companies and we also have a crossover fund as anchors, said R Ramakrishnan, CEO, Polycab Wires, in an interview with ETNOW.
Edited excerpts:
What was the Polycab Wires issue like? What part of it is OFS and what part is fresh issue?
The OFS is Rs 945 crore and the fresh issue is Rs 400 crore. The whole issue size is Rs 1,345 crore and there is a little reservation for employees.
What about your anchor book? We understand it was subscribed by 25 investors. Could you talk about the significant and prominent ones?
We are really proud and happy to say we have as anchor firms Nomura, Reliance MF, Sundaram MF, L&T MF, Franklin Templeton, Birla MF, Chris Capital which is PE firm and SBI Life Insurance. We also have IDFC MF, Birla Life, Kuwait Investment Authority and Tata MF, Bajaj Alliance, Abacus and Edel Crossover and ICICI Lombard.
If you look at the anchor book, we have a great combination of mutual funds, foreign institutional investors, life insurance companies, general insurance companies and we also have a crossover fund. The participation from domestic mutual funds is really very encouraging.
Can you introduce the company to our viewers? Is it a new company hitting the markets?
Polycab is a company that has revenues of Rs 6,800 crore in FY18. Out of it, Rs 6,200 crore was in the cable and wire business and we had about Rs 500 crore in terms of the consumer electricals business.
In terms of the total business, 75-80% happens through distributors and dealers and approximately 15-20% is direct business with leading EPC contractors and other public sector undertakings.
Our government business is approximately 2-3%. I would further like to say that on the consumer electrical side, we have fans, LED lighting, switches, switchgear, conduit pipes and a little bit of products in terms of solar inverters, solar pumps and some agricultural pumps. So that is the product portfolio. Very happy to say that our products have been received very well in the market and a significant network expansion has happened.
What differentiates you from competition? What edge does Polycab have?
Fundamentally, distribution is a very key strength for us with 2,800 dealers and distributors and 100,000 retail outlets across India. Our inventory is kept across 30 locations in the country and we can reach our inventory to our customers in very quick time.
The quality that we offer and the technology that goes into our cables and wires is something that is very significant. We have a lot of backward integration in terms of copper and aluminium. We work with cathodes and ingots and from there, we make the rods and from the rods we draw the wires. That is a big differentiator.
On the consumer electrical side, we believe that the industry sees a lot of outsourcing but our belief is outsourcing never delivers the quality or the technology or the features that the consumers are interested in.
Manufacturing enables us to improve production processes, give the right innovation and be in a position to control your value chain in terms of costs much better. The other big differentiator for us is the brand. Polycab brand is very well known in the electrical segments.
With a higher dependency on the wires and cable segment, can you tell us if that poses any sort of a risk? Is there any plan to diversify the expected revenue mix over the next few years?
That is exactly why we have gone into consumer electrical from a situation where the cable and wire industry is Rs 53,000 crore. We have stepped into some industries that by themselves are worth about Rs 35,000 crore. So, by FY23, when the cable and wire industry is Rs 130,000 crore, the consumer electrical businesses that we are in will be worth about Rs 70,000 crore.
We have expanded the size of the cake tremendously. In terms of future diversifications, I really do not think there is a significant need. We will innovate with some newer products in the segments in which we operate.
Can you tell us about your joint venture with Trafigura? What is the current status of the manufacturing facility? What is the expected production capacity?
Trafigura is one of the global leaders in terms of distribution and trading in metals and certain other products. Trafigura sought a partnership with Polycab and we have set up a joint venture which can produce 20,000-tonnes per month. That is about 240,000 tonnes per annum in terms of conversion of cathodes into rods in terms of copper. Now, 50% will come to us and 50% will be going to Trafigura. The unit is called Ryker. I am happy to say that the Ryker plant will be commissioned in April and we might be able to start pilot production and probably commercial production in a not so distant future.
