In a change, Havells beats Polycab in Q3 performance

Polycab’s FMEG revenues

After several quarters, Polycab India Ltd reported a set of financial results that were decidedly less rosy than those of its primary rival Havells India Ltd.

Two days after Havells reported a 39% year-on-year jump in revenue to Rs 3,175 cr, Polycab said its third-quarter revenue rose 12% on year to Rs 2,799 cr.

While Havells’ Q3 pretax profit doubled to Rs 470 cr from Rs 234 cr last year, Polycab was able to report a more modest 22% increase in pretax profit to Rs 354 cr.

In other words, the quarter was one of a definite break-out for Havells from its string of disappointing quarterly reports last year, while Polycab seems to have only returned to its usual growth rate in Oct-Dec.

Part of the reason for the difference in performance may be that Polycab is less exposed to the non-cable segments of the electrical goods market compared to Havells.

Underlining this point, Polycab’s electrical equipment business — which includes lights, fans, switches and motors — saw its revenue increase by 41% year over year.

However, at Rs 306 cr, the fast-moving electrical goods business contributed only about 11% of the company’s revenues, while they account for about 70% of Havells’ top line.

This is largely because Polycab, which listed in April 2019, entered the small electrical equipment business only in the mid 2010s, at a time when Havells was already an established brand in that segment.

Polycab’s Q3 performance

Polycab’s wires and cables business, which contributes about 85% of its revenue, grew by only 6% year-on-year during the Oct-Dec quarter to Rs 2,207 cr, while Havells’ cables segment saw a 27% jump in revenue during the third quarter to Rs 907 cr.

Polycab also saw substantial increases in its raw material costs during the quarter.

While overall revenue increased by Rs 326 cr, material costs alone were higher by Rs 301 cr during Oct-Dec this year, possibly because of rising copper prices.

However, the company was able to realize savings of around Rs 44 cr under the head of ‘other expenses’, which helped boost its net margin.

Chairman and Managing Director Inder T. Jaisinghani said some challenges lingered, though the situation was improving fast.

“Business trends continue to improve and demand for B2C products remains buoyant with improving consumer sentiment. Accordingly, our top line has bounced back to growth along with considerable progress in return ratios, cash flow, financial position, distribution expansion and strategic initiatives,” he said.

Even as Havells has more or less caught up last year as far as revenue for the first nine months of the financial year concerned, Polycab is still down about 12%.