Finolex Cables eyeing Rs 500 crore revenue from appliances biz

India’s largest manufacturer of electrical and telecommunication cables Finolex Cables has set a near-term target of achieving Rs 500 crore revenue from its relatively new appliances business in the next 24-30 months. In FY22, the Pune-based manufacturer had reported a revenue of Rs 3,768.1 crore, with the electric cables business alone comprising over Rs 3,193 crore.

In this interview with ETMarkets, Mahesh Viswanathan, CFO, Finolex Cables, explains the strategy behind the Rs 500 crore goal. Edited excerpts:

Do you expect gross margins to normalize in the next 2 quarters?
We do expect gross margins to stabilise over the next few months. However, that would be subject to the commodity price volatility returning to near normal.

What is the quantum of price hikes taken by you in the last quarter? Any more hikes in the offing?
In Q4 of FY21-22, we resorted to price revisions on two occasions in electrical wire. The hike during this period was of the order of approximately 7%. Future actions will depend on commodity price behaviour.

As things open up post Covid, what is the kind of revenue growth that you are staring at in FY23?
As the economy opens up and activity levels return and improve over pre-COVID levels, one can expect a volume growth in the region of 2X of GDP. Of course, this will not happen right away, but over a period. I believe that if there are no further Covid, Ukraine or inflation related disruptions, then one can reasonably expect a high single-digit growth in volume. I am refraining from commenting on potential revenue numbers, since that would in a sense be a function of prevailing commodity prices as well as INR/USD rates.

How much growth are you expecting from appliances? Are you happy with the growth rate seen so far?
The near-term target for appliances would be to reach Rs 500 crore in the next 24-30 months. We have seen considerable growth in the past 12 months and that is a positive.

How different is your distribution strategy in the appliances business?
The appliance business is primarily distribution driven. Over the past 24-30 months, we have appointed distributors in approximately 585 districts with a potential to service 175,000 retailers on a weekly or fortnightly basis. Our near-term target is to expand this coverage to around 650-675 districts which will improve retailer coverage further. This action together with improving supply conditions and a widening product basket should help us move quickly to the Rs 500 crore target.

How much of a tailwind are you seeing in the shift from unorganized to organized?
As for the switch over from unorganised to the organised, post GST there has been a definite shift. Unfortunately, there is no verified data available and one is forced to make a guesstimate. I estimate this to be between 60% and 65% organised and the remaining unorganised. Earlier estimates used to be 50:50.