Detailed Narrative
Q3 FY25 Performance Overview
R R Kabel reported its highest-ever revenue for the nine-month period of FY25 at ₹5,400 crores, marking a 12% YoY growth. For Q3 FY25, revenue reached ₹1,782 crores, a 9.1% YoY increase. Operating EBITDA stood at ₹111 crores, and Profit After Tax (PAT) was ₹68.6 crores. The company noted a marginal reduction in EBITDA and PAT primarily due to volatile commodity prices in H1 FY25, but sequential growth in margins indicated a stabilizing trend.
Wire and Cable Segment Dynamics
The Wire and Cable segment recorded a Q3 FY25 revenue of ₹1,543 crores, an 8% YoY growth, and a 9M FY25 revenue of ₹4,732 crores, up 10% YoY. Segment profit for Q3 FY25 was 7%. Volume growth for 9M FY25 was around 6% overall, with cable growing 20% and wire showing a negative 3%. Domestic cable volume grew 18%, while domestic wire declined by 1.9%. Exports, contributing 27% to Q3 revenue, saw an 11% YoY increase despite global challenges🌐, with cable exports growing 7% and wire exports declining by 9%.
FMEG Segment Growth and Breakeven Path
The FMEG segment continued its robust growth trajectory, delivering approximately ₹240 crores in Q3 FY25 revenue, maintaining a consistent 20-25% quarterly growth. For the nine months of FY25, FMEG revenue grew approximately 25% YoY. Fans remained the largest contributor at 45% of segment revenue, followed by lights (32%) and appliances/switches (23%). The company is committed to achieving breakeven in the FMEG business by Q1 FY26 (June '25 quarter) at the EBITDA level, supported by operational cost savings and an optimized product mix.
Capex and Capacity Expansion Plans
R R Kabel plans a significant capex of approximately ₹1,200 crores over the next three years, starting April 2025. This investment is expected to boost the top line by an additional ₹4,000-4,500 crores annually. A substantial portion, almost 80%, of this capex will be directed towards the cable segment, primarily for brownfield expansion at its Waghodia facility. The company anticipates a revenue return of 3x to 3.5x on cable capex. Current capacity utilization stands at 65-70% for wires and 90-95% for cables.
Export Market and US Certifications
Exports contributed 27% to Q3 FY25 revenue, growing 11% YoY, with Europe being the largest market (over 50%) and the US contributing about 10% of export revenue. The company is actively securing new certifications for the US market, with one to two product certifications already received and more new products planned for the US market from next year. Management expects export growth to normalize, backed by these additional certifications and easing Red Sea crisis impacts and freight charges.
Margin Outlook and Drivers
Management expressed optimism about future margin improvements, targeting an approximate 8% segment profit in the wire and cable business for Q4 FY25. The company aims to achieve double-digit EBITDA margins in the coming years, first in the wire and cable segment, and then at the company level by FY28. Key drivers for margin expansion include a favorable product mix with high-margin products like export cables and solar cables, along with benefits from increased scale and operational efficiencies.
Industry Demand and Supply Outlook
Despite a moderated GDP growth and slowdown in H1 FY25, the demand for cables and wires remains resilient. Management anticipates a significant boost from higher government spending on infrastructure and housing activity in coming quarters. They believe that even with planned industry-wide capacity additions, there will be a supply shortage for cables for the next three to four years, driven by government initiatives in solar power generation and infrastructure, as well as growing export opportunities.