Polycab sees opportunities in EHV cable business

Polycab India sees good business potential in extra high voltage (EHV) cables, according to R. Ramakrishnan, the company’s CEO. Ramakrishnan was addressing a press conference in Mumbai, ahead of the company’s initial public offering (IPO) of equity shares that is scheduled to open on April 5, 2019.

Currently, Polycab produces power cables up to 220kV and there are plans to manufacture cables of even higher voltage ratings in the coming years. However, as the business of EHV cables is highly specialized, the company is scouting for suitable partners. Such partnerships could be technical and could be with or without equity partnership by the chosen partner.

The business of EHV cables, apart from manufacturing also involves project execution, which typically means laying of the cables. “We are enhancing our capabilities in the project execution space,” remarked Ramakrishnan. Currently, Polycab does have a project execution division that had clocked business of around Rs.200 crore during FY18.

It may be mentioned that in 2008, International Finance Corporation (IFC), the private funding arm of World Bank, had picked up 15 per cent equity stake, worth Rs.400 crore, in Polycab India Ltd. At that time, it was planned that this money will be invested in the EHV cable business. According to information available with T&D India, Polycab India did form a joint venture with an international cable manufacturer, with a view to produce EHV cables. However, this partnership did not make the desired progress and was subsequently called off. The investment made by IFC was then used towards general capacity expansion of the cables business.

The EHV cable business in India is witnessing slow but steady growth in recent years. Multinational players like Brugg, J-Power and Prysmian are already present in the market, either in partnership with Indian companies or solo. Others like Elsewedy Electric have announced their plans of entering the Indian EHV cable market.

Ramakrishnan also observed that Polycab India had made around Rs.1,000 crore worth of capital expenditure over the past five years in the wires and cables business. The company has recently diversified into consumer electrical equipment like LED lamps, fans, switches, switchgear, water pumps, etc.

Polycab India has a share of 18 per cent in the organized wire and cable market and that of 12 per cent in the total market. The total wire and cable business in India is estimated at Rs.52,500 crore. Of the total sales of Polycab India, in the wire and cable business, nearly 80 per cent is through dealers and distributors, another 15 per cent comes from institutional sales (offtake by companies like Siemens, Larsen & Toubro, etc) and the remaining 5 per cent is accounted for by exports.

In FY18, Polycab India exported wires and cables worth Rs.300 crore to around 40 countries. The Mumbai-headquartered company recently won an export order of specialized cables, worth $137 million, destined to a petroleum refinery in Africa. Around 40 per cent of the  value of the order came as advanced payment, Ramakrishnan observed.

Photo captions:

Main photograph shows Inder T. Jainsinghani, CMD, Polycab India Ltd (right) along with R. Ramakrishna, CEO, Polycab India Ltd at the company’s IPO-related press conference in Mumbai on April 2, 2019.

Smaller photograph shows samples of cables manufactured by Polycab India Ltd