000)

6,380

(16.0)

7,380

(2.8)

FY22

1,22,038

38.8

12,652

10.4

2,015

352

899

(26)

11,159

2,706

24.3

8,365

31.1

8,365

13.4

FY23

1,41,078

15.6

18,521

13.1

2,092

598

1,333

(93)

17,073

4,250

24.9

123

12,700

51.8

12,700

51.8

FY24E

1,74,089

23.4

23,744

13.6

2,444

1,190

2,600

22,709

5,564

24.5

123

17,023

34.0

17,023

34.0

FY25E

1,99,180

14.4

26,185

13.1

2,749

1,400

2,900

24,937

6,109

24.5

123

18,704

9.9

18,704

9.9

(INR M)

FY26E

2,27,938

14.4

31,126

13.7

3,094

1,573

3,400

29,859

7,315

24.5

123

22,420

19.9

22,420

19.9

(INR M)

FY26E

1,498

1,10,411

1,11,908

851

409

743

1,13,912

54,569

20,687

33,882

2,508

13,505

1,05,768

47,685

21,857

23,138

167

12,921

41,751

32,473

8,118

1,159

64,017

1,13,912

FY19

1,412

27,057

28,470

2,724

231

31,509

17,859

5,103

12,756

1,930

294

41,303

19,958

14,694

3,176

178

3,297

24,774

15,202

9,201

371

16,529

31,509

FY20

1,489

36,875

38,364

1,571

165

150

40,250

20,664

6,444

14,220

2,412

655

42,319

19,250

15,997

2,813

298

3,962

19,356

13,537

5,325

494

22,963

40,250

FY21

1,491

46,048

47,539

2,487

418

188

50,633

26,989

8,293

18,696

991

6,349

44,111

19,879

15,641

5,313

123

3,155

19,514

13,480

5,547

487

24,597

50,633

FY22

1,494

53,943

55,437

831

272

251

56,791

27,059

10,308

16,751

3,755

7,733

45,880

21,996

13,763

4,071

127

5,922

17,328

12,175

4,634

518

28,552

56,791

FY23

1,498

64,814

66,311

1,551

409

374

68,646

33,069

12,400

20,669

2,508

13,505

57,559

29,514

12,992

6,952

103

7,997

25,596

20,326

4,552

717

31,964

68,646

FY24E

1,498

78,279

79,776

1,051

409

497

81,734

41,569

14,844

26,725

2,508

13,505

70,883

36,420

16,693

7,774

128

9,869

31,887

24,802

6,200

885

38,996

81,734

FY25E

1,498

92,840

94,337

951

409

620

96,318

48,569

17,593

30,976

2,508

13,505

85,813

41,669

19,099

13,607

146

11,291

36,483

28,376

7,094

1,013

49,329

96,318

April 2024

Cables and Wires: Thematic

Financials and valuations (Consolidated)

Ratios

Y/E March

Basic (INR)

Adjusted EPS

Growth (%)

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/Sales

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors. (Days)

Asset Turnover (x)

Leverage Ratio

Debt/Equity (x)

Cash Flow Statement

Y/E March

PBT before EO Items

Add : Depreciation

Interest

Less : Direct Taxes Paid

(Inc)/Dec in WC

Others

CF from Operations

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

CF from Investments

(Inc)/Dec in Net Worth

(Inc)/Dec in Debt

Less : Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

FY19

35.4

39.6

45.4

201.6

3.0

8.5

9.4

149.8

116.7

78.5

9.4

26.3

0.1

17.6

18.4

19.1

2.5

(0.0)

FY20

51.0

44.1

61.8

257.7

7.0

13.7

8.9

104.0

85.8

69.4

8.9

20.6

0.1

19.8

20.1

2.2

(0.0)

FY21

49.5

-2.9

61.3

318.8

10.0

20.2

9.0

107.1

86.5

70.9

9.0

16.6

0.2

15.5

15.3

17.6

1.7

(0.1)

FY22

56.0

13.1

69.5

371.0

14.0

25.0

6.5

94.7

76.3

62.3

6.5

14.3

0.3

15.1

15.4

17.9

2.1

(0.1)

FY23

84.8

51.5

98.8

442.8

20.0

23.6

5.6

62.5

53.7

42.6

5.6

12.0

0.4

19.2

19.4

25.6

2.1

(0.1)

FY24E

113.7

34.0

130.0

532.7

23.8

20.9

4.6

46.6

40.8

33.1

4.5

10.0

0.4

21.3

22.1

26.6

2.1

(0.1)

FY25E

124.9

9.9

143.2

629.9

27.7

22.2

4.0

42.4

37.0

29.8

3.9

8.4

0.5

19.8

20.6

25.6

2.1

(0.1)

FY26E

149.7

19.9

170.4

747.2

32.4

21.6

3.5

35.4

31.1

24.8

3.4

7.1

0.6

20.0

20.8

27.4

2.0

(0.2)

(INR M)

FY26E

29,859

3,094

1,573

7,315

5,158

(3,400)

18,653

(6,000)

12,653

3,400

(2,600)

(100)

1,573

4,850

(6,523)

9,530

13,607

23,138

FY19

7,561

1,414

1,167

1,814

(3,052)

1,036

12,417

(2,814)

9,603

(23)

(2,836)

(5,651)

781

(88)

(6,511)

3,069

106

3,176

FY20

10,100

1,609

495

3,012

6,221

(279)

2,692

(2,891)

(199)

(35)

(2,926)

4,000

(1,194)

433

1,793

(709)

(129)

(363)

3,176

2,813

FY21

10,122

1,866

531

2,409

(2,600)

(325)

12,385

(1,935)

10,450

(5,664)

(7,599)

(1,217)

463

(68)

(1,748)

3,038

4,658

7,696

FY22

11,159

2,088

352

3,340

4,974

(169)

5,116

(5,267)

(151)

997

(4,270)

(168)

309

1,492

(38)

(2,007)

(1,160)

5,231

4,071

FY23

17,073

2,092

598

3,704

1,058

(725)

14,275

(4,795)

9,481

(7,232)

(12,026)

332

476

2,094

(32)

(2,271)

(22)

6,974

6,952

FY24E

22,709

2,444

1,190

5,564

6,211

(2,600)

11,969

(8,500)

3,469

2,600

(5,900)

(500)

1,190

3,558

(5,248)

821

6,952

7,774

FY25E

24,937

2,749

1,400

6,109

4,500

(2,900)

15,576

(7,000)

8,576

2,900

(4,100)

(100)

1,400

4,143

(5,642)

5,833

7,774

13,607

April 2024

Initiating Coverage | Sector: Cables and Wires

Cables and Wires: Thematic

KEI Industries

BSE Sensex

74,245

S&P CNX

22,519

CMP: INR3,980

TP: INR5,000 (+26% )

Buy

Elevating growth with focus on retail segment

Retail segment’s contribution to revenue at 47% in 9MFY24 vs. 29% in FY20

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

KEII IN

90.2

360.3 / 4.3

4043 / 1715

21/34/101

827

62.9



Financial Snapshot (INR b)

Y/E Mar

FY24E FY25E FY26E

Sales

79.6

92.7 108.0

EBITDA

8.5

10.6

13.1

PAT

5.8

7.3

9.0

EBITDA (%)

10.6

11.5

12.2

EPS (INR)

64.1

81.1

99.7

EPS Gr. (%)

21.1

26.5

22.9

BV/Sh. (INR)

347

423

517

Ratios

Net D/E

(0.1)

RoE (%)

18.5

19.2

19.3

RoCE (%)

18.7

19.2

19.5

Payout (%)

7.0

5.9

6.0

Valuations

P/E (x)

62.1

49.1

39.9

P/BV (x)

11.5

9.4

7.7

EV/EBITDA (x) 42.1

33.5

27.0

Div Yield (%)

0.1

FCF Yield (%)

(0.2)

0.1

0.6

Shareholding pattern (%)

As On

Dec-23 Sep-23 Dec-22

Promoter

37.1

37.3

Public

16.1

17.7

19.1

Others

31.0

29.6

26.8

FII Includes depository receipts

Stock Performance (1-year)



Strong presence in the EHV segment with a varied product portfolio:

KEI, the

second-largest player in the cables & wires industry, is one of the few players with

the capabilities to produce EHV (extra high voltage) cable above 220KV. It has a

market share of ~9% in the industry and ~15% among the companies we have

analyzed. It has a diversified business model with a significant presence in

domestic and international markets and gained ~330bp market share over FY14-

23 within our analyzed companies.

Robust business model with backward integration:

KEI operates five

manufacturing plants with backward integration for in-house PVC manufacturing.

This approach allows the company to exercise greater control over the

manufacturing process, ensuring superior quality. KEI has enhanced its

manufacturing capacity over the period and further aims to invest ~INR14b over

the next few years to ramp up production capacities.

Scaling up of retail and export segments to aid growth:

KEI is focused on

improving its retail sales and its contribution to revenues increased to 47% in

9MFY24 vs. ~29% in FY20. The company further aims to enhance its retail

contribution to 50% within the next two years. Exports contributed 10%/14.5% to

its revenue in FY23/9MFY24, and it intends to improve it to 16-17% in the next

three years. KEI has set up five overseas offices and exports its products to over 60

countries.

Strong earnings growth and sector dynamics support sustained rerating; initiate

with BUY:

KEI has delivered a 40% profit CAGR over FY14-23 and we expect an EPS

CAGR of 25% over FY24-26. We initiate coverage on KEI with a BUY rating and a TP

of INR5,000, premised on 50x FY26E EPS, considering strong earnings delivery;

improved balance sheet, and improved sector dynamics.

Key downside risks:

a) rise in commodity prices, b) higher competitive intensity in

the sector and c) demand impact due to economic slowdown.

Strong presence in EHV segment with a varied product portfolio



KEI is the second largest player in the cables & wires segment in India with a

market share of ~13% in the organized cables & wires industry and ~9% of

the overall market. Among the companies we have analyzed, its market

share stands at ~15%. Our analysis indicates that it has gained a significant

market share of 300bp over FY17-23 among these players.

KEI is among the few companies in India to manufacture EHV cables above

220KV+. The industry size for 220KV+ cables is estimated to be INR25-30b.

The industry is estimated to record a 13-14% CAGR over FY23-27.

KEI operates five manufacturing plants along with two plants for PVC

compound, which help in backward integration. Its EHV business reaps

significant benefits from seamless integration into EPC project execution,

given that a 75-80% of the project's value is derived from cables. It has

lowered its exposure to the EPC business (revenues declined at 19% CAGR

over FY20-23) by strategically choosing a select portfolio of high-quality

projects with improved margins and a streamlined working capital cycle.

Integrated business model; capacity increase to help growth



April 2024

Cables and Wires: Thematic



KEI has enhanced its manufacturing capacity over the years and further aims to

incur a capex of ~INR13b via internal accruals over the next 3-4 years. It is

planning to establish a Greenfield plant in Sanand, Gujarat (capex of ~INR12b

over the next 3-4 years); the first phase of this project will be operational by

4QFY25. It is also increasing its capacity at its Chinchpada (in phases by Mar’24)

and Pathredi units (in 1QFY25).

Focus on improving contribution from retail segment and exports



KEI set up a target to improve its retail sales and hired a leading consultant to

help formulate the strategies to increase sales through its distribution network.

This segment’s contribution to revenues improved to 47% in 9MFY24 (44% in

FY23) vs. 29% in FY20. The company aims to achieve its stated target of ~50%

revenue contribution from this segment within the next two years.

KEI exports its products to over 60 countries and has set up overseas marketing

offices in five countries. In FY23/9MFY24, exports accounted for 10%/14.5% of

total sales, backed by strong foothold in the US markets. It further aims to

increase its export contribution to 16-17% of revenue in the next three years.

KEI has ramped up its dealer strength to 1,910 in FY23 (reached 1,975 in Dec’23)

from 650 in FY14, registering a CAGR of ~13% over the period. In the near term,

the focus will be on expanding the distribution network and increasing revenue

contribution from each dealer.

KEI has been strengthening its brand presence by increasing its ad-spends. Since

FY16, there has been a continuous uptick in advertising spending, primarily

aimed at driving retail sales. The company initiated a successful strategy in FY16

by becoming the lead sponsor for IPL teams, a sponsorship initiative that has

been upheld till date. Average advertising expenditure as a percentage of retail

sales has consistently stood at ~1% over FY16-23.

Rerating to sustain on earnings growth and improving sector dynamics;

initiate with BUY



EBITDA/Adj. PAT of KEI registered a CAGR of ~18%/40% over FY15-23 despite

margin pressures (led by RM cost volatility) in the cables & wires segment during

FY22/23. Going forward, we expect EBITDA and EPS to register a CAGR of 25%

(each) over FY24-26E.

FCF generation over the years has played KEI to strengthen its balance sheet,

transforming it into a net cash positive company. Its cumulative OCF is expected

to be at INR16.4b over FY24-26E vs. cumulative capex of INR14.5b in this period.

We estimate FCF generation of INR1.9b given the aggressive expansion plan.

We estimate KEI’s RoE/RoCE to be at 19%/20% in FY26 vs. ~18% in FY23.

Investments into the new Greenfield unit will limit improvements in RoE, in our

view. Multiples of cables & wires companies have rerated significantly in the last

two years, driven by strong earnings growth, which we expect to sustain, driven

by government capex and strong traction in the real estate segment. We expect

the company to maintain its premium valuations and value it at 50x FY26E EPS

to arrive at our price target of INR5,000. We initiate coverage on the company

with a

BUY

rating.

April 2024

Cables and Wires: Thematic

STORY IN CHARTS

Breakup of product revenue (FY23)

Expect ~16% revenue CAGR over FY24-26E

FY15-23

Stainless

steel wires

Cables and

wires

90%

EPC

FY24-26E

17%

18%

11%

10%

17%

16%

-10%

Cables & wires

Source: MOFSL, Company

SSW

EPC

Total

Source: MOFSL, Company

High capacity utilization in cables warrants capacity expansion

Utilisation (%)

Cables

Housing Wires

Stainless steel wires

FY19

FY20

FY21

FY22

FY23

Source: MOFSL, Company

Retail sales as a percentage of total sales

Retail sales % of total sales

Exports as a percentage of total sales

Exports as a % of total sales

Source: MOFSL, Company

Dealer network has steadily scaled up to 1,975+ by Dec’23

Dealers and distributors

27.4

11.8

23.9

11.9 12.9

13.8

0.3

9.1

5.8

YoY change (%)

Ad spending as a percentage of retail sales trend

Ad-spends as % of Retail sales

1.4

1.2

0.9

0.4

0.5

0.3

0.5

0.7

0.3

Ad-spends as % of sales

1.8

3.9

1.0

0.7

1.0

0.3

1.4

0.4

0.1

0.2

0.1

0.3

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

EBITDA margin to improve over FY24-26E

EBITDA (INR b)

Margin (%)

11.5

10.3 10.2

10.6

12.2

Expect Adj. PAT CAGR at ~25% over FY24-26E

180.2

91.4

50.9

54.1

25.7 42.3

5.7

37.6 26.9 21.1 26.5 22.9

Adj.PAT (INR b)

YoY (%)

10.4 10.2

9.5

9.8

10.5 10.2

11.0

1.9 2.4 2.7 3.4 4.4 5.0 4.6 5.9 7.1 8.5 10.6 13.1

0.3 0.6 0.9 1.4 1.8 2.6 2.7 3.8 4.8 5.8 7.3 9.0

Source: MOFSL, Company

Estimate KEI to generate healthy OCF over FY24-26E

OCF (INR b)

12.0

7.0

2.0

-3.0

-8.0

Capex (InR b)

FCF (INR b)

7.0

OCF/EBITDA trends

OCF/EBITDA (%)

141

106

4.0

1.0

-2.0

-9

-5.0

-3

Source: MOFSL, Company

RoE/RoCE is estimated to improve over FY24-26E

RoE (%)

23.9 23.3

15.7

17.3

20.4

17.0

10.7

16.0

20.4

17.2

15.1

15.4

19.4

16.3

RoCE (%)

Expect RoIC to stable ~21%

RoIC (%)

19.5

18.3 18.7

19.2

19.2 19.3

17.6 18.4 18.5

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Second largest player with a varied product portfolio

Market share at 9% with strong revenue growth over FY15-23



Established in 1968, KEI has ~five decades of experience in the cables & wires

industry. In 2010, it set foot into the manufacturing of EHV cables up to 220kV in

collaboration with BRUGG Kables, AG a century old Swiss company, and

gradually expanded it to 400kV. KEI has a diversified business model with a

significant presence in domestic and international markets. It services retail and

institutional segments and caters to both private and public sector clients.

Exhibit 36: Product range across different segments

Source: MOFSL, Company

Robust business model with backward and forward integration



KEI has built its manufacturing facilities at Bhiwadi, Chopanki, and Pathredi (all

three in Rajasthan) and Rakholi and Chinchpada (Silvassa, Dadra, and Nagar

Haveli). It has been able to backward integrate by setting up in-house

manufacturing of PVC. Backward integration has enabled KEI to exercise greater

control over the manufacturing process and quality, thereby resulting in

improved efficiencies and higher margins. It also enables the company to fulfill

customers’ needs in a timely manner and enhance its ability to offer cost-

competitive solutions. Its EHV business also benefits from the integration into

EPC project execution, as 75-80% value of the EHV EPC project / contract

consists of the value of the product. As forward integration, KEI largely focusses

on projects with significant cabling requirements (25-30% in LT/HT and 75-80%

in EHV) in the EPC space. However, the company is reducing its exposure in the

EPC business, considering higher competitive intensity and prolonged working

capital requirements (with revenues declining at a CAGR of 19% over FY20-23).

It has a strong presence in the institutional segment and caters to more than

2,000 institutional customers.

April 2024

Cables and Wires: Thematic

Exhibit 37: Key cable applications in the T&D segment

Source: MOFSL, Company



Time and again, KEI has enhanced its manufacturing capacity and further aims

to invest ~INR13 via internal accruals over the next 3-4 years to ramp up

capacities in LT, HT and EHV cables. It is planning to establish a Greenfield plant

in Sanand, Gujarat with a total investment of ~INR12b over next 3-4 years. The

first phase of facility is expected to be operational within 18 months (by

4QFY25) from the start of construction and will entail an investment of INR4-5b.

This phase of expansion will provide a revenue potential of INR10-11b.

It is also increasing capacity at its Chinchpada unit with an investment of

INR1.1b and this expansion is expected to get completed in phases by Mar-24

(capacity increase in Oct’23/Dec’23 will have revenue potential of INR2.4b each;

whereas; revenue potential from Mar’24 expansion will be ~INR5b). Further, the

company is increasing capacity at its Pathredi plant at a capex of INR1.1b by

1QFY25. Revenue potential from this expansion will be INR8-9b.

FY16

700

5,700

76,700

3,75,000

4,800

FY16

83,100

3,75,000

4,800

FY17

900

7,500

87,600

6,77,000

6,000

FY17

96,000

6,77,000

6,000

FY18

900

7,500

87,600

6,77,000

6,000

FY18

96,000

6,77,000

6,000

FY19

900

11,100

97,600

8,17,000

6,000

FY19

1,09,600

8,17,000

6,000

FY20

900

11,100

1,13,100

11,17,000

6,600

FY20

1,25,100

11,17,000

6,600

FY21

900

11,100

1,16,600

11,17,000

7,200

FY21

1,28,600

11,17,000

7,200

FY22

900

10,400

1,42,700

13,32,000

9,000

FY22

1,54,000

13,32,000

9,000

FY23

900

10,800

1,42,300

13,32,000

9,000

FY23

1,54,000

13,32,000

9,000

Exhibit 38: Capacity ramp-up across all product categories over FY16-23

Total product wise capacity

EHV Cables (kms)

HT Cables (kms)

LT Power and other Cables (kms)

Winding, Flexibles & House Wires (kms)

Stainless Steel Wires (MT)

Total capacity

Cables (kms)

Wires (kms)

Stainless steel wires (MT)

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Exhibit 39: High capacity utilization in cables warrants capacity expansion

Utilisation (%)

Cables

Housing Wires

Stainless steel wires

FY19

82%

92%

FY20

76%

68%

91%

FY21

59%

61%

85%

FY22

76%

59%

84%

FY23

91%

79%

87%

Source: MOFSL, Company



With the commencement of 400kV EHV production in Chopanki (2017), KEI has

become the third company in India to manufacture cables above 220KV+. The

industry size for EHV cable above 220KV+ is estimated to be INR25-30b and is

estimated to register a CAGR of 13-14% over FY23-27. KEI has also strengthened

its EHV segment by undergoing forward integration through EPC project

execution.

The demand for EHV cables is rising due to the government’s continued focus on

converting overhead power networks to underground power grids as they offer

enhanced safety and reliability. Similarly, the private sector, including premium

hospitals, hotels, and shopping malls, is increasingly opting for underground

cable networks.

Exhibit 40: Product range across different segments

Companies

Finolex Cables

Havells

KEC

KEI

Polycab

V-Guard

Universal Cables

Power cables

(EHV) up to 220KV

✓

Source: MOFSL, Company



✓

Power cables

(EHV) up to 400KV

✓

EHV segment’s revenue of KEI clocked a CAGR of 39% over FY17-22; however;

this segment’s revenues faced some challenges in FY23 as delay in project

clearances led to deferment of orders by a few customers.

Exhibit 41: Strong growth in EHV segment’s revenues over FY17-22; decline observed in FY23

EHV revenue (INR mb)

130

(4)

YoY chg (%)

(29)

FY17

FY18

FY19

FY20

FY21

FY22

FY23

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Empowering retail and exports segments for accelerated

growth



The retail segment consists of Household wires, LT and HT cables. Given KEI’s

brand strength, it enjoys higher margins in this segment, coupled with favorable

working capital cycle. The company emphasized on boosting segment sales,

aiming for a ~50% retail revenue share. It engaged a leading consultant to

enhance sales strategies within their distribution network. This segment

accounted for ~44% of total revenues in FY23 (~47% in 9MFY24), up from ~29%

in FY20. The management now aims to reach its target of ~50% revenue

contribution from this segment in the next two years. The company was also

planning to foray into the FMEG segment to boost its B2C business; however,

this decision has been deferred now considering significant capital investments

for the Gujarat plant. This decision would be reviewed after the completion of

Gujarat plant in the next two to three years.

KEI exports a wide range of products such as EHV cables, HT cables, and LT

power cables and stainless steel wires to over 60 countries. Also, as forward

integration, the company provides EPC services to its customers. KEI has set up

overseas marketing offices in five countries to drive customer outreach efforts

and build on global relationships. Australia, Kuwait, and Abu Dhabi (in the

Middle East), Nigeria and Ghana (in Africa) are the major export destinations for

the Company. In FY23, exports accounted for 10% of total sales. Its export

contribution increased to 14.5% of revenues in 9MFY24 as it targets to gain a

strong foothold in the US markets with export approval for its product. The

company further expects its export contribution to increase to 16-17% of

revenue by FY27.

Exhibit 43: Exports as a percentage of total sales

Exports as a % of total sales

Exhibit 42: Retail sales as a percentage of total sales

Retail sales % of total sales

Source: MOFSL, Company

Ramping up distribution and ad-spends with focus on retail segment

With an aim to quickly scale up its retail segment, KEI is focused on expanding its

dealer network and also started also weeding out the non-performing touchpoints

in certain geographies, replacing them with new dealers. KEI has increased its

dealers network to 1,910 in FY23 (reached 1,975 in Dec’23); a 13% CAGR over FY14-

23. It has 23 depots and 36 marketing offices across the country. The focus in the

near term will be to continue expanding the distribution network as well as higher

revenue contribution from each dealer.

April 2024

Cables and Wires: Thematic

Exhibit 44: Dealers’ concentration is lower in the South

South

19%

Exhibit 45: Marketing offices across geographies

14.0

North

34%

9.0

6.0

7.0

West

23%

East

24%

North

Source: MOFSL, Company

East

West

South

Source: MOFSL, Company

KEI has been strengthening its brand recall by increasing ad-spends. Ad-spends has

increased from FY16 onwards, with focus on ramping up retail sales. Since FY16, the

company has been the lead sponsor for IPL teams. In FY21, owing to COVID

outbreak and increased TV viewership, the company strategically invested in

branding activity on Hindi news channels as well as leading regional news channels.

In CY23, it entered into a strategic association with Royal Challengers Bangalore as

its principal partner for the IPL tournament, 2023. While IPL remains the key area of

focus, the company is also expanding its sponsorship to other sports such as kabaddi

and football to enhance brand visibility.

Exhibit 46: Dealer network has steadily scaled up to 1,975

by Dec’23

Dealers and distributors

27.4

11.8

23.9

YoY change (%)

Exhibit 47: Average ad-spends as a percentage of retail sales

stood at ~1% over FY16-23

Ad-spends as % of Retail sales

Ad-spends as % of sales

1.8

11.9 12.9 13.8

0.3

9.1

5.8

3.9

1.0

0.7

1.0

0.3

1.4

0.9

1.2

0.5

0.3

0.7

0.5

0.3

0.4

0.1

0.2

0.1

0.3

0.4

0.5

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Financial Outlook

Expect revenue CAGR of ~16% over FY24-26



Overall, revenue CAGR stood at ~16% over FY15-FY23, driven by double-digit

growth (~17% CAGR) in cables & wires (EHV cables, HT cables, LT cables,

Housing wires) and (~11% CAGR) in stainless steel wire, while EPC revenues

registered a CAGR of ~9%.

We expect a revenue CAGR of 16% over FY24-26E, led by ~18% growth in the

cables & wires segment. However, EPC (other than cables) revenue is likely to

see a CAGR of ~3% as the company continues to focus on selecting limited and

high-quality projects above a certain margin threshold and a better working

capital cycle.

Exhibit 48: Expect Revenue CAGR of 16% over FY24-26

Revenue (INR b)

25.5

14.5

13.0

31.6

22.2

YoY (%)

37.0

15.6

(14.4)

20.7

15.1

16.4

16.5

20.3

FY15

23.3

FY16

26.3

FY17

34.6

FY18

42.3

FY19

48.9

FY20

41.8

FY21

57.3

FY22

69.1

FY23

79.6

92.7

108.0

FY24E FY25E FY26E

Source: MOFSL, Company

Exhibit 49: Expect cables & wires revenues to register a

CAGR of 18% over FY24-26E

Cables and wires (INR b)

YoY (%)

Exhibit 50: In the EPC segment (ex-cables), we expect

gradual scale down of the business during FY25-26E

EPC (INR b)

YoY (%)

18.4 20.8 22.7 27.3 33.6 39.9 35.7 51.2 62.5 72.4 85.4 100.8

5.9

6.8

9.6 10.3 14.0 9.8

8.7

7.1 12.6 11.3 10.2

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Exhibit 51: Expect revenue contribution from cables & wires to be 86-89% over FY25-26, as

the EPC business share gradually reduces

Cables and wires

Stainless steel wires

EPC

Source: MOFSL, Company

Gross margin to improve going forward



Surge in the price of raw materials (Copper and Aluminum) adversely impacted

gross margins in FY22/23. Gross margin declined to 24.2%/23.4% in FY22/23 vs.

26.8% in FY21.

We estimate gross margins to improve gradually to 25.5% in FY26, benefitting

from softening raw material prices.

Exhibit 52: Gross margins to scale up to 25.5% in FY26E

Gross margin (%)

28.0

25.2

28.3

27.2

27.9

27.6

26.8

24.2

23.4

24.2

24.8

25.5

Source: MOFSL, Company

Employee cost continues to increase with growth in retail business



Employee costs grew in double-digits over FY15-20 as the company ramped up

its retail business and further strengthened its position in cables (especially EHV

cables) and EPC segments.

In FY21, employee costs decreased ~19% YoY due to the pandemic-driven cost

control measures. The company experienced growth in the number of

employees over FY17-20, driven by the execution of a significant order for

Dangote Oil refining company in FY19-20. The company has rationalized its

permanent employee strength and employee counts have declined at a CAGR of

~10% over FY20-23.

We estimate employee cost to register a CAGR of ~15% over FY24-26E with

focus on rapid growth in retail business and commissioning of new capacities.

April 2024

Cables and Wires: Thematic

Exhibit 53: Employee costs to increase due to commissioning of new capacities

Employee cost (INR m)

YoY (%)

15.6

16.0

33.5

20.3

34.9

31.4

18.1

31.3

8.5

(18.7)

15.0

621

828

1,117

1,468

1,734

2,276

1,849

2,006

2,320

2,691

3,095

3,559

Source: MOFSL, Company

Exhibit 54: Permanent employee counts declined over FY20-

No of employees

45.8

16.3

21.6

(7.4)

(22.5)

812

1,184 1,377 1,675 2,346 1,819 1,685 1,705

1.2

YoY (%)

Exhibit 55: However, per employee cost increased during

FY20-23

Per employee cost (INR m)

33.5

YoY (%)

40.1

13.0

(7.5)

4.8

(2.9)

(6.3)

1.0

17.1

14.3

0.8

1.0

0.9

1.1

1.0

1.2

1.4

Source: MOFSL, Company

Estimate EBITDA CAGR of ~25% over FY24-26



EBITDA registered a CAGR of ~18% over FY15-23, with margin expansion of 70bp

over the same period due to the rising share of retail and export revenue. This

growth was achieved despite a significant margin pressure in FY22/23,

attributed to an inflationary RM-cost environment.

We estimate margins to improve gradually, backed by softening raw material

cost, a higher contribution from retail sales, and the expansion of its export

operations. We also expect improvement in EBIT margin in the cables & wires

segments over FY24-26E. EBIT margin of the cables & wires segment is

estimated to be at 10.3%/11.2%/11.7% in FY24/25/26E vs. 9.1% in FY23. We

expect EBIT margin of the EPC segment to be at 11.2%/11.2%/11.5% in

FY24/25/26E vs. 9.5% in FY23.

Margin improvement in the cables & wires and EPC segments will drive EBITDA

CAGR of 25% over FY24-26 with OPM of 10.6%/11.5%/12.2% in FY24/25/26E vs.

10.2% in FY23.

April 2024

Cables and Wires: Thematic

Exhibit 56: EBITDA margin should improve FY24-26E

EBITDA (INR b)

Margin (%)

12.2

10.4

9.5

10.2

10.5

9.8

11.0

10.2

10.3

10.2

11.5

10.6

1.9

2.4

2.7

3.4

4.4

5.0

4.6

5.9

7.1

8.5

10.6

13.1

Source: MOFSL, Company

Adj. PAT CAGR expected at ~25% over FY24-26E



Over FY15-23, Adj. PAT CAGR stood at 40%, aided by lower interest expense

(declined at ~14% CAGR and the company becomes net cash positive in FY22),

higher other income (increased at ~36% CAGR) and lower tax rate (ETR at 25.6%

in FY23 vs. 35.3% in FY15).

We expect Adj. PAT CAGR at ~25% over FY24-26E similar to EBITDA CAGR.

Depreciation expense should increase at 26% CAGR over FY24-26E due to

commissioning of new capacities.

Exhibit 57: Expect Adj. PAT CAGR at ~25% over FY24-26E

180.2

91.4

50.9

54.1

25.7

42.3

Adj.PAT (INR b)

YoY (%)

5.7

37.6

26.9

21.1

26.5

22.9

0.3

0.6

0.9

1.4

1.8

2.6

2.7

3.8

4.8

5.8

7.3

9.0

Source: MOFSL, Company

Working capital cycle to remain at 83-87 days going forward; though

working capital excluding acceptances to be at 99-94 days



Working capital cycle of the company increased during FY19-21, led by an

increase in inventory days and lower payables. Average working capital of the

company has been at 88days over FY14-23 (86days in FY23).

Average working capital days, excluding trade acceptances, have remained at

123days over FY14-23 and FY23 working capital cycle (ex-trade acceptances)

was the best at 98days in this period.

With increase in retail contribution to revenues, we expect the working capital

cycle to remain stable at 83-87 days over FY24-26E. The working capital cycle

(ex-trade acceptances) is projected to stay in the range of 90-94 days over the

same period.

April 2024

Cables and Wires: Thematic

Exhibit 58: Working capital to be at 83-87 days over FY24-26E

Working capital (days)

129

103 103

Working capital without acceptances (days)

142

149

121

120

101

87 94 85 92 83 90

117

118

104

Source: MOFSL, Company

Announced brownfield and Greenfield expansion



The company is aiming for higher growth and announced a capex of INR12b

over the next three-four years to set up a facility in Sanand, Gujarat. It has

already acquired land and the first phase of this plant is expected to be

operational within 18 months (by 4QFY25) from the start of construction.

Apart from that, the company is investing INR1.1b in brownfield expansion at its

Chinchpada unit. This expansion is expected to get completed in phases by

Mar’24. Further, the company is increasing capacity at its Pathredi plant at a

capex of INR1.1b by 1QFY25.

Exhibit 59: Capex increased, owing to high utilization in the cable segment

Capex (INR m)

4,500

5,000

977

167

625

656

1,223

805

240

597

979

Source: MOFSL, Company

Healthy operating cash flow to support elevated capex plan



KEI has generated a cumulative OCF of INR20.9b over FY14-23; though higher

working capital requirements had led to a negative OCF in FY17/20. It spent a

cumulative capex of INR6.5b in this period, and hence, cumulative FCF stood at

INR14.4b over FY14-23.

The company’s robust FCF generation during FY21-23 facilitated the

deleveraging of its balance sheet, leading to a net cash position by FY22. Net

cash stood at INR4b in FY23 (INR3.1b as of Dec’23) vs. a net debt of INR638m in

FY21 (average net debt of INR4.8b over FY14-19).

Going forward, we expect its cumulative OCF to be at INR16.4b over FY24-26E;

whereas cumulative capex over FY24-26E should be at INR14.5b. We estimate

FCF generation of INR1.9b given the aggressive expansion plan.

April 2024

Cables and Wires: Thematic

Exhibit 60: Estimate KEI to generate healthy OCF

OCF (INR b)

12.0

7.0

2.0

-3.0

-8.0

Capex (InR b)

FCF (INR b)

7.0

4.0

1.0

-2.0

-5.0

Exhibit 61: OCF/EBITDA conversion of 52-54% over FY25-26E

OCF/EBITDA (%)

141

102

(11)

(3)

Source: MOFSL, Company

Expect ROE/ROCE to improve over FY24-26E



With ~40% Adj. PAT CAGR over FY15-23, RoE expanded from ~11% in FY15 to

~18% in FY23. With robust operating performance and lower corporate tax rate,

RoIC expanded to ~22% in FY23 from ~16% in FY15. We estimate the company’s

RoE/ROCE to be at ~19%/20% in FY26E vs. ~18% in FY23. RoIC should decline in

the initial period of high capex to ~21% in FY26 vs. ~22% in FY23.

Exhibit 63: Expect RoIC to stable ~21%

RoIC (%)

Exhibit 62: ROE/ROCE to improve over FY24-26E

RoE (%)

23.9 23.3

15.7

17.3

20.4

16.0

17.2

15.1

15.4

19.4

16.3

19.5

18.3

18.7 19.2

RoCE (%)

17.0

10.7

19.2

19.3

17.6 18.4

18.5

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Earnings growth and strong sector dynamics to

help sustain rerating; initiate with BUY



KEI, one of the rare industry players capable of manufacturing cables above

220KV+, holds the position of the second-largest player in the cables & wires

segment. The company commands a significant market share of ~13% in the

organized industry and ~9% in the overall market. In our analyzed company

group, KEI stands out with a market share of ~15%. Our analysis indicates that it

has gained 300bp in market share over FY17-23, among these players.

Its brownfield expansion at its Chinchpada, Silvassa plant (to be completed in

phases by Mar’24) and Pathredi plant (by 1QFY25) should help growth in FY25E

as the utilization rate of the cable segment was higher at 91% in FY23. It is also

in the process of setting up a Greenfield plant at Sanand, Gujarat; the first phase

(investment of INR4-5b) of the plant will be commissioned by 4QFY25. It intends

to invest ~INR12b over the next three to four years at this location.

EBITDA/Adj. PAT of the company registered a CAGR of ~18%/40% over FY15-23

despite margin pressures in the cables & wires segment during FY22/23, led by

RM cost pressures. Going forward, we expect EBITDA and EPS to register a CAGR

of 25% (each) over FY24-26E.

FCF generation over most of the years helped it to strengthen its balance sheet,

transforming it into a net cash positive company. Projections indicate that its

cumulative OCF is expected to reach INR16.4b over FY24-26E; while the

cumulative capex over the same period is estimated to be INR14.5b.

We estimate KEI’s RoE/RoCE to be at 19%/20% in FY26 vs. 18% in FY23.

Investments into the new Greenfield unit will limit improvement in RoE, in our

view. Multiples of cables & wires companies have rerated significantly in the last

two years driven by strong earnings growth, which we expect to sustain, driven

by government capex and strong traction in the real estate segment. We expect

the company to maintain its premium valuations and value it at 50x FY26E EPS

to arrive at our price target of INR5,000. We initiate coverage on the company

with a BUY rating.

Exhibit 65: One-year forward EV/EBITDA chart

Max (x)

-1SD

40.0

30.0

20.0

10.0

0.0

EV/EBITDA (x)

Min (x)

Avg (x)

+1SD

Max (x)

-1SD

Exhibit 64: One-year forward P/E chart

P/E (x)

Min (x)

60.0

45.0

30.0

15.0

0.0

Avg (x)

+1SD

Source: MOFSL, Company, Bloomberg

April 2024

Cables and Wires: Thematic

Company overview

KEI Industries Limited (KEI) was established in 1968 as a partnership firm known as

Krishna Electrical Industries, primarily engaged in the manufacturing of house wiring

rubber cables. In December 1992, the company underwent a transformation and

became a public limited company, adopting the name KEI Industries Limited.

In 1996, it acquired 'Matchless', a company operating under the same management,

specializing in the manufacturing of SSW. In 2010, KEI further diversified its portfolio

by venturing into the production of EHV cables up to 220kV, in collaboration with

BRUGG Kables, AG, a renowned Swiss company with a century-long legacy. Over the

years, KEI successfully expanded its expertise in EHV cables, eventually reaching the

capability to manufacture cables up to 400kV.

KEI has a diversified business model with a significant presence in domestic and

international markets. It services retail and institutional segments and caters to both

private and public sector clients. Currently, it is engaged in manufacturing and

marketing of Power cables and addresses the cabling requirements of a wide

spectrum of sectors such as Power, Oil Refineries, Railways, Automobiles, Cement,

Steel, Real Estate, Telecommunications, Textile, and Renewable energy. It is well-

poised to garner opportunities from the power utilities, core infrastructure, and

construction projects across the country.

Exhibit 66: Plant locations and manufacturing capabilities of KEI

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

SWOT analysis



Second largest player in

the cables & wires

industry, one of the few

companies with a

presence in cables above

220KV in India.

Strong backward

integrated facility leads

to higher advantage

toward cost control and

supply chain

management.

Wide outreach across

different export markets

with marketing offices

setup in five countries.



Higher dependence on

cables & wires (~90% of

sales). Lower

construction activity and

subdued real estate

could negatively impact

the segment.

Elevated working capital

(compared to other

electrical categories)

owing to higher

proportion of B2B sales

(~50-55%).



Rising demand for the

EHV cables with growing

EPC infrastructure

projects, where the

competitive intensity is

low.

Increasing revenue share

of retail segment due to

its superior profitability.

Growth in the exports

revenues with increasing

geographical presence

and penetration.



Capex deferment,

delays in key

infrastructure projects

and temporary

sluggishness in the

housing sector owing

to various headwinds.

Volatility in key raw

material prices and

exchange rates.

Rising competitive

intensity from existing

players.



April 2024

Cables and Wires: Thematic

Bull and Bear Case

Bull Case

With increased focus on Infrastructure and construction, we assume revenue

CAGR of ~19% and EBITDA/PAT CAGR of ~28% (each) over FY24-26E.



Higher revenues from retail wires and exports would lead to favorable revenue

mix, thus aiding EBITDA margin expansion of 170bp over FY24-26E.



Assuming a target P/E multiple of 55x, we arrive at a target price of INR5,820, at

~46% upside from CMP.



Bear Case



We assume slower off take in industrial and construction activity, thus factoring

in revenue/EBITDA/PAT CAGR of 12%/11%/10% over FY24-26E.



With lower operating leverage, we expect EBITDA margin at ~10-10.5% over

FY25-26E.



Assuming a target P/E multiple of 45x, we arrive at a target price of INR3,500, at

~12% downside from CMP.

Scenario analysis - Bull Case

(INR b)

Revenue (INR b)

Growth (%)

EBITDA (INR b)

YoY growth (%)

EBITDA Margin (%)

PAT (INR b)

EPS (INR)

P/E multiple (implied)

Target price (INR)

Upside/ (downside) (%)

FY23

69.1

20.7

7.1

19.9

10.2

4.8

52.9

FY24E

79.6

15.1

8.5

19.7

10.6

5.8

64.1

FY25E

93.9

18.0

11.2

32.2

11.9

7.7

85.7

FY26E

112.7

20.0

13.9

24.0

12.3

9.5

105.8

55.0

5,820

46.0

Source: Company, MOFSL

Scenario analysis – Bear Case

(INR b)

Revenue

Growth (%)

EBITDA (INR m)

YoY growth (%)

EBITDA Margin (%)

PAT (INR m)

EPS (INR)

P/E multiple (implied)

Target price (INR)

Upside/ (downside) (%)

FY23

69.1

20.7

7.1

19.9

10.2

4.8

52.9

FY24E

79.6

15.1

8.5

19.7

10.6

5.8

64.1

FY25E

89.1

12.0

9.2

8.6

10.3

6.2

69.3

FY26E

99.8

12.0

10.5

14.2

10.5

7.0

77.8

45.0

3,500

(12.0)

Source: Company, MOFSL

April 2024

Cables and Wires: Thematic

Management overview

Mr. Anil Gupta - Chairman cum Managing Director

Mr. Gupta commenced his journey with KEI in 1979 as a partner in the erstwhile

Krishna Electrical Industries and soon rose to become its Chairman-cum- Managing

Director. With over four decades of experience at the helm, he plays a strategic role

in guiding the Company to scale new heights of success.

Mr. Akshit Diviaj Gupta - Executive Director, Non-Independent

Mr. Akshit Diviaj Gupta is a young and dynamic professional with a strong

entrepreneurial background. He has experience in handling EPC projects and

marketing functions of the Company. He holds a BBA degree in Management, an

Honorary Graduate Fellowship, and has an acute interest and knowledge of diverse

business activities.

Mr. Rajeev Gupta - Executive Director Finance and CFO

Mr. Rajeev Gupta has around 28 years of experience in Corporate Finance and is

presently heading the Finance & Accounts Department of KEI. Mr. Gupta holds a

B.Com. degree and is a Chartered Accountant.

Mr. Manoj Kakkar - Executive Director: Sales and Marketing

Mr. Manok Kakkar has around 34 years of experience heading the Sales and

Marketing of KEI. He holds B.Com. and PGDM degrees.

April 2024

Cables and Wires: Thematic

Financials and valuations (Consolidated)

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

% of Net Sales

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Extra-ordinary Inc.(net)

Reported PAT

Change (%)

Adjusted PAT

Change (%)

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Current Assets

Current Liab. & Prov.

Creditors

Other Liabilities

Provisions

Net Current Assets

Application of Funds

FY19

42,270

22.2

4,422

10.5

340

1,362

2,792

974

34.9

1,818

25.7

1,818

25.7

FY20

48,878

15.6

4,996

10.2

567

1,292

165

3,302

716

21.7

2,586

42.3

2,586

42.3

FY21

41,815

(14.4)

4,605

11.0

578

573

201

3,655

921

25.2

2,734

5.7

2,734

5.7

FY22

57,270

37.0

5,887

10.3

555

404

146

5,075

1,315

25.9

3,760

37.5

3,760

37.5

FY23

69,123

20.7

7,062

10.2

571

347

276

6,420

1,647

25.6

4,773

27.0

4,773

27.0

FY24E

79,582

15.1

8,450

10.6

677

402

403

7,774

1,994

25.6

5,780

21.1

5,780

21.1

FY25E

92,650

16.4

10,618

11.5

830

252

300

9,834

2,522

25.6

7,312

26.5

7,312

26.5

(INR M)

FY26E

1,07,968

16.5

13,122

12.2

1,075

231

274

12,090

3,101

25.6

8,989

22.9

8,989

22.9

(INR M)

FY26E

180

46,414

46,594

266

46,913

23,168

5,577

17,591

146

43,146

16,861

19,227

4,654

2,366

13,982

10,057

3,550

375

29,164

46,913

FY19

158

7,631

7,789

5,059

442

13,289

5,799

912

4,887

316

22,432

6,896

10,946

1,953

115

2,521

14,360

10,203

3,936

221

8,071

13,289

FY20

179

14,889

15,068

3,151

310

18,528

6,298

1,309

4,989

112

27,579

8,638

13,676

2,143

154

2,969

14,158

11,690

2,277

192

13,421

18,528

FY21

180

17,597

17,776

2,850

296

20,922

6,631

1,869

4,761

25,295

7,682

13,496

2,212

220

1,685

9,214

7,414

1,658

142

16,081

20,922

FY22

180

21,175

21,355

3,314

294

24,963

7,733

2,424

5,309

165

29,776

10,794

13,955

3,600

1,410

10,307

7,626

2,538

143

19,469

24,963

FY23

180

25,711

25,892

1,353

266

27,511

8,668

2,995

5,673

146

31,870

11,023

13,878

5,372

1,573

10,191

7,482

2,469

240

21,679

27,511

FY24E

180

31,087

31,267

1,053

266

32,586

13,168

3,672

9,496

146

34,110

13,300

15,044

3,993

1,744

11,178

8,285

2,616

277

22,932

32,586

FY25E

180

37,966

38,146

553

266

38,965

18,168

4,502

13,666

146

37,647

14,976

17,007

3,600

2,031

12,506

9,138

3,046

322

25,141

38,965

April 2024

Cables and Wires: Thematic

Financials and valuations (Consolidated)

Ratios

Y/E March

Basic (INR)

Adjusted EPS

Growth (%)

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/Sales

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors. (Days)

Asset Turnover (x)

Leverage Ratio

Net Debt/Equity (x)

Cash Flow Statement

Y/E March

PBT before EO Items

Add : Depreciation

Interest

Less : Direct Taxes Paid

(Inc)/Dec in WC

Others

CF from Operations

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

(Inc)/Dec in Net Worth

(Inc)/Dec in Debt

Less : Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance+FD

Closing Balance

FY19

23.0

24.8

27.3

98.7

1.0

5.2

7.4

172.8

145.6

71.7

7.5

40.3

0.0

23.3

20.4

23.5

3.2

0.4

FY20

28.9

25.5

35.2

168.3

1.5

10.7

7.3

137.7

113.0

71.5

7.3

23.6

0.0

17.2

19.4

21.2

102

2.6

0.1

FY21

30.4

5.3

36.9

197.8

2.0

6.6

8.6

130.8

108.0

77.8

8.6

20.1

0.1

15.4

15.1

16.1

118

2.0

0.0

FY22

41.7

37.2

47.9

237.0

2.5

6.0

6.3

95.4

83.1

60.9

6.3

16.8

0.1

17.6

16.3

18.5

2.3

(0.0)

FY23

52.9

26.8

59.3

287.1

3.0

5.7

5.2

75.2

67.2

50.3

5.1

13.9

0.1

18.4

18.3

21.8

2.5

(0.2)

FY24E

64.1

21.1

71.6

346.7

3.7

7.0

4.5

62.1

55.6

42.1

4.5

11.5

0.1

18.5

18.7

20.2

2.4

(0.1)

FY25E

81.1

26.5

90.3

423.0

4.0

5.9

3.9

49.1

44.1

33.5

3.8

9.4

0.1

19.2

20.6

2.4

(0.1)

FY26E

99.7

22.9

111.6

516.6

5.0

6.0

3.3

39.9

35.7

27.0

3.3

7.7

0.1

19.3

19.5

21.2

2.3

(0.1)

(INR M)

FY26E

12,090

1,075

231

3,101

2,970

(274)

7,052

(5,000)

2,052

274

(4,726)

(500)

231

541

(1,272)

1,053

3,600

4,654

FY19

2,782

339

1,356

865

(2,592)

6,226

(1,223)

5,003

(1,564)

(2,751)

(2,951)

1,356

(4,382)

(906)

2,859

1,953

FY20

3,279

567

1,276

947

4,365

(130)

(805)

(936)

783

133

110

5,020

(1,062)

2,558

276

(131)

994

974

1,169

2,143

FY21

3,654

578

554

903

2,420

1,539

(240)

1,299

952

754

(714)

471

180

(1,286)

1,007

1,205

2,212

FY22

5,075

555

404

1,247

2,505

2,286

(597)

1,688

(8)

(584)

666

404

224

(408)

(314)

1,388

2,212

3,600

FY23

6,420

571

347

1,776

349

(74)

5,139

(979)

4,160

(547)

156

(1,371)

(1,961)

347

271

(2,559)

1,208

4,163

5,372

FY24E

7,774

677

402

1,994

2,631

(403)

3,826

(4,500)

(674)

403

(4,097)

(300)

402

405

(1,107)

(1,378)

5,372

3,993

FY25E

9,834

830

252

2,522

2,602

(300)

5,493

(5,000)

493

300

(4,700)

(500)

252

433

(1,185)

(393)

3,993

3,600

April 2024

Initiating Coverage | Sector: Cables and Wires

Cables and Wires: Thematic

R R Kabel

BSE Sensex

74,245

S&P CNX

22,519

CMP: INR1,598

TP: INR2,200 (+38% )

Buy

Electrifying growth in cables and wires

Expected to deliver industry-leading profitability growth over FY24-26

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

RRKABEL IN

112.8

180.3 / 2.2

1822 / 1137

15/-3/-

667

37.2



Financial Snapshot (INR b)

Y/E Mar

FY24E FY25E FY26E

Sales

65.9

81.9

97.4

EBITDA

4.7

6.9

9.1

PAT

3.0

4.6

6.2

EBITDA (%)

7.2

8.4

9.4

EPS (INR)

27.0

40.7

54.8

EPS Gr. (%)

60.3

51.0

34.5

BV/Sh. (INR)

164.5 198.3 244.1

Ratios

Net D/E

(0.0)

(0.1)

RoE (%)

18.6

22.5

24.8

RoCE (%)

16.6

20.7

23.6

Payout (%)

18.5

17.2

16.4

Valuations

P/E (x)

59.2

39.2

29.2

P/BV (x)

9.7

8.1

6.5

EV/EBITDA (x) 37.9

26.2

19.6

Div Yield (%)

0.3

0.4

0.6

FCF Yield (%)

0.3

0.2

1.4

Shareholding pattern (%)

As On

Dec-23

Sep-23

Promoter

62.8

Public

8.9

8.7

Others

4.7

5.0

FII Includes depository receipts

Stock Performance (1-year)



One of the top five players in fast-growing cables and wires business:

RR Kabel

(RRKABEL) has ~7% market share in the domestic cables and wires industry, with

the business-to-consumer (B2C) sales channel accounting for ~77% of revenue in

FY23, one of the highest among peers. The company clocked a CAGR of 36% in

export revenue over FY20-23, significantly higher than its peers. RRKABEL plans to

increase its cables capacity by 2.4x by FY26E and aims to grow its wires revenue by

20% YoY over the next few years. This will ease out capacity constraints for cables

and drive higher growth along with margin improvement.

Acquisition in FMEG segment accelerated growth:

RRKABEL has diversified and

expanded its product portfolio in the FMEG segment, primarily led by inorganic

opportunities. Its portfolio of FEMG products now covers ~77% of the addressable

market. It now focuses on the integration of acquired businesses, diversification of

product portfolio and value-added products. We estimate a revenue CAGR of 15%

over FY24-26 and expect this segment to break-even at EBIT level in FY26.

Increasing dealer network led to market share gain:

The company has significantly

increased its distribution network over the last few years, which consists of 3,598

distributors (up 3.3x vs. FY20) and 3,781 dealers as of Sep’23 (up 50% vs. FY20).

The company has expanded its distribution network through various initiatives,

such as - 1) Project KaRRma, which was aimed at increasing its market share; and

2) Project Lakshya for FMEG business.

Estimated to deliver industry-leading profitability growth; initiate with BUY:

RRKABEL delivered a PAT CAGR of ~22% over FY19-23 and we estimate an EPS CAGR

of ~43% over FY24-26. We initiate coverage on RRKABEL with a BUY rating and a TP

of INR2,200 (based on 40x FY26E EPS), considering strong earnings growth and

better return ratios — RoE/RoCE of 25%/24% in FY26E.

Key downside risks:

a) volatility in RM prices, b) higher competitive intensity in the

sector, and c) demand impact due to economic slowdown.

Delivering industry-leading growth in cables and wires



RRKABEL is one of the leading producers of cables and wires in India and has

been in the industry for more than 20 years. The company’s revenue growth

over the last few years has been the strongest among peers and it delivered

a revenue CAGR of 22% (21% excluding export revenues) in the cables and

wires segment over FY19-23. In this period, its export revenue saw a CAGR

of 25%. It is the second-largest exporter of cables and wires among the

companies we have analyzed.

The company plans to spend INR5b each year for the next two years to

increase capacities for cables and wires. It plans to increase cables capacity

by 2.4x over the next two years and wires revenues by 20% every year over

the next few years.

We estimate higher revenue growth for cables (36% over FY23-26) in our

assumptions, which should lead to margin improvements for the segment.

In 9MFY24, the cables & wires segment reported revenue/EBIT growth of

18%/43% YoY, and its EBIT margin improved to 8.6% from 7.2% in 9MFY23.

April 2024

Cables and Wires: Thematic

Targets to accelerate growth of FMEG business and reduce losses



The company has diversified and expanded its product portfolio in the FMEG

segment, both organically and inorganically. Its portfolio now covers ~77% of

the addressable market and consists of fans, lighting, switches & switchgears,

and other home appliances.

RRKABEL plans to increase revenue and margins of the FMEG segment through –

1) expansion of product portfolio- 344 products launched during FY21-23 and 45

products under development at Sep’23-end; 2) offering products across price

ranges; 3) higher share of value-added products like premium fan, downlights,

etc.; 4) integration of acquired companies and realizing synergies in logistics,

brand promotion, manpower, etc.; and 5) expansion of distribution network.

We estimate a revenue CAGR of 15% for the FMEG segment over FY24-26. We

expect losses in this segment to decline going forward and expect the segment

to break-even at EBIT level in FY26. RRKABEL’s initiatives to offer value-accretive

products and expansion of product portfolio will help it to reduce losses.

Increasing dealer network led to market share gain



RRKABEL has significantly increased its distribution network over the last few

years through various initiatives, like Project KaRRma and Project Lakshya.

As of Sep’23, it has a pan-India distribution network, with 3,598 distributors and

3,781 dealers. Its products are available at ~124k retail touchpoints and it has

connect with ~330k electricians.

Its advertising and promotion spending increased by 73% YoY to INR851m in

FY23, mainly due to the low base effect as brand spending was muted in

FY21/FY22. It spent 1.5% of its revenue on ads in FY23. We estimate ad spending

to be at 1.2-1.4% of revenue over FY24-26 (11% CAGR over FY23-26E). The

company has a strong R&D team, which helps it to develop the first-of-its-kind

products and acquire export certifications from various countries.

Expect 39% EBITDA CAGR and 43% PAT CAGR over FY24-26



We estimate RRKABEL to report a ~22% revenue CAGR over FY24-26, led by 22%

growth in cables and wires and 15% growth in FMEG. The cables and wires

segment’s revenue would be largely driven by volume growth (estimate a CAGR

of 36%/16% in cables/wires volume over FY24-26).

We estimate a CAGR of 39%/43% in EBITDA/profit over FY23-26. We estimate

EBITDA margin to be at 7.2%/8.4%/9.4% in FY24/FY25/FY26 vs. 5.8% in FY23

(average 7.8% over FY19-22).

Industry-leading profitability growth over FY24-26E; initiate with BUY



RRKABEL has demonstrated its ability to grow at a higher rate than peers, with

its cables and wires segment posting a CAGR of 22%/20% in revenue/EBITDA

over FY20-23. In 9MFY24, revenue of this segment grew ~18% YoY and the

management indicated that volume growth was ~19%.

We initiate coverage on RRKABEL with a BUY rating and a TP of INR2,200 (based

on 40x FY26E EPS), considering strong earnings growth and better return ratios -

RoE/RoCE of 25%/24% in FY26E.

April 2024

Cables and Wires: Thematic

STORY IN CHARTS

Domestic market share trend of key players

FY19 (%)

20.1

12.4

10.0

6.7

3.2

5.3

2.5

Polycab

KEI

3.8

5.5

7.6

5.7

22.6

20.5

9.5

23.1

FY23 (%)

77.4

B2C revenue contribution is higher

B2B (%)

79.6

B2C (%)

76.9

76.7

23.3

RR Kabel

Universal

cables

Finolex

cables

Havells*

FY20

FY21

FY22

FY23

Source: MOFSL, Companies, *60% of exports assumed for C&W

Source: MOFSL, Company

RRKABEL’s revenue growth better than peers’…

FY19-23 Revenue CAGR (%)

21.7

16.1

16.8

14.4

11.7

9.3

…so was EBIT growth over FY19-23

FY19-23 EBIT CAGR (%)

20.1

19.0

11.6

8.2

2.2

1.3

Finolex

cables

Havells

RR Kabel

Polycab

KEI

Universal

cables

Finolex

cables

Havells

RR Kabel

Polycab

KEI

Universal

cables

Source: MOFSL, Companies; C&W segment revenues

Source: MOFSL, Companies; * contribution margin for Havells

Export contribution is highest among peers

22.7

FY23 (% of total revenues)

Export revenue growth of different companies

35.9

FY20-23 (%)

22.6

15.8

9.8

10.3

4.3

0.9

8.1

RR Kabel

Polycab

KEI

Universal

cables

Finolex

cables

RR Kabel

Polycab

-7.4

KEI

Universal

cables

Finolex

cables

Source: MOFSL, Companies

April 2024

Cables and Wires: Thematic

STORY IN CHARTS

Expect revenue CAGR of 22% over FY24-26

Revenue (INR b)

61.0

21.2

20.6

3.8

23.9

FY19

24.8

FY20

9.9

27.7

17.8

24.2

18.8

YoY (%)

22.3

21.1

19.2

19.5

20.2

Gross margins to improve to 20% by FY26E

Gross margin (%)

17.7

27.2

FY21

43.9

FY22

56.0

FY23

65.9

81.9

97.4

FY19

FY20

FY21

FY22

18.3

FY24E FY25E FY26E

Source: MOFSL, Companies

FY23

FY24E FY25E FY26E

Source: MOFSL, Companies

Expect EBITDA margin to improve over FY24-26

EBITDA (INR b)

8.3

8.4

6.9

5.8

7.2

EBITDA Margin (%)

8.4

9.4

Expect Adj. PAT CAGR at ~43% over FY24-26

PAT (INR b)

58.0

42.9

10.6

(11.2)

YoY (%)

60.3

7.4

51.0

34.5

1.8

FY19

2.0

FY20

2.3

FY21

3.0

FY22

3.2

FY23

4.7

6.9

9.1

0.9

FY19

1.2

FY20

1.4

FY21

2.1

FY22

1.9

FY23

3.0

4.6

6.2

FY24E FY25E FY26E

Source: MOFSL, Companies

FY24E FY25E FY26E

Source: MOFSL, Companies

FCF to increase post completion of expansions

OFC (INR b)

5.0

3.0

1.0

-1.0

-3.0

FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Source: MOFSL, Companies

Capex (INR b)

FCF (INR b)

4.1

RoE/RoCE to improve over FY24-26E

ROE (%)

ROCE (%)

20.7

2.8

1.4

0.0

13.3

-1.4

FY19

FY20

FY21

FY22

FY23

FY24E FY25E FY26E

10.8

11.9

14.1

10.8

18.6

13.9

13.7

11.9

18.6

14.2

16.6

22.5

23.6

24.8

Source: MOFSL, Companies

April 2024

Cables and Wires: Thematic

Delivering industry-leading growth in cables and wires

Fifth-largest player in domestic market with ~7% market share

RRKABEL is one of the leading producers of cables and wires in India and has been in

the industry for more than 20 years. The company diversified and expanded its

product portfolio in the FMEG segment, both organically and inorganically. In FY20,

it amalgamated the business from one of its group companies, Ram Ratna Electricals

Limited. In FY20, it acquired the LED lights and related hardware business of

Arraystorm Lighting Pvt. Ltd., along with its trademarks and design certificates. In

May’22, it acquired the home electrical business of Luminous Power Technologies

Pvt. Ltd. It also started manufacturing switches in FY21.

Exhibit 67: Product range across different segments

Cables

LT Power Cable

Medium & High Voltage Cables

Data & Communication Cables

Instrumentation Cables

Solar Cables

Fire & Security Cables

Silicon Rubber Cables

Auto Cables

Battery Cables

Lift & Elevator Cables

Appliance Wiring Material

Power Cord

Wires (House + Industrial)

Heat Resistant Wires

Fire Resistant Wires

Low Smoke Zero Halogen Wires

Single & Multi Core Flexible Cable

Control Cables

Submersible Flat Cable

FMEG

Fans

Lighting

Switches

Water Heater

Room Heater

Irons

Coolers

Source: MOFSL, Company

Its revenue growth over the last few years has been the strongest among peers,

with a revenue CAGR of 22% (21% excluding export revenues) in the cables and

wires segment over FY19-23. RRKABEL is the second-largest exporter of cables and

wires among our analyzed companies, with a CAGR of 25% in export revenue over

FY19-23.

Exhibit 68: RRKABEL beat peers in revenue growth…

Exhibit 69: …and EBIT growth over FY19-23

FY19-23 EBIT CAGR (%)

21.7

16.1

FY19-23 Revenue CAGR (%)

20.1

16.8

14.4

11.7

9.3

19.0

11.6

8.2

2.2

1.3

Finolex

cables

Havells

RR Kabel

Polycab

KEI

Universal

cables

Finolex

cables

Havells

RR Kabel

Polycab

KEI

Universal

cables

Source: MOFSL, Companies; C&W segment revenues

Source: MOFSL, Companies; * contribution margin for Havells

As per our analysis, RRKABEL is the fourth-largest producer of cables and wires in

India; however, it ranks fifth in terms of total sales of cables and wires in the

domestic markets. Its revenue contribution from the B2C sales channel stood at

76.7% in FY23, one of the highest among peers.

April 2024

Cables and Wires: Thematic

Exhibit 70: Domestic market share trend of key players

FY19 (%)

20.1

12.4

10.0

FY23 (%)

Exhibit 71: B2C revenue contribution is higher

B2B (%)

77.4

79.6

B2C (%)

76.9

76.7

6.7

3.2

5.3

2.5

Polycab

KEI

3.8

5.5

7.6

9.5

5.7

22.6

20.5

23.1

23.3

RR Kabel

Universal

cables

Finolex

cables

Havells*

FY20

FY21

FY22

FY23

Source: MOFSL, Company

Source: MOFSL, Companies, *60% of exports assumed for C&W

The company has been operating in the cables and wires segment since FY19 and

has a wide range of products such as house wires, industrial wires, power cables and

special cables. It was the first company in India to introduce low-smoke zero

halogen insulation technology in wires and cables products, and to introduce

‘Unilay’ core technology (heat resistant and flame retardant) products.

Exhibit 72: Revenue composition in FY23

Exhibit 73: Export contribution is on higher side

Outside

India

23%

FMEG

11%

Cables and

Wires

89%

Source: MOFSL, Company

India

77%

Source: MOFSL, Company

RRKABEL reported a CAGR of 36% in export revenues over FY20-23 (export revenue

grew ~19% YoY in 9MFY24); significantly higher than its peers. The company exports

its products to 67 countries across North America, Europe, Middle East and Asia

Pacific. In the export markets, the company sells most of its product under its own

brand, and also manufacturers under private labels for select customers.

Exhibit 74: Export contribution is highest among peers

22.7

FY23 (% of total revenues)

Exhibit 75: Export revenue growth of different companies

35.9

FY20-23 (%)

22.6

15.8

9.8

10.3

4.3

0.9

8.1

RR Kabel

Polycab

KEI

Universal

cables

Finolex

cables

RR Kabel

Polycab

-7.4

KEI

Universal

cables

Finolex

cables

Source: MOFSL, Companies

April 2024

Cables and Wires: Thematic

RRKABEL has 35 certifications for exporting its products to international markets,

which should help the company boost its exports in the wake of the China+1

strategy. It has long-standing relationships with 10 distributors (72 distributors in

total), who cover a majority of its exports.

Exhibit 76: Few of the international certifications of RRKabel

Source: MOFSL, company

The company’s cables and wires plants are located at Waghodia, Gujarat (started in

FY2012) and Silvassa, Daman (started in FY1999). It has been able to backward-

integrate by setting up in-house manufacturing of PVC, LS0H compound, cross-

linked polythene compound and solar cable compound at both these plants.

Backward-integration helps the company to ensure quality control and reduce raw

material and logistics costs. It also intends to start manufacturing other raw

materials such as thermoset e-beamable LS0H compound and ethylene propylene

rubber compound in FY24. The company’s share of in-house manufacturing is one of

the highest in the industry (100% for cables & wires).

Exhibit 77: Mix of in-house manufacturing and outsourcing of different companies

In-house Manufacturing (%)

10%

Outsourced (%)

35%

60%

96%

90%

91%

95%

96%

65%

40%

RR Kabel

Havells

Polycab

KEI

Finolex

V-Guard

Crompton

Source: MOFSL, RRKabel DRHP

RRKABEL has increased its Installed capacities of cables and wires at a CAGR of 9%

over FY20-23 (20% CAGR at Waghodia facility). The company’s export requirements

are primarily fulfilled from the Waghodia facility.

April 2024

Cables and Wires: Thematic

Exhibit 78: Manufacturing plants and capacities of the cables & wires segment

FY20

Cables & Wires plants

Waghodia, Gujarat

Cables & Wires (Circuit km)

Various types of compounds (Mts)

Silvassa, Daman

Cables & Wires (Circuit km)

Various types of compounds (Mts)

Total Cables & Wires (circuit km)

Capacity Utilization (%)

Waghodia, Gujarat

Cables & Wires

Various types of compounds

Silvassa, Daman

Cables & Wires

Various types of compounds

FY21

FY22

FY23

12,23,670

22,150

19,41,000

13,200

31,64,670

13,49,850

25,300

19,41,000

13,200

32,90,850

17,19,300

39,950

19,41,000

13,200

36,60,300

21,16,620

40,400

19,36,000

13,200

40,52,620

52%

73%

66%

68%

55%

64%

61%

65%

62%

55%

67%

75%

62%

63%

87%

86%

Source: MOFSL, Company

RRKABEL plans to spend INR5b each year for the next two years to increase

capacities for cables and wires. It is facing capacity constraints for cables, which

impacted its pricing power, leading to lower margins for the cables and wires

segment. The company plans to increase its cables capacity by 2.4x over the next

two years and its wires revenues by 20% YoY for next few years. We expect higher

revenue growth for cables (28% over FY23-26) in our assumptions, which should

also improve margin of the segment. In 9MFY24, the cable & wire segment saw

revenue/EBIT growth of 18%/43% YoY, and its EBIT margin improved to 8.6% vs.

7.2% in 9MFY23.

Exhibit 79: Expect 20% revenue CAGR for C&W segment

C&W Revenue (INR m)

YoY change (%)

Exhibit 80: C&W’s EBIT margin estimated to improve

C&W EBIT (INR m)

9.0

7.8

7.1

EBIT m (%)

9.7

9.2

8.7

8.9

63.1

12.1

-0.4

22,488

FY20

25,202

FY21

41,113

FY22

20.6

16.6

25.4

19.3

49,585

FY23

57,802

FY24E

72,498

FY25E

86,485

FY26E

1,991

FY20

2,269

FY21

3,227

FY22

3,516

FY23

5,029

FY24E

6,670

FY25E

8,389

FY26E

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Targets to accelerate growth of FMEG business

Estimate 15% revenue CAGR and EBIT losses to reduce over FY24-26E

The company diversified and expanded its product portfolio in FMEG segment, both

organically and inorganically. Its portfolio of FEMG products covers ~77% of its

addressable market and consists of fans, lighting, switches & switchgears and home

appliances (room heaters, water heaters, Irons and coolers). Around 35% of FMEG

products are manufactured in-house (in value terms).

Exhibit 81: Production capabilities of the FMEG segment

Capacity

Waghodia, Gujarat

Switches

Roorkee, Uttar Pradesh

Fan

Lights

Gagret, Himachal Pradesh

Fan

Bengaluru, Karnataka

Lights

FY20

FY21

9,00,000

15,00,000

54,00,000

15,00,000

55,12,500

FY22

56,83,000

15,00,000

39,00,000

FY23

89,25,000

15,00,000

18,00,000

16,50,000

1,10,080

1,32,096

1,21,088

1,32,096

Source: MOFSL, Company

In FY20, it amalgamated the business from one of its group companies, Ram Ratna

Electricals. In FY20, it acquired the LED lights and related hardware business of

Arraystorm Lighting, along with its trademarks and design certificates. In May’22, it

acquired the home electrical business of Luminous Power Technologies, which

helped it to enter the premium FMEG segment. It also obtained a limited and

exclusive license to use the ‘Luminous Fans and Lights’ brand for fan and light

products for a maximum period of four years with a one-time option to further

renew the license for a period of three months. It started manufacturing switches in

FY21.

Exhibit 82: Acquisition helped growth in FMEG segment; targets to accelerate growth

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

RRKABEL plans to increase revenues and margins of the FMEG segment through – 1)

expansion of product portfolio- 344 products launched during FY21-23 and 45

products under development as of Sep’23-end; 2) offering products across price

ranges; 3) higher share of value-added products like premium fan, downlights, etc.;

4) integration of acquired companies and realizing synergies in logistics, brand

promotion, manpower, etc.; and 5) expansion of distribution network.

Exhibit 83: Strategy for FMEG segment

Source: MOFSL, Company

We estimate a 15% revenue CAGR for the FMEG segment over FY24-26. Revenue

growth in FY23 was led by the acquisition of Luminous. We expect losses in this

segment to reduce going forward and expect it to achieve break-even at EBIT level

in FY26. RRKABEL’s initiatives to offer value-accretive products and the expansion of

its product portfolio will help it to reduce losses, in our view. In FY23, this segment

had incurred higher losses due to acquisition/integration-related costs of HEB

business of Luminous.

Exhibit 84: Expect 12% revenue CAGR for FMEG segment

FMEG (INR m)

135

9,882

8,593

1,939

FY20

2,039

FY21

2,750

(695)

FY22

FY23

FY24E

FY25E

FY26E

FY20

FY21

FY22

FY23

6,475

7,472

(178)

(301)

(298)

(344)

YoY change (%)

Exhibit 85: Estimate to reduce losses going forward

FMEG EBIT (INR m)

(672)

FY24E

FY25E

FY26E

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Increasing dealer network led to market share gains

Ad spending grew in FY23; focus on renovation and new product launches

RRKABEL has significantly increased its distribution network over the last few years,

led by its focused approach through various initiatives like Project KaRRma and

Project Lakshya. Even before the acquisition of the HEB segment of Luminous, the

company had increased its network of electricians/retailers by 5.7x/2.4x during

FY20-22. Similarly, its network of distributors/dealers increased at a CAGR of

31%/11% during FY20-22.

As of Sep’23, it has a pan-India distribution network with 3,598 distributors and

3,781 dealers. Its products are available at ~124k retail touchpoints and it has

connect with ~330k electricians. RRKABEL implemented a partner loyalty program

for retailers and electricians, including RR Connect mobile phone application and

web portal, and rewards schemes, such as RR Dosti 3.0 and Udaan 3.0. Its Kabel Star

initiative further provides scholarships to the children of electricians, who have

registered on RR Connect application.

Exhibit 86: Significant increase in distribution network

Distributors

Dealers

Exhibit 87: Strong jump in retail touchpoints

Electricians

Retailers

FY20

FY21

FY22

FY23

Q1FY24

Q2FY24

FY20

FY21

FY22

FY23

Q1FY24

Q2FY24

Source: MOFSL, Company

Its distribution network is spread across regions, with the north, central and south

regions comprising 23-24% of total distributors and dealers. The west and east

regions make up 17% and 12%, respectively, at FY23-end.

Exhibit 88: Dealers/distributors concentration is higher in north, central and south regions

West

17%

Central

24%

South

23%

North

24%

East

12%

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

RRKABEL initiated Project KaRRma in FY20 to increase its market share in housing

wires by expanding retail outlets, electrician connect, sales force and product

portfolio. This project was intended to double the market share and retail outreach

in domestic house wires by increasing its reach into the micro (all towns with over

0.3m population) and nano (particular localities within micro markets) markets.

It also launched another five-year long initiative Project Lakshya in FY20, comprising

two phases: 1) grow fans and lights product portfolio organically and inorganically,

and 2) integration of acquired business segments of Luminous.

Exhibit 89: Project KaRRma: to increase C&W market share

Project KaRRma (C&W)

Phase 1:

Double market share and retail outreach in domestic

house wires

Phase 2:

Increase micro and nano market reach

Source: MOFSL, Company

Exhibit 90: Project Lakshya launched for FMEG segment

Project Lakshya (FMEG)

Phase 1:

Grow fans & lights segment through field sales officers

Phase 2:

Integration of Luminous Home Electrical Business

Source: MOFSL, Company

RRKABEL focused on expanding its geographical market share. For instance, for its

90-meter housing wires, the company classified its geographical presence in India

into ‘winner’ (9%+ market share), ‘growing’ (market share between 5-9%) and

‘opportunity states’ (less than 5% market share). This approach helped it to increase

its market share in this product category over the last few years. It intends to classify

its geographical presence in the same manner for all product categories over the

next few years.

Exhibit 91: Focused approach led to market share gains in housing wires (90 meters)

Source: MOFSL, Company

Its advertising and promotion spending increased by 73% YoY to INR851m in FY23,

mainly due to the low base effect as brand spending was muted in FY21/FY22. It

spent 1.5% of its total revenue on advertising in FY23. We estimate ad spending to

be at 1.2-1.4% of revenues over FY24-26 (11% CAGR over FY23-26E). Ad spending as

% of B2C sales stood at 2.2% in FY23 (average of 2% over FY20-23). It sponsored

Bengaluru Pro Kabaddi Team in CY19 and KKR IPL Team in CY21. The company has

invested in implementing brand initiatives, such as Kabel Nukkad and Kabel Mela, to

April 2024

Cables and Wires: Thematic

enhance its brand visibility over the last few years. Its brand also provides the

opportunity to cross-sell its FMEG products to cables and wires customers. The

company has also mapped the distribution network of its cables and wires products,

and identified and worked with distributors and retailers to carry its FMEG products.

The company focuses on a strategic advertising mix between outdoor advertising

(such as temples and police stations) and advertising campaigns with a broad reach,

namely, through print, television and sponsorships.

Exhibit 92: Ad spending as a % of total sales

AD spends (INR M)

1.9

1.5

1.0

1.1

1.4

1.2

1.6

AD spends as % of sales

Exhibit 93: Ad spending as a % of B2C sales

2.8

AD spends as % of B2C sales

2.2

1.3

2.0

482

FY20

260

FY21

491

FY22

851

FY23

923

FY24E

983

FY25E

1,168

FY26E

FY20

FY21

FY22

FY23

Average

(FY20-23)

Source: MOFSL, Company



RRKABEL has a strong R&D team, which helps it to develop first of its kind

products and acquiring export certifications from various countries. It was the

first company in India to launch products compliant with European regulations

such as REACH (Registration, Evaluation, Authorization and Restriction of

Chemicals), ROHS (Restriction of Hazardous Substances Directive) and CPR

(Construction Products Regulations). RRKABEL was the first company to launch

low-smoke zero halogen (LSOH) insulation technology wire in the country. Its

R&D consists of 60 people, of which 22 work exclusively for FMEG products.

Exhibit 95: Product launches during FY21-23

FMEG

Cables & Wires

Exhibit 94: Strong R&D helps in developing new products

116

FY21

Source: MOFSL, Company

153

FY22

FY23

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Financial Outlook

Expect revenue CAGR of ~22% over FY24-26



RRKABEL posted a revenue CAGR of ~24% over FY19-23, driven by a ~22% CAGR

in the cables and wires segment and a ~45% CAGR in the FMEG segment, albeit

on a small base. RRKABEL exports its products to 67 countries and generated

~23% of its revenue from exports in FY23 (~27% in 9MFY24). The company

reported a CAGR of ~25% in export revenues over FY19-23.

We expect a revenue CAGR of 22% over FY24-26, driven by robust growth in the

cables and wires segment (strong demand in infrastructure development, real

estate and rural electrification), capacity expansions in cable and wires, and

various initiatives for both business segments (Project KaRRma and Project

Lakshya aimed at growing distribution network; new product launches etc.).

We estimate a revenue CAGR of ~22% in the cables and wires segment over

FY24-26. FMEG revenue is estimated to see a CAGR of ~15% over the same

period.

Exhibit 96: Revenue is estimated to clock 22% CAGR over FY24-26

Revenue (INR b)

YoY (%)

61.0

20.6

3.8

9.9

27.7

17.8

24.2

18.8

FY19

FY20

FY21

FY22

FY23

FY24E

FY25E

FY26E

Source: MOFSL, Company

Exhibit 97: Estimate revenue CAGR of ~22% in C&W

Cables and wires (INR b)

63.1

YoY (%)

Exhibit 98: Estimate ~15% revenue CAGR in FMEG

FMEG (INR b)

135.5

YoY (%)

12.1

(0.4)

20.6

16.6

25.4

19.3

31.0

5.1

34.9

15.4

15.0

22.6

FY19

22.5

FY20

25.2

FY21

41.1

FY22

49.6

FY23

57.8

72.5

86.5

1.5

FY19

1.9

FY20

2.0

FY21

2.7

FY22

6.5

FY23

7.5

8.6

9.9

FY24E FY25E FY26E

Source: MOFSL, Company

FY24E FY25E FY26E

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Exhibit 99: Revenue contribution from cables and wires to be at 89-90% till FY26E

Cables and wires

FMEG

FY19

FY20

FY21

FY22

FY23

FY24E

FY25E

FY26E

Source: MOFSL, Company

Gross margin to improve going forward



Higher key raw material (copper and aluminum) prices, inability to pass on the

price increases and higher exports led to lower gross margin in FY22/FY23.

However, lower raw material prices led to increase in gross margin to ~19% in

9MFY24 vs. ~18% in 9MFY23.

Gross margins will improve to ~20% by FY26E vs. ~18% in FY22-23, with stable

commodity prices and higher share of value-added products.

Exhibit 100: Gross margins to improve to ~20% by FY26E

22.3

21.2

21.1

19.5

17.7

18.3

19.8

20.3

Gross margin (%)

FY19

FY20

FY21

FY22

FY23

FY24E

FY25E

FY26E

Source: MOFSL, Company

Employee costs continue to increase



Employee costs grew in double digits over FY20-23 (except in FY21 due to Covid-

19) due to business growth and the expansion of its product portfolio in the

FMEG segment. The permanent employee count has been increasing over the

years and stood at 3,036 in FY23 vs. 2,247 in FY20.

Exhibit 101: Employee costs increased in double digits over FY20-23 (except in FY21)

Employee cost (INR b)

39.9

26.7

9.3

27.3

18.6

YoY (%)

19.0

18.8

1.1

FY19

1.4

FY20

1.5

FY21

1.9

FY22

2.6

FY23

3.1

FY24E

3.7

FY25E

4.4

FY26E

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Estimate EBITDA CAGR of ~39% over FY24-26



EBITDA recorded a ~16% CAGR over FY19-23, primarily driven by volume

growth. However, margin contracted 164bp in this period mainly due to higher

commodity prices and higher losses in the FMEG business.

We expect that the company’s margin will improve, driven by - 1) stability in RM

cost, which should lead to improvement in gross margin and, in turn, EBITDA

margin; and 2) reduction in FMEG losses and expect it to achieve break-even at

EBIT level in FY26. EBIT margin of the cables and wires segment is estimated to

be at 8.7%/9.2%/9.7% in FY24/FY25/FY26 vs. 7.1% in FY23. We expect the FMEG

segment’s EBIT loss to be at INR672m/INR344m in FY24/FY25 vs. a loss of

INR695m in FY23. We expect this segment to break-even at EBIT level in FY26.

Strong revenue growth and margin improvements should lead to an EBITDA

CAGR of 39% over FY24-26E, with OPM of 7.2%/8.4%/9.4% in FY24/25/26E vs.

5.8% in FY23.

Exhibit 102: Expect improvement in EBITDA margin over FY23-26

EBITDA (INR b)

8.3

8.4

6.9

5.8

7.2

EBITDA Margin (%)

8.4

9.4

7.4

1.8

FY19

2.0

FY20

2.3

FY21

3.0

FY22

3.2

FY23

4.7

FY24E

6.9

FY25E

9.1

FY26E

Source: MOFSL, Company

Adj. PAT expected to see strong CAGR of ~48% over FY23-26



Over FY19-23, adj. PAT CAGR stood at ~22%, aided by lower tax expenses (25.8%

in FY23 vs. 35.3% in FY19). Adj. PAT declined ~11% YoY in FY23 due to lower

OPM, higher interest and depreciation expenses, and lower other income.

We expect adj. PAT CAGR at ~43% over FY24-26, led by strong EBITDA growth

and financial deleverage (IPO proceeds would be used for debt repayment).

Exhibit 103: Expect Adj. PAT CAGR at ~43% over FY24-26

PAT (INR b)

58.0

42.9

10.6

(11.2)

0.9

FY19

1.2

FY20

1.4

FY21

2.1

FY22

1.9

FY23

3.0

FY24E

4.6

FY25E

6.2

FY26E

YoY (%)

60.3

51.0

34.5

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Working capital cycle to further improve to 56-58 days going forward



RRKABEL’s working capital cycle improved over FY22-23, led by a decline in

debtor days (36 days in FY23 vs. 56 days in FY21) and inventory days (51 days in

FY23 vs. 61 days in FY21). We estimate net working capital cycle to further

improve to ~56-58 days over FY24-26 from ~63 days in FY23.

Exhibit 105: Inventory, debtors and creditors days trend

Inventory

FY20

FY21

FY22

FY23

Debtors

Creditors

Exhibit 104: Net working capacity and days trend

Net working capital (INR b)

Days

6.8

FY19

6.7

FY20

9.0

FY21

10.6

FY22

9.5

FY23

10.5

12.5

14.9

FY19

FY24E FY25E FY26E

Source: MOFSL, Company

FY24E FY25E FY26E

Source: MOFSL, Company

Operating cash flows to support robust capacity expansion plan

Cumulative OCF is expected to be at INR10.5b over FY24-26, while cumulative capex

of INR7b. Its FCF generation over FY24-26E will be INR3.5b.

Exhibit 106: Capex to be funded through internal accruals

OFC (INR b)

5.0

3.0

1.0

-1.0

-3.0

FY19

FY20

FY21

FY22

FY23

FY24E

FY25E

FY26E

Capex (INR b)

FCF (INR b)

4.1

2.8

1.4

0.0

-1.4

Source: MOFSL, Company

Return ratios to improve

We estimate RRKABEL’s RoE/ROCE to increase to 25%/24% in FY26 vs. 14%/12% in

FY23, led by improvements in operating profit margin and higher asset turnover.

RoIC will be at ~23% in FY26 vs. ~12% in FY23.

Exhibit 107: RoE/RoCE to improve over FY24-26E

ROE (%)

18.6

13.3

14.1

ROCE (%)

22.5

18.6

14.2

13.7

10.8

23.6

20.7

24.8

Exhibit 108: RoIC to improve over FY24-26E

ROIC (%)

19.9

16.4

8.9

11.6

10.2

12.3

23.2

13.9

16.6

11.9

10.8

11.9

FY19

FY20

FY21

FY22

FY23

FY24E FY25E FY26E

Source: MOFSL, Company

FY19

FY20

FY21

FY22

FY23

FY24E FY25E FY26E

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Valuation and view



RRKABEL has demonstrated its ability to grow at a higher rate than peers, with

its cables & wires segment recording a CAGR of 22%/20% in revenue/EBITDA

over FY20-23. In 9MFY24, revenue of this segment grew ~18% YoY and the

management indicated that volume growth was ~19%.

It is one of the leading exporters of cables and wires, with exports accounting

for 23% of its revenues in FY23 (27% in 9MFY24). Exports from India are growing

strongly, with a CAGR of 16% over FY17-23 (36% over FY21-23). Globally, many

countries have opted for a ‘China+1 strategy’ after Covid-19-related disruptions,

and RRKABEL, with various international certifications, is well suited to benefit

from this opportunity.

The company has outlined a capex of INR5b in FY24/FY25 to expand its cables

capacity by 2.4x and its wire capacity by 20% every year for the next few years.

This expansion will boost growth from FY26 onward.

EBITDA/Adj. PAT clocked a CAGR of 16%/22% over FY19-23 despite margin

pressures in the cables and wires segment during FY22/FY23 due to high RM

costs. We expect a CAGR of 39%/43% in EBITDA/EPS over FY24-26.

OCF during FY21/FY22 (cumulative OCF of INR271m) was affected by working

capital issues (cumulative working capital increase of INR4.6b in this period).

Working capital release of INR1.5b in FY23 helped the company to generate FCF

of INR2.4b despite a higher capex of INR2.2b. Going forward, we expect

RRKABEL to generate cumulative OCF of INR10.5b over FY23-26, leading to FCF

of INR3.5b (capex of INR7b over FY24-26E).

We estimate RoE to improve gradually to 25% in FY26 vs. 14% in FY23. RoCE is

estimated to be at 24% in FY26 vs. 12% in FY23. Multiples of cables and wires

companies have rerated significantly in the last two years, driven by strong

earnings growth, which we expect will continue on the back of government

capex and strong traction in the real estate segment. We expect the company to

trade at premium valuations and value it at 40x FY26E EPS to arrive at a TP of

INR2,200, upside of 38% from CMP. We initiate coverage on the company with a

BUY rating.

April 2024

Cables and Wires: Thematic

Company overview

RRKABEL started its cables and wires business in FY99 and was founded by Mr.

Rameshwarlal Kabra. It had set up its first plant in Silvassa. The company’s cables

and wires segment offers a wide range of products such as house wires, industrial

wires, power cables and special cables. The company later diversified and expanded

its product portfolio to the FMEG segment, both organically and inorganically.

In FY20, the company amalgamated the FMEG business of one of its group

companies, Ram Ratna Electricals and acquired the LED and related hardware

business of Arraystorm Lighting. In May ‘22, it acquired the home electrical business

of Luminous Power Technologies and also obtained a limited and exclusive license to

use the ‘Luminous Fans and Lights’ brand for fan and light products for an initial

period of two years’ subject to extension of six months at a time for a maximum of

four times.

The company started export of its products in FY2001 to UAE and has become one

of the leading exporters of cables and wires. It exports its products to more than 60

countries across North America, Asia Pacific, Europe and the Middle East.

The company has five manufacturing facilities across Waghodia (Gujarat), Silvassa

(Dadra and Nagar Haveli, Daman and Diu), Roorkee (Uttarakhand), Bengaluru

(Karnataka) and Gagret (Himachal Pradesh). It has a pan-India distribution network,

with 3,598 distributors and 3,781 dealers as of Sep ‘23. Its products are available at

~124k retail touchpoints and it has connect with ~3.3lakh electricians

Exhibit 109: Journey of RRKABEL

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

Exhibit 110: Manufacturing facilities of the company

Source: MOFSL, Company

April 2024

Cables and Wires: Thematic

SWOT analysis



Leading exporter of

cables and wires from

India, with various

international

certifications

B2C sales one of the

highest in the industry

aided by its strong

distribution network

Strong R&D team has

helped it to launch

various new products in

cables and wires



Higher sales of wires

(~70% of the cables and

wires segment’s

volumes) impact its

margins of the segment

It has followed

acquisition-led growth

in the FMEG segment

and hence, delivery

needs to be watched for

over the next few years



International

certifications to help

increase cable exports

(~15% of total export

revenues in FY23);

Wires have low margins

Government’s focus on

construction,

expectation of private

capex pick-up and

uptick in real estate

should boost growth in

cables, wires and FMEG

products



High dependence on

raw materials like

copper/aluminium;

Any disruption in

supply of these

materials could lead

to loss of sale

Growing competitive

intensity in FMEG

segment could lead

to continued losses in

this segment



April 2024

Cables and Wires: Thematic

Bull and Bear Case

Bull Case

Considering higher off-take via key infrastructure projects and exports in new

geographies, we assume a higher revenue/EBITDA/PAT CAGR of 23%/41%/48%

over FY24-26E.



With higher operating leverage, we expect margin expansion of 260bp over

FY24-26E.



Assuming a target P/E multiple of 43x, we arrive at a TP of INR2,460 per share,

~54% upside from CMP.



Bear Case



We factor in lower volume growth and estimate EBITDA margins to be at 7.5-8%

through FY25-26.



We estimate a revenue/EBITDA/PAT CAGR of 16%/23%/25% over FY24-26E.



Assuming a target P/E multiple of 35x, we arrive at a TP of INR1,470 per share,

~8% downside from CMP.

Scenario analysis - Bull Case

FY23

Revenue (INR b)

Growth (%)

EBITDA (INR b)

YoY growth (%)

EBITDA Margin (%)

PAT (INR b)

EPS (INR)

P/E multiple (implied)

Target price (INR)

Upside/ (downside) (%)

56.0

27.7

3.2

6.3

5.8

1.9

16.8

FY24E

65.9

17.8

4.7

47.2

7.2

3.0

27.0

FY25E

83.1

26.0

7.3

54.1

8.8

4.9

43.5

FY26E

99.7

20.0

9.5

29.5

9.5

6.4

57.1

2,460

Source: Company, MOFSL

Revenue

(INR b)

Growth (%)

EBITDA (INR m)

YoY growth (%)

EBITDA Margin (%)

PAT (INR m)

EPS (INR)

P/E multiple

Target price (INR)

Upside/ (downside) (%)

Scenario analysis – Bear Case

FY23

56.0

27.7

3.2

6.3

5.8

1.9

16.8

FY24E

65.9

17.8

4.7

47.2

7.2

3.0

27.0

FY25E

75.8

15.0

5.7

19.9

7.5

3.7

32.9

FY26E

89.5

18.0

7.2

25.9

8.0

4.7

42.0

1,470

(8.0)

Source: Company, MOFSL

April 2024

Cables and Wires: Thematic

Key management personnel

Mr. Tribhuvanprasad Kabra, Executive Chairman

Mr. Kabra was appointed to the company’s Board of Directors in May’97. He has an

extensive experience in the electrical industry. Previously, he was associated with

Shramik Winding Wires Pvt. Ltd. as a Director.

Mr.

Shreegopal Kabra,

Managing Director

Mr. Shreegopal Kabra was appointed to the company’s Board of Directors in Jun’14.

He has extensive experience in the electrical industry. Previously, he was associated

with the International Copper Association as the chairman of wire and cable product

council and the Indian Electrical and Electronics Manufacturers’ Association as the

president.

Mr.

Mahendrakumar Kabra,

Joint Managing Director

Mr. Mahendrakumar Kabra was appointed to the company’s Board of Directors in

Feb’95. He completed his diploma in mechanical engineering from Veermata Jijabai

Technological Institute, Mumbai. He has extensive experience in the electrical

industry. Previously, he was associated with MEW Electricals Limited as a Director.

Mr.

Dinesh Aggarwal,

CEO (Domestic)

Mr. Aggarwal joined the company in Dec’22 and is responsible for handling the

domestic business administration of the company. He holds a degree of bachelor’s

in science from Kurukshetra University and a post graduate diploma in management

from the Indian Institute of Management, Calcutta. Previously, he has worked with

Anchor Electronics and Electricals Private Limited, Panasonic Life Solutions India

Private Limited, Net4India Limited, Voltas Limited, DSQ world.com Limited, Antarix

e-Applications Limited and Forbes Gokak Limited.

Mr.

Sanjay Taparia,

CEO (International Business)

Mr. Taparia has been associated with the company since 2010. In his current role, he

is responsible for the expansion of the company’s international business and

exports. He holds a degree of bachelor’s in science from the University of Bombay.

Previously, he has worked with Ram Ratna International as a Director.

Mr.

Rajesh Jain,

CFO

Mr. Jain has been associated with the company since 2000. He holds a degree of

bachelor’s in commerce from Mohanlal Sukhadia University, Udaipur. He has also

qualified as an associate from the Institute of Cost and Works Accountants of India

and enrolled as a licentiate of the Institute of Company Secretaries of India.

Previously, he had worked with Harshvardhan Chemicals and Minerals Limited.

April 2024

Cables and Wires: Thematic

Financials and valuations (Consolidated)

Income Statement (INR m)

Y/E March

Net Sales

Change (%)

EBITDA

Change (%)

Margin (%)

Depreciation

Int. and Fin. Charges

Other Income

Profit before Taxes

Change (%)

Margin (%)

Tax

Tax Rate (%)

Profit before JV/Associates

Share of JV/Associates

Adjusted PAT

Change (%)

Margin (%)

Reported PAT

Balance Sheet (INR m)

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Investments

Debtors

Cash & Bank Balance

Loans & Advances

Other Current Assets

Current Liab. & Prov.

Creditors

Other Liabilities

Provisions

Net Current Assets

Application of Funds

FY19

23,881

20.6

1,766

(20.7)

7.4

306

383

247

1,324

(28.1)

5.5

468

35.3

856

(30)

3.6

856

FY20

24,785

3.8

2,048

15.9

8.3

388

352

270

1,578

19.1

6.4

353

22.4

1,225

(1)

1,224

4.9

1,224

FY21

27,239

9.9

2,301

12.4

8.4

448

271

220

1,803

14.3

6.6

460

25.5

1,343

1,354

5.0

1,354

FY22

43,859

61.0

3,032

31.8

6.9

461

233

463

2,802

55.4

6.4

704

25.1

2,097

2,139

4.9

2,139

FY23

55,992

27.7

3,223

6.3

5.8

596

421

344

2,550

(9.0)

4.6

661

25.9

1,889

1,899

(11)

3.4

1,899

FY24E

65,937

17.8

4,743

47.2

7.2

664

555

575

4,098

60.7

6.2

1,066

26.0

3,033

3,043

4.6

3,043

FY25E

81,922

24.2

6,882

45.1

8.4

848

442

604

6,196

51.2

7.6

1,611

26.0

4,585

4,595

5.6

4,595

FY26E

97,360

18.8

9,116

32.5

9.4

1,034

377

634

8,339

34.6

8.6

2,168

26.0

6,171

6,181

6.3

6,181

FY19

234

8,081

8,315

3,824

12,215

3,783

768

3,016

426

382

10,868

3,527

1,552

4,465

366

899

2,477

1,904

383

190

8,392

12,215

FY20

234

8,807

9,040

3,953

13,085

5,031

1,126

3,905

154

320

11,075

3,752

1,888

4,190

113

472

660

2,368

1,809

469

8,707

13,085

FY21

239

10,227

10,466

4,987

15,532

5,526

1,527

3,999

406

12,679

5,341

1,960

4,204

1,032

1,619

1,135

369

115

11,061

15,532

FY22

239

12,264

12,503

5,211

131

17,845

5,914

1,923

3,991

423

622

15,471

7,096

2,055

5,171

123

143

882

2,661

1,679

771

212

12,809

17,845

FY23

478

13,718

14,197

5,158

149

19,504

7,574

2,403

5,172

436

777

19,951

8,602

2,849

5,919

811

129

1,642

6,832

4,401

1,982

448

13,119

19,504

FY24E

564

17,999

18,564

3,558

149

22,271

9,778

3,067

6,711

436

777

21,296

9,213

2,849

6,323

1,038

151

1,721

6,949

4,087

2,335

528

14,347

22,271

FY25E

564

21,805

22,369

3,058

149

25,576

12,576

3,915

8,660

436

777

24,317

11,447

2,349

7,407

816

189

2,110

8,614

5,057

2,901

656

15,703

25,576

FY26E

564

26,971

27,535

1,788

149

29,472

14,567

4,950

9,617

436

777

28,830

13,604

2,849

8,802

865

224

2,485

10,189

5,962

3,447

780

18,641

29,472

April 2024

Cables and Wires: Thematic

Financials and valuations (Consolidated)

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout %

Valuation (x)

P/E

Cash P/E

EV/Sales

EV/EBITDA

P/BV

Dividend Yield (%)

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Debtor (Days)

Creditor (Days)

Inventory (Days)

Asset Turnover (x)

Leverage Ratio

Debt/Equity (x)

Cash Flow Statement

Y/E March

Profit before tax

Depreciation

Exceptional Income

Interest Paid

Others

Direct Taxes Paid

(Incr)/Decr in WC

CF from Operations

Incr in FA

Pur of Investments

Interest/MF/Div Income

Others

CF from Invest.

Changes in Net worth

Incr in Debt

Dividend Paid

Interest paid

Others

CF from Fin. Activity

Incr/Decr of Cash

Add: Opening Balance

Closing Balance

FY19

7.6

10.3

177.7

0.0

210.5

155.1

7.6

103.3

9.0

0.0

13.3

10.8

8.9

68.2

29.1

41.4

2.3

0.5

FY20

10.8

14.3

193.2

0.0

147.3

111.8

7.4

89.0

8.3

0.0

14.1

11.9

11.6

61.7

26.6

53.6

2.0

0.4

FY21

12.0

16.0

218.7

0.0

133.1

100.1

6.7

79.6

7.3

0.0

13.9

10.8

10.2

56.3

15.2

71.6

1.9

0.5

FY22

19.0

23.0

261.3

0.0

84.3

69.3

4.2

60.4

6.1

0.0

18.6

13.7

12.3

43.0

14.0

59.1

2.6

0.4

FY23

16.8

22.1

148.4

0.0

94.9

72.3

3.2

56.4

10.8

0.0

14.2

11.9

12.3

38.6

28.7

56.1

3.0

0.4

FY24E

27.0

32.9

164.5

5.0

18.5

59.2

48.6

2.7

37.9

9.7

0.3

18.6

16.6

16.4

35.0

22.6

51.0

3.2

0.2

FY25E

40.7

48.3

198.3

7.0

17.2

39.2

33.1

2.2

26.2

8.1

0.4

22.5

20.7

19.9

33.0

22.5

51.0

3.4

0.1

FY26E

54.8

64.0

244.1

9.0

16.4

29.2

25.0

1.8

19.6

6.5

0.6

24.8

23.6

23.2

33.0

22.4

51.0

3.5

0.1

FY19

1,324

306

383

(48)

(648)

(915)

402

(1,054)

(1,507)

(225)

(2,758)

3,153

(264)

(233)

(379)

2,277

(79)

(21)

FY20

1,578

388

352

(335)

135

2,156

(931)

(288)

(132)

(1,283)

(54)

(425)

(340)

(819)

113

FY21

1,803

448

271

(419)

(2,837)

(711)

(474)

367

(59)

1,029

(287)

(33)

708

(61)

113

FY22

2,844

461

233

(69)

(733)

(1,754)

982

(682)

(2)

(627)

184

(278)

(222)

(40)

(356)

(1)

FY23

2,560

596

421

(582)

1,534

4,547

(2,179)

(1,188)

(3,335)

(160)

(500)

(355)

(1,015)

197

614

811

FY24E

4,108

664

555

(575)

(1,066)

(1,000)

2,688

(2,204)

575

(1,628)

1,888

(1,600)

(564)

(555)

(832)

228

811

1,038

FY25E

6,206

848

442

(604)

(1,611)

(2,079)

3,203

(2,798)

500

604

(1,694)

(500)

(790)

(442)

(1,731)

(222)

1,038

816

FY26E

8,349

1,034

377

(634)

(2,168)

(2,389)

4,569

(1,992)

(500)

634

(1,858)

(1,270)

(1,015)

(377)

(2,662)

816

865

April 2024

Cables and Wires: Thematic

NOTES

April 2024

REPORT GALLERY

RECENT STRATEGY/THEMATIC REPORTS

Cables and Wires: Thematic

April 2024

Cables and Wires: Thematic

RECENT INITIATING COVERAGE REPORTS

April 2024

100

Cables and Wires: Thematic

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

< - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following 30 days take

appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in

the business of providing Stock broking services, Depository participant services & distribution of various financial products. MOFSL is a listed public company, the details in respect of which are available on

www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National

Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for

its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of

Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of

associate entities of Motilal Oswal Financial Services Limited are available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or

derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial

instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and

other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are

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service

transactions.

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9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

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received compensation/other benefits from the subject company in the past 12 months

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific

recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an

inherent conflict of interest in some of the stocks mentioned in the research report.

acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

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