Finolex Cables Targets Rs 500 Crore Revenue From Appliances Over Three Years
As more applications start riding on 5G, the need for fibre-based cables will be higher, says CFO Mahesh Viswanathan.
Finolex Cables Ltd. could have done better in the appliances segment in the first quarter which missed estimates, according to Chief Financial Officer Mahesh Viswanathan.
The appliances segment's performance lagged due to persistent "reluctance and letting go of discretionary spends", Viswanathan told BQ Prime in an interview. He highlighted that unseasonal rain in parts of the country in April and May also affected the business.
The company aims to earn Rs 500 crore in revenue from the appliances business over the next two–three years and is on track currently, the CFO said.
Finolex Cables Q1 FY24 Highlights (Consolidated, YoY)
Revenue up 19% at Rs 1,204.3 crore vs Rs 1,015.7 crore.
Ebitda up 23% at Rs 146.5 crore vs Rs 119.1 crore.
Margin at 12.17% vs 11.73%.
Net profit up 34% at Rs 160.4 crore vs Rs 119.6 crore.
Growth Potential
The growth in profitability has been led by volume this quarter. Electrical cables grew about 29% on the wire side and about 3–4% on the power-cable side, he said.
The two segments under communication cables also witnessed volume growth. The metal-based cables grew by 17%, while fiber-based cables grew by 50%, Viswanathan said.
"In this segment, there has been a price erosion consequent to large-scale dumping of fibre from overseas," he said. "The government has taken note of it and has recently introduced anti-dumping measures."
There was 50% growth in the company's optical fiber cable segment. Viswanathan said that the Union Cabinet's approval for a Rs 1.4-lakh-crore plan for last-mile broadband connectivity would push fibre consumption in the country and be beneficial to companies like Finolex Cables. "As more applications start riding on 5G, the need for fibre-based cables will be higher."
Capacity Expansion
Finolex's capacity expansions are on track. "By the end of the fiscal, the e-beam clients should be operational," Viswanathan said.
The preform facility of the company should be operational towards the second half of next year, depending on the pull from rural broadband plan. "There is a ramp-up in the capacities to be seen over the next two years."
Revenue Addition
The preform segment is "margin-accretive" and will enhance the value chain within the organisation, according to Viswanathan.
The fibre and cable facilities will increase the company's revenue along with e-beam which would positively impact overall revenue, he said. Finolex is also expanding into the auto-cables segment.
Over the next few years, the company should see Rs 600–700-crore of top-line once the projects in the pipeline are completed, according to Viswanathan.
Inorganic Growth
Finolex is considering inorganic growth as a strategy as it expands from a wire and cable company, and forays to one also offering lighting, electricals, and home appliance solutions.
If there is an existing business attractive enough for buying and response from the target side as well, then that can be looked at in the future, Viswanathan said.
