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Finolex Cables Ltd
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Ladies and gentlemen, good day, and welcome to the Finolex Cables Limited Q1 FY '24 Analyst Conference Call. [Operator Instructions] I now hand the conference over to Ms. Mamta Samat from perfect Relations. Thank you, and over to you, ma'am.
Thank you, Vik. Good evening, everyone, and thank you for joining us on the Finolex Cables Limited Q1 FY '24 Analyst Conference Call. Today, we have with us the senior management represented by Mr. Deepak Chhabria, Executive Chairman; and Mr. Mahesh Viswanathan, Chief Financial Officer.
Before we begin, I would like to say that some of the statements that will be made in today's discussion may be forward-looking in nature. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session. I will now request the management for the opening remarks. Thank you, and over to you, sir.
Good afternoon, and welcome to this call of the first quarter results of Finolex Cables Limited. I'm Mahesh Viswanathan, speaking on behalf of the company. A quick recap on the quarter that went by. Revenue -- we posted fairly strong results. Revenue was up by about 19% on a comparable basis and almost similar to what was done in quarter 4 last year.
At the EBIT level, the numbers improved substantially from close to 14% PBT as against 12% in the corresponding quarter of last year. And post-tax results were about 11% compared to 9.3% earlier. In absolute terms, the post-tax results were actually 38% higher than the corresponding quarter of last year.
Within these segments, Electrical segment, the revenue was up by about 22% compared to the corresponding quarter of last year. Almost similar to what was achieved in quarter 4 last year as well. Communication cables was flat, whereas there was growth in the copper segment from INR 300 crores to about INR 383 crores.
At segment EBIT levels, the electrical cables line stabilized at about 13.1%. We have traditionally been around 13%, 13.5% in the past except for 1 or 2 quarters last year where because of commodity price movements, we had to take a cut in the margins. But now we're back on track.
In volume terms, the electrical wires, which is one of the -- which is our largest selling product, recorded a volume increase of about 29%. Power cables grew by about 3%, and communications cables, the segment grew about 17%. There was price erosion in the communications cable side, mainly on the fiber prices. Globally, fiber prices declined substantially over the last 6 months and the effect was spent in the -- on the top line.
We had, together with other industry members participated made a representation to the government on the quantity of fiber that was being dumped into the country from overseas. The government has taken note of it. And last week issued a corrective mechanism, whereby the -- there is imposition of antidumping duty on imports from those countries. So we hope that going forward, the correction to the realization will take place. It will not happen immediately, but over a period of time, that should steady.
The last part that I would like to touch upon is that upon the communication cable side, 2 weeks ago, the cabinet approved a spend of approximately INR 1.4 lakh crores on the last mine collectivity on broadband under the BharatNet program. I think this will, over the next couple of years, add more to the top line of the company. And it fits in line with our expansion programs on those areas. So with this brief background, I now open it up for questions.
[Operator Instructions] Our first question is from the line of Rahul Agarwal from InCred Capital.
One clarification and then three questions. Firstly, on volume growth. The press release mentioned electrical wire is 29% volume growth in power cable separately. So if I understand it correctly, electrical wire is excluding all cables, right, the auto agriculture and power. Is that correct?
No, power cable is separate. Electrical wires when I say that includes auto as well as [agricultural] applications.
Okay, got it. So now getting into questions, firstly, on revenue growth, obviously, we're all seeing that cable and wire is getting disproportionate growth right now into up cycle of the industry. For full year fiscal '24, across your three segments, what kind of revenue growth would you expect? So electrical cables, I understand copper is down Y-o-Y, but still you're managing 20% plus, I would imagine that should continue. So in case just your thoughts on electrical cable segment and FMEG communication cable, both have been flat this quarter, but what's the way out ahead, please?
On the Electrical segment, a lot of it is driven by growth in the Infra segment. So that could be reality, that could be housing -- I mean that could be housing that could be infrastructure that could be other government spends. So as long as those spends continue on the same trend as we have seen over the last 6 months, then you're right, a similar growth is possible.
On the communications cable side, while the volume growth was there, the value growth was kind of flat like I mentioned earlier. Primarily due to the depressed prices of fiber. First quarter, I think the average price of fiber was about $3.2. So I think once now that this antidumping duty has come into place effective last week, we should see realizations getting back to some sense of normalcy going forward. The demand is still there. And with the additional announcements from the cabinet, those should translate into demand, maybe not in the immediate term but in the medium and long term, it should bounce back strongly.
On the appliances and FMEG part. The rains in summer kind of disrupted the whole [scene]. I think this has been a common theme across many participants in the Hindi industry. So that has had an impact on the volumes. Secondly, while inflation has come down from its high, I think there is still a lot of hesitancy in terms of discretionary spends. But if the housing momentum keeps going on, I think those should also bounce back in the short and medium term.
So on communication cables, largely assuming the price remains flat, let's say, base case, what should be the growth for fiscal '24?
We should see tenders coming up now, it depends on when those tenders are opened up, and that will drive volume. So that's something that I'm not able to really comment with a degree of certainty there.
But in terms of existing order book, what kind of visibility will we have?
We will have visibility for about 6 months.
So from the private sector, you have got Bharti and Reliance investing in 5G, and they are doing a lot of good rollouts. I mean, while the rate contracts are fixed for a year, the quantity is placed every month. And so -- but we do expect that because of the 5G rollouts, the demand should be robust. They would still go on purchasing. Everyone knows about the rollout.
Other than that, the company has taken steps to do some EPC business. So we started in Gujrat where we are installing and laying the fiber optic cables also and giving to them. So this activity, we are going to try and replicate and grow in more states. So we see the demand for cable will also pick up a little bit from the EPC contracts as well.
Go it, sir. And FMEG, just to summarize what you said, obviously, I understand demand is weaker because of rains, but we are pretty small. I thought we are focused on increasing market share and new product launches, shouldn't that help you to on a smaller base to at least grow on this base?
Well, yes and no. When the overall market spend itself is depressed, it will have an impact on smaller players as well, right?
Okay. Okay. Got it. So the next question was on communication cables again. In terms of capacity, I just wanted to know what is it right now? And based on the current price what could be the peak revenue we could achieve both for metal-based and OSE.
So on the communication on the fiber optic, if you want to know capacity, we have capacity on the cabling side of 8 million fiber kilometer. And we saw the fiber is about 4 million fiber kilometer. So that's the present capacity. In the expansion plan that the company is doing, where we are adding additional capacity on the cabling side, we will go from 8 million to 10 million fiber kilometer and we are going to increase on the towers from 4 million to 8 million. And we are also adding preforms as a backward integration, which in the first phase would be 4 million and then later on, second phase will take place of 4 million between two branches.
Got it. So to understand this correctly, let's say, if we're doing like INR 150 crores a quarter of communication cable business right now, that number can go up to at current pricing and go up about INR 8 million to INR 10 million -- INR 8 million goes to INR 10 million, so that's about 25% increase. Is that correct?
That's on the cabling side. But instead of buying fiber from outside, we'll be growing our own fiber, so you will add more value addition and profit in the company. And as time goes, we will be adding preforms the project is underway right now. So in a year's time, we would have INR 4 million of preforms. So the end cable product may not be going up, but the value addition in the organization will be going up. The profits will go up.
Understand. Sir, the margins will go up basically?
The market will go up, yes.
And lastly, sir, and pardon me for this question. We saw -- we've seen stock exchange filing on the pending legal matters I think no decision was made there. It was more of a disclosure. There has been a lot of discussion last 1 year on amicable settlement and stock is almost more than doubled based on rumors on insider information on WhatsApp and a lot more other sources. Whatever legitimate update you can provide based under the law, if you could help shareholders to understand whatever you can provide. What is really happening on the family settlement, please? That's my last question.
See, the problem is that since there are so many cases like you mentioned, the matters are subjudice, so I'm not allowed to comment on the same. I'm restricted. -- you have to explain...
I understand, sir, but it's still very material for shareholders, isn't it?
But I do follow the law, and I cannot break the law, because this is all in court, so I can't comment one way or the other way. I can say it's not over. It still continues. But other than that, I can't say anything about the case.
Got it, sir. So no decision has been made. Is that correct? Is that understanding correct?
Yes, the status is still the same as it was earlier.
Our next question is from the line of Shivam Mitin from Punta Investment Advisors Private Limited.
Sir, a lot of peers is talking about China plus one strategy that is going in the U.S. market. So U.S. customers actually don't want to dependent on Chinese suppliers itself. So they are looking for India. So how are we looking like export opportunities?
We haven't looked at U.S. at the moment. We are -- we have some exports, not very large, but we have some exports to the Middle East and parts of Africa. And so that's where our focus has been so far. We have not looked at the U.S. at this point in time.
So what is the current capacity utilization as a whole and in wired, electric wire specifically?
Wires at the moment, we should be somewhere around 70%.
Right. And company as a whole?
It's very difficult to add wires and other product lines but let me make an attempt. I think it should be somewhere around the 65% to 68% mark.
So sir, CapEx for FY '23 and '24, you guide for INR 250 crores for'24, and INR 100 crores next. So is this remain same?
Yes, that's on track. That is on track. Nothing much has changed there.
Our next question is from the line of Sonali Salgaonkar from Jefferies.
So my first question is on the electrical wires of 29% volume growth, which are the key end user segment? And if you could quantify them as well, please?
Okay. Actually, growth has been fairly broad-based. Construction wire has gone up by about just under 30%. Industrial wire has gone up by about 20% Agriculture has gone up substantially, but then we had a [long] lower base last year. It's almost up double and auto is up by about 30%.
Right. Sir. And is it fair to say that almost 65% of our electrical wires is catering to construction?
Yes.
Understand. Sir, my second question is regarding pricing actions. You mentioned that the price of optic fiber has eroded. Could you quantify what was it about 6 months back, you just did $3.2 is the average price in Q1. What was it 6 months back?
It was close to 4.5%, I think.
Okay. All right. Sir, and about the ADD input, what's the percentage of ADD and on which countries is it imposed?
It's between 5% and 15%, and the countries involved are China, I think Indonesia and a third country.
And this is some immediate effect, right?
Is from the 5th of August.
Sir, thirdly, on the operating margin of the company as a whole, we have [input year-on-year] to about 12%. But earlier, say, about 3, 4 years back, we were even higher at about 13% to 15%. And in the interim during will be reported to discounting wherein our margins came down to 12% or sub 12%. So, what could be required for us to regain that 13% to 15% mark on the operating margins of the role?
I think the price realizations on the communication cable sector, an improvement is required. I think this ADD would help and that should flow through into the margin space. While it may not bridge the entire gap, I think it is part of the reason why it is a little depressed at this point in time. And of course, we have also started a higher spend over the last 3 years on our advertisement and sales promotion expenses. So that is also taking a bite out of the margins. So as we improve top line as we improve volume, I think the recovery will start coming in.
Got it, sir. And on the Cables & Wires [indiscernible] communication in the electrical side, were there any material pricing actions that we saw in Q1 or in Q2 so far?
Q1 yes, we did two price reductions in May and one price increase in June.
And the quantification of that, please?
Net, I think net reduction would be around 2.5%, I think, twice, we reduce prices and once we increased.
Increase. So net reduction is 2.5%. Got it sir. And last question from my side, approximately of our overall mix, how much is cable for suppliers?
For us?
Yes.
Cables versus wires it's a small number. It's about -- it's about 15% -- 10% to 15% of the total.
No, sir. So of our overall mix, product mix, how much is cables and how much is wires?
Yes, that's what I said...
So how much is cable in the total and how much the wire in this?
You are talking in terms of value?
Yes, sir.
So out of the INR 1,200 crores, [total company] Yes. Out of the INR 1,200 crores for the quarter, wires is about INR 1,000 crores and cables is about INR 34 crores.
Our next question is from the line of Natasha Jain from Nirmal Bank.
My question is just a follow-up on what one of the previous participants had asked. Sir, BharatNet project, I believe the third phase is going on and there are tenders that cable and wire play have submitted. So I want to know if you have submitted tenders and has the allotment being done? First question is that. And second question is, what kind of a top line contribution can we see from these tenders? And how -- over how many years will the top line kick in?
So Phase 3 that was announced two weeks ago, where the cabinet has approved the spend, is about INR 1.4 lakh crores for various items to be used in the last mile connectivity. So it is not just cable. It could be electronics, it could be other stuff as well. Now those tenders are not out. They have just -- the cabinet has announced that, yes, we are okay, ready to spend this money, but the tenders are not yet out.
Earlier to this, the -- about 2 years ago, an attempt was made, tender was floated but the tender was scrapped because they were trying to do it on a PPD basis and there were way too many questions for which the answers are not very clearly visible. How would the participation happen? How would the participants be allowed to charge what kind of fee they would be allowed to charge. All those were questions for which there were no real answers. So I think at that point in time, the tender scrapped. Subsequently, whatever they have been buying, they have been buying to fill in gaps and not really large-scale rollouts. So this would be a large-scale rollout, and we are still awaiting the tender. And I -- like I mentioned earlier, I don't believe this is going to get done in any hurry. Deployment would take time and you're looking at probably, yes, 3- to 5-year program.
Our next question is from the line of Reshab Sisodiya from Summit Capital.
Yes, sir, please a question on the FMEG part. So if you could just give us a broad target for the year and what is the current inventory in the channel, which is one of the reasons why we saw a 7% decline Y-o-Y basis?
I think the channel inventory, which was -- which got blocked during quarter 3 last year, the depletion is slowly happening. There have been changes, especially in the fans category, there have been changes in regulatory requirements. In fact, there was one yesterday as well. So that part is happening. But what created issues during this quarter was the unseasonal range that we had in summer in many parts of the north. And season is when you sell most of it, and that's the bank that offtake really did not happen. And like I mentioned earlier, while inflation has come down, discretionary spend still people are not so lose with their wallets yet.
So there is a little bit of sluggishness in the market. We tried to compensate for that by introducing newer models but the activity levels need to increase before we get back on track. And when we last spoke, we said we would like to see this segment hit a number of about INR 500 crores in 2 to 3 years. So that target number is still alive for us. We've not gone back on that. And we will increase our efforts on the ground to make sure it does not clear.
Okay, that's helpful.
So we are adding efforts on the advertisement side. So maybe in another month or so, you should see newer adds on the screens around each of these products. So that should give us better visibility and hopefully, that should give us better pool as well.
Understood. The next part is on the CAP, your FY '24 and [indiscernible]
What was your question?
You have CapEx guide for the year and the company? CapEx rate?
For the year, I think we mentioned that we would be spending close to INR 300 crores over the next 18 to 20 months. And that is still on. So we -- our [e-beam] program is progressing well. We expect the machine to be -- at least one of those machines to be commissioned by end of this calendar year and both going live by quarter 1 next year. The construction work on the preform project is due to start any time now for the optic fiber expansion, the building is already ready. How we need to do is to complete it with equipments so that process is on.
On the regular expansion in terms of replenishments that program continues. Additionally, I think we are increasing capacity on the auto cable side in one of our sites.
Okay. So cumulative, it should be around INR 400 for FY '24 and '25 inclusive of the replenishment CapEx that you mentioned. Should be around [indiscernible] -- and so..
Currently, you are running at a 65% order utilization mark. So for this year and most of the CapEx would get 100% utilized by mid-FY '26. Is that a correct to understand?
Yes.
We would be announcing another CapEx down late next year, FY '25, right?
Yes. Once this is done and the programs are finished, then we will look at if there are additional gaps there.
So this -- so just last thing. So accounting for this new capacity and the current one so we should be -- that should be [ supported ] enough to reach almost 6,000, 6,500 top line?
Yes.
Our next question is from the line of Sushil Choksey from Indus Equity Advisors.
Congratulations on stable results. One question from the last con call, you had answered that your aspirational turnover is INR 10,000 crores to INR 11,000 crores, and you will be doing INR 2,000 crores of CapEx if that has been met, out of which you are indicating INR 400 crores of CapEx typically in the next 12 months of run rate. Can you guide further on this aspiration turnover and CapEx? And elaborate from where we were last quarter and now?
Yes, I'm thinking either in my mind. So yes, so over the next 1.5 years, from what I remember, we had talked -- I don't know whether it was you or somebody else, what I recall, we had talked about aspirations to get there INR 10,000 crore, INR 11,000 crores, and we would get there in various means. So one of the means was expansion of the existing product lines in terms of capacity. Now just to take you through what we've done. On the -- we started our PVC [ conduce ] business more than a year ago. We've expanded it twice.
Today, we are producing 25 lakh pieces a month. There is no space to expand into this plant as in Goa. So now we are looking at a new plant and to put it in the East and as well as in the north. So this is a on top of that, but that is another expansion coming up, which will happen in the next 12 months. Then in the automobile sector, we have actually sold out capacities are in full. We are expanding 50% capacity. We've ordered some machines recently, and the deliveries are about 12 months.
So you will see a physical expansion happening with capacity in about 12 months in the automotive side. We have big plans for the optic fiber business, where we are increasing capacity in the cabling in the draw towers as well as in the preform. So this part is about INR 300 crores expansion where the accounting preforms at INR 4 million in the first phase, but we are making the building ready for INR 8 million because we don't -- this is a [indiscernible] environment kind of business where you don't go expanding piece at a time. But the second phase will be another INR 4 million, which will happen in the next 2 years. And so there will be more CapEx planned there and it will also contribute to the turnover.
From only making fiber optic cable will be selling fiber and fiber optic cables as we expand in those lines. We started the EPC division, and we are trying to grow that division investments will take place in that area. We have [ Elektron ] beam two lines coming on. When they go live, there are quite a few products which will come out of this electron beam. No one has asked that question. So I'll just want to update you on that. We are putting 1 -- 2 lines. One is a smaller line one is a larger line. The smaller line will run wires. So even in the house wiring sector, we can have a premium product, which is coming out because with radiation technology, you are able to enhance the properties of the installation to withstand higher temperature, higher current rating and higher aggressive existing properties for open use. We will be launching from the bigger line solar cables. We'll also be launching products for railways and there are a lot of high-speed railways coming in. We require instrumentation cable. Those have been made in the E Beam. While Mahesh talked of the E-Beam building, there's a lot of other equipment required for making these products like you require tending lines, [drawing] lines, extruding lines before they actually go for leading.
So if you really count all these projects, it will be more than INR 500 crores happening in the next 18 months. Now these are things we have in hand, which is already planned out for growth of the company. There is always going to be more products as we go along and new ideas that come along. And if you recall on the FMEG products, we had talked that our first goal was to reach INR 500 crores as a turnover in all those 5, 6 product lines. But the minute we cross INR 100 crores in a singular line we will set up a plant because today, we are getting the product made from outside.
The design is our's, the [indiscernible] is our's, but we are getting it manufactured through a third-party manufacturer because the volume is not sufficient to justify a plant. If you want to invest in a plant and you want a state-of-the-art plant, which is automatic, robotics, high-qualit,y, didn't require higher volume to justify the plant. Otherwise, you will make losses. So we are waiting for that to happen before we invest, and we believe in this run of this INR 10,000 or INR 11,000 crores, we will have those plants also coming up in the next few years to support the activity.
And to grow that business, we are working a lot on advertisement, which using Bollywood stars we are making spend on hire and strengthening the distribution network with the 2 tier network, and we hope to see results with that happening in the next couple of years.
So these expansions. And as Mahesh has also said in the past, we are looking for acquisitions. There are a couple of places where we are evaluating. We have not been successful as yet, but the evaluation continues in product lines, which are natural extensions of our product plans and the minute we click 1 or 2 of those, I think the expenditure will also happen and we will also reach our goal and our aspiration target of INR 10,000 crores. So this should take a couple of 3 years at least to reach that target.
Between the current capacity utilization to optimum capacity and the value addition plus the CapEx of INR 500 crore, what kind of top line can be added based on INR 500 crore CapEx in the next 18 months?
At least INR 2,000 crores.
INR 2,000 crores. And value addition percentage?
No. The top line will be INR 2,000 crores with that CapEx can be added.
And the value addition because of integrating various materials on optic fiber and various other things, what will that be in percentage terms?
We -- I think it should add a couple of 2 -- at least 2 to 3 percentage points on the EBITDA number.
And this is without any protection on imports or -- this is a natural course of action based on value addition you are seeing? Right now, those are being made by imports, right?
Yes, correct.
So if there is a duty protection that will be added to it, right?
Yes, I see the reforms are in today, we draw the preforms. We import them, it's all 100% imported. There is only one Indian manufacturer making 3 forms. So we will be the second one. There is a good value addition in there. It it's always a volume gain. That's why we planned it to be an INR 8 million unit, but we are implementing in 2 phases of INR 4 million crore because we want to get a hand and make sure it is all stable before you add the second phase.
But real values come in as the entire -- the infrastructure when you spend on a larger building on the gases and all the supporting infrastructure will be made for Phase 1 and Phase 2. So initially, you may see for 1 year, a different payback, and it will change going into the second year.
Okay. My next question is compared to auto cables and currently as the world is moving from IC engine to EV. And second thing is on solar cable, what's your outlook based on our products?
So you see in auto cable, even if the world is changing to EV, the harness is still required, because inside the car, it's about the wires, which are connected to the various places like your windows, doors, those music system. All that is going to remain, it's not going to vanish. The -- just that the driving the car, I mean, the engine was driving the train. Now it's a motor with the battery at the back, which is driving it.
So my question was more about how much more value addition will you do from ICE to EV that is more [indiscernible]. I understand the cables are required. The value addition will increase or it will remain at the same level.
No. The [indiscernible] remaining same value addition remains same, but the volumes are growing.
Okay, okay. And on outlook on the solar cable?
Sorry?
Solar cables.
Solar cable is a public new product line, which is going to be manufactured in the EV plant from scratch. So that will add additional value to the turnover to the company and value addition, both.
What kind of capacity you're putting up to that? Annualized production government thinking is to add 20,000, 30,000 gigawatt of capacity. If you have a 10%, 20% market share will be serviced or we will not be able to service?
No, no. We -- with two lines that you are not servicing 10%, 20% market share is much smaller. We are going to make that and then expand further with more lines.
I mean, this is what -- this is our first step in that.
Correct.
So our first step would be for 1,000 gigawatts or more?
No. We -- I don't have the number with me right now, the calculation, but it's about, if I'm not mistaken, about 2,000-odd kilometers a month, somewhere there.
Okay. And how is the pricing trend on that compared to normal cables?
The construction is different. So the pricing is going to be different. The question is when we are ready at the point where the market would be. Today, you have cables which are secured chemically as well as secured through this valuation process and the price point is slightly different.
When the project was conceived where we were and where the price trend is, it's stable or it's up or down?
See, we've conceived the project doing all parts of the project, which includes [indiscernible] process include wireline, extrusion as well as this e-beam process that goes with it. So value adding happens in all the places. When we concieve the entire project, the payback was about 4 to 4.5 years, and it should remain the same. We had looked at two options where a compound, this is a very difficult compound to manufacture, people normally import it. We have done R&D, we are able to make [all the parts]. And that brings more profitability in the project. Now I don't have an exact number for you in terms of what the value addition is. But I don't -- you the payback number.
Our next question is from the line of Mahesh Bendre from LIC Mutual Fund. [Technical Difficulty] Next question is from the line of Bhavani Kumar from Philip Capital.
[Technical Difficulty] Just a data-driven question. Can you just let me know about the active touch points in Q1 vis-a-vis Q4 last year?
Q1 vis-a-vis Q4 last year.
Yes.
Okay? So the active touch points. Last -- so I don't have Q4, but I have Q1 to Q1, I have INR 50,730 has gone to INR 60,390.
Okay. And any plans to expand it further, sir?
Absolutely, absolutely. I mean our goal is not at 60, 60 is not enough. We should be -- we have a universe of about 175,000 people. And out of those 175,000, 60,000 have been billed at least once during the quarter. There have been many who been billed twice, thrice and more than 3x, but unique billing has happened to about 60,000 people. But the target that we have given to the field force is that increase the 60,000 towards the 175,000. And the quicker we close that gap to better because then you have a presence across all the geographies.
Okay. Okay. Just next question is on the -- how much will be our share of silver cable in Q1 compared to Q4 and Q1 last year?
What cable?
Silver Cable.
I believe about Half.
50%?
Yes, it'd be about half.
Got it, sir, got it. I think in last quarter, you mentioned somewhere around 75,000 plus retail touch points -- active touch points. Just wanted to confirm that. Is it?
Early quarter 4 is the highest and then the buying pattern is slightly depressed. If you go back in history also, the revenue keeps more -- I mean the highest revenue is always and quarter 4 and quarter 1 immediately succeeding that has a lower number.
Okay. Okay. Just last question from my side. Just one. Just can you just give the revenue guidance and margin guidance for FY '24?
Okay, normally, I don't give a guidance out. But all I can say is that if you have the kind of bottom support in the form of infrastructure growth or housing sector growth that we have seen over the last 4 to 6 months. Then a similar reflection of the revenue in our financials can also be seen. So it depends on how the base infrastructure works.
Okay. Okay. Single level will be showing the margins as well, right, sir?
Absolutely.
Our next question is from the line of Rahul Agarwal from InCred Capital.
Sir, three questions. Firstly, on electrical cable segment. the EBIT margins, when I look at fiscal '17, '18, '19, '20, it used to be about 15% to 16% on an average. We are now back to 13%. Do we get back to that 15%, 16% range?
I think in the early days, there was also a little bit of -- we were selling everything directly. We didn't have a distribution set up at that point in time. That started coming in towards the second half of 2021. So there is a cost associated with distribution, which then eats into a margin. That is number one. Number two is our [indiscernible] spends have been higher than in the earlier years. That also comes out of the -- how do the margins. So I think steady state, what is sustainable is anywhere between 13 and 14.
Got it, sir. Secondly, on the e-beam, just wanted to simplify whatever we discussed and Deepak explained earlier. What is the CapEx spend here for both the lines put together?
In the total project cost is about INR 85 crores or INR 88 crores, somewhere on that.
Okay. And given current pricing, are these orders going to be short cycle, for example, if one line starts in fourth quarter, would you book revenue as well? Like could you get sales in fourth quarter itself? Or how does this work?
Maybe one quarter for line. So if I'm able to complete it, let's say, by December, then in the quarter of March, we should be able to [indiscernible]
Okay. And both lines put together, the top line expected on this INR 88 crores, should we expect like a similar asset turn, 4, 5x? Is that fair? Obviously, the pricing is going to be higher, but will 5x asset turn be fair for this business?
Over a longer period, yes, but not in the immediate short term.
So the time to ramp up is pretty long. Is it for e-beam facility?
It will be at least 1 year, I think, because right from day one, you will not be able to show as a turn of 5x. I think that takes a little bit of time to stabilize and increase returns.
Got it, sir. Got it. And lastly, on communication cables, I mean we're approaching election sometime in March, April, I would imagine until January starting, we'll have some kind of protocols to be followed. Assuming new tenders take a bit of more time to come out from Phase 3, and based on the current order book, you said you have 6 months visibility. But would you say that you would increase the revenue from last year? Like last year, I think you were about INR 580 million. Is it possible to increase that based on whatever visibility we have right now?
I think so. As long as the prices hold, no issues.
Got you. Okay. So that could still grow based on the current order book, like 15%, 20%. Is that possible?
That's possible, yes.
Okay. So any particular reason for that being flat this quarter?
No. Like I said, volumes have gone up because of pricing prices, the values have remained kind of flat.
Right, right. So from here, if pricing stays flat, we could reach -- we could do 15%, 20% Okay, I get it.
[Operator Instructions] Our next question is from the line of Mahesh Bendre from LIC Mutual Fund.
Sir, we are very strong on wire side. Cable side of product portfolio is very limited. And what we have been witnessing right now is demand for cables for solar cable or whatever. I mean, T&D and all kind of stuff is really growing. So our expansion plan that you just talked about, that is what we're going to focus on that we want to increase the presence in cable side?
On the solar part of it, yes. But on the T&D side, we are a little bit choosy. You're exposed to distribution utilities. And okay, maybe sometimes with the higher end of the chain, you are exposed to transmission utilities. But there financial strength is you know what it is. So we have always been a little choosy and we have not therefore, consciously not participated in that side of the business. And that's a large business. We understand that. But it also means it also means a larger working capital outlets. It also means chasing around for money. More importantly, it means that you have to be, it's an entirely tender-driven business, and therefore, you have to be [indiscernible] all the time to get into a business. So you might end up sacrificing margins for volume. So it's something that we have avoided so far consciously and we have been only looking at ad opportunities which makes make contractual sense to us.
But sir, I mean, the approach on the industrial side, if you are not comfortable, I understand your CV has its own payment problem. But on the industrial side, the cable requirement is huge. So on that part also, can we expand? Or even for export side, many cable manufacturers are exporting to U.S. and other countries. So that part is also not being addressed from our end. So I'm just trying to understand, are there any plans of looking into that particular business? Because that size of the business opportunity seems to be very high.
It is and in fact, it's not that we don't address the industrial requirements. So if there are large industrial houses, which have got expansions, we do consider those opportunities. We participate in those opportunities. Exports, you are right, we have not done that so far. That is something that we will have to look and take further. And I do see quite a number of our peers have been reporting that they have very good export numbers. So it's probably something that we should look at as well.
Sir, last question from my end. Sir, post 2008, I mean, we have become quite conservative in terms of growth and balance sheet and overall business opportunity and how we address it. But now looking at the CapEx plan and new segments, we want to go over the next 2 years, is it fair to assume that we, as a company, has become slightly aggressive or, in a sense, more -- I mean, growth focused rather than sticking to the more old business or you can say the traditional business?
So our focus on growth has been there. You're right, around the time of 2008, '09, '10, there were other issues that were facing the company and therefore, we had a fixed cost. So we spent some time in getting those fixed. And now that those are behind us, I think our focus is back on growth, adding new avenues of revenue. And at the same time, maintaining a certain level of profitability. One has to balance it out. It cannot be all focused on one area or the other. So we're trying to do the best we can using that.
Our next question is from the line of Anupam Goswami from STUD Life.
You mentioned about INR 500 crores CapEx, and that would give up out a top line -- additional top line of INR 2,000 crores. So given that is on -- mostly on the cyber expansion and free form and all these cables. So let's say, on FY '25 on a already a base of INR 4,000 crores what sort of growth in the current business that you are anticipating?
No, he actually -- he was very clear. He said on fiber, that would be effectively, we would expand from about INR 8 million to -- sorry, INR $8 million to INR 10 million, that will add to the top line. Most of the CapEx on the preform and draw would actually add margin to the bottom line. The growth would come from automobile expansion in automobile cables, the growth would come from the e-beam facility is going live. The growth would come from [indiscernible] plants getting expanded and additional growth in FMEG.
Right. And sir, what is about the capacity utilization right now in the electric wires?
Somewhere around 70%.
Got it. And your overall, you are anticipating INR 2,000 crores by FY '25? Or should it be later than that?
You add one more year. Because if this program is going to complete towards the middle of '25, then all the result and revenue is not going to happen in the same year. It will take the year.
And sir, what is our retail to institution mix right now?
I'm sorry.
Retail to institution?
When wires are mostly retail. We sell them through two channels. One is the distribution network and the other one is direct to our channel partners who is our stockist. So that is entirely retail oriented. Some of the communication products are also retail oriented. So close to around 65% to 68%, depending on which quarter it is, would be retail oriented. What is not retail-oriented is what goes to the automobile harness manufacturers and what goes to telecom operators and some power gas.
Okay. So going forward, there will be more sort of growth since new capacity in the non-retail side, right?
Solar cables, if you talk about it, it can be sold through a distribution outlet also and it is probably going to be a mix of both institutional and retail. Auto cables will be largely institutional and so would the optic fiber cables. We also talked about conduit pipes. We also talked about FMEG. That will all be retail.
Okay. And margin improvement in the wires, you're sensing all the optic fibers aligned, right, mostly?
No, I didn't understand your question.
Where is the margin expansion mostly coming -- anticipating from?
On the optic fiber business.
Our next question is from the line of Manoj Gori from Equirus Securities.
[Technical Difficulty]
Our next question is from the line of Dhruv Agarwal from [ Neesha ] Investment Advisors.
Sir, in case of high tension cables there, in which industry do you see the [industry] demand coming from, sir?
Let me repeat your question. You said, in the case of high tension cables?
Do you see some major demand coming from?
Well, it will come from utilities on the transmission side and some from the distributions plus people who are putting up large projects will have a requirement.
Okay. Sir, like basically, can you just throw some color on that, which industry to be in specific sir?
I think it is any industry. So let's say you're putting up a new factory. It will require an incoming bar source. So that has to be high tension bar source.
Okay. Right. And there are one more question.
I mean in class vision utilities, when they are converting the overhead lines to underground cables, they will require. They will also require them in distribution utilities.
And sir, what will be the sales [reflex] in case of cable segment within low, medium, high and extra high tension cable, sir?
I don't understand your question. You want to know the segmentation?
Yes, sir.
He wants to know segmentation of what do you mean by low, medium, high and extra [indiscernible].
So generally, up to 3.3 kVs called low voltage cables.
I got that sir, in case of sales mix, like out of your total revenue, what would be the contribution in the sales?
Our sales mix is largely in the low voltage wires.
Okay. And sir, can quantify also would be a great help, sir.
So I think somebody else asked me this question before, all of the INR 1,200 crores of sales that we had let's say INR 1,050 is wires and cables. Out of the 1,050, 1,000 is wires of different types and about 50 is the cable part. Is that clear?
And like is there -- like there is a target of government like to do the 500 gigawatt by 2030. Sir, do we expect any demand from that, sir? In case of renewable energy?
So you're talking about renewable energy. So that is wind and solar plant. Yes. So as more of those plants get set up, then obviously, they will need cables for evacuating them. So yes, it will translate into business for us. And yes, that is why we are setting up this electron beam facility so that we can participate in the flux.
Right, sir, like if you can like share some percentage of that, sir, how much [indiscernible] like our share would be out of that sir?
We are just setting up the facility. So I think it's a little too early to say that I've got to X percentage share or Y percentage share.
Next question is from the line of Manoj Gori from Equirus Securities. .
[Technical Difficulty]
Sir, your line is not clear. May I request you to rejoin the queue with a different connection to ask questions.
[Technical Difficulty]
Mr. Manoj Gori, you may write to us for any further queries at mamta.samat1@entsu.com. Ladies and gentlemen, that was the last question of a question-and-answer session. On behalf of Finolex Cables Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.