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Sustained growth momentum continues in C&W

We met with the management of Polycab India (POLYCAB) to get an update on business trends across Cables & Wires (C&W), FMEG, and EPC segments, RM price trends, and the company’s key strategic initiatives.

* Management reiterated strong demand momentum in the C&W business, led by broad-based growth across power, infrastructure, real estate, and industrial capex, supported by rising opportunities in renewables and data centers. The company reiterated that India’s C&W market will grow 2.0x of real GDP growth, with POLYCAB estimated to jump 1.5x of the industry growth. The company maintains a unique leadership position in C&W with a product portfolio, distribution network, and capacity base ~2-3x that of its nearest competitors. It reported strong growth in 2Q and expects momentum to continue in 3QFY26E.

* The company’s FMEG segment contributes ~7-8% of total revenue with six major categories – fans, lights and luminaries, switches, switchgears, conduit pipes & fittings, and solar inverters. Solar inverters are the largest sub-segment. The company intends to maintain profitability in the FMEG segment with improvement YoY without the addition of a new product category.

* Under EPC, POLYCAB is executing two projects, RDSS and BharatNet. Under BharatNet, its order book stood at INR80b, of which INR45b is for C&W supplies (for the next 3-4 years) and the balance of INR35b is for maintenance (over the next 10 years). Since the company has excess capacity, it can easily accommodate such types of projects. Margin in this segment is in high single digits.

We are structurally positive on POLYCAB, given its leadership position in the C&W segment, positive sector outlook, robust balance sheet, and strong return ratios. We reiterate our BUY rating with a TP of INR9,110 (based on 40x Dec’27E EPS).

C&W: Core growth engine with multi-year visibility

* The C&W segment continues to witness strong demand tailwinds backed by robust demand from infrastructure, real estate, power transmission, and industrial capex. Over the last few years, the segment has clocked a ~12-14% CAGR, and industry growth is likely to be sustained at these levels over the medium to longer term, given strong underlying demand across key segments. The Indian C&W market stood at INR900b, out of which INR650b is from cables and INR250b is from wires.

* In cables, demand from power infrastructure is emerging as the largest growth drivee, led by the government’s acceleration of transmission project approvals and the massive scale-up in renewable capacity from 235GW to 500GW (this alone represents an INR500–550b opportunity for C&W over the next few years). The power sector has the largest consumption of cables, as ~15-20% of the project cost accounts for cables, followed by the data center, in which cables account for 8-10% of the project cost. However, in the rest of the sectors (rail, roads, infra, and real estate), cables account for 3.0-3.5% of the project cost. In data centers, the cable requirement per MW is ~INR30m. Going forward, the defense and electric vehicles are also expected to support overall demand growth.

* The cables industry is highly organized at ~80%, while wires have ~55%–60% organized mix. POLYCAB, with its ~26% share in the organized market, remains the market leader, supported by a product portfolio and distribution network nearly 2x that of peers and a capacity base 3x larger than the nearest competitor. Cables are expected to grow faster than wires, with industry growth of ~15-16% in cables and ~9-10% in wires, translating into a combined ~12-14% CAGR over the next 5–10 years.

* In the wires segment, demand is predominantly led by real estate at ~70%, while industrial applications account for the balance of ~30%. The ongoing upcycle in residential and commercial construction, coupled with increasing penetration in Tier 3-5 cities, is likely to drive strong growth momentum. Management stated that it has actively targeted the semi-urban and rural market through its “Etira” brand, priced ~10% below its main brand (~5% premium to unorganized players' products), aimed at capturing share from unorganized players that dominate smaller cities. Wires are sold entirely through distributors, providing higher market reach and scale efficiency.

* The company’s capacity utilization currently stands at ~70%–80%, providing adequate headroom for growth. To support rising demand, the company has outlined INR60b–80b of capex over the next five years, with INR14b–15b planned each year.

* Margins in the C&W segment remain healthy and stable. Domestic C&W margin is ~9-10%, while export (primarily cables) margins range between ~15% and 30% (based on geographies and product types), given a higher-value mix and institutional nature of orders. Within cables, Extra High Voltage (EHV) products command mid-teen margins, supported by strong demand-supply dynamics, while Low Voltage (LV) and Medium Voltage (MV) cables operate at ~9–10% margins. The company’s strong technical capabilities and its extensive product certifications provide a distinct competitive advantage.

* Exports have steadily scaled up, contributing ~6% of the revenue in FY25, with a target to reach ~10% by FY30. The addressable export opportunity for the company is USD100b within the global C&W export market at USD170b. Export sales are well-diversified across geographies with the Middle East (40%), the US (16%), Europe (19%), South America (14%), and Australia (8%).

* On the domestic front, POLYCAB’s distribution network of 4,300 partners contributes ~90% of total revenue, displaying the strength of its channel network. Distributors typically hold three weeks of inventory, with prices revised on a monthly basis to reflect fluctuations in copper and aluminum prices. Copper purity of ~99.97%, used by organized players, remains a key differentiator vs. unorganized players. The company does not expect a decline in copper prices over the medium term, ensuring stable pricing and margin trends.

* The company remained focused on innovation and R&D with 10,000 SKUs across C&W (vs. 7,000 for the nearest competitor), supported by a dedicated R&D team of 400 engineers and over 2,000 staff. The company continues to invest in product efficiency, design improvements, and certification-led quality standards, which are critical entry barriers in the organized cable market.

* Further, the management does not expect any major impact from new competitors, as the company has a strong brand, an established dealer network, large scale, and proven execution capabilities.

FMEG: gradual progress with margin expansion potential

* The FMEG segment contributes ~7%–8% of revenue, with six key categories being solar inverters, fans, lighting, switches, switchgear, and conduits. Solar inverters currently form the largest business, while fans and lighting remain key focus areas.

* The segment is not capital-intensive, though capex may increase over the next 2-3 years. It expects FMEG margins to rise from ~1–2% currently to ~7–8% over the next five years, supported by operating leverage and product mix improvement.

* Except for solar inverters, which are outsourced, all products are manufactured in-house. The fans division, though currently loss-making, has expanded capacity from 3.5m to 9.5m units, adding 6m units in FY25.

* The company intends to remain focused on its current six categories rather than expanding into new ones. Under Project Spring, it targets to grow its FMEG revenue at 1.5-2.0x the industry growth rate, while targeting an EBITDA margin of ~8-10%.

EPC: strategic business with a healthy order book

* In the EPC segment, the company has two main projects: the RDSS and BharatNet projects. The BharatNet project alone has an order book of INR80b, with INR45b to be executed over the next 3–4 years by way of C&W supplies, and the remaining INR35b is a 10-year maintenance contract. Margins are expected to remain in the high single digits.

* The EPC business is not working-capital intensive, with receivables at 60 days. Moreover, supply to EHV projects requires specific EPC supplier approvals, which the company has successfully obtained.

* While EPC’s contribution is gradually declining, the business remains strategically relevant in strengthening POLYCAB’s institutional relationships and enhancing the cable business’s credibility in large-scale infrastructure projects.

Valuation and view

* We estimate a CAGR of 18%/22%/21% in revenue/EBITDA/EPS over FY25-28. POLYCAB has benefited from continuous capacity expansions and sustained a healthy margin (~13-15%) in the C&W segment. We project a stable margin of ~14% over FY26-28, given the company’s operational strength, an increase in contribution from the EHV capacity (expected from FY27), and export growth.

* Cumulative FCF is expected to stand at INR43.4b during FY26-28, despite increased capex intensity. Net cash is likely to increase to INR48.3b by FY28 vs. INR29.4b as of Sep’25. We remain structurally positive on POLYCAB, given its leadership position in the C&W segment, positive sector outlook, robust balance sheet, and strong return ratios. We reiterate our BUY rating with a TP of INR9,110 (based on 40x Dec’27E EPS).

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