Polycab, India’s leading wires and cables (W&C) manufacturer, is the second-order beneficiary of infra and real estate growth. The lower interest rate, government capex, real estate cycle, power and renewable capacity building are all expected to support the high growth aspirations of the W&C segment. The fast-moving electrical goods (FMEG) segment, building traction in its portfolio of fans, lighting, solar inverters and switches, is inching to a larger size and profitability. The EPC division has a stable order-book ensuring next three-year visibility. The company has plans to invest ₹6,000-8,000 crore in the next five years to capture demand in its W&C segment.
An announcement by UltraTech in February 2025 on entering the cables and wires segment with a ₹1,800-crore investment made a short-term impact on the stock prices of the sector, which have since recovered. Polycab is the leader in the segment with a wide range of SKUs, deep channel connect and appropriate approvals with customers. The company should deliver on its growth despite the threat of new entrants.
The strong growth prospects are fairly factored into valuations at 39 times one-year forward earnings. Hence, we recommend investors have the stock in their radar and accumulate the stock on dips.
Wires and cables
The leading segment accounted for 84 per cent of revenues in FY25 and reported 23 per cent CAGR revenue growth in FY23-25. The recent Q1FY26 also reported 31 per cent growth year on year. The segment has gained from sustained government spending in the last four years. With government capex reaching ₹11 lakh crore in FY25 at 22 per cent five-year CAGR, even if growth slows down – which it is expected to, the high spending levels will sustain growth for the W&C segment of Polycab.
The company intends to spend ₹6,000-8,000 crore in the next five years primarily in this segment to create additional capacity to match the pace of demand. The segment has a high asset turnover of 4-5 times, which implies a continued growth runway if executed. The company expects to clock 1.5 times industry growth, which itself will be 1.5-2 times GDP growth of the country.
Power infrastructure and real estate activity are the other two drivers. The company is setting up a EHV (extra high voltage) cable manufacturing facility, which will allow participation in this segment. With a mandate to double India’s power generation capacity by 2031-32, transmission and generation will offer strong growth. Polycab’s solar cables are addressing the solar energy facet, expected to be a large contributor to the new power installation. The lower interest rates (lower EMIs) and higher disposable income (through lower direct and indirect taxes) should support the real estate cycle, benefiting the division.
International exports account for 6 per cent of segment revenues currently and the company aims to increase it to 10 per cent. The US accounts for a third of the company’s exports. The tariff situation will impact exposure to the large market. The company has presence across West Asia, Europe and Australia. It should make up for the share in other regions.
FMEG and EPC
Polycab’s FMEG division accounts for 7 per cent of FY25 revenues and reported 15 per cent CAGR in FY23-25. The division has been re-emphasised in the last two years with the expansion of channels, presence across fans, lighting, solar inverters and switches. Premiumisation and gaining operational scale has aided the division report EBIT-level profitability in the last two quarters. In the next few years, the company aims to achieve 8-10 per cent EBITDA margins.
The EPC division undertakes cabling projects and accounts for 8 per cent of FY25 revenues, having grown at 108 per cent CAGR in the last two years. The company has ₹8,000-crore order-book for the next three years under Bharat Net (high-speed Internet scheme with BSNL) and RDSS (Revamped Distribution Sector Scheme – power distribution scheme) projects with an outlook for stable high single-digit margins in the next three years.
Financials, valuation
The company reported an average EBITDA margin of 13.4 per cent in the last three years. It expects to report 11-13 per cent EBITDA margin in the long term. The FMEG division and its return to profitability from the scale of operations from a wide portfolio with an expanded channel is an incremental support for margins. Exports in the W&C division with premium realisations is the other driver for strong margins. But the company is adding capacity as well along with R&D to support innovation and automation and will have to spend for advertising and promotion to deliver growth in the FMEG division. Despite high margins currently, the company expects high operational costs to temper the margin profile/operating leverage. It also has a net cash position of ₹3,100 crore as on June 30.
Polycab is trading at 39 times one-year forward earnings, which is a 11 per cent premium to last five-year multiple of 35 times. The strong growth outlook is factored into valuations. For a margin of safety, we recommend investors accumulate the stock on dips.
Published on August 30, 2025
