Among the long-term investment options in the electrical cables and wires sector, two industry leaders are Finolex Cables Limited and Polycab India Limited. Both have a robust market presence, diversified product offerings, and a track record of consistent financial performance. Yet, some critical differences in growth strategies, financials, and market positioning make one a better bet for long-term investors. This article offers a comparative review based on financial performance, growth prospects, and strategic initiatives.
Financial Performance
Polycab India Limited
Revenue Growth: Polycab announced a 20% year-on-year revenue growth in Q3 FY25, showcasing robust market demand.
EBITDA Margin: Improved to 13.8%, thanks to operational efficiency and rising contributions from the international segment.
Net Profit: The company reported its all-time quarterly PAT of ₹4,643 million, with a PAT margin of 8.9%.
Capex & Investments: Has a ₹60-80 billion capex lined up for the next five years to increase production capacity and move into overseas markets.
Market Share: Dominant player in India’s cable and wire market and growing fast in overseas markets.
Finolex Cables Limited
Revenue Growth: Saw a 7% quarter-on-quarter growth and 10% year-on-year growth in Q2 FY25.
EBITDA Margin: Declined by 4 percentage points over the year driven by fluctuating copper prices.
Net Profit: Though profitable, Finolex’s margins were hurt by steep inventory expenses and falling raw materials prices.
Capex & Investments: Intends to invest ₹500 crore in optical fiber and automobile cables, but growth is still more cautious than Polycab.
Market Share: Dominant in wires and optical fiber cables, but much smaller in the power cable market than Polycab.
Verdict: Polycab has better revenue growth, profitability, and expansion plans, and is therefore financially stronger than Finolex for long-term investment.
Growth Strategy & Market Expansion
Polycab India Limited
Initiated Project Spring, a five-year strategy with emphasis on market leadership in B2B, global expansion, and product innovation.
Plans to increase international revenue to 10%+ of total sales, based on the China+1 approach to global manufacturing shifts.
Increasing its FMEG (Fast Moving Electrical Goods) business to 8-10% EBITDA margins by FY30.
Investing in automation and R&D to boost efficiency and enhance product range.
Finolex Cables Limited
Concentrates on wire segment and optical fiber cables, instead of power cables on a large scale.
Investing in backward integration of raw materials to manage costs and boost margins.
Growth in automotive and agri cables but at a lower rate than Polycab.
Less international exposure, so more dependent on domestic market trends.
Verdict: Polycab’s aggressive growth, diversified business, and robust global strategy make it a better growth-investment bet than Finolex.
Risk Factors & Challenges
Polycab India Limited
Raw material price dependence: Fluctuation in copper prices can hurt margins.
High capex: Expansion is promising but needs massive capital, impacting near-term profitability.
Global economic risks: International expansion subject to foreign exchange volatility and geopolitical risks.
Finolex Cables Limited
Limited growth options: Overdependency on domestic wire business and less international presence restrain future scalability.
Lower power cables margins: Pricing pressures and government orders maintain profitability lower than at Polycab.
Capex limitations: Constrained expansion strategy could restrict long-term revenue horizon.
Verdict: Polycab is riskier with aggressive expansion, but its diversification strategy is more effective in hedging market fluctuations compared to Finolex.
Final Verdict: Which is the Better Long-Term Investment?
Polycab India Limited is the better long-term investment for long-term investors looking for a high-growth stock with robust expansion plans because of:
- Higher revenue growth and profitability.
- Robust international market expansion.
- Strategic investments in automation and R&D.
- Increasing FMEG segment for diversification.
Finolex Cables, while stable and profitable, lacks the aggressive growth strategy and market diversification that make Polycab a stronger long-term bet.
Conclusion
Both Polycab and Finolex have their merits, but as an investment for long-term investors seeking high returns, Polycab India Limited is the better bet. Its growth strategy, global expansion, and market leadership put it in a position to excel in the next few years. High-risk, long-term investors can consider Polycab a great option for long-term wealth creation.