Rating Rationale
October 14, 2024 | Mumbai
Polycab India Limited
Long-term rating upgraded to 'CRISIL AAA/Stable'; Rated amount enhanced for Bank Debt
Rating Action
Total Bank Loan Facilities Rated Rs.9721 Crore (Enhanced from Rs.5000 Crore)
CRISIL AAA/Stable (Upgraded from 'CRISIL
Long Term Rating
AA+/Positive')
Short Term Rating CRISIL A1+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings.
The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities
Detailed Rationale
CRISIL Ratings has upgraded its rating on the long-term bank facilities of Polycab India Ltd (PIL) to ‘CRISIL
AAA/Stable from ‘CRISIL AA+/Positive’ and reaffirmed its ‘CRISIL A1+’ rating on the short-term bank facilities of the company.
The upgrade factors in sustenance of PIL’s strong business risk profile which is expected to further improve, led by improving
scale of operations, market leadership position and established brand in the cables and wires industry, diversified end user
segments catered to and strong operating efficiency supported by integrated nature of operations. The ratings also factor in the
company’s healthy financial risk profile, marked by strong capital structure and robust debt protection metrics. These strengths
are partially offset by exposure to intense competition and exposure to volatility in raw material prices.
Operating income has increased at a healthy compound annual growth rate (CAGR) of 18% over the five fiscals through 2024
driven by consistent capacity additions to meet growing domestic demand, extensive distribution network and higher
advertisement spends. Driven by strong revenue growth and brand recall, market share in the organised cables and wires
industry has grown to 25-26% in fiscal 2024 (from 18-19% in fiscal 2019).
Revenue grew 28% to Rs 18,039 crore in fiscal 2024 (as compared to Rs 14,108 crore in fiscal 2023), while the operating
margin remained healthy at 13.9% (as compared to 13.1% in fiscal 2023). Double digit revenue growth momentum is expected
to continue over the medium term, driven by robust demand and timely ramp up of capacities.
Although the cables and wires segment contribute ~87% to the overall revenue of PIL, the end user segment remains
diversified as the company has a varied product portfolio catering to multiple industries such as railways, ports, power
generation and distribution, manufacturing, building infrastructure, auto, mining etc . This helps the company tide over slowdown
in any end user industry. Revenue diversification is also supported by gradual scale up in the fast moving electrical goods
(FMEG) segment, which has increased at a healthy five-year CAGR of 15% over fiscals 2019-2024. Additionally, PIL has
transitioned from being a pure business-to-business player to a business-to-consumer (B2C) player (retail wires and FMEG),
with the B2C business contributing 30-31% to overall revenue in fiscal 2024.
The financial risk profile continues to be healthy, marked by strong capital structure and robust debt protection metrics. Overall
gearing was comfortable at 0.24 time as on March 31, 2024 (against 0.21 time a year ago) and interest coverage ratio at 22.21
times (35.4 times). Gearing and debt protection metrics are expected to remain comfortable over medium term as well, in the
absence of any major, debt-funded capital expenditure (capex). Yearly capex of ~Rs 1,000 crore planned for the next three
fiscals will be entirely funded by cash accrual.
In December 2023, IT raid was conducted on across various plants of PIL. Till date, PIL has not received any notice for tax
demand from the IT department. CRISIL Ratings will continue to closely monitor the developments in this regard and any
adverse regulatory action will remain a key monitorable.
Analytical Approach
CRISIL Ratings has combined the business and financial risk profiles of PIL, its subsidiaries and joint venture, as these entities,
collectively referred to as PIL, have strong business and financial linkages.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.
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Key Rating Drivers & Detailed Description
Strengths:
Market leadership position in wires and cables in India: PIL is a market leader in the Indian wires and cables industry,
with 25-26% share of the organised market, supported by its strong dealer-distributor network of over 3,800 entities. The
company has significant market share in west and south India, which contributed over 60% to its revenue in fiscal 2024.
PIL also has healthy revenue diversity as it caters to various end-user industries such as railways, manufacturing, ports,
power generation and distribution, building infrastructure, auto, mining etc. Revenue diversification is also supported by
gradual improvement in the FMEG segment, which commenced in fiscal 2014, witnessed robust growth over the past few
years and now contributes around 7% of revenue. Going forward, revenue may continue to increase, driven by strong
domestic demand, growing product mix across different price points and distribution network expansion.
PIL also has an EPC division which started as a forward integration initiative. It currently contributes to 3.5-4.5% of the
overall revenues.
Integrated operations: The integrated nature of operations results in high-quality output and operating efficiency. PIL has
done significant backward integration, including facilities to manufacture aluminum rods and polyvinyl chloride. Further, the
acquisition of Silvan Innovation Labs Pvt Ltd in fiscal 2023 helped develop new products to address evolving consumer
needs and provide innovative solutions.
Healthy financial risk profile: The financial risk profile should remain supported by the increasing cash accrual, strong
liquidity and absence of any major, debt-funded capex. Networth is estimated at a sizeable Rs 8,223 crore as on March 31,
2024 (against Rs 6,648 crore a year ago) with gearing (including letter of credit acceptances) at 0.24 time and total outside
liabilities to tangible networth ratio at 0.47 time. Interest cover and net cash accruals to adjusted debt (NCAAD) ratio
continue to remain healthy at 22.2 times and 0.87 times respectively in fiscal 2024 as compared to 35.4 times and 0.93
times in previous year. The financial risk profile is expected to remain healthy over the medium term backed by increasing
cash accruals, strong liquidity, and absence of any major debt funded capex plan.
Weaknesses:
Exposure to high competition: The wires and electrical cables industry comprises numerous unorganised as well as
organised players. While the company has gained market share over the past few years owing to new product launches and
its go-to market strategy, intense competition may continue to constrain scalability, pricing power and profitability.
Exposure to volatility in raw material prices: PIL’s main raw material includes copper and aluminium which has seen lot
of volatility in the past. These raw materials form ~75-80% of overall RM cost and any sharp variations can impact the
company’s operating performance. However, the company has strong risk mitigation strategies including hedging of
commodities. Further, strong pricing power wherein prices are reset on a monthly basis and majority of RM price changes
are passed on to the customer, mitigates the risk to an extent.
Liquidity: Superior
Liquidity is backed by unencumbered cash equivalent and liquid investments of Rs 2,234 crore and unutilised fund-based bank
lines of Rs 450 crore as on March 31, 2024. Available liquidity and expected cash accrual of over Rs 2,000 crore per annum (as
per CRISIL’s assumption) will comfortably meet yearly debt obligation of Rs 3-4 crores, incremental working capital requirement
and capex of ~Rs 1,000 crore per annum planned for the next three years.
Outlook: Stable
PIL will continue to benefit from its market leadership position in the wires and cables segment, growing FMEG business,
established distribution network and backward integrated operations.
Rating sensitivity factors
Downward factors
Weaker-than-expected operating performance, leading to lower revenue and moderation in the business risk profile
Operating margin declining to less than 10%, resulting in lower-than-expected cash accrual
Any large, debt-funded acquisition or capex
ESG profile
The environment, social and governance (ESG) profile of PIL supports its already strong credit risk profile. The sector can have
moderate environmental and social impact, driven by its plastic waste generation, intensive water usage and direct impact of
products on the health and wellbeing of customers.
Key ESG highlights
PIL has scaled up its renewable energy initiatives with the goal of reducing our carbon footprint. By augmenting their solar
panel installations, investing further in wind energy, and exploring new hydropower opportunities, PIL has increased its
renewable energy consumption to 1.26 lac GJ in fiscal 2024 from 1.24 GJ in the previous year.
PIL has reduced water withdrawal volumes to 2.64 lac kilo litres in fiscal 2024 from 7.62 lac kilo litres in the previous year by
investing in advanced water saving technologies at its plants, introducing sophisticated filtration and purification processes
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to ensure the reuse of water and improving irrigation efficiency.
The company aims to improve gender diversity across functions; Zero cases of discrimination were reported in FY24.
It is focussed on ensuring safety and security of employees. There were no fatalities in fiscal 2024 and the lost time injury
frequency rate ratio stood at 0.08
The governance structure is characterised by effectiveness in board functioning to enhance shareholder wealth presence of
investor grievance redressal mechanism and extensive disclosures
ESG is gaining importance among investors and lenders. The commitment of PIL to ESG will play a key role in enhancing
stakeholder confidence, given shareholding by foreign portfolio investors and access to both domestic and foreign capital
markets.
About the Company
Incorporated in 1996, PIL operates in the electrical industry and is a market leader in the Indian wires and cables industry, as
well as a fast-growing FMEG player. The company also operates in the engineering, procurement and construction business
and executes limited projects. It has 28 manufacturing facilities located across Gujarat, Uttarakhand, Maharashtra and Daman.
Revenue from operations stood at Rs 4,698 crore and profit after tax (PAT) at Rs 401.6 crore for the three months ended June
30, 2024, against Rs 3,889 crore and Rs 403 crore, respectively, in the corresponding period of the previous fiscal.
Key Financial Indicators (CRISIL Ratings-adjusted financials)
As on/for the period ended March 31, Unit 2024 2023
Operating revenue Rs crore 18,039 14,108
PAT Rs crore 1,803 1,283
PAT margin % 10.0 9.1
Adjusted debt/adjusted networth Times 0.24 0.21
Adjusted interest coverage Times 22.2 35.4
Any other information: Not Applicable
Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in
the 'Annexure - Details of Instrument' in this Rating Rationale.
CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available
information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent
to the issuance of the instrument when details on such features are available.
For more details on the CRISIL Ratings` complexity levels please visit [Link]. Users may also call the Customer
Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
Name Of Date Of Coupon Maturity Issue Size Complexity Rating Outstanding
ISIN
Instrument Allotment Rate (%) Date (Rs. Crore) Levels with Outlook
Fund-Based
NA NA NA NA 500.00 NA CRISIL AAA/Stable
Facilities
Non-Fund
NA NA NA NA 9221.00 NA CRISIL A1+
Based Limit
Annexure – List of entities consolidated
Name of entity Extent of consolidation Rationale of consolidation
Dowells Cable Accessories Pvt Ltd Full Subsidiary
Tirupati Reels Pvt Ltd Full Subsidiary
Steel Matrix Pvt Ltd Full Subsidiary
Polycab USA LLC Full Subsidiary
Polycab Australia Pty Ltd Full Subsidiary
Polycab Electricals & Electronics Pvt Ltd Full Subsidiary
Uniglobus Electricals & Electronics Pvt Ltd Full Subsidiary
Polycab Support Force Pvt Ltd Full Subsidiary
Techno Electromech Pvt Ltd Proportionate consolidation Operational and financial linkages
Annexure - Rating History for last 3 Years
Start of
Current 2024 (History) 2023 2022 2021
2021
Outstanding
Instrument Type Rating Date Rating Date Rating Date Rating Date Rating Rating
Amount
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Fund Based LT 500.0 CRISIL 02-01-24 CRISIL 03-08-23 CRISIL 03-08-22 CRISIL 12-05-21 CRISIL CRISIL
Facilities AAA/Stable AA+/Positive AA+/Positive AA+/Stable AA+/Stable AA/Positive
CRISIL
-- -- -- 02-08-22 -- --
AA+/Stable
Non-Fund
CRISIL CRISIL CRISIL CRISIL
Based ST 9221.0 02-01-24 CRISIL A1+ 03-08-23 CRISIL A1+ 03-08-22 12-05-21
A1+ A1+ A1+ A1+
Facilities
CRISIL
-- -- -- 02-08-22 -- --
A1+
Commercial CRISIL
ST -- -- 03-08-23 Withdrawn 03-08-22 -- --
Paper A1+
CRISIL
-- -- -- 02-08-22 -- --
A1+
All amounts are in [Link].
Annexure - Details of Bank Lenders & Facilities
Facility Amount ([Link]) Name of Lender Rating
Fund-Based Facilities 100 Bank of Baroda CRISIL AAA/Stable
Fund-Based Facilities 41 ICICI Bank Limited CRISIL AAA/Stable
Fund-Based Facilities 75 Citibank N. A. CRISIL AAA/Stable
Fund-Based Facilities 50 Bank of Baroda CRISIL AAA/Stable
Fund-Based Facilities 10 RBL Bank Limited CRISIL AAA/Stable
Standard Chartered Bank
Fund-Based Facilities 63 CRISIL AAA/Stable
Limited
The Hongkong and
Fund-Based Facilities 50 Shanghai Banking CRISIL AAA/Stable
Corporation Limited
Fund-Based Facilities 50 State Bank of India CRISIL AAA/Stable
Fund-Based Facilities 60 HDFC Bank Limited CRISIL AAA/Stable
Fund-Based Facilities 1 Bank of India CRISIL AAA/Stable
Non-Fund Based Limit 624 ICICI Bank Limited CRISIL A1+
Non-Fund Based Limit 400 Bank of Baroda CRISIL A1+
The Hongkong and
Non-Fund Based Limit 460 Shanghai Banking CRISIL A1+
Corporation Limited
Non-Fund Based Limit 1250 State Bank of India CRISIL A1+
Non-Fund Based Limit 209 Bank of India CRISIL A1+
Standard Chartered Bank
Non-Fund Based Limit 547 CRISIL A1+
Limited
Non-Fund Based Limit 3721 State Bank of India CRISIL A1+
Non-Fund Based Limit 135 Bank of India CRISIL A1+
Non-Fund Based Limit 345 RBL Bank Limited CRISIL A1+
Non-Fund Based Limit 420 HDFC Bank Limited CRISIL A1+
Non-Fund Based Limit 50 Bank of Baroda CRISIL A1+
Non-Fund Based Limit 120 HDFC Bank Limited CRISIL A1+
Non-Fund Based Limit 250 YES Bank Limited CRISIL A1+
Non-Fund Based Limit 430 Citibank N. A. CRISIL A1+
Non-Fund Based Limit 260 RBL Bank Limited CRISIL A1+
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
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CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
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