Polycab shares slide as price-driven revenue growth masks weak volumes
Polycab India's 39% revenue surge failed to satisfy investors, sending shares down 4% as underlying volume growth remained tepid and elevated valuations faced scrutiny.
Shares fell 4% early Friday despite Polycab India's Q1FY27 revenue hitting ₹8,210 crore, a 39% year-on-year increase. The selloff reflects investor skepticism over the quality of the top-line expansion, as underlying demand failed to match the headline figure.
Management reported low-to-mid single-digit volume growth in wires and cables, the company's core business. The robust revenue was largely inflated by higher copper and aluminium prices rather than genuine market demand. When commodity prices dropped in June, dealers delayed purchases, highlighting how sensitive Polycab's business remains to raw material fluctuations.
This price-led dynamic weighed on profitability. Consolidated Ebitda margins contracted to 13.8% from 14.5% a year earlier. Furthermore, a structural shift in Polycab's revenue mix could pressure future earnings, as the faster-growing segments currently carry lower margins than the company average.
Wires and cables, which generated 88% of Q1 revenue, saw domestic sales jump 43%. This offset a 13% plunge in exports, where revenue contribution fell to 3.3% from 5.2% a year ago amid geopolitical disruptions in West Asia.
The smaller FMEG segment, contributing 9% of revenue, surged 68% on strong solar product sales, which more than doubled. Polycab is actively prioritizing higher-margin channel sales over institutional business to protect profitability. Within FMEG, premium products now make up roughly a quarter of the portfolio, and the company targets an 8-10% Ebitda margin for the segment by FY30.
Long-term demand indicators remain constructive. “Industry tailwinds in the form of investments power T&D (additions of 20,000–21,000ckm annually over next five years), infrastructure and data centres ( ₹25,000 crore opportunity, spread over seven–eight years) inspire confidence in meeting wires & cables growth guidance of 1.5x industry growth,” said JM Financial Institutional Securities.
The EPC division saw an 11% revenue decline due to project seasonality, though a ₹10,900 crore order book provides visibility. Polycab expects to recognize ₹4,500 crore in BharatNet revenue over the next three years, with meaningful execution expected from FY27 onwards.
Trading at 42 times estimated FY27 earnings after a 20% year-to-date rally, the stock leaves little room for error. With Nuvama Research projecting full-year revenue of ₹37,099 crore, valuations already reflect this structural optimism. Investors will now need to see an actual recovery in volumes to justify the premium multiple.
