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Finolex Cables Ltd
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Ladies and gentlemen, good day, and welcome to the Finolex Cables Q2 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [Mr. Binay Sarda from Christensen Advisories]. Thank you. And over to you, sir.
Thanks, Lizan. Good evening to all of you, and thanks for joining this Q2 FY '22 earnings call for Finolex Cables Limited. We have mailed the results to you. I hope you have received the same, and we have also uploaded this on our website and the stock exchanges. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risks that could cause future result performance or achievement to differ significantly from what is expressed or implied by such forward-looking statement. To discuss the results and address the queries of the investors, we have with us the management represented by Mr. Deepak Chhabria, Executive Chairman; and Mr. Mahesh Viswanathan, Chief Financial Officer. We'll start the call with a brief overview of the quarter gone past, and then we'll open the floor over to Q&A session. With that said, I will now hand over the call to Mr. Viswanathan. Over to you, sir.
Good afternoon, ladies and gentlemen. Thanks for joining in this call. We have with us today Mr. Deepak Chhabria, Executive Chairman of Finolex Cables, as well as myself. So I will give a brief overview of the quarter that just went by and then we can open up for questions afterwards. In the meantime, I'm sure you have seen the results, which have been posted in the -- posted on the websites of BSE as well as on our own website. We have this morning uploaded a small presentation on the quarter as well. So briefly, for the quarter, the revenue numbers were up on a year-on-year basis approximately 46% and sequentially approximately 38%. For the 6-month period, the revenue was up by about 58%. Part of this is on account of the commodity price increases, but volumes have also gone up. If you've seen my note, you would have seen that the electric wire volumes had gone up by about 5% during the quarter. Communications were up by about 4%, other than optic fiber. And optic fiber volumes were about 80% higher than in the previous quarter -- corresponding quarter. All the new products that we have come out with have all shown positive volume growth, various business lines from between 6% to 15% in volume growth. The profit for the quarter was about INR 149 crores compared to INR 69 crores in the corresponding quarter last year. Of course, in this quarter, we have also accounted for the dividend that was declared by Finolex Industries. Last year was a one-off case where the dividend for the year was declared ahead in the fourth quarter of '19/'20 itself. Some comments about the quarter. Economic activity definitely was visibly improving. Most markets had opened up after June. And we could see -- we did see an improvement in the main segments that contribute to higher income, from real estate as well as the automobile sector. Automobile today is facing another issue because of chip availability. But I think that is a matter of time before it is sorted out and it comes back to normalcy. The second thing during the quarter that we noticed was a steep price increase on all commodities across the board. You name the commodity, whether it is copper, aluminum, steel, PVC, fuel, every item showed an increase. And as has been our practice, we try to keep the cost increases and the pass-through. And to the extent possible, we have changed our selling prices. And while there will be a small lag in doing so, effectively, we have passed on the price rise to the end customers. Temporarily, therefore, because of the lag, there could have been some margin issues. The one other point that I would like to mention here is that we have a joint venture with Corning. Over a period of time, we've been running this joint venture together with them for the last 10, 11 years. So both the organizations have today gotten a certain -- got to a certain level of comfort where we both believe that the structure of the JV is no longer necessary. So we have agreed to move out of that structure and engage directly. So as and when the regulatory and other approvals from shareholders, et cetera, is obtained then the JV will no longer be a physical entity, that the transactions will happen directly between us and Corning. With this background, I now open up for questions. So I'm happy to take questions from here.
[Operator Instructions] The first question is from the line of Sonali Salgaonkar from Jefferies India.
Sir, my first question was, what is the current demand scenario? Within that, how has been the festive season for, especially in the appliances section? And secondly, what is the inventory channel -- inventory how is that you think like?
So can you repeat the question, please?
Right. Sir, how is the current demand scenario and the festive demand? And secondly, how is the channel inventory?
Festive demand, current -- okay, channel inventory, channel inventory, okay. Okay. Festive demand, I think, was encouraging. And we do see activity in the real estate sector happening. So the likelihood of demand for our products in the coming months being strong is quite high. And as far as the channel inventory is concerned, I did see a report a couple of days ago where the secondary sales for July, August and September from the distributors was close to 85% of their primary uptake. So I don't believe therefore there is too much of an inventory at the distributor point.
Got it, sir. Sir, second question is regarding gross margins. We have seen almost firm EBITDA margins year-over-year, but there's a steep decline in the gross margin. Is this because of the lag effect of passing in the price hikes?
No. The gross margin today at a company level is about 24%, right? And compared to the previous quarter, it has actually improved from 22% to 24%. And earlier on, it used to be around 26%, 27% on an average. But that, as I had explained in the earlier calls also, if you recall, we had -- since COVID came in, we had started the practice of, whatever costs we budget for schemes and so on, we had started the practice of giving it straight away on the invoice to the customers. So earlier on, we used to budget about 8%, and that 8% was straightaway given on to the invoice from last April onwards. The actual reality earlier than that was, while we budgeted for 8%, our actual spend used to be around 5.5%, 6%. So post COVID, we have actually increased the benefits to the customers because of the disturbed market situation. As and when this normalizes, we should go back to what we used to do in the past and run schemes on a periodical basis, focused at different requirements and different parts of the year or at different markets. So that normalcy, as and when it returns across the country, I think we should get back to it. But in the meanwhile, yes, margins are lower than earlier years by about 2 percentage points.
Got it, sir. Sir, thirdly, how should we look at the growth in the margins in the Communications segment going forward? We had a weak margin this quarter. Should we see this as a one-off?
This is a one-off. The -- as you know, the Communication Cable segment is largely dependent on B2G sales. And B2G for us in this context represents BSNL, BBNL, BCIL, the likes of those companies. While the money will not disappear, timing of payment is something that nobody is able to control, and they pay when they pay. Standards require us to take provisions for expected time losses. And therefore, we have taken additional provisions in this quarter, but I don't believe this to be a recurring feature for all times to come.
Got it, sir. And for the overall business, do you still believe that the sustainable operating margin could be 15% to 16%?
At a company level, yes, possible.
Yes, sir, at the company level. And last question from my side, CapEx guidance, please.
So we are on our -- we are on track to complete what we had spoken about earlier. The only question mark is on availability of visas to Chinese engineers. Some of the equipment is from China. So as and when those visas are opened up, the installation of those equipments could take place. So barring that, I think everything else is on track. So that's the only area where there could be a slippage or time delay.
Right, sir. So in FY '22 and '23, how much do we expect the CapEx outlay, please?
We had announced INR 200 crores over about 18 months. This was 6 months ago. I think we've spent probably around INR 50 crore of that. The balance should still be spent.
[Operator Instructions] The next question is from the line of Abhishek Ghosh from DSP Mutual Funds.
Sir, if you can talk about the FMEG part of it, that seems to have seen a credible growth, and also in terms of a broadly annualized number is more like INR 200 crores. So how should one look at that part of the business? And in terms of margins, at what threshold revenues or what margins could you do? If you can just probably talk about that segment, it will be helpful.
Okay. For us, the numbers are contained in the segment which we call Others. So that includes fans, water heaters, switches, switchgear.
Conduits.
And PVC conduits. And as of day before yesterday, also room heaters. So we have seen that as we expanded our distribution footprint, we have seen volumes improve. We noticed it last year. But then last year was -- there were too many disruptions because of COVID. This year, that's -- post June, there have been hardly any disruptions, and we can see the impact of that distribution starting to play out. As we connect more geographically and as we sign up with more retailers, that is bound to pay -- that is bound to pay off. And we have seen volumes increasing. So like I mentioned earlier, each of these product lines have shown volume growth ranging from 6% at the lowest level to 15% at the highest level. And the trend seems to be continuing. And as we expand the appliance basket, I think that, that is good for us as well. So we are not seen as then just a one-off player, but we are seen there as somebody that is serious to be in this space. We have said in the past as well that our short-term aim is to reach a revenue number of somewhere around INR 500 crores over the next 2 to 3 years. And that seems to be something that is reachable now. Coming to margins. Right now, the margins reported are showing a very positive number there. But then we've also not spent much on advertisement and publicity in the last 2 quarters. As and when that spend happens, and I think we need to spend some more, and as and when that happens, the margins will reflect differently. We have maintained that in the past, at a turnover level of somewhere around INR 150 crores, INR 175 crores, we should be breakeven for the product lines that we have currently. And I think we are still maintaining that number.
Sir, just one clarification there. On an annualized basis, for the current quarter, you are already doing those kind of revenues. So are you kind of breaking even at that? I'm just trying to understand from that perspective.
Today, we are showing a profit. So if I had spent on advertisement, I would be breaking even, yes.
Okay, okay. And sir, the whole thing about this INR 500 crores of revenue over the next 2 to 3 years, if you can just take us through in terms of the current -- that current INR 50 crores that you have done for the current quarter, which are the key contributors. And in the INR 500 crores, will there be new scaling up of some of the new products? Or how should one look at it? Some color there will be helpful.
Our revenues typically come from lights, fans, and recently, the PVC conduits also. These would be the larger numbers there. I think at a INR 500 crore level, we should be more than INR 100 crores in each of these product lines. And right now, we are looking at to see how to improve the PVC conduit business because the response has been extremely encouraging. We have this plant at Goa. So currently, the services are geared towards the southern markets. And going by the response, we are actually looking at to see whether we need to expand the facility in Goa as well as look at additional lines maybe at another location. So those are currently works in progress. And once we hit INR 100 crores in fans, then I think we are ready to set up and bring the manufacturing in-house.
Okay. And sir, just lastly, if you can also talk about the whole retail channel which you had set up, that 500 x 300 metrics where you had moved into something like -- you were supposed to reach a target of 150,000 retail touch point. How is the journey there? How is the flavor of the business from the active 60,000, 70,000 retail touchments, whatever it is. If you can just talk about it, will be helpful.
Sure. So active distributors as at the end of September were about 520. So that actually goes -- takes us beyond the potential of 150,000. For the quarter, we have had unique billings of about 49,000 retailers. This is only during this quarter. So this 49,000, some of them have been build once, some of them have been built multiple times. In comparison, the previous quarter was about 28,000. And in comparison, the whole of last year was about 90,000. So I think we are on track to reach across the 100,000-plus for this year for sure. And maybe we'll be very close to the 150,000 number.
Sorry, sir. I missed the number. 49,000 retailers you have built in this quarter?
49,000 have been built in the current quarter. And many of them have been built multiple times. Many of them have been built single time. So 49,000 touch points have been covered during this quarter. In comparison, the previous quarter, that is the April-June quarter, was about 27,000 or 28,000 numbers.
But how many are registered?
Registration has crossed 100,000. The number of -- registration -- number of retailers registered has crossed 110,000.
Just to add. When you say registered, registered and onetime sale, FEMGs bought material from us, is close to 110,000. But some of them by -- depending on the retail counter and how fast moving it is, some by twice a month, some may buy once in 2 months or once in 3 months. So he's trying to say in the last quarter, it was 49,000 who actually purchased out of the registered customers who have at least bought once from us which has reached 110,000.
Correct. So you're saying out of the total universe, 50% of them have actually bought?
In this quarter. 50%, let's say, our regular customers, means they buy on a routine basis.
Correct. And sir, you mentioned 28,000 in 1Q FY '22. And you also mentioned one more number, which I kind of missed, which was, I think, '21 quarter.
No, you're trying to get him how in the past.
What I said was, in the previous quarter against this 49,000, the number was 28,000.
28,000.
28,000. Okay? And last year, the whole year was about 90,000, 9-0.
So from this current quarter's number, there can be substantial improvement as that -- this 90,000 will sometimes come back at some point in time for the current year.
So that 90,000 was for the full 12-month period. But 49,000 is only for the 3-month period.
Got it, got it. And sir, just lastly, in terms of some color, because growth seems to be coming back also. If you're analyzing internally, is there a market share shift? If you can talk about certain regions because of this retail expansion. Is there any traction that you're seeing in the -- in any of the regions? Or is this an unorganized to organized gain? If you can just help us with your thoughts, it will be great for us.
Well, we don't have any concrete data, but a thumb rule tells us that the way the prices have been rising, so for the unorganized sector, it becomes more difficult in a sense for the cash flow and arranging for funds for manufacturing. But on the other hand, they also get a higher delta in terms of branded products pricing and their pricing because unorganized people normally are using scrap copper or scrap PVC, and manufacturing and branding and selling it in their names. So there's a mixed reaction. We don't have any substantiated data to tell us exactly how much unbranded may have gone down and benefited the organized sector. But I think there is some movement. For sure, organized sector have benefited, but I don't know how much.
Great. And sir, just one last question from my side. In I think 2 or 3 con calls back, you had spoken about your long-term revenue targets, medium-term revenue target. But then the wave -- second wave hit, and there was a lot of turmoil into the market. Any thoughts on it? What are the key strategies? Anything that you would like to share?
See some of the strategy was, on the new products, that as we reach 100 crore as a target number in trading activity, we set up a plant, and we get a value addition in the organization itself. So some numbers now we are coming closer, and we may then start setting up those plants. In the case of conduits being in the business and knowledge, we didn't start with any trading activity. We set up a plant. The plant is doing about 8 crores a month at the moment. And we are servicing only the South from there because freight costs are higher for moving of PVC pipes. It's got air inside it. So our plan is to have 4 such plants in 4 regions. So we are actively looking at setting up a second plant. We are also looking at enhancing capacity in the present plant in Goa, which is servicing the south, because we are already filled up. I mean, they're earning at full capacity. So -- and there is space in the building where we can maybe increase the capacity by another 25%, 30% just by adding the machines. So that will happen going forward. So I think these new products where we hit 100 crores expansion of PVC conduits. And we have still not been able to do an acquisition. We've looked at some options, but we have not been successful in closing an acquisition which we want to do. So that's why we were looking at how to grow the company.
Also, in the meanwhile, we had already planned to increase the wire capacity both at our Urse and Goa plants. And that is on track. In fact, we will -- we should probably have everything up and running by end of this fiscal, which means as demand returns, our capacity is also able to handle the increased loads.
Those equipments have all already come into India. There are in installation right now.
Great. What will be the current utilization of the wire and cable plants at ? And it's a difficult one, but just say broadly.
I think currently, we are running at close to 80%.
The next question is from the line of Rahul Agarwal from InCred Capital.
Congrats for the recovery in second quarter as well. So I had 4 questions, largely revolving around top line margins, cash and . Some of that partly got answered, but I'll just try and squeeze that. From the revenue, sir, can you just help understand how do you foresee all 3 key segments, the electrical cables, communications cable, FMEG for the full year of fiscal '22? If you could talk about largely volume growth for the entire year for cable growth led by penetration. You spoke about something on that. And communication cable order pipeline, how does that look at? And what should we expect in terms of revenues for the 3 segments? That's my first question.
I typically do not give a guidance on the revenue numbers because future market conditions is something that one doesn't really know. And -- but going by what we are seeing today, the recovery seems to be across the board in the wire and cable segment. We are a very small player in the cable segment, as you know. But in the wire segment, all the applications that we are looking at, whether it is construction or whether it is auto or whether it is industrial, all 3 are seeming to do well. So that momentum, if it continues, I think you can see similar numbers in the next 2 quarters also, provided the price holds where it is. Okay. Does that give you a sense?
Yes, that helps. Anything on the communication cable side, the order pipeline, how does the telecom market looks like?
Okay. On the communications side, the need is still there. There is a lot of need for a fiber-based communication solutions. However, the players are not many. So you have government on one side, which is about 50%, 60% of total market, and they don't have the money to spend. And not only do they not have the money to spend, the time delays in decision-making is also extremely high. So while projects are announced, the realization of those projects is -- seems to be slipping all the time. So for example, if you recall, there was a statement from the government saying that over the next 1,000 days, so this was made last year, over the next 1,000 days, all villages would be connected. And they came up with a plan sometime in June this year where they wanted a PPV model to operate. So the winning bidder would have won either because he has quoted the highest premium or he has asked for the least support for about 17 circles in different states. And the proposal was that the winner of these bids would be allowed to operate the existing network there as well as would be required to complete the remaining pieces in that area so that every village, every town is connected and would be allowed to operate that area for a period of, I think, 15 years, charging revenue basis the services that he provides. But -- so that tender was supposed to open in mid-August. Then there were so many questions, they deferred the opening to 30th November. Even as on date, there are about 7,000 questions to which responses are not yet there from DoT. So basic questions like what would be the mechanism? How would the prices be regulated? What kind of services would be allowed to be given? There are quite a few doubts there. When we saw the original -- when we saw the tender, our estimate for just this one piece was approximately 10 million kilometers of fiber. So there is a huge opportunity. But timing of when this would actually realize into reality, whether it is going to be '22, '23 or much later, that is something that we are not able to predict. That's the problem with the OFC. The second, I said 50% is with the government. The other 50% is run by private players like Bharti or Reliance or Vodafone. The good thing that happened during the quarter was Vodafone has got a lease of life. So it is not going to disappear as one feared maybe sometime in July, August. But the other part is that CapEx still has to happen. And for that, the funding is -- at least to us, it is not really visible. So while the opportunity sizes are still the same, in fact, growing, funding issues seem to take the timing horizon beyond the 1- to 3-year mark.
[Foreign Language].
Yes. So consumption-wise, the need is there. We just had a meeting with our partners, Corning, and they shared the global data. Globally, the consumption of fiber has increased in calendar '21 as opposed to calendar '20 by about 12%. Currently, therefore, the global consumption is somewhere around 660 million or 670 million kilometers. And China has actually consumed more, and their consumption is up by about 19%. The rest of the world is, I think, 14% or so, so that's why the average is about 16%. And demand seems to be picking up everywhere. Countries are rolling out on their 5G conversions. And that will take fiber consumption up by a lot more. However, those are areas where funds do not seem to be that much of a constraint whereas that seems to be our main issue.
Got it, sir. So essentially, to understand, as of now, the INR 100 crores run rate per quarter for communication will continue. Still the point is tender gets rectified or either the state or central government start spending or is that something from Bharti, Jio or -- so how do we look at it? So INR 100 crores per quarter stays, right, as of now?
Right, right.
Okay. Got it. Secondly, on the margin side. So you partially answered that in terms of recovery not happening to the long term of more than 27%, that's the question I asked. But have price hikes taken. Anything left for third quarter? EBITDA margin for first half were about 11.8%. At least we should maintain last year's level of 13.4% for full year. I understand electric cables are doing okay, but communication cable had a one-off issue. FMEG, obviously, right now profitable. But once you start ASPs, that again will go back. So any thoughts here?
No, I think we should be on track to maintain the EBITDA numbers. So that should not -- I don't think that should be a major factor.
So 13%, 13.5% is what we should maintain, right, at least the last few months?
I don't believe that should be a major concern.
Okay. Got it. Third, on the cash. So about INR 1,500 crores is obviously liquid with us. Capacity utilization, you said is about 80%. What is the plan, Mahesh and Deepak, to use this cash going forward? Obviously, you're looking at M&A. We're looking for expanding capacity. But it's impacting the ROE, ROCEs of the company since quite a while. Any thoughts -- long-term thoughts in terms of how do you see this number going forward?
Well, this cash has been accumulated primarily for looking at acquisitions. But the valuations right now that we are seeing are horrendous, and we don't really agree with those valuations. So that's been an issue. We will still look for quality acquisitions. But eventually, the money can only go into -- it can only find its way in 3 places: on acquisitions, on CapEx or on dividend returns to the shareholders. We realized that keeping the cash, especially in today's condition when the return is not very high, impacts the ROCE, ROE numbers. But I think we need a little patience to get quality acquisitions and bring them inside.
Fair point. Would you like to add like what areas are you looking for? I mean, will it be FMEG? Or will it be into -- whether it's possible for any import substitution opportunity into cables itself? Or will it be largely FMEG?
It could be FMCG -- FMEG. It could be areas that we are currently not present in the wire and cable market. It could be any of those areas.
Okay, okay. Got it. And one question, small, on the Corning JV side. So how does this change life for Finolex Cables? I mean if you don't have a JV, how does the financial or the cash movement works now? So obviously, we have the tech. So we'll keep on doing the fiber with them, and then we will do the cable side of it. But do we have any royalty agreements here? Or how would that work?
No, basically, the JV was a conduit through which Corning had access to the India market. Okay? And we provided that access in return for upgraded technology and fiber source. So that technology has already come. The fiber source remains. And the JV basically was an administrative entity taking up time from all of us. So we have -- over a period of time, you grow in confidence with each other. Your relationship has grown. And the trust level is fairly high that we thought that particular entity to pass through is no longer necessary and we can deal direct. So life should not really make a big change. So any fiber that we require in excess of our capacity, we should still be able to purchase from Corning. We will have those agreements in place.
Okay. Got it. And lastly, on this communication cable, you mentioned there's some provisions which have made based on expected tax loss. What was the amount here?
INR 8 crores, INR 8 crores.
And so this is just provided as a cautionary step that -- because it got delayed, hence, we're providing it, and it could be reversed when we get the payment. Is that correct?
It will be reversed when we get the payment.
The next question is from the line of Ajay Sharma from Maybank.
I had a few questions. One is on the -- what was the growth difference between the B2C and B2B basically in terms of electrical cables?
B2C and B2B.
I think B2C is there.
Auto cables was also pretty good this quarter.
Yes.
So both -- I mean, both were upwards of 20% on revenue terms. The B2C would have probably been a little higher.
Okay. And your growth is really linked to new real estate construction, right, not the sale of an existing inventory?
Yes, absolutely. I mean -- there could be some of it because existing inventory, whether the power lines have been drawn or not, we do not know. But it could go either way.
Okay. And the volume growth was still 5%, so...
I'm sorry.
For full year, you actually were doing much better than that, right? So do you see that picking up as the real estate market continues to improve?
I'm sorry. No, I -- your voice is a little garbled. Can you repeat that?
I said that the volume growth of 5% was still on the lower side compared to what you have achieved in good markets, right? So I was just wondering, do you see that pickup as the real estate market continues to improve?
Absolutely, absolutely.
And the other thing I wanted to -- was there any inventory gain in terms of the way copper price has been moving?
No. See, we -- our inventory buying practices policy is very simple. We do not take long calls. We only buy what we can consume during a particular month. And we price it on the month average for most of the time. So the production and sales cycle of, let's say, 3 to 4 weeks allows us to modify prices if need be. So there could be a small lag in changing our prices, but we keep the metal prices and the commodity prices as a pass-through. And because of pricing, we don't either gain or lose.
Sure. And the capacity increase for wire that you're doing at the 2 plants, so what is the magnitude in terms of percentage increase?
In the 2 plants, I think we have taken that currently from 10 to 15.
We are going from 18 to 24 lakh coils.
That is total, no?
Yes. But counting both...
18 is not the -- so total company goes up by 1/3.
Okay. Fine. And just lastly, any update on J-Power? What is the outlook and the performance this year so far?
Okay. The performance for -- of J-Power YTD September, they have crossed revenues of last year. They have this year supplied and installed 100 and -- I think 129 or 130 kilometers of various grades of cables, primarily in the 132 and 220 kV range. They have supplied to Kanpur Metro. They have supplied to Agra Metro. They have supplied some to Puna here. They have also supplied to Delhi. So the order acquisition is gaining strength. And as we speak, they are sitting on an order book of another 70 or 80 kilometers. The projects that we had won in Tamil Nadu, there were 4 of them; 2 of them are nearing completion and the other 2 are likely to be completed in another 4 to 6 months. Currently, they are -- there is a small loss for the quarter, but I think they are on their way to to erasing cash losses from maybe the March quarter.
Okay. And just a very last thing, on the dispute basically, the ownership dispute. Is there any time line to that in terms of the court process? And where are we in that?
I mean, one cannot put a time line there. The courts take whatever time they believe they need to take. So it's very difficult to predict if it's going to be sorted out tomorrow morning or 2 years from now. So that's unknown at the moment. And since I'm not involved in it, I'm not able to comment beyond this.
But is that disrupting the various AGM resolutions and the directors you want to appoint basically?
Yes. There are those pinpricks from time to time, but I think we've learned to manage it over the last 3 years.
The next question is from the line of [Santosh Silapo from Asian Market Securities].
First question.
Sorry to interrupt, Santosh. You're audio is breaking up.
Is it audible now?
No sir, can you use the handset mode while speaking?
I'm using a handset mode only.
Sir, because the audio is breaking up and there's lot of background disturbance from your line.
Okay. Is it now better, ma'am?
A little better. Please go ahead.
Yes. So sir, first question, if one looks at the first half, H1 FY '22 electric cable segment, we have seen a 66% kind of a growth. If you could please help me understand, what percent of this -- which segments within the electrical cable segment that is housing wires or the power cables or the auto cables or the other, the cables or wires that go into the pump sets and all, which particular subcategory witnessed stronger growth than the segment level growth, and which ones reported lower growth and the segment level growth?
Okay. The growth has been -- the better performance has been the general wires, so that is construction, automobiles, these were the largest growth area. I think industrials were -- had also grown, but not to the extent that the other 2 had shown. Power cables, like I said earlier, we are a very small player, and the numbers are not sizable to make a big comment there.
Okay. Sir, just if you could help me understand, like you had put up the electrical cable segment, for this quarter, volumes grew 5%. What was the volume growth for the first half of the year, sir?
The full first half. First half, I think, was about 7%. I'll have to check back on that. I don't have the sheet in front of me, but I'll have to check back and can come back to you.
Okay, sir. Second question, sir. I -- just I'm trying to understand -- this is more of a clarification to the first earlier question being asked. Last year, we did 90,000 dealers billing, right? Unique billing or repeat billing, both put together, right, for the full year of FY '20, right? So what are the challenges we are facing? I know that Q1 was more of a washout in the sense of COVID. There are lockdowns and all. But what could be the challenges or what are the challenges still we are facing for that 90,000 number going back to 48,000 number, or 48,000, 49,000 kind of a number?
So that 90,000 was spread through -- spread over a 12-month period.
Right. But I'm assuming those 90,000 should -- after the COVID gets opened, should come back for orders, right? At least some other period of time. So is it that the 90,000 for -- so the additional 45,000, 50,000, whatever is the number, would they take more than 7, 8 months to come back to again?
No. See, one is, that 90,000 that we have are not people that are buying. Not every one of them is buying every month or repeatedly. So 90,000 was the number of unique billings that were done last year.
Right. So sir, my question is that what are we doing internally to get more of repeat billing from these onetime or 2-time billing? The special incentive package we are designing for them, or any aggressive marketing plans we are rolling out for them? Anything specifically that the management has thought to get more attention business from the -- in the form of repeat business from these distributors and dealers? Because adding numbers won't lead us to anywhere, right, unless we are able to hold their arm or get continuously their business. My intention of asking the question is that, is it that every year, we're going to see the same kind of cycle? That first quarter will be a smaller number than -- only the 90,000 or the full peak utilization of the network would be seen only by Q4. Is that what we are seeing? Or can you see the change happening because of some internal initiatives?
Okay. Let me try and answer that question. Mahesh explained earlier on quarterly and then giving those yearly numbers for the retail network. We also talked about why the margins are less by 2% because of schemes not being there. And in the COVID times, we haven't put targets on most of our distributors because it -- sometimes is going to demotivate them. We want to get the maximum sale. And so nobody is putting targets now on the customers. So as we go forward, the targets will come back. Because the target drives a person to sell more, the schemes will also come back. Now the schemes -- other than having schemes for distributors or channel partners, we are also looking at putting direct schemes on the retail counters. So we've developed -- we've worked last few months on the software, which is right now undergoing testing, where we are able to launch the schemes directly on the retailer. And we are tracking the sale of the retailer from each distributor. And the scheme money will be paid directly by us to the retailer itself. So we will motivate them with direct schemes based on certain slabs and incentives so that they will be repeat business and not just one-off sales. So...
How is this different from the industry practice, sir? Is it very unique from the industry practice? Or will we -- the schemes that you plan to roll out are going to be more unique to the industry? Or how...
When you -- earlier would give a scheme to a distributor, you would not know the real number and whether the distributor is selling to the retailer, and that's why the scheme money is being claimed or is bulk selling it somewhere else and just leaving the scheme money. So the -- growing the distribution part, you want to know exactly how much is being sold through that distribution channel through the retailer counter. So now when you track on the computer, because the distributor is being tracked on our computer of how much he sells to each retailer, I can give a direct scheme to the retailer who doesn't go through the distributor. And there, you can have slabs or various kinds of schemes basically, schemes which may be in a quarter. So we force them to come back and buy our product. They're trying to handle the competitors' product. So that way, you will be able to garner repeat business from the retailer. And that's what we're trying to do.
Sir, okay. One last question. I think it has 2 parts. Of the total 110,000 retailers network, what is the geographical mix in terms of Southeast, Northwest, one? And second thing, how many of them are pure cable-based retailers? And how many of them are mix of FMEG and cable wire retailers? And how many are purely FMEG retailers? That's it, sir.
Number?
I think about 40% are pure.
Pure cable, yes, you are correct.
So about 40% are pure cable guys and the rest are mixed.
Okay. And what would be the geographical mix, sir?
Geography mix, I don't have it with me. But again, I -- let me come back to you. I don't want to give you a...
If one has to take a guess, is it fair to say that 35% to 40% of it would be in the South, other 25%, 30% would be in west. Is that one fair guess?
You're right. We are stronger in the south, second strongest in the west and then followed by the east and then the north.
The next question is from the line of [Suresh Churiani], an individual investor.
To the team of Finolex Cable, it has been nice -- these are nice results. I have 2 basically -- not a really question. There has been a uplift, reduction in the feedstock prices for you, like a PVC, steel, aluminum, copper. How do you see the margins going? As we enter into Q3, are we already entered in Q3? Hello? Hello? Hello?
Ladies and gentlemen, the line for the management has got disconnected. [Operator Instructions] Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir.
Can I go ahead?
Yes, please. Go ahead.
This is [Suresh Churiani]. I'm an individual shareholder. Well, it may be too early to celebrate. But as far as the reports are concerned, the raw material price, the raw material which is -- which are used by you, like a PVC, steel, aluminum, copper, after it started sliding, there -- how do you see the margins shaping up in the current quarter and the quarter next? Over, sir.
Like I mentioned earlier, we look at all these material -- I mean, the pricing of all these materials as a pass-through. Very clearly, one doesn't -- one is not able to forecast exactly whether the price movement will -- in copper will go up or go down. The volatility is too high. So we do not take the risk of making long calls. The pricing that we enter into with our suppliers is one for price -- average price of the month, which means that for cash flow purposes, as and when we procure the material, we pay them a provisional price. At the end of the month, the actual price is discovered. And either we reimburse them for any shortage in -- between the provisional price and the actual cost, or they pay us back if the provisional price is higher than the actual cost. In terms of selling price, what we therefore do is, changes in prices, we pass it on to the customers. So both upwards or downward changes in the cost, we pass it on to the customer. There could be a small lag between when we change prices. But effectively, we give it back to the customer. So margins, if you look at it, margins should be reasonably steady. Unless you've got into a situation like last year when COVID disrupted much of the quarter, and therefore, the fixed cost remained unabsorbed. Otherwise, the margin should be steady at about 14%, 15%. So if you see the segment margins and you go through them for the last few years, you will find that they have been around the 15% to 16% number.
A small clarification, sir. Have you accounted dividend received of INR 4 per share of Finolex industry received on 4th October?
We have taken it in as a receivable, and the cash flow was, like you said, received on 4th of October.
The next question is from the line of Rahul Agarwal from InCred Capital.
Sir, one question I had on the housing wire market. Obviously, Finolex Cables get a large share of electrical cables from that segment. We're looking at commentary from Polycab, KEI and other large national brands. They're all very aggressive on housing wires. They're very optimistic about demand. They want to increase their share. Overall market share anyway shifting to organized branded, right. What was your thoughts? Because over the past decade, obviously, you have been a bit weaker relatively in terms of holding on our share. But going into next 5 years, what do you think from a Finolex perspective in terms of gaining further market share in the housing wires or not? At least losing to these guys, how would that really play out?
In terms of growth.
Well, in terms of growth, the numbers are comparable. But yes, everybody is becoming more aggressive. We have not compromised on the quality of the business in the sense that our margins, if you see, are probably the highest in the peer group. And so that is something that we do not want to compromise on. People say, give credit, reduce the price, and then your volumes will climb. But what you give away, you never get back, at least that is our feeling. So yes, we have to make sure that there is more geographical coverage, that the distribution part that we have embarked on plays out well and that we are -- we do not miss out an opportunity. One can still lose an opportunity in competition, but we shouldn't miss out because we were not present there. So those are things that we should take care of. Typically, but from the market side, I think, yes, as activity starts building back and as construction starts getting back to normalcy, the demand should improve.
Okay. Got that. One clarification, on the capacity expansion. So you mentioned INR 200 crores CapEx 18 months, INR 50 crores already done. That leaves us about INR 150 crores over the next 12 months. Is that correct?
Right.
Okay. Any thoughts on fiscal '23, '24? It does -- this doesn't include obviously the conduit expansion, right? This INR 150 crores?
No, that is not it. We are still talking about it. So not finalized.
Okay. So overall, for this year, total, we should look at like INR 150 crores over the next 12 months, 6 months of this year, 6 months of next year?
Correct.
And then the balance for further expansion on conduits, you will come back on future conference calls?
Yes. As and when we finalized those arrangements, we will come back. And again, like I'd mentioned in the beginning, if there is -- if the visa window opens up early, then yes, you have the time line that we talked about just now. But if the visa vendor is not going to open up anytime soon and it takes another year before that is fixed, then some of -- there will be some deferment.
This you are referring to the E-beam plant, right?
Yes, primarily that.
So if I understand correctly, the INR 200 crores was basically INR 80 crores of E-beam, INR 80 crores of tin copper and INR 40 crores of conduits. Of which, conduits INR 40 crores done and the balance, EV maintained is still pending. Is that correct?
Correct.
Okay. Perfect. And just last question from my side. Earlier, I had a question on price hikes. So anything left for third quarter? I mean, to be back to, basically, the gross margin of 25%, let's say? Obviously, reducing the 2% scheme part here. The 27% minus 2% is 25%. So any price hike that you have to come back on this number?
We'll have to see what the market can absorb at this point in time. As demand is climbing, and then if you jack it up too much, then maybe people go to somebody else. So one I'll have to take a patient call on that.
Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.
Thank you. Thank you for being patient with us and thank you for an engaging call.
Thank you. Ladies and gentlemen, on behalf of Finolex Cables, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.