Ladies and gentlemen, good day, and welcome to Polycab India Limited Q2 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gandharv Tongia, Chief Financial Officer from Polycab India Limited. Thank you, and over to you, sir. Thank you, operator, and good afternoon, everyone. I hope all of you are doing well. It is a pleasure to have you on the call. As operator mentioned, my name is Gandharv Tongia, and I am the CFO at Polycab India Limited. Thank you for joining us today to discuss our Q2 earnings. During the call, we'll be referring to the presentation, financial results, and condensed financial statement, which are available on the stock exchanges as well as investor relations web page of our website. It can also be downloaded through QR code on slide number 10 of earnings presentation. From our management team, we have with us our Chairman and Managing Director, Inder Jaisinghani. Let me now hand it over to him for his opening remarks. Good afternoon, everyone. We continued with our strong business performance in Q2, posting highest ever Q2 revenue in the current year. More importantly, we are also progressing well on our long-term strategic agenda on focusing on sustainable value creation across B2B and B2C businesses. The strong domestic economy with structural reform, reforms focus on the infrastructure development across almost all our product categories. Given our high power value, I believe we are ideally placed to take advantage of the market opportunity and grow steadily to achieve our FY 2026 goals. I now request Gandharv Tongia to take you through our earnings presentation. Thank you, Inder bhai. Before I take you through the financial numbers for the quarter, let me give you a flavor of the macro environment. The macro has been a bit of a mixed bag during this quarter. Our economy is in choppy waters, facing twin shocks of a slowdown in economic growth accompanied by high level of inflation. The three major world economies, U.S., China, and the Eurozone, are facing growth decapitation, while emerging market economies are infected by currency depreciation, reserve losses, and foreign fund outflows besides the ripple effect of global and domestic inflation. Over the past one year, the global economy has gone through a fundamental shift from one of relatively predictable economic environment with low interest rates and low inflation to a world with more fragility, greater uncertainty, and geopolitical confrontation. Despite these global challenges, Indian economy is relatively stable with improvements in capacity utilization, buoyant formal job creation, significant bank credit expansion, and government continued surge on capital expenditure. The central government spending on rural development, roads, and railways has progressed at a relatively healthy pace. Capacity utilization of manufacturing sector improved from 73% in Q4 October 2022 to 74.3% in Q1 September 2023, and is at the highest level it has been over the past three years. We believe that the domestic economy is likely to remain resilient in H2, with rural demand catching up and urban demand likely to improve further with the typical upturn seen in the second half of the year. Moving on to the presentation. Please refer to slide number four. For the quarter ending September 2022, our consolidated revenue grew by 11% year-over-year. Please note here that this growth has been achieved on a high base of last year, whereby high commodity prices had helped the sector post good sales numbers. In comparison, the current quarter sales has been achieved in a decreasing commodity prices and increasing inflationary environment, primarily on the back of strong volume growth in cables and wires business. EBITDA margin for the company improved by 307 basis points year-over-year and 149 basis points quarter-on-quarter to 12.8% on account of strong growth in export and judicious pass-through of the benefit of decrease in commodity prices. A detailed break-up of the other income and finance costs have been provided on slide 14 of our earnings presentation. PAT for the quarter increased by 37% year- on- year, with PAT margin improving by 154 basis points year-over-year to 8.1%. On slide five, we have presented the key numbers for the first half of the year. Our revenue in H1 FY 2023 grew strongly by 25% year-over-year. EBITDA was up by 33% with 12.1% margin, and PAT grew by 82% year-over-year. The growth percentages are seemingly higher on account of a weak base. Moving on to segment-wide performance, please refer to slide number six. Our wires and cable business continued the strong momentum, with sales growing 13% year-over-year on a relatively healthy base. Despite softness in commodity prices, both domestic distribution as well as institutional business posted healthy growth. Revenue growth was driven by volume sales growth, which grew in double digits on a year-over-year basis. The highlight of the quarter was the strong momentum in the export business, which exhibited a remarkable growth of 75% year-over-year on a healthy base, led by strong orders from USA, Europe and Australia. Globally, we are seeing good demand from sectors like oil and gas, renewables and infrastructure. Overall export business contributed to 13% of the consolidated revenue in Q2 FY 2023, up from 6.7% last quarter. Our focus on achieving consistent double-digit contribution target over a mid-term for this business remains intact. EBIT margin for cable and wire segment increased by three and four basis points year-over-year to 11.7%, mainly driven by exports and judicious price revisions. Please refer to slide seven for an update on FMEG business. The quarter was soft for FMEG business as it de-grew 12% year-over-year on account of subdued demand environment due to high inflation, especially from rural markets. This was further accelerated by for us as we are in the midst of rearrangement of our distribution strategy, which I had explained during the last quarter earnings call. This transition is a multi-quarter journey, which is expected to be completed by the end of the current fiscal. One should consider FY 2023 as a base year for FMEG business and expect the business to post decent growth from FY 2024 onwards. During the quarter, the fan business, which has been our largest revenue generator in FMEG product portfolio, was initially affected on account of an off-season. The switch business which was affected due to supplier side challenges regained its growth momentum in the Q2 as we started production in our own manufacturing plant, posting 123% quarter-on-quarter growth. We expect strong sales momentum to continue in H2 FY 2023 as well. Last year, we took a strategic decision to merge the HDC and LDC verticals. We have started to realize the benefits of this merger in the form of operational efficiencies and cross-selling. With similar thought, we have taken two very important strategic decisions during the quarter of merging the fans vertical with lights and luminaires vertical and merging the retail wire vertical with switches and switch gear vertical. We found significant overlap between the distribution channels of these verticals, which we can optimize by merging them as well as generate higher business through cross-sell, availing larger share of the customer wallet. The optimization will also help in faster rolling out of the GTM initiative at a leaner cost base. We can also streamline the marketing and influencer management platform to increase efficiency. Moving on to slide eight, which gives us an update on our other businesses, which largely comprises of our strategic EPC business, which drove revenue of INR 826 million in Q2, a growth of 4% year-over-year. Segmental margins for the same stood at 17%. Annual sustainable operating margin in this business is expected to be in high single digits over mid to long term. Overall, our financial position continues to remain healthy with debt to equity ratio of 0.02x and net cash of around INR 1,660 crores. Our efforts to optimize working capital is also taking shape as well as we are seeing good optimization of receivables and inventory. Slide nine is a new slide wherein we have given a breakup of our sales mix between B2B and B2C as well as through dealers and distributors versus institutional versus export. During our recent NDR to London and Singapore, we found a lot of confusion in minds of the investor on what can be classified as B2C. A lot of them confuse B2C with dealer and distributor generated sales. We thought we should explain the difference between the two. A B2B or a B2C sale is based on the product's end user. If the end user of the product is an individual consumer, it is classified as B2C, and if it is used by a business, then it is a B2B. On the FMEG side, our entire product portfolio and on the wires and cable side, housing wire business are included in B2C. The remaining products with HDC, LDC and other products and EPC businesses are categorized as B2B. Polycab has been historically a B2B driven business. Since fiscal 2014 when we introduced the FMEG business, we have been incrementally shifting to a B2C driven business. As can be seen from the chart, contribution of sales through B2C medium has increased to 38% in fiscal 2022 from 34% in fiscal 2019. Completely separate classification of business can be through the means of sales, which is either through dealer and distributor, directly to institution or via export. Strong distribution channel has always been our strong point with its contribution in generating sales having increased to 84% of the total sales in fiscal 2022. Now let us delve deep into the key updates of the transformational Project Leap. To recap, for everyone, under Project Leap, we are working on four key strategic themes, namely customer centricity, go-to-market excellence, winning with new products, and set up organizational and digital enablers. Under our customer centricity approach, as I referred earlier, we had merged the HDC and LDC segments in the fiscal 2022 with a view to redesign the operating model of the B2B business and making it more customer centric. We have started to realize the benefit to this merger in the form of incremental cross-selling revenue within H1 FY 2023 itself, and which will scale up in the future. Also, under the customer-centric operating model, we have now been able to match 39% of primary sales to end customer. This has helped us to have deeper insight into customer dynamics and enabling us to generate 1.1 times secondary sales from these customers via repeat orders. Under the agenda of improving our go-to-market strategy, we have been focusing on expanding reach to white spaces, that is, regions where we have no presence or marginal revenue generation. In H1 FY 2023, we have penetrated 120 new cities, generating INR 112 crore of incremental revenues from these districts. Geography wise, the penetration has been quite broad-based, with the breakup of new cities being 30% from South, 26% from North, 15% each from West and Central, and 13% from East. We have also added 150 new distributors in retail wire business and 187 new distributors in FMEG business in the current year. As part of building new product strategy, we have identified gaps as well as opportunities and have created a product portfolio roadmap of 300+ new products to be launched in the coming future across large B2C businesses. Most of these new products will be in the fans and lighting verticals, which will leverage the merged operational efficiencies of common distribution network to increase cross-sell. Another important strategy under this theme has been to increase our presence across price points to cater to complete set of customer demand. Under this, we have been focusing on premiumization of our offerings, especially in the FMEG category. I'm very happy to inform you that during the first half of the year, contribution of premium products in the fans and light segment have increased to high teens% of the total revenue generated through channel distribution. Etira wire, an economically priced wire segment that was launched in the fiscal 2022, has also been very well received and the product contributing almost 11% of our overall sales for retail wire in the current nine months of the calendar 2022. As far as setup of digital enablers is concerned, we are now moving to completely transform our company into a digital first organization. We have segregated our IT into two sections. First, the current IT team, which will continue to look after the back-end technology requirement within the company. Second, we have now created a separate digital vertical, which will be focused on advancing our business initiatives by focusing on end-to-end digitalization of front-end sales, enhancing customer experience, and enabling access to relevant data to perform deep analytics to better understand customer demand. To drive this initiative, we have recently hired our Chief Digital Officer, Ritesh Arora, from one of the large Indian organization. That was the update on Project Leap for the first half of the year. We will continue to share periodic updates on the progress we make and are excited to see how rest of the year pans out. Thank you. With that, I hand it over to operator for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Ravi Swaminathan from Spark Capital. Please go ahead. Hi, sir. Congrats on a good set of numbers. My first question is with respect to the kind of volume growth that would have been seen in the wires and cables business, given the fact that Q2 copper prices have dropped by 16%-17% year-over-year. Is our volume growth more than 20%-25% kind of growth in wires and cables segment? Yeah. Thank you, Ravi, for your kind words. You are right. Whatever revenue growth we are seeing in value terms, by and large, is driven by the volume growth, and this mainly is coming from the cable and wire business, HDC and LDC vertical. It would differ from product category to product category, but generally I would believe that the growth is between mid- to high-teens across the product categories. The second reason of the growth is exports, which I was alluding to in the opening remarks. Exports on the first half basis are almost 10% of our top line. There also is a broad-based recovery of growth. We have traction from geographies like U.S. and Australia and with countries like Spain and EU. It's a combination of both exports as well as domestic, and domestic would be generally between mid- to high teens%, depending on the product category. Got it, sir. Our working capital has come up a lot, so basically, from 53 odd days it has come down to 44 days. Any reason behind that? Ravi, when we spoke last, I was trying to explain you how we are trying to optimize the working capital, and there are two or three elements of that particular thought process. One is on the receivables. The objective is to improve the channel financing penetration. In the cable and wire business it's almost 75%. In FMEG business it varies from product category to product category, but it would be generally between 60%- 70% now. And that has helped us in improving the number of days of receivables. It's hovering around 25, 26 days now. The second part is on inventory and trade payables. One is we want to optimize the inventory, which is currently, now around 80-90 days, which is sustainable. Second is we want to broadly map or marry our number of days of payables with inventory with a gap of 10-15 days. That is how you can see the number of days of working capital is around 44-45, which is nothing but 25 days of receivables and 20 days of delta between payables and inventory. I would believe 45-50 days is sustainable number for at least a few quarters from now. Got it, sir. Thanks, I'll come back. Sure. Thank you. Thank you. We have our next question from the line of Atul Tiwari from Citi. Please go ahead. Yeah. Thanks a lot and congratulations on good set of numbers. Gandharv, just one question on FMEG business. Could you, like, flesh out in a little bit of a more detail, you know, what exactly is being changed in the distribution channel, and how has it, I mean, and why has it impacted the sales so much? Because one would have thought that pre-festive season, despite this kind of interruption, you know, probably, FMEG revenues, you know, should have been a little higher. Second question from that is that once you are done with all these changes this year, you know, so in FY 2024 and 2025, you know, what kind of revenue growth can one expect in FMEG business on this year's pace? Sure. Thank you, Atul, for your kind words. Let's pick up the first question first. You know, we poured into this FMEG business almost seven years back, and we took several decisions which were relevant and apt for the first phase of FMEG growth. Today, we are a INR 1,250 crore top-line business with almost all in-house manufacturing facilities, almost 2,000 dealers and distributors, in-house team. If we want to further scale this business, we have to make some changes. To give you an example, a few of the dealers and distributors who helped us in journey or phase one of FMEG not necessarily would be able to help us in scaling this business to, say, 5x from now in a few years. That is where we have done a very scientific analysis of our current dealers and distribution network. We have picked up a few areas where we believe we need to probably up our game. In few of the cases, we had to replace the existing dealers and distributors, or in few of the cases, we had to help them in accelerating the pace of the growth. That is what is getting reflected in current quarter's numbers. My sense is this will continue for at least till March of the next year. From next year onwards, we should be able to get to a regular routine growth trajectory. I won't be able to give you a specific guidance on the number for the next year at this stage, but safe to assume that FMEG would play a very significant role in achieving INR 20,000 crore of top line by fiscal 2026. Okay. That's clear. My second question is on cables and wires. I mean, if I remember correctly, in the last quarter, the volume growth was impacted because of channel destocking. Would you attribute some of this mid- to high-teen growth to channel filling? What is the level of inventory? Has it normalized or is the channel filling still continuing? Give or take few percentage point, I would believe the inventory in the channel is by and large comparable between Q2 and Q1. I'll tell you why. Because we believe that our channel partners, they need not to carry more than optimum level of inventory. We are any which way carrying inventory for them. We have strengthened our SCM over the period, and now we have ability to supply goods immediately or within one or two days. That is why I would believe that whatever inventory levels we have today in the channels are optimum and should continue in the quarters to come. The other thing is, which I'm sure you would be able to relate, is if they carry higher level of inventory, and when I'm saying they, I am referring to channels, they are unexposed to price fluctuation, which is an unwarranted risk. Whereas if we are carrying, we have an established hedging framework, and we know how do we mitigate that risk. That is also the reason why we are persuading our dealers and distributors to optimize the inventory levels, work on better returns, work on higher turnover or higher turns and, get you know, more returns from the business. Great. Thanks. Thanks a lot, Gandharv. Yeah. Thank you, Atul. Thank you. We have our next question from the line of Sonali Salgaonkar from Jefferies India. Please go ahead. Sir, thank you for the opportunity, and congratulations on a great set of numbers, especially the margin expansion, given the copper volatility. My first question is regarding the current demand scenario. Sir, any updates you would like to give on the current demand, especially the feelers you are getting from the festive demand? Yeah. Thank you, Sonali, for your kind words. You know, you know this already. India is a consumption powerhouse, and from one or the other pocket, you would always have good traction on demand side. As of now, we are seeing fair amount of traction on the private CapEx, and that is where our institutional business has also registered growth in the Q2. Having said that, and generally speaking, second half of the year for our industry as well as for our company is better than the first half. I would expect in the Q3 and Q4 to have better performance than what we have already achieved in the Q1 and Q2. Got it, sir. Sir, could you help quantify the price revisions that you have been talking about in both cables and wires and FMEG? I think broadly it would be in the mid-teens. There is a range between 1%-2%, between the decrease in input cost and the product basket level. These are the changes which we have made in our selling price. Both would be in mid-teens and the price reduction is slightly lower than the benefit which we have received on the procurement side. Understood. Got it, sir. Sir, one bookkeeping question. Our other non-operating income this quarter has come out to be negative, so any thoughts on that? Other income has two elements. One is sustainable income which we are getting on the deployment of surplus cash, either in fixed deposit or mutual fund, and that is in line with the expectation and trends. The other part is mark-to-market accounting, which we have to do as part of IFRS and which was accounted for, which again is a mark-to-market. It has no cash implication, but it is in compliance with the accounting requirements. Got it, sir. Sir, Sir, last question from my side. Your cash position has almost doubled on a year-over-year basis. Any thoughts on the utilization of cash, or are you revising your CapEx guidance at all? You're right. We have been able to improve our cash balance to almost INR 1,600 crore- INR 1,700 crore is now because of two reasons. One is the business itself is generating fair amount of cash. Second is we are slightly more focused than what we were earlier on the working capital. You can see the working capital has reduced to almost 44-45 days now. Having said that, I think there are two or three opportunities for us for deployment of this cash. One is CapEx. We have been doing around INR 400 crore of CapEx every year, and we expect that we'll continue to incur something similar in years to come. Having said that, we are in discussion internally as well as with the BCG team, and we are in the process of identification of additional opportunities where we can make more investment to get better returns. The second is M&A opportunities. You are aware, Sonali, we did a very small acquisition last year in the form of Silvan, which was acquired in June of last year as a 100% subsidiary. Coincidentally, board has also approved merger or amalgamation of that subsidiary with the holding co. We will continue to scout for opportunities and up our game on M&A side. The third is dividend payout ratio. Since the time we got listed 3.5 years back, every year we have increased the dividend payout ratio, and we expect that we give adequate returns to our shareholders as part of dividend payout. Whatever is then left, as part after retaining something for war chest, we would like to then give it back to shareholders. Got it, sir. Sir, very clear. Thank you and all the best. Thank you so much, Sonali. Thank you. Reminder to participants to press star and one to ask a question. We have our next question from the line of Aditya Bhartia from Investec. Please go ahead. Hi. Good afternoon, Gandharv. My first question is on the changes that you have made on the FMEG business. Just want to understand it a little better. Are these changes being made largely at the dealer end or at the end of the sales team? It's across. The idea is to get closer to the customer. If you think from the Polycab lens, the sales teams have been merged. Earlier, we used to have separate teams, right from the BU head to the TSI, and we are now trying to merge that at our end. If you visualize a particular geography, you will have a particular person who is capturing the requirement of both the businesses, lighting as well as fan. Similarly is true for retail, switchgear. On the distribution side, the way we have started doing cross-selling of HDC and LDC dealers, we will continue to do same, something similar in these merged businesses of fan and lighting as well as retail, wire, switches and switchgear. It's both, integration of team at our end, sales team, plus, integration of cross-sell at the dealer end. Sure. Why is it leading to this kind of a disruption? Is it that channel inventory is going down or we are taking away certain dealers without being able to appoint new dealers and distributors in the same area at the same time? Where exactly is the challenge? I don't think there is any challenge. These are strategic decisions which we have taken, and we are implementing it. That is where whenever you do a bit of a course correction, you would witness some softness in the numbers. Another factor is external environment on the FMEG side is slightly softer. For example, fan, which contributes almost 35%-40% of our top line, is slightly a non-seasonal quarter for that particular business vertical and that is why it got impacted. As I was explaining to Ursula a while back that as part of our GTM revamp, we have identified few dealers and distributors where we believe we need to either replace or support them. That exercise is taking some time. In such exercise, you would expect some slowdown during the implementation phase. I would expect from the next fiscal, we would be back to our regular growth trajectory. Understood. Gandharv, secondly on export- I request you to come back in the queue, sir. Sure. Thanks. Thank you. We have our next question from the line of Nitin Arora from Axis Mutual Fund. Please go ahead. Hi, Gandharv. Thanks for taking my question. Gandharv, you know, just want your commentary on the export side because, you know, this quarter also exports have been very strong. If you remove the exports and look at like-for-like on a domestic, there is almost like just about 6% value growth. I think you highlighted that, you know, mid-teen volume growth assuming 15%, 16% copper price decline. Is this number sustainable in export, you know, because generally, you talk about order books when export comes in, so which we saw, let's say in case of Dangote and all. Can you highlight that this number looks sustainable, you have that visibility in order book for the exports? That's my first question. Sure. You know, even if we exclude exports, in the sense of domestic business would have, I assure almost like a double-digit growth, after adjusting for volume and value. As far as export is concerned, you know, I was alluding to this, in the last call. We are not looking for one-off orders. What we are trying to do is have sustainable distribution presence in identified geographies. This is what we did in India, many years back. You know, between 2011-2016, our focus was to have distribution-led business rather than institutional-led business. Today, almost 85% of our business is coming through distributors, and something similar is what we are trying to do in overseas markets. It will take a while, but we believe that's more sustainable. We have fair amount of presence now in countries like U.S. and Australia. This quarter we got some traction from Africa as well as Spain and E.U. The objective is to get into additional geographies, ensure that you have all the relevant approvals in place, and slowly and gradually set up own distribution channels in the key geographies. Getting it. That's helpful. Gandharv, from the domestic side, you know, the question was more that 8%-10% volume growth was also used to happen pre-COVID, right? We generally used to be 10%-12% growth company. The question here is despite, you know, you said the levers like private CapEx, institutional business is firing, is doing good, you know, we are doing the same volume growth, so which is good, but I'm asking from a perspective that, where is that weakness which you are seeing because of the inflation or, you know, general slowness in the economy, which you highlighted in the starting, that would be helpful. Yeah. One is the financial growth, the numbers you mentioned are not comparable with the current period numbers. Current period numbers are mid-teens to high-teens. To that extent, there is a delta between the numbers you mentioned versus what actually we have delivered. Second is, I don't think we should take a view on half-yearly basis. We should wait for this year to pan out, and after that we should ascertain the actual growth. Because generally speaking, H1 is only 45% of the annual revenue, and H2 would be almost 55%. We have to wait till the Q4 and then see what type of volume growth we are able to achieve. Got it. Thank you, Gandharv, and all the best. Thank you. Thank you so much. Thank you. We have our next question from the line of Shrinidhi from HSBC. Please go ahead. Yeah, hi. Thank you for the opportunity. Just couple of questions from my end. Gandharv, a very impressive ramp-up of Etira brand, with almost double-digit contribution of retail wire business. Just wondering, in your view, large part of this business that comes under this brand is an incremental business or it could be cannibalizing some of Polycab brand's revenue as well? There is some amount of cannibalization which is there, but by and large it's incremental. Okay, great. Just one more question, Gandharv, here's export business. Some of the competition does talk about export business being a much less profitable business given a lot of trade costs involved in the distribution and all. Just wondering, in case of Polycab, is this an incremental export opportunity that companies are targeting? Is it broadly a similar margin business that you have in domestic market? Yes. Similar margin business, but with slightly better working capital. Okay, great. My question, those were my question. Yeah. Thank you so much. Thank you. We have our next question from the line of Achal Lohade from JM Financial. Please go ahead. Yeah, good afternoon. Thank you for taking my question. Just two of them. One is, you know, can you help us understand what is the capacity utilization for both the segments? In cable and wire it's between 65%-70%. As far as FMEG is concerned, because this quarter was soft, there is slightly lower utilization. If I were to give a historic view, Fans Roorkee facility is optimally being utilized, and the new facility like switches and switchgear are being ramped up to meet the current requirement. Got it. You're saying you plan to incur INR 400 crore-INR 500 crore of CapEx towards the cable and wire business. Is it in a particular sub-segment or it's across the board? Out of INR 400 crore, around two-thirds will go to cable and wire and one-third to FMEG. Within cable and wire it would be plant-based. Some facilities which are required for export businesses, bit of backward integration as where there's some amount of maintenance CapEx. On FMEG it is primarily for adding new capacity, for example, switches or switchgear and like that. Got it. Just second question, you know, there was one media article about the litigation with Atomberg. Can you help us understand this particular issue and what is the outcome and implication for us in terms of impact on the numbers? Yeah. There was a particular model of fan which contributes immaterial value to our top line, both at the fan vertical as well as the company vertical. One of the peer companies opted for litigation alleging that their model is similar to ours. We believe that we have a fair case. The matter is currently sub judice. There was an interim order which was passed by the Honorable Court, and the hearing is now scheduled, I think, next month, and that is when we will be able to present our side and our perspective, and then we'll get guided by the court's order. We are confident of, you know, our position. Having said that, the contribution of that particular SKU is immaterial to both fan business as well as to the company. Got it. At this point in time, have we done any recall of the products or it's still status quo? We are in complete compliance of the court order. We have not done any new transaction on this particular SKU. Understood. Thank you. I wish you all the best. Thank you so much. Thank you. We have our next question from the line of Amit Bhinde from Morgan Stanley. Please go ahead. Hello, sir. Amit Bhinde from Morgan Stanley. I had two questions. First is that I wanted to understand that, the FVTPL adjustment in other income, is that related to the commodity hedges that we do on the copper purchase side, or is it something else? That is one. It is- Second, yeah. Yeah. Please go ahead. Sorry, yeah. Sorry. I think you are trying to understand on FVTPL and accounting. This is not hedging. This is for the ineffective portion and which is required to be done end to end, and which is what we have done. This has no cash implication. This is only an accounting entry which is required to be recorded as of the quarter end. It is not related to the commodity hedges that we are doing in the wires for the cable for copper purchases, right? This is not related to that. It's not related to copper purchases. It's an element of ineffectiveness which is required to be accounted for like this, and that is what we have done. Right. Okay. Other thing I just wanted to understand is that we have mentioned that FMEG business partly was affected also by the rural demand slowdown. How much is the contribution of rural in our FMEG business right now? Apart from Etira, what are the other plans to, I mean, boost the rural presence et cetera? We are working on both rural as well as you know urban markets. We have started appointing our dealers and distributors in the rural market, and Etira is a offering which will help us in further penetrate the rural market. As far as contribution of rural business to FMEG is concerned, it's not very meaningful at this stage, but I think these initiatives which are undertaken in the recent past would help us in gaining some momentum as well as market share in the quarters to come. Right. That's helpful. Thank you. You're welcome. Thank you. We have our next question from the line of Akhilesh Bhandari from ICICI Prudential AMC. Please go ahead. Yeah. Thank you for taking my question. My question is on the FMEG margin. If you look at your revenue, it's broadly flat quarter-on-quarter, but the segment margin is negative and your A&P spend has also come down, come off sequentially, which coupled with whatever changes you're doing for, you know, merging the team, if anything, that should reduce the slack which is there in terms of OpEx. What explains the reduction in margin? Is it only the additional cost for the new switches facility or there's something else as well which is impacting the margin? Yeah. I would just like to clarify this merger which I had mentioned a while back is effective October. The September numbers are any which ways, after considering the actual expenses which were incurred on these two separate verticals. Broadly, the loss or slight negative EBIT number is because of reduction in top line. The gross margin is by and large comparable between first and Q2. At the organization level, the expenses have not gone up. Just because we are not getting leverage, because reduction in top line by 10%-15%, which is why the EBIT is negative. Sir, I mean, comparing quarter-on-quarter. Your quarter-on-quarter, your revenue is same, but your A&P spend is down. Why would your EBIT from INR 6 crore positive move to negative in the FMEG segment? That's my question. Yeah. No, I I understand it on YoY basis. Yes, please complete. I understand the movement in the YoY basis. I'm just comparing quarter-over-quarter. No, absolutely right. If you compare Q1 with Q2, there is a slight movement. If you actually see the exact number, we are talking about mid-single digits, INR 10.4 crore, which in a large business is possible. I had mentioned about some hiring which we have done, which is getting reflected, and there's some investment which we have done in the IT and digital. You know, I would like to, you know, emphasize that there is no contraction in the contribution margin, which is one of the important parameters in our FMEG business. It's only organizational cost which is reflecting into the slight negative margin. As I was explaining to another participant a while back, we are confident of getting 10% EBITDA margin by fiscal 2026 in this particular business. Okay, if you were to look at the broad pricing level of your products in FMEG segment, that would be flat quarter-on-quarter, or you have passed on some of the benefit to the consumers? It would vary from product to product, but it would have a combination of both of these factors. That is why I'm saying there is no negative effect on contribution margin. Contribution margin, in fact, as a matter of fact, in few of the product categories, better in Q2 than the Q1. Any broad range which you can mention of the price change which has happened on a sequential basis? The net impact would be in low single digits or between 0%-3% of the change in the input cost vis-à-vis the change in selling price. Got it. Thank you so much. You are welcome. Thank you. We have our next question from the line of Abhijit Akella from Kotak Securities. Please go ahead. Yeah, good afternoon. Thanks for taking my questions and congratulations on a good quarter. Just two from my side. One was I just wanted to clarify the mid-to-high teens volume growth number that you shared. Was that for the Q2 or for the first half? If it's for the quarter, if you could please share the, you know, the comparable number for the first half as well. Thanks, Abhijit, for the kind words. This was for the Q2. I would not have the, you know, first half numbers handy. To that extent, even the Q1 was not comparable because in the base Q1, there was a COVID impact, which impacted the business. Sure, understood. Thank you. The other thing I just had was on the A&P spending line. Once we start to see some pickup in the FMEG top line starting fiscal 2024, should we expect, you know, significantly higher investment in A&P next year? If so, is there a ballpark number you could guide us to? Absolutely. In fact, we have already started working in that direction. We believe as a B2C company, we need to invest on A&P. We have already onboarded A&P consultants like Interbrand and Ogilvy. As of now, we are discussing with them our roadmap and execution should start pretty soon. We believe anywhere between 3%-5% of B2C revenue is what we need to invest, and this will be done gradually over the period. Thank you so much, and wish you all the best. Thank you. Thank you. We have our next question from the line of Gopal Navandar from SBI Life Insurance. Please go ahead. Yeah, hi. Thanks for the opportunity. I have two questions. One, can you just explain this MTM element which you referred in the other income? What kind of hedges we are taking here? Yeah. This is in compliance with India's accounting requirements. As far as hedging framework is concerned, this is being done in a particular structured manner. When we procure our commodity, we get an option to price it at a date subsequent to the procurement date, and that is how we manage commodity. In few cases, when we get back-to-back orders, we have an option to also go to a bank and take back-to-back positions. On the sales side, we revise our list price on a monthly basis for cable and wire, and that is how it becomes a pass-through. Whatever accounting you are seeing is only because of MTM accounting or the ineffective portion, which is in compliance with the Ind AS requirement. But it's not a cash item. It's a non-cash adjustment. What is the amount for this quarter? It's for the first half, for the Q2 it will be almost INR 15 crore-INR 20 crore negative, and for the Q1 it will be around INR 25 crore. Okay. The second question was on this BEE rating changes, how well we are prepared and how are the inventories for us or in the system for the older ratings stands? Yeah. We are fully prepared. In fact, when we acquired Silvan last year, the objective was to be ahead of the curve. Slowly and gradually we have our product portfolio in place. We have everything in place for BEE as well. We have in-house motor, we have other product offerings. Few of the products have already been launched. As far as non-compliant BEE inventory is concerned, there is nothing material which is there. Whatever is variance is being, you know, offered to our customers or dealers and distributors presently. Same will be the case for other players or others might have higher inventory? No, I don't have a view at the industry level at this stage, but certainly I can assert that at our company level, we don't have, you know, any sizable non-compliant BEE inventory as of now. Should one expect any pre-buying ahead of these rating changes? Yeah. Any of these transformative changes would have one or the other implication. We believe changes like these would be positive, because it will drive the sector to a better compliance, better quality of the product. At a country level, it would help us in getting into energy conservation. In the interim, it's quite possible few of the smaller players face some difficulty, but I think for a large player like us, we believe is a positive. Okay. Lastly, on FMEG side, this decline in commodity prices and all, should one expect better margins in H2? I would probably take you back to our latest guidance, which is for FY 2026. We believe by then we should be able to get to 10% EBITDA margin as an industry. I would not like to give you a particular guidance for the second half, but you can practically assume from next year onwards every year there will be some improvement in EBITDA margin. Sure. Thanks. Thank you. We have our next question from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead. Yes, sir. My question is linked to your initial comments, where bulk of, you know, the growth has actually come from exports, for our company in the quarter and the domestic growth rate is very low. I don't know how your calculation shows 6%, but it's lower than that. It doesn't coincide with then your commentary for domestic, outlook or, you know. If you could just shed some more light there. Does this export growth have any impact, extra or positive impact on the margin side? Yeah. I mean, of course, we can do the math. I'm happy to have a offline chat with you. Broadly just to give you perspective, the copper LME, aluminum LME, and USD INR exchange rate was significantly higher. Blend of all of these things was significantly higher in the base quarter vis-a-vis what is here in the current quarter. That is where whatever growth you are seeing is by and large coming only from volume. As far as export is concerned, exports margins are generally comparable. At times because of mix and at times because of better realization we are able to get, better profitability. I would not like to single out only exports as a reason for better contribution margins. It's combination of everything including exports. Okay. My last question, so this BEE rating products, now is the notification done and dusted and, there is a deadline beyond which the non-BEE will not be sold or is still ambiguous? As of now, the way it has been notified by the government is done and dusted, but if there is a revision by the government then that's a different thing. What is the deadline now? First of January. Okay. Thank you very much. Thank you. Thank you. We have our next question from the line of Aniruddha Joshi from ICICI Securities. Yeah. Mr. Joshi, your line is broken. Yeah, is it okay now? Yes. It's not open, sir. It's not open, sir. Yeah. No, I'm not on Bluetooth phone. Please mute and unmute now. Okay, I will still go ahead. Sir, any update on Etira brand apart from wires? Have we introduced the product or the brand in any other segment? What would be total distribution reach of Etira? That is one question. Secondly, in case of cables and wires, do we have any different pricing as far as B2B and B2C is concerned? The most of the portfolio goes through the same distribution channel, so is there any difference in the pricing policy as well as the margins of those products? Yeah. Thanks. Yeah. In quarter after quarter it is getting more traction. It would have generated almost 100% revenue CAGR between Q4 of last year to Q1 or Q2 of this year. In fact, Q2 is slightly better than Q1. That's on Etira. This is a focused effort and as I was explaining earlier, this will help us in further penetrating the rural market or the cost-conscious category of our customers. Sorry, I forgot. What was the second part of your question? Is Etira launched in other segments too apart from wires? Existing wires and Mr. Joshi, mute your line, please. being done now, which was a very recent development. Okay. Sure, sir. In terms of the pricing in B2B and B2C, cables and wires as well as realization policy. Let's take this into product categories. Let's pick up wires first. Wires is generally done only through distribution. There is no B2B or institutional business for wires. Wires are generally more profitable than traditional core cable businesses. At EBITDA level, the margin difference could be as high as 3%-5%. On the cable side, institutional business is slightly inferior in terms of margin profile than the distribution business. Mr. Joshi? Okay. Sure. Yeah. Thanks. Thanks. We have our next question from the line of Arshia Khosla from YES SECURITIES. Please go ahead. Thank you. Congratulations on a good set of numbers. My question is with respect to Etira. Just wanted to understand how is it placed versus the unorganized brands in terms of pricing, and what kind of premium are you charging? The difference is not very significant. It would be at max mid to high, high single digit, but it is comparatively better, quality or specification product. The another important thing which is helping us is availability. Our products are available wherever we want them to be available, and that is also helping us in getting some traction with from the customers and market. Arshia? Yeah. Okay. Thank you, sir. That's it from my end. Thank you. We have our next question from the line of Akshay Kothari from Envision Capital. Yeah, hello. There's some disturbance coming from your line, sir. Am I audible now? Hello? Yes, please go ahead. Yeah. Sir, I wanted to know regarding the receivables aging schedule which you have given in the annual report, what are the? Sorry, I can't hear you. Can you be a bit louder, please? Yes, sure. Sir, I wanted to know about the CapEx aging schedule which you have given in your annual report. The other projects, what are they pertaining to? These are back-end civil projects where some delays were there. I expect all of them to be completed in next 9-12 months. Okay. Can you touch upon the backward integration projects? How are they expected to give us benefits, synergies, if you can touch upon it? Yeah. Philosophically, we believe that if we have a complete control of the entire value chain, we can get better quality and which is what is getting reflected in customer's confidence in our products over the period. That is also one of the reason why we had achieved number one position in cable and wire business. We particularly have 24%-25% market share today in organized cable and wire business or industry. Whatever backward integration we are doing, either for copper or steel or on a family side for other components, is expected to give us more confidence on the quality side. As a by-product, it's quite possible we get better margin, but the objective is not cost led, objective is quality led. Okay, understood. Sir, who owns the rest 25% in Steel Metrics? There is a family. Mr. Kothari, please mute your connection. I hope I'm audible. What I was saying is a local promoter family was involved, and they have business interest in this particular sector and very good expertise, and that is why we have decided to partner with them. The project has not yet been initiated though. Okay, thanks a lot and all the best. Thank you so much. Thank you. We have our next question from the line of Nikunj Gala from Sundaram AMC. Please go ahead. Yeah, hi. Good afternoon, everyone. Gandharv, I have just two question. Firstly, in the wires and cable revenue, if I just look at a YoY, there is an 11% growth. I think as you mentioned, the pricing revision is to the tune of, you know, mid-teens. In the volume growth also, isn't it in tune of mid-teens then 11% growth? I'm not able to reconcile. Can you just help me with that? When I was talking about mid-teens, I was talking Q1 to Q2, and I think what we are trying to consider volume growth there is from base quarter to this quarter, and that is where there is a disconnect. Just to demystify between Q1 to Q2, the changes in the prices have been passed on to the end customer while retailing a part of it, and that is where you can see improvement in contribution margin by a few basis points. As far as volume growth is concerned, between last base quarter to this quarter in cable and wire, it ranges between mid teens to high teens. Okay. Even on a YoY basis, the copper prices are, you know, down by 17%-18%. So the same pricing revision would be on a YoY, right? In our end product. Yeah, you are right, but then there is a difference between the price which you are taking, because that's a price at the retail level of copper, whereas what we get is the best price because we procure it from the largest supplier worldwide. Our landed price is significantly different from what you get from the retail. Okay. Okay, sure. Yeah. Thank you for that. Just secondly, you know, how big would be the retail wire contribution in our total revenue? Retail wire, it would be around 30-odd percent now. All businesses put together, FMEG plus retail wire both put together would be around 40%. Okay. When we are, you know, just want to understand from the accounting of revenue perspective, this retail wire till date was residing in cable and wire business, right? Yeah. Even today also. Yeah. I'm saying, when we have mentioned we will merge retail wire with the switch business. There won't be any accounting of revenue change from the- No, no. no. No change. Okay. Reportable segment continues to be cable and wire and FMEG, and that is how we'll continue to report. There's no revision in the reporting segment. Yeah, only route to market. We have done this merging of two businesses, right? Yes. That's a correct understanding. Yeah. Okay. Yeah. Thanks, Gandharv. Yeah. Thank you so much. Thank you. I would now like to hand the conference over to Mr. Gandharv Tongia for closing comments. Over to you, sir. Thank you so much for your time. In case if you have any follow-up questions, please feel free to get in touch with us. You can write to investor.relations@polycab.com and we would be happy to assist you. I don't know whether I'll get another opportunity to interact with you before Diwali, and here I am wishing all of you, your team members, and everyone at home a very happy Diwali from me as well as everyone from Polycab. Have a great time ahead. Thank you so much. Bye-bye. On behalf of Polycab India, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.