What slowdown? Polycab sales continue to zoom

Third Quarter results

Polycab, one of India’s biggest makers of electrical wires, reported an exceptionally strong set of results for the October-December period, despite widespread reports of a slowdown in the economy, including the construction sector.

Polycab India Ltd reported revenue of Rs 2,507 cr from its operations, up from 2,242 cr in the preceding three months and Rs 2,025 cr in the same three months of 2018.

Against the Rs 265 cr sequential (QoQ) jump in revenue, total expenses increased by Rs 195 cr.

This resulted in an increase of Rs 60 cr in the company’s profit before tax to Rs 290 cr for the three months ended December, compared to the three months ended September.

Out of the Rs 195 cr increase in expenses, Rs 175 cr was contributed by material costs.

Material costs showed a sharp increase in year-on-year terms, which reflected in a fall in margins when compared to the same quarter of last year.

Compared to Oct-Dec 2018, material costs jumped by a whopping Rs 376 cr, even after netting the impact of inventory build-up and so on. This was, in fact, almost comparable to the Rs 459 cr year-on-year jump in revenues.

As a result, despite the sharply higher revenue, profit before tax was flat this year compared to the last year.

Out of the Rs 459 cr of revenue increase seen on a year-on-year basis, Rs 339 cr — or 74% — was contributed by the main business of wires and cables.

The company’s electrical goods business — which includes items like lights and switches — posted an operating profit of Rs 1.4 cr, compared to a loss of Rs 5.0 cr last year.

The electrical goods business is a new area for the company.

The numbers are surprisingly robust, given that construction activities in India have shrunk due to an ongoing slowdown in the real estate market, which in turn has been a reflection of an overall economic malaise.

The slowdown has pushed most of the big real estate companies into bankruptcy.