Electrical goods company Finolex Cables is now seeing green shoots emerging in the wires business, with new residential projects picking up in the country. In an interaction with Moneycontrol, Deepak Chhabria, Executive Chairman, Finolex Cables, said that several residential projects are coming up, especially in the South.
“Our major product line is wires used in housing and commercial establishments. But new projects are coming up, especially on the residential side. So, I am hoping that the worst is over and there is a V-shaped recovery from now on,” he added.
For the September quarter (Q2), Finolex Cables posed a 10 percent Y-o-Y decline in net sales at Rs 639.4 crore. Net profit was down 43.8 percent to Rs 69 crore Y-o-Y in Q2FY21, though it improved sequentially by 97.5 percent.
Chhabria said that business was close to zero in April and May due to the Coronavirus-led lockdown and started picking up gradually from June. He said that monthly sales are at pre-COVID-19 levels right now.
“Revenue started picking up from July onwards. In the last two months, we also saw a sudden requirement for wires for making harnesses for cars. Maybe, it is because the pipeline was empty or due to the fact that car/bike demand is high since COVID-19 fears have motivated people to travel by their own vehicle,” he said.
For Finolex Cables, the electrical cables business is the largest segment, contributing close to 70 percent to the revenue. This is followed by copper rods and communication cables. Finolex Cables is the largest manufacturer of electrical and telecommunication cables in India.
Sales data also show that the real-estate sector has started seeing growth amidst COVID-19. According to JLL, India’s residential market was more active in Q32020, with sales increasing by 34 percent versus Q2 2020. Mumbai accounted for 29 percent of the total sales in the quarter, while 22 percent of sales was contributed by Delhi-NCR. Growth in sales activity was also driven by stronger demand in Chennai, Hyderabad, and Pune.
The laggards and emerging segments
Chhabria explained that among the different sectors, the telecom sector has seen a slump in business. “In the fibre optic cable space, we have seen close to a 35 percent drop in demand,” he said.
“On the other side, remote working has led to demand for broadband and WiFi at home. So there is a demand increase for small fibre cable,” he said.
The government push for optical fibre cable will also aid the business and boost demand for telecom companies, according to him. The tenders for connecting gram panchayats through optical fibre cable will be released in the near future.
During his Independence Day Speech on August 15, Prime Minister Narendra Modi said that in the coming 1,000 days, every village in the country will be connected with optical fibre cable. He added that this will reach all the 600,000 villages within 1,000 days.
In the last 2-3 years, Finolex has expanded into allied electrical products like switches, fans, switchgear and water heaters. This segment is seeing a 20 percent plus growth, he added.
Chhabria added that the company is also planning to enter two other categories in the electrical goods space. He, however, did not mention the categories. Finolex Cables has also set up a new manufacturing plant in Goa that is in the trial stage.
“The Goa plant will manufacture electrical conduits. It will take another year for this facility to go live and will help us connect with builders for new projects at an early stage,” he added.
Change in distribution strategy
Apart from the channel partner distribution, where Finolex would engage with electrical shops that would sell to electricians, Chhabria said that there is a new strategy to sell.
“We have channel partners, but now, we also have a two-tier network where a distributor, who will have vans and sell to say 200 small shops in smaller towns. Through these efforts, we will be able to increase our retail points from 40,000 to 1,50,000,” he added.
Change in brand name
While Finolex Cables has expanded from being a wires and cables business, the brand still has the ‘cables’ tag attached to it.
Chhabria explained that as the business expands into new product lines in the electrical goods space, they could consider a change in name.
“All products will always carry the ‘Finolex’ tag. But as we enter and move along new product lines, and as they pick up in the overall revenue pie, we may consider calling the company Finolex, instead of Finolex Cables. But it hasn’t been decided as yet,” he added.