Polycab Vs KEI Industries: India’s infrastructure story is playing out stronger than ever in the recent past. The Indian Government has allocated substantial funds for infrastructure, with a focus on roads, railways, power, infrastructure, and renewable energy. The real estate market also has been heating up with residential house sales touching an all-time high in FY23.
All of these trends are the perfect recipe for the growth of an underlying industry that would power this growth. It is none other than the Wires & cable Company that provides electricity to your home which comes from the power plants situated far away from the city.
Polycab Vs KEI Industries
So let us learn about two such Wire & Cable manufacturers and understand a bit more about their segments. Although both Companies manufacture the same product, they cater to slightly different markets. So let us understand who they cater to and how their financials compare against each other.
Polycab Vs KEI Industries – Company Overview
Polycab India
Polycab India is India’s largest integrated manufacturer of wires & cables and a prominent player in India’s Fast Moving Electrical Goods industry. The Company has 25 manufacturing facilities spread across 5 strategic locations across India: Gujarat, Maharashtra, Uttarakhand, Tamil Nadu and Daman.
The Company has 4 regional offices, 9 local offices, 17 experience centers, and 23 warehouses. The Company has a robust Pan-India presence with a network of 4300+ authorized distributors and 2.05 Lakh retail outlets.
Polycab is an undisputed leader when it comes to the Indian wiring & Cables segment with an approximate 22%-24% market share in the organized market. Launched in FY14, the Company’s FMEG segment has been a successful diversification. In the last 7 years, the FMEG segment’s revenue grew at 30% CAGR.
To scale the FMEG business, the Company is consistently ramping up its distribution. It has so far recognized 122 such districts with untapped potential. During FY23, 317 distributors were added in retail wires business and 371 distributors in the FMEG business.
The Wires & Cables business accounts for 89% of the Company’s sales and it saw a 17% growth since previous year. Cable exports alone contribute for 9.8% of the Company’s revenue. The FMEG business remained flat during the year, contributing to 11% of revenue.
KEI Industries
KEI Industries, just like its above-mentioned competitor is a top manufacturer of Wires & Cables (W&C) in India. Established in 1968, KEI is one of the top three organized Companies in the W&C market with a strong presence in domestic and international markets.
KEI’s product line is catered more toward heavy-duty industry applications. The product line varies from 220 kilo Volt (KV) Extra High Voltage (EHV) cables to 400 kV cables. The Company takes up EPC contracts from utility companies that require such high-tension cabling solutions.
KEI Industries’ business can be divided into three segments –
- Retail: The retail segment is the market for KEI’s residential wires, Low Tension, and High Tension wires. KEI Industries enjoys a strong brand that supports its presence in the retail segment. Currently, the segment contributes to 44% of the revenue and the Company continues the brand and dealership network.
- Institutional: In the segment, KEI offers its Extra High Voltage cables, stainless steel wires, and turnkey EPC Projects. The business is capital intensive, requires a greater amount of technical know-how, and hence has a higher barrier to entry.
- Exports: KEI exports to over 60 countries worldwide and has an office presence in 5 of them. The key export markets for the Company are Australia, Kuwait, Abu Dhabi, Nigeria, and Ghana. In FY23, exports accounted for 10% of the total revenue for the Company.
Polycab Vs KEI Industries – Industry Overview
The global economic turmoil of FY23 stood out for its resilient performance largely driven by consumption. Global pricing pressures continued due to geopolitical uncertainties and tightening financial conditions in the form of elevated inflation. Inflation stayed above the RBI’s upper tolerance band of 6% for nine months of the financial year.
Influenced by global uncertainties, Copper prices on the London Metal Exchange (LME) remained highly volatile during the year. Copper & aluminum are major raw materials in the production of Wires & Cables. Copper prices dropped from around $10,250 per metric tonne in April 2022 to a low of $7000 in July 2022. By the end of March 2023, prices rose to $9000.
Aluminium prices followed a similar trend falling from about $3,500 per MT in April 2022 to around $2,100 per MT in September 2022, then climbing back up to about $2,350 per metric ton by March 2023. Prices for PVC compounds, used in wire and cable insulation, were also erratic, tracking crude oil prices.
The Indian W&C industry is estimated to have grown in the low teens in FY23 to Rs. 68,000 Cr -73,000 Cr in size, contributing to 40-45% of the Indian electrical industry. Sectors like Power, Railways, Infrastructure, Oil & Gas, Telecom, Real Estate, Renewables, Defence, Automobiles, etc. are the largest demand drivers for the industry.
Organized players command a lion’s share of the market, at roughly 70%, while unorganized players largely dominate the rural geographies. The Indian W&C market is projected to grow to Rs. 90,000 – 95,000 Cr by FY26, on the back of several megatrends, including Government focus on infrastructure, residential real estate, railways, and increased demand for renewable power generation.
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Polycab Vs KEI Industries – Financials
Revenue & Net Profit
Polycab reported a revenue of Rs. 14,108 Cr in FY23 which increased from Rs. 12,203 in FY22, scaling its revenue by 16% that year. KEI Industries during the year increased its revenue by 40% from Rs. 5727 Cr in FY22 to Rs. 6912 Cr in FY23.
Polycab saw muted growth in FY21, while KEI Industries’ revenue dropped by 14% during the same period. However, both Companies have scaled their revenue by double digits in other years. Since FY19, Polycab’s revenue has increased by 15.4% CAGR as compared to the 13.06% CAGR of KEI Industries.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 4 Year CAGR |
|---|---|---|---|---|---|---|
| Polycab – Revenue | ₹ 7,955.98 | ₹8,829.96 | ₹8,926.54 | ₹12,203.70 | ₹14,107.77 | 15.40% |
| KEI Industries – Revenue | ₹ 4,230.98 | ₹4,887.80 | ₹4,181.54 | ₹5,726.99 | ₹ 6,912.33 | 13.06% |
Net profits of Polycab grew by a whopping 40%, from Rs. 917 Cr in FY22 to Rs. 1282 Cr in FY23. During the same period, KEI Industries grew its Net Profits from Rs. 376 Cr in FY22 to Rs. 477 Cr in FY23, growing at a rate of 27%.
Since FY19, polycab’s Net Profits have increased by 26.5% CAGR as compared to the 27.48% CAGR growth of KEI Industries. KEI Industries, a company with less than half the Net Profit of Polycab is growing its Profit at a long-term rate that is just 95 Bps higher than Polycab.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 4 Year CAGR |
|---|---|---|---|---|---|---|
| Polycab – Net Profit | ₹500.31 | ₹765.62 | ₹885.91 | ₹917.28 | ₹1,282.25 | 26.53% |
| KEI Industries – Net Profit | ₹180.75 | ₹256.29 | ₹273.41 | ₹376.02 | ₹477.34 | 27.48% |
Profit Margins
Polycab reported Operating Margins of 13.94% in FY23, as compared to 10.57% of KEI Industries. In the past 5 years, the OPMs come to around 11.4% and 8.3% respectively for both Companies. Polycab enjoys higher margins as it caters to residential consumers. Although KEI also caters to residential consumers, its major revenues come from the industrial segment.
The marginal difference between Polycab & KEI Industries is carried forward to Net Profit Margins. In FY23, Polycab reported net profit margins of 9.09% as compared to 6.88% of KEI Industries.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 5 Year Avg |
|---|---|---|---|---|---|---|
| Polycab – Operating Margins | 10.10% | 10.90% | 11.00% | 11.02% | 13.94% | 11.39% |
| KEI Industries – Operating Margins | 10.61% | 10.46% | 11.32% | 10.51% | 10.57% | 8.30% |
| Polycab – Net Profit Margins | 6.30% | 8.70% | 9.90% | 7.52% | 9.09% | 10.69% |
| KEI Industries – Net Profit Margins | 4.30% | 5.21% | 6.42% | 6.55% | 6.88% | 5.87% |
Return Ratios
Moving towards Return on Equity, both Companies are evenly matched with an ROE of 21% and 20% for Polycab & KEI Industries respectively. ROE of KEI Industries has greatly reduced from a high of 26.29% in FY19 and has stabilized at 20%.
In terms of return on Capital Employed, KEI Industries is ahead of Polycab with an ROCE of 29.25% as compared to 25.74% of KEI Industries. Both Companies have consistently maintained high return ratios above 20-25% in the past 5 years.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 5 Year Avg |
|---|---|---|---|---|---|---|
| Polycab – ROE (%) | 17.50% | 19.90% | 18.60% | 17.74% | 20.96% | 18.94% |
| KEI Industries – ROE (%) | 26.29% | 22.32% | 16.43% | 19.25% | 20.21% | 20.90% |
| Polycab – ROCE (%) | 27.90% | 26.40% | 22.30% | 20.27% | 25.74% | 24.52% |
| KEI Industries – ROCE (%) | 25.71% | 23.76% | 20.81% | 27.74% | 29.25% | 25.45% |
Debt Analysis
In terms of Debt to Equity, we find Polycab to be a virtually debt-free Company with a debt to equity of 0.02x. KEI Industries, on the other hand, has a debt to-equity of 0.11x. KEI Industries had significantly increased its borrowings back in FY19, as its ratio reached a 5-year high of 1.04x. The Company has consistently brought down this ratio to just 0.11x.
As the Company have very low debt we find them in comfortably high interest coverage ratios. Polycab with an ICR of 29.57x & KEI Industries with an ICR of 0.11x, both of them above the minimum ICR requirement of 1.5x.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 5 Year Avg |
|---|---|---|---|---|---|---|
| Polycab – Debt to Equity | 0.10 | 0.04 | 0.05 | 0.01 | 0.02 | 0.04 |
| KEI Industries – Debt to Equity | 1.04 | 0.42 | 0.21 | 0.18 | 0.11 | 0.39 |
| Polycab – Interest Coverage | 13.80 | 35.60 | 28.70 | 34.76 | 29.57 | 28.49 |
| KEI Industries – Interest Coverage | 3.05 | 3.53 | 7.29 | 13.57 | 19.50 | 9.39 |
Polycab Vs KEI Industries – Key Metrics
We have now understood both the Companies’ business and take a good comparative look at their financials. Now let us look at a few Key Metrics.
| Particulars | Polycab | KEI Industries |
|---|---|---|
| CMP | ₹5,271.65 | ₹3,626 |
| Market Cap (Cr.) | ₹66,540 | ₹27,228 |
| EPS | ₹84.87 | ₹52.94 |
| Stock P/E (TTM) | ₹40.02 | ₹51.54 |
| ROE (%) | 20.96% | 20.21% |
| Book Value | ₹479.14 | ₹316.72 |
| Price to Book Value | 9.25 | 9.53 |
| Promoter Holding | 65.80% | 37.10% |
Read more: Best Debt-Free Chemical Stocks In India
Conclusion
India’s massive infrastructure push is fueling strong growth prospects for the wires and cables industry. The two major players, Polycab and KEI Industries have demonstrated robust financial performance driven by this opportunity.
Polycab leads the organized wires and cables market with a 22-24% share and diversification into fast-moving electrical goods. KEI focuses more on industrial heavy-duty cables and EPC projects.
Both companies reported double-digit revenue growth in FY23, with Polycab’s profits up 40% and KEI’s up 27%. Polycab has higher margins from its residential focus, while KEI has better capital efficiency.
With their strong market positioning and financial strength, Polycab and KEI are well-placed to capitalize on India’s infrastructure growth driving demand for wires and cables.
Written by Nasir Hussain
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