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Finolex Cables Ltd
Earnings Call Analysis
Q1-2025 Analysis
Finolex Cables Ltd
In the recent earnings call for Q1 FY '25, Finolex Cables reported that their revenue grew slightly by 2% year-over-year, but this marks a 12% decline from the previous quarter. Several challenges impacted performance, including the backdrop of national elections, an exceptionally hot summer, and volatile commodity prices—particularly copper, which fluctuated between $10,857 and $8,809 per ton during the quarter. This volatility led to decreased revenue in both their electrical and communication cables segments, with electrical cable sales reaching INR 1,031 crores against INR 1,011 crores the previous year, yet significantly below INR 1,200 crores from the preceding quarter.
Copper prices remain a critical factor for Finolex, currently hovering around $8,800 per ton. The company has faced pressure to reduce prices without significantly harming profit margins. Overall company margins closed at about 13%, with the electrical cables segment showing just over 11%. In June, the company implemented a price cut of around 10%, which negatively affected overall margins, and the profit for the quarter after tax amounted to INR 122 crores, down from INR 132 crores last year and INR 146 crores in the previous quarter.
Despite challenges in the cable segment, certain areas of growth provided some optimism. The new products, especially fans, water heaters, and appliances, showed healthy growth both in volume and revenue. The communications segment had better volume figures for optic fiber, up by about 10%. However, the realization prices on fiber were lower due to ongoing global price reductions. For the upcoming quarters, an expectation remains for fiber prices to recover.
Looking ahead, opportunity lies with the BharatNet initiative, where Finolex has participated in tendering for communication cables. The total potential spend for this initiative is estimated between INR 50,000 crores to INR 55,000 crores. This tender includes around 16 packages, and it is expected that Finolex could secure a share that would yield about INR 450 crores in additional cable revenue annually if successful. Moreover, with ongoing 5G deployments in the telecom sector, Finolex anticipates an uptick in fiber demand in the coming years.
Finolex's capital expenditure is planned at around INR 500 crores for the fiscal year, primarily directed towards expanding fiber production capabilities and other essential infrastructure. If the price stability for copper and fiber returns, margins may potentially regrow to the historical averages of around 13% to 14% as demand strengthens. Without significant improvements, the current margins reflect a declining trend in profitability.
In summary, while current financials reveal pressures from commodity prices and volumes, strategic participation in high-potential tenders and new product lines offer a glimmer of hope for future growth. Investors should closely monitor commodity price trends, the recovery of demand in the electrical and communications segments, and the overall economic environment as these factors will bear heavily on Finolex’s route to profitability.
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Ladies and gentlemen, good day, and welcome to the Finolex Cables Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Mamta Samat from Perfect Relations. Thank you, and over to you, ma'am.
Thank you, Govind. Good evening, everyone, and thank you for joining us on Finolex Cables Limited Q1 FY '25 Earnings Conference Call. Today, we have with us Mr. Mahesh Viswanathan, Deputy CEO and Chief Financial Officer from Finolex Cables.
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 Mahesh sir, after which we will have the forum open for interactive Q&A session.
I will now request Mahesh Viswanathan sir for opening remarks. Thank you, and over to you.
Thank you, Mamta. Good evening participants. Thank you for joining us on this call today. So as usual, I will give a brief remark about the quarter that just went by. So there are three distinct features to this quarter. One was the elections, it was held in the background of elections. So the business sentiments were definitely impacted by the changes that we felt during the course of that 3-month long election period.
The second was the extreme summer. So while this helped in certain businesses, it was the opposite in certain other businesses. And lastly was the extreme volatility in the commodity markets. Copper, for instance, touched a high of $10,857 on LME and also a low of $8,809 on the LME in the same quarter. So that's a difference of almost 21% -- sorry, 20%. And so these three major features impacted the business during this quarter.
What started as an extremely promising quarter did not eventually pan out to be so. Our revenues improved only by about 2% over the corresponding quarter of last year and lower by 12% compared to the immediately preceding quarter. This is also reflected in the electrical cables business, where we ended up with a turnover of INR 1,031 crores against INR 1,011 crores in the last year and compared to INR 1,200 crores in the previous quarter. So like I said, those three events, though or rather those three items significantly impacted the business during this quarter.
As we speak now, copper prices are still yet to recover. Yesterday, it was about $8,800. So what this has meant is that there is a serious pressure on price reduction. And to the extent that was possible without hurting margins too much, we have done so, but volumes are yet to recover.
Having said that, we had to revise prices downwards in the month of June, and that impacted the overall margins as well. So we closed the quarter with about a 13% margin overall for the company and about slightly over 11% for the electrical cables segment. On the communications cable segment, the same metal impact was felt on the metal-based products. So that would be a co-axial cables, LAN cables and so on. While optic fiber volumes were better by about 10%, although realizations were lower because of the ongoing low prices on fiber across the globe. We expect the fiber prices to recover over the next 2, 3 quarters. So I think going forward, it is still -- it looks better. But for the quarter, the revenue impact was -- I mean, the volume impact was overshadowed by the lower prices.
The silver lining was on the other segment, which comprises of the new products that we have brought in, so that could be the fans, water heaters, appliances and conduit pipes, all of them showed a very healthy growth both in volume as well as in value realization. Of course, on lights, while there was a very good volume impact, the price erosion continues LED prices continue to [ decline ] across the globe.
With this background, the profit for the quarter after taxes was about INR 122 crores, lower than the corresponding quarter of last year, which was INR 132 crores and, of course, lower than the immediately preceding quarter of INR 146 crores. Basically, these are the highlights of the quarter. So now I will stop with my brief, and I can take questions from now.
[Operator Instructions] The first question is from the line of Rahul Agarwal from Ikigai Asset Management.
Three questions. Firstly on the wire sales, could you just elaborate as on what's really happening post 1Q, like July, August, what is [ business ]. Copper, as you said, is still not got down obviously, but how is the channel behaving there? And a bit of outlook on overall demand for wires, both housing as well as on the automotive industry landscape for the balance of the year.
Okay. So like I mentioned, copper is still down. Yesterday's close was about $8,800, I think. So it doesn't cut back to -- it is barely at March average levels at this point in time. As long as it maintains this number, I think things will fill up afterwards. I remember talking about the high -- or rather the increasing copper values when we last spoke in the month of May. And the other question somebody asked, how long do you think this will last, and nobody was clear at that point in time. I had explained the reasons why prices were going up at that point in time. But I've also said, I'm not very sure how long this will last.
And well, within a couple of weeks after I said that, the price was buttoned up . It is still not recovered to the extent that we would like to see it at. In the meanwhile, quite a number of purchases have been made in the month of April and May by the channel. And there is still some of those stocks available in the final. It is still not fully dried out. I think demand will start to pick up maybe once there is stability at the price level. If people see that the prices remain at $8,800, $9,000 levels, probably demand will pick up immediately afterwards or one might have to wait a little bit longer. At this moment, I'm not really sure.
We did expect sometime early July that the prices would recover, but it hasn't happened. It was actually dropped further since then.
Your second part was on the automobile. Last quarter, I think, was not such a great quarter for the automobile companies within the country. And I think we had a reflection of that as well. But as the demand starts to pick up, festival season is upon us anytime now. And we expect those demands to pick up soon thereafter.
Any comments on the industrial and agri side, please?
I'm sorry, I couldn't hear that question. Any comment on the?
Industrial and agri cables?
Well, Agri was good both April, May. In fact, we were unable to keep up with the demand between April and May. Now it's the rainy season. So the net pickup on agri would happen somewhere around November time frame when pre-sowing starts up again. But the monsoon season is basically a slack season for the agricultural products. Industrials, the price change seems to have hurt it a little bit. It is similar to what I said about construction.
Got it, sir. And secondly, any update on the wire CapEx and the fiscal '25 cash outflow for the overall CapEx for the full year?
Okay. On the CapEx, happy to say that both the e-beam equipment have been installed, commissioned. From our side, everything is good, We are just waiting for the final clearance from AERB. They are supposed to come inspect it and then give us go ahead for -- their consent to operate. So that's the thing that we're waiting for. We have invited them for the inspection. As soon as their schedule opens up, they will come and do that. So we are hoping that by -- within this quarter, we should be able to offer products in the market. The trial at productions have all performed at much, much better levels than what the standards demand. So we are very happy with the products that have come out of the facility there.
The auto cable expansion at Roorkee. The equipment were landing either today or tomorrow at Roorkee. So we expect that by mid-October to mid-November, we should be ready to put them to use. As far as the preform is concerned, the structure is ready. Currently, the HVAC work is going on. And simultaneously, contractors are designing the [ SOL ] treatment plans and the other necessary features. The equipment, the main machine is expected to be installed in the month of November -- I mean, October and November. So we are hoping that trial collections can start by December or January at the latest. So those are the major CapEx programs in place.
Besides this, we are adding a compounding plant for Goa. Currently, the insulation compound is moved from Urse to Goa. The Goa reached a stage where it can sustain a component plant of its own. So we are putting the plant there. The permissions to construct have been obtained from the local bodies. So right now, tendering process is on for finalizing the contractor. So hopefully by May, June of next year, that facility should be operational. So this is broadly the CapEx plan. It is to say it's going on as we have planned. There has not been any glitches so far.
Sir, what is the cash outflow expected on CapEx for fiscal '25 full year?
It will be about the same that we talked about last quarter. There is no change in the outflow. Overall expenditure until next year would still be around INR 500 crores, bulk of it would be spent this year.
Got it. Sir, I had one more question, if I may, please. On the consol margins, if you could average a bit on a 3 year range, right? Obviously, pre-COVID the business was at 15%. Should we work around 13%, 14%? Is that the right number for the overall business to consolidate? This is inclusive of electric cables and communication cables. So at EBITDA level for consolidated entity? What should be the long-term EBITDA margin range be?
Okay. At the entity level, there is going to be a little bit of changes here and there depending on the dividends -- released from the associate company. But if you exclude that, 13%, 13.5% is something that we should work on.
The next question is from the line of Sonali Salgaonkar from Jefferies.
My first question is, could you give the quantum of the price cuts with electrical wires that we talked about in June. And also, you said that impacted operating margins. So should we consider this quarter sort as a one-off and expect the core operating margin to regain, say, about 13% from the coming quarter?
So it depends on how long this -- the commodity prices stay at the level they are. If I go back to April and May, we were unable to satisfy demand to the extent we would have liked. So what that probably has happened is there is a fairly large number of stocks in the channel. And when the prices tumble, there is just freezing of orders from the channel side. So they probably are still sitting on some level of stocks which were secured at an earlier price.
To expect us to cut the prices to these levels may not work. I think there would still be a little bit of resistance for some time. But then if the commodity price is certainly at where they are without too much of volatility, then you might see demand coming back again. There is a little bit of congestion, of course, but that's the best that I can offer at this point in time.
So coming to margins then, if demand remains at a lower level, then margins would also be similar. But if demand picks up, then I think we should be back on track.
Sir, what was the quantum of your price cuts in June?
I think we took overall from then till now about 10%.
So from June 1 till now, it's about 10%.
Yes.
Okay. Sir, my second question is regarding the overarching opportunity for communication cables. I mean, without concentrating on just about the near term like 1 or 2 quarters, you had earlier spoken about the BharatNet opportunity and the kind of sloping and generally, the impending 5G rollout as well. And now with your new CapEx coming in uptick, could you help us understand about your broader path of the opportunity that you foresee for communication cables going forward?
Yes. Okay. So the one opportunity that we talked about last time was on the BharatNet opportunity. We like to say that finally, the tender -- the bids were still, I think, 1 week ago, last Tuesday finally. We have also participated in the tender through consulting. This -- the technical business being open, but I think there is evaluation going on. We expect the price mix to be open sometime in the next 1 month and a half. This opportunity is approximately, the total size is about between 15 million to 17 million kilometers. But this covers only 8 states. There are other states which still have to come up for their piece of the third phase. And we believe that opportunity is going to be as big, if not slightly bigger.
And then we talked about 5G rollouts. We also talked about how the towers are still be connected by fiber and so. So the opportunity size is fairly large. And in that context, what we are doing is to us the right thing to do. We're building capacity. At the same time, we are also adding capacity on the back end which will give us better pricing and -- better control over pricing and flexibility as well when we participate in such large tenders. So in that sense, I think we have done the right thing. And we believe that the opportunity over the next few years is fairly large. We are talking multiple, multiple opportunities there.
I don't want to put a number to the size because it's all finally going to depend on the financing ability and the speed with which finance comes into the picture. But the numbers are fairly huge. We are still nowhere near where China is or even where the western countries are.
Understood. Sir, just to clarify, you mentioned that you have participated in the BharatNet opportunity. And by when can we expect to understand what part of this entire tender we have through...
I said so the technical bids have been opened. And the price bids are yet to be opened. We expect those price bids to be opened once the technical evaluations are completed, there are 21 or 22 bids which have come in. So I guess they will need some time to go through each of the bids to make sure that everybody is qualified and all the t's and i's are dotted and crossed. So as that will take some time. So probably by end of September is when one can really expect them to open the prices. At that point in time, we will know whether we have been -- how successful we have been.
Understood. Sir, my third question is regarding your FMEG business. Now this quarter, we have seen some very good growth in there. I do remember we have a target of breakeven. So could you elaborate where we are into this -- achieving the breakeven from an annualized perspective? And what are our plans going forward for this segment?
If you recall my comments from the earlier conversations, I've always been saying that between INR 250 -- around INR 250 crores, we should be breaking even. And we are there at this point in time. If INR 68 crores is what we've done in this quarter, times 4 is just over INR 250 crores. And I think at this speed, we will be breaking even barring any lapse.
[Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor & Company.
Sir, firstly, you were alluding to the fact of the fluctuations in copper prices, which resulted into lowering of prices for the -- in the wires and cable segment. And sir, do you think that there is also a shift that is happening in terms of the demand also moving towards aluminum being a better metal of choice in the cable segment going ahead then because of the availability and the higher prices for copper?
Typically, aluminum, I think in our country, on the construction wire, people still use copper. On automobile, people still use copper. On agricultural application, we still use copper. Aluminum just used more on the power cables side. And definitely, at some of the lower voltages, so 110 kV, 132 kV, there are many utilities which prefer aluminum. So having said that, our presence in the medium voltage power cable segment is fairly small. I think I have said this earlier also. How does the player in market size of about [ INR 25,000 crores, INR 28,000 crores ], our presence there is only INR 200 crores.
Diwali been a little reticent about that. Payment patterns are -- we are dealing with a lot of distribution utilities who are not the most well-funded companies. And there are leakages along the way when you get the order, when you execute the order and when you have to collect the money for the order. So we have been a little reticent about participating in that portion of the entire market. So I am not able to comment whether there has been a shift from copper to aluminum. It could be a factor because obviously aluminum prices are lower. But then to push the same quantity of power, you need more quantity of aluminum also to be used there. So that's something that -- so I can't give any firm conviction to say that it has happened or it is happening.
Sir, in the extra high-voltage segment, that is the EHV segment, what is our current order book and current out of the sales mix?
We have a fairly decent order book there. Our current order book is close to INR 300-odd crores. The challenges there are slightly different. It is more to do with between the time and order is secured and the time the order is completed, there are multiple challenges. You'll need to get ROW permissions, which are a problem in our country. While you may get it from the civic authorities, as we go to execute it, a lot of people start popping up from the ground, drastic -- managing them is a challenge. And in [indiscernible] there are -- from the time you are declared [indiscernible] to the time that we signed the contract, also there is a long waiting period. They have their own processes to go through before we get these contracts signed and then the production startup.
Those are challenges which I think some of them can be overcome. We need to be better than that. I think that is where we are focusing on right now. We have been fairly successful in getting orders. I think the next step for us is to ensure that our speed of execution is good and that the orders are converted quickly into sales and into profitable sales. So it's been a learning curve. I would say that the learning curve doesn't go too long from now.
Sir, can you give me the revenue for the EHV segment for the last financial year and for the...
Last year it was about INR 130 crores.
Last financial year?
Approximately INR 130 crores or INR 123 crores, somewhere around it.
And depending on a INR 300 crore order book, what should be envisaged for this year?
Target this year is INR 240 crores.
Okay. And sir, the last point on EHV segment is what is the current scenario? I think so there is a lot of trust in the state discoms, financials now also improving and things like the renewable story altogether getting a lot of traction and network to be built for the same separately. How does this segment pressing in? And going ahead what should be an ideal order book position for you as you told that we are in the learning curve? And that is the process...
Okay. As far as the potential is concerned, the potential has never been in doubt. With so much of infrastructure needing to be done and needing to be upgraded, the need for high-voltage cables are -- extra high-voltage cables is definitely there. When our cables find to use mostly R&D transmission sector where the overhead lines are getting replaced with underground lines, especially when they come into metropolitan area or urban area. And there is quite an amount of work to be done.
Secondly, even on areas which were earlier serviced by [ 66 ] cable lines are now upgrading themselves to 220kV or 132kV and so on. So that need definitely is there. The [indiscernible] so far has been in the utilities being able to fund themselves to be able to handle all these CapExes.
And that is where the project needs announced today. We expect it to be done in 6 months or 1 year, but then it pushes over to a couple of years because money flow is still not as met. If you look at the utilities, to some extent, they have been able to get themselves funded either through REC or through Power Finance Corporation. But then not everybody is rated on the same scale. And there are some where the projects go smoothly and there are some where it gets delayed for funding reasons. So like I said, opportunity, I mean, are the -- potential is never in question. It is more the reality of funding the project. That is true for most infrastructure projects in India. Your second point was on? Sorry.
For the EHV only. I think you have answered it.
As far as we are concerned, our present facility can at constant prices, it can generate revenue of about INR 400-odd crores with this 1 vertical line. To increase it, we need to put additional lines. But then the rest of the utilities, we don't need to put it. So the buildings, everything else, we tailored for 3 lines whereas the insulation line we have populated it with only one at this point in time. Once utilization gets to 100%, they are get to 70%, 80%, then we can start thinking of pulling another one there.
Very small point, sir, and then I'll join the queue. We are in the VCB line in the...
Yes, on the vertical, I guess.
Okay. And sir, for OFC, I have one question, if the moderator allows me. Sir, for the OFC segment, if you could give us some understanding on how post the June exit, what are the OF and the OFC prices? And I think so major players are running suboptimal capacity in the current scenario in the country and globally also.
You are right, because no big rollout has happened. So after the technical 5G rollouts by the telecom players a year ago, not much as fiber has been consumed. BSNL has not bought anything in the last 1 year, nothing of significant in any case. So the -- you're right in saying that most people are running for the optimal capacities. And therefore that is reflected in the prices. So in the beginning of automobile harness all through the last year, most of last year, there is a lot of cheap fiber coming from China.
Then in February this year, the government came out with an AD and, to some extent, that has stopped. But fiber prices still haven't gone back to where they were, let's say, 2 years ago. There are still some $4 at this point in time. But I think with additional demand coming in from the either the BSNL tender or what is expected to come subsequently from the other states plus the -- now that telecom companies have revised their tariffs or plans, they will have a little more cash to spend on CapEx. We do expect more fiber to be utilized in connectivity over the next year, 1.5 years.
Okay. I'll join the queue. I have one question. May I ask now?
I'm okay.
Sir, as you mentioned about -- firstly, about the BharatNet technical tender being opened and the financial one will take some time. And about the telco part of the study also the revival of Vodafone post their FPO. So for the OFC in particular, optic fiber cable, what kind of demand can we see because as the prices are lower, the CapEx cost should be lower for the telcos. This is one of the best opportunities to put the CapEx in front because the cost of OFC is trading at multiyear low.
I don't deny that, but they haven't done so far, which is why I said for now that they have the cash to spend, if you see all the telecom players, whether it is Reliance, or Bharti or now Vodafone, all of them have raised their prices towards the consumers. So they will have more money coming into the kitty. And that they could utilize to buy [indiscernible] fiber across there was a [indiscernible].
So what could be the amount spent, especially only for the OFC segment?
Last year, there was nothing much to talk about.
This is what we can anticipate with technical bids that is [Foreign Language] for BharatNet being opened. So there in, you are getting and understanding what kind of money will be spent only particularly for OFC layout, laying out the cable?
For BharatNet, the current tender spend is expected to be somewhere around between INR 50,000 crores and INR 55,000 crores. I don't know who is quoted yet, but between INR 50,000 crores to INR 55,000 crores. Again this will include a lot of electronics and other stuff as well. The cable portion there is let's say about 10%.
Okay. And so at current prices, what does it translate into the 5 kilometer -- fiber kilometers?
It depends on the design, there are multiple designs there. There is a 6 fiber design, there is a 24 fiber design, there is a 38 fiber design. There is armored, there is unarmored, all of it put together. So we won't be able to give you an average. It's not as simple as that.
Okay. And our utilization level, sir, at what capacity are we running?
Right now our Goa factory is running full because we have orders from Bharti, so that we are supplying to them. I would say there is still some capacity.
And another which region, sir?
Urse.
Come again?
Urse, that is in Pune.
Okay. And total market share, what is our optic fiber cable market share?
We will be about between 13%, 14%.
Sir, we would stay in this vicinity going ahead since now there is no point in improving or increasing the capacity? Or do we -- have you planned any CapEx for the OFC segment? .
That is what we talked about in the beginning. What we have done on the OFC, fiber, everything is that we are putting up a preform plant, so we gained control over the raw material that goes into the fiber. We are adding capacity on the fiber draw towers that currently, we have a 4 million draw capacity. We will take it up to 8 million over two stages, first from 4 to 6 and then 6 to 8. The preform capacity that you're putting in now will give us an equivalent of 4 million kilometers of fiber. So preform should be operational by December or January latest. And the fiber draw tower from 4% to 6% should happen maybe 3, 4 months down the line. So that will give us more control over the material prices. Because currently, we're importing the preforms, and we will have better pricing ability.
But the end product cable...
Cable, we have constructed a factory to house the machines. But right now, like I said, at the Urse factory still there is some capacity available. We will wait for the results from the BSNL tender to be long. And it's at that time, we believe that we need additional capacity, we will populate this -- we will populate the place.
And with this completion, margin accretion [Foreign Language] for the optic fiber segment, I think that now we are at 1.5% or 2% margin.
Yes. So if you went back a few years ago, we were close to double digits, we are above 9% and 10%. The aim is to reach there. We may not be able to reach there in one go. It might take 2 steps before we reach that but definitely double of where we are today.
[Operator Instructions] The next question is from the line of Sonali Salgaonkar from Jefferies.
Sir, just 2 quick questions, and I'll keep it brief; so firstly, on the capacity utilization, could you let us know what is our present capacity utilization separately into electrical cables and communication cables?
Electrical, under 60% now -- around 60% now. Communication, like I mentioned, OFC -- the Goa plant is running full, whereas as Urse there is still some spair capacity. So we're probably around 70% overall.
Understood. So it's good to know that we are not facing any constraints. Sir, second question is of our cables and wires mix, is it fair understanding that about [ 60%, 70% ] is wires and the rest is cables?
Cables will be about 10% to 12%, the rest is all wires for various applications.
Understood. So we are more into B2C-centric wires vis-a-vis B2B-centric cables. Is that right?
Well okay, if I would look 100, but the [indiscernible] with cables. Little time -- some part of it is through the channel, some part of it is direct. Then after balance, let's say, 85% to 88%, about 10% to 12% growth to automotive. That is the B2B -- the balance is B2C.
I understand, sir. So that's about 65% to 70%.
About 70%.
Understood. Sir, my third question is about EHV. Could you help us understand, say, approximately of our overall electrical piece, how much would be EHV currently?
EHV has done through the joint venture, right? So that comes -- and since it is a joint venture, we don't consolidate line by line. We are only consolidating at an equity level there. But if I were to add that number, you add another INR 125 crores to the electrical. I think you are on annual basis, and I'm talking about last year's number.
Understood, sir. And my last question is regarding the margin of our communication cables. You did mention that we are targeting to achieve double digit or rather retain the double-digit 9% to 11% that we used to do about 3 to 4 years back. Yes, I understand that's a 2-step process. But with the current opportunity that you elaborately explained, would it be a fair assumption to expect those margins coming back, say, by '26 or '27.
Yes, if the numbers -- if the volume comes in, then I don't see that as a major challenge.
The next question is from the line of Rahul Agarwal -- sorry, we have the next question from the line of Drashti from ThinkWise.
Sir, I just wanted to know what are the prices of fiber optic cables globally now? And what has been the price again in the last 1 year?
Again, I can't give a single price point there because it depends on the design. You have your products which have only 2 fibers in them. You've got 4, 6, 24, 48, 96 and so on and so forth. So depending on the design of the product, depending on whether it's armored, whether it's an aerial cable, whether it's going to go underground, the costing changes. And so I can't give you a single price of that. All I can tell you is that the price of fiber, they say one of the major element that goes into the cable, that is around $4 at the moment.
And what has been the price decline in this 1 year?
It used to be 5.5% sometime ago.
The next question is from the line of Rahul Agarwal from Ikigai Asset Management.
Just wanted to delve a bit more on this overseas tender. The way I understand the business, you do about INR 500 crores, INR 550 crores annually on communication cables. If let's say, whatever market share we have on the specific BharatNet tender, this revenue number, like on an annualized basis, what is the revenue potential we are talking about here? And what is going to be the working capital cycle? Because my sense is, right now, the balance sheet is pretty lean as of March. It looks like we are running like a 30-, 35-day kind of sale number bigger. Will that expand because of BharatNet? These are the 2 questions.
Okay. The way they have positioned -- you're right, with the receivables will expand for sure but it will not expand straight away by the value that is invoiced because they have factored in a system where they will give you an advance towards managing the working capital. It is then up to the efficiency of the organization to see how quickly they are able to rotate that number. So up to 10% of the tendered value can be claimed as working capital advance once certain initial steps have been taken. So that's one part.
But other than that, yes, there will be a slight increase in the receivables. They have also taken, I think, steps to say that they will make payments within 90 days or so. These are government organizations saying 90 days, which means 90 days can go to 120 days. So to that extent, there could be an increase in the size of the balance sheet. What does it mean for any individual company? Like I said, the total expected spend on this particular tender is anywhere between INR 50,000 crores to INR 55,000 crores. That is over 16 packages if you -- and all these packages have different sizes, but then if you were to take an average, so INR 55,000 crores divided by 16 works out to about INR 3,500 crores per package. And no one company or one consortium can get more than 4 packages, that is the best that one can get. So 4x 3.5 is about INR 12,000 crores or INR 13,000 crores. And that has to be done over 3 years. So INR 13,000 crores divided by 3, comes to about INR 4,600 crores per year. And so 90 days out of that would be -- 90 days to 120 days otherwise would be outstanding.
And then you to apply that 10% for the cable portion of it also on this number, right?
Yes, I mean this is at a consolidated level. So if you apply a 10% number on this, so you're talking roughly about INR 450 crores of cable revenue.
Right. And that has provided all the 4 packages comes to one consortium.
One bidder, yes.
So my sense is that hit rate could be like, max it could be like 50%. Overall, we are talking about one on INR 550 crore run rate today, you're talking about INR 250 crores to INR 300 crores of additional revenue over 3-year time frame. Is that correct?
Right, per year.
Is that correct?
Yes, you're right. But it's per year I would say.
Yes, yes, per year, absolutely. If we do that, so let's say if we do it -- if we run at INR 700 crores, INR 800 crores annual revenue starting next year, at that point of time, we should hit 8% to 9% of EBIT margins is what you mentioned. Is that correct?
Correct.
Okay, okay. And secondly, similarly on the e-beam side, just to clarify, I mean the total asset turn on this asset is how much? What's the CapEx and what's the sales potential here?
The CapEx is slightly under INR 100 crores.
Right. And what is the asset turn we are expecting?
Initial years, let's say, about 2 going to 4.
Sorry, 2 to how much?
Initially years, it's 2, going to 4 to 5.
And typically, how much time will this take to achieve full utilization?
See, application-wise, solar would be the first application that we are looking at. Additionally, we are working on designs for railways. So those would take a little bit of time before the approvals are in place. And then you have our applications around instrumentation and automobiles. So the quickest, I think, would be solar and automobiles, followed by railways and instrumentation.
So we're looking -- we're talking about incremental full year revenue of INR 200 crores, maybe starting fiscal '26? And what could be the EBITDA margins here?
I think it's still something that we are working at.
The next question is from the line of Praveen Sahay from Prabhudas Lilladher.
So the first question is related to your CapEx. So on the CapEx, post that, how much the capacity is going to increase from existing? So if you can give the color on how much the electrical from here, the capacity is going to increase and the other segments?
So the bulk of the spend is going on the fiber and fiber-related assets. So there, we are setting up a preform facility, which will deliver about 100 tonnes of preform, which is equivalent to 4 million kilometers of fiber. Secondly, our fiber currently we have a broad capacity of 4 million. In Stage 1, we take up that 4 million to 6 million. And in Stage 2, we'll take it up to 8 million.
This is where the bulk of the spend is going to happen between this year and next year. Finally, we have scaling capacity on optical side of about 8 million kilometers of fiber. Depending on the outcome of the direction of tender and additional opportunities that will come, we may take it up to 10 million kilometers of fiber. So this -- that is still something that we are keeping it open. We have not placed any orders on anybody for that orders yet. But the rest of it, we have placed on it.
So this is how the capacity will increase. So today, preform we have 0 capacity that will go to 100 tonnes. Fiber, we have 4 million kilometers that will go up to 8 million kilometers over 2 stages. On the electrical side, we are increasing capacity on automobile cables at Roorkee by half. So it again depends on various designs there. So I'm not able to give you a specific volume number. And on the e-beam side, we're at putting up a new facility, which has 2 equipments, both of which have now been installed.
Okay. And especially in the extra high-voltage, the CapEx has been done, what you are saying?
I'm sorry.
In the EHV side, you had done...
EHV side, it was done through a joint venture. It is not -- within this entity. It is in a joint venture where Finolex Cables participates together with Sumitomo.
Yes. So there, the CapEx has been done or you are still in the process.
Here, we have not -- we have done. It's the factory is functional. But that particular business has a very long gestation period of getting yourself certified and so on and so forth. So we are now in a position where we are able to compete in tenders most of the time. And most of the utilities have -- we have qualified there. So there are still a few utilities where qualification is an issue. But otherwise, we qualified for a substantial portion of the utilities, and we are able to participate in, let's say, about 7 out of 10 tenders floating we are able to participate.
And currently, we have an order book which is in excess of INR 300 crores. And what else is there to mention, about automative, INR 230 crores, INR 240 crores which should breakeven that.
The next question is from the line of Sushil Choksey from -- I'm sorry, he's an individual investor.
You answered all my questions from the previous 2, 3 questioners. All the best.
The next question comes from the line of Saket Kapoor from Kapoor Company.
Sir, for the e-beam facility, electron beam solar cable, what is the size we are going to set up? And currently when will this to be on stream and the CapEx being done? And also, sir, are we catering to the railways also in terms of their rolling stock and cable requirement?
So e-beam, we have got 2 accelerators. One accelerator works at 1 MeV and the other one works at 1.5 MeV. Both these machines have been installed and commissioned as far as the manufacturers grow. All production has happened. Quality from the trial production far exceeds the standard requirements. So we are very happy about the equipment themselves. We are yet to receive consent to operate from AERB. That is the Atomic Energy Board. They are the regulatory agency involved in this. And we have called them for an inspection. Once they complete the inspection, we believe that we should have the consent to operate and put the products out into the market.
We are starting first with the solar cables. We are also working on designs for automotive industry. We are in talks with a few of the OEMs there. As far as railways is concerned, we are working on designs which we need to get approved by RDSO before we are able to supply to them. The other opportunity there is on the instrumentation side, which will be probably the last of the products to come onstream. So that's broadly the answer here. How much have we spent on this? Slightly like some INR 100 crores. That's the total spend. That includes equipment, building, not adding the cost of land to this because the land is something that we have -- we used our existing fees.
Sir, in the railway part of the story, we have been hearing about this anti-collision part or the Kavach theme. Therein also I think the requirement of the cables and other equipment will be there. So does the demand for the railway cables coincide or comes along this Kavach project only where we will be supplying the same? Or are these 2 different aspects all together?
Honestly, I do not know. So I should not say something about what I don't know. So I can get back to you.
Okay. But last, the point which you were mentioning about the railways part that I missed in terms of supplying cables to the railway. What are...
What I understand is they do need cables, which are e-beam cured. But then those designs had to be approved by RDSO. Anything that we supply to railways has to be approved finally by the railways design organization, which is RDSO. So those designs are -- I think we are working on samples under those events. We'll have to get them approved before we are able to supply to them.
Okay. What was the cable category you mentioned, sir, I missed again?
No. They would be required certain cables which are e-beam cured.
E-beam, electron -- eradicated...
Yes. Those cables are irradiated cables.
And for the Kavach part of the story, you need to come again.
I need to come back to you. I do not honestly know.
Okay. Sir, in the solar cable part, what is the current installed capacity in the country and who are the major players? And what kind of annual demand for solar cables do you envisage?
The number is huge. I mean, we are talking of 150 gigawatts of solar energy through nonconventional sources. And you're talking of huge solar parks that are coming in. And all of them require -- the panels require to be connected by cables to the inverter and so on. So there is a very large requirement out there. The cables can be supplied either through chemical process or this irradiation process.
The chemical process, obviously, is not that environment-friendly. And in the long run, this is a better process to use. The requirement is growing, continues to grow. There are other suppliers today. I think a few of our competitors already have a line, which is not similar to ours. It's made by a different manufacturer. So Polycab has got a line, I think Apar has got a line. And I'm not sure about the others yet.
Universal Cables and Vindhya Tele are also -- have also reported in their annual report about the product cable and the e-beam part. So we are competing with them also.
I guess if they are in the line, then we will be competing with them?
Okay. And your market share in this product cable?
So we have not released anything.
Come again?
We have not released our product as yet.
Okay. No. But taking into account the capacity which you are going to set up and depending upon the total capacity in the country, what would be your contribution.
Okay. You mean my which part?
Currently, [Foreign Language].
That's also -- you're saying if this was to convert into 100% sales, what it will be. That's what they're asking, right? I think we would like to get to somewhere around between 15% to 20%.
And sir, lastly point, sir, as the railway part [Foreign Language] definitely you will -- later on you will mention, but there are also signaling cables, quad cables, do we cater to those segment also.
At the moment, no. So that is what I said when I meant railways, they have a lot of requirement of e-beam cured cables, both for their rolling stock operations as well as further instrumentation of devices. So these are products which we will be able to supply by using our accelerators.
Hope to hear more, sir. And next time, sir, please do get the data for the Kavach part of the story also where...
I will do that.
Thank you. This brings us to the end of the question-and-answer session. On behalf of Finolex Cables Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.