Detailed Narrative
Q1 FY27 Performance Overview
Finolex Cables reported a strong Q1 FY27 with revenue from operations at INR 2,013 crores, a 44.19% YoY increase from INR 1,396 crores in Q1 FY26. Profit Before Tax (PBT) surged by 61.98% to INR 277 crores, and Profit After Tax (PAT) rose by 59.71% to INR 221 crores. This led to an improvement in PBT margin from 11.8% to 13.4% and PAT margin from 9.6% to 10.7% compared to the previous year's first quarter.
Segmental Performance Highlights
The Electrical Cables segment recorded a 46.51% YoY revenue growth, reaching INR 1,767 crores, driven by strong volume-led growth in automotive, battery, flexible wires, solar, and agricultural applications. Communication Cables demonstrated exceptional performance, with revenue increasing by 61.92% to INR 176 crores and achieving margins close to 30%. Exports were a significant contributor, accounting for INR 50 crores, nearly matching the previous year's total export value.
Communication Cable Margins and Raw Material Dynamics
The high margins in communication cables (close to 30%) were attributed to the consumption of older, lower-cost raw materials, particularly fiber. Management cautioned that these margins are not sustainable and are expected to normalize📎 to low-double digits once the existing inventory is depleted and new, higher-cost raw materials are procured. Fiber prices, which were USD 5-6 per kilometer last December, surged to USD 17-18 and are currently settling around USD 12-13 per kilometer.
Preform Production and Fiber Capacity Expansion
The company has commenced preform production and expects stability in the next couple of months. It has decided to accelerate the draw tower expansion from 4 million to 8 million kilometers in one go, rather than phased, due to a global shortage of fiber. The overall capex for FY27 remains approximately INR 300 crores. A decision on Phase 2 expansion for preform capacity will be made after further study.
FMEG and Copper Rod Segment Challenges
The FMEG segment continued to be a 'weak link,' with limited growth primarily due to supply chain issues, specifically the unavailability of commercial LPG, which impacted fan manufacturers during a hot summer. Despite these challenges, the company maintains its target of INR 5 billion in FMEG revenues by FY28. The Copper Rod segment faced a complete shutdown during the quarter due to continued restrictions on LPG availability, resulting in a revenue of only INR 8 crores compared to INR 403 crores in the prior year.
Export Strategy and Data Center Opportunity
Finolex Cables is adopting a more aggressive and systematic approach to exports, with a revamped team focusing on building long-term relationships across multiple geographies. The company capitalized on immediate opportunities in the US and Europe for optic fiber cables, contributing INR 30-40 crores to communication cable revenue. The management sees a substantial opportunity in India's data center market, driven by AI and hyperscalers, with the capability to produce high-fiber count cables (up to 14,000 fibers).
Germanium Supply Chain and Contractual Terms
The availability of Germanium tetrachloride, a critical raw material for preform manufacturing, remains a concern due to its restricted nature and long lead times, leading to a 'hand to mouth situation.' While the company has sufficient supply for the calendar year, it requires careful planning and daily follow-up. Management noted that long-term contracts for such raw materials are rare globally, with most agreements not exceeding one year.