Informist, Monday, May 16, 2022

--Polycab CFO: Co eyeing inorganic growth in some product segments

--May buy cos in segments where co's penetration is low

--May look to buy small cos with strong regional presence

--Eyeing inorganic growth in extra high voltage cables space

--Eyeing inorganic growth in smart home devices segment

By Kiran Murali and Jatin Grover

NEW DELHI - Polycab India Ltd is aggressively looking for inorganic growth opportunities with an eye on product segments where it currently has minimal presence, apart from increasing penetration in key regional markets with its core wires and cables business, Chief Financial Officer Gandharv Tongia told Informist.

The major focus areas for possible acquisitions and joint ventures are extra high voltage cables segment and the internet of things, or smart devices space, Tongia said.

Extra high voltage cables are widely used for power transmission and the company sees exponential growth opportunity in the segment. Polycab could benefit from the rise in power demand and transition to renewable energy, as well as higher government capital expenditure on infrastructure.

Currently, the segment contributes only a miniscule to the company's revenue, with KEI Industries Ltd among the major players in the space.

"Extra high voltage cable is a product category where we do not have a significant presence. There we will need to have some sort of tie up or collaboration or joint venture in place," Tongia said.

As for home automation segment, Polycab expects it to contribute significantly to its revenues in the second half of 2022-23 (Apr-Mar), despite inflationary pressures. Polycab, therefore, is looking at acquisitions to boost product offerings in the internet of things, or smart devices space.

Last year, the company acquired Bengaluru-based smart home automation player Silvan Innovation Labs for 182 mln rupees. The acquisition helped Polycab strengthen its offerings, like smart lighting, smart fans, and smart water heaters, which it sells under its 'HOHM' brand.

"We will probably explore companies which are in a similar space or having some niche offerings that can be either clubbed with our existing product offerings and leverage our distribution network," Tongia said. He added that the company is also looking to acquire smaller firms in its core business segment that may have a strong presence in some regional markets.

When asked about the likely ticket size that the company has in mind for acquisitions, Tongia said the issue is being discussed and there would be more clarity on it in about six months.

"We will not do any acquisition just for capital acquisition purpose, whatever merger and acquisition we do will be return accretive," he said.

For 2022-23, the company has planned a capital expenditure of around 3.5 bln rupees, but this does not factor in any potential acquisitions, Tongia said. If the company does manage to acquire other firms, the capex would go up.

In 2021-22, Polycab incurred a capex of about 5.20 bln rupees, of which 2 bln rupees was spent on acquisition of a new office space in Mumbai.

Of the total planned capex for 2022-23, Polycab is likely to invest 70% in its flagship cables and wires business, while the remaining 30% will go into the fast moving electrical goods business, Tongia said. The cables and wires business contributes 87% to the company's overall topline and Polycab has around 24% share in the branded cables and wires market.

Most of the planned investments will be to set up new production lines. As of Mar 31, Polycab's cash position stood at 11 bln rupees.

Talking of new production units, Polycab's upcoming fan manufacturing factory in Halol, Gujarat, is running behind schedule by a few months.

The facility, which will be able to manufacture up to 6 mln fans a year, was expected to be commissioned in Jan-Mar, but got delayed due to pandemic-related disruptions. Polycab now expects to commission the plant in the first half of the current financial year.

Currently, fans category accounts for one-third of the revenue from fast moving electrical goods business, which in turn accounts for 10% of the company’s topline. Though the segment is currently small for Polycab, the company sees immense growth potential, going forward.

At 1350 IST, shares of Polycab were trading at 2,567.05 rupees on the National Stock Exchange, up 1% from the previous close.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Vandana Hingorani

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