Finolex Cables (NSE:FINCABLES) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q1 FY 'twenty seven Earnings Conference Call of Finolex Cables Limited. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. I now hand the conference over to Mr. Pranay Premkumar from Dentsu One Investor Relations team. Thank you, and over to you, sir. Thank you, Parag. Good evening, and thank you all for joining us on the Finolex Cables Q1 FY 'twenty seven earnings conference call. Today, we have with us Mr. Mahesh Viswanathan, CEO from Finolex Cables Limited.

0:46 We will begin the call with the opening remarks from the management. After this, we will have the forum open for the interactive q and a session. I must remind you that the discussion in today's earnings call may include certain forward looking statements and must be viewed, therefore, in conjunction with the risks that the company faces. Please restrict your questions to the quarter performance and to strategic questions only. I would now request Mr. Vishwanathan for the opening remarks. Thank you, and over to you, sir. Thank you, Prane. Good afternoon, ladies and gentlemen. Welcome to this earnings call first quarter earnings call of Finolex Cables Limited. Before I get into the explanation about the quarter, I would like to introduce Mr. Sachin Naik, who has joined me who has joined us as the CFO effective June one this year.

1:41 Welcome, Sachin. Good afternoon, everyone. Look forward. So very quickly recap on the quarter performance. As you must have all seen, we posted pretty good numbers, both in terms of revenue rise as well as in terms of the bottom line improvements. While Sachin will come back to you with the specific numbers, I thought I would give you a brief on what has gone well this quarter. Overall, there were certain product lines which did extremely well in terms of volumes. So on the electrical cable side, automotive cables, battery cables, flexible wires, solar and agricultural applications, all of them did extremely well, posting fairly high double digit growth numbers.

2:40 And this is not just not a price growth, it is also volume led growth. Building wire was more or less stable, very small low digit volume growth. All the products had been impacted by the commodity price changes, which happened which has been happening for quite some time now. Added to this was also the fact that post March, there have been issues around supply chain, whether it relates to availability of fuel or it relates to availability of PVC. We've been able to handle all of those changes, albeit at a higher cost. And the good thing is we've been able to pass on most of the cost to the end consumer.

3:33 At the end of the quarter, channel inventory, especially on building wires, was low. That also then is reflected in the low single digit growth in volumes for building wire. And we did see a reduction, a destocking of the inventory at the channel. Exports for this quarter was has been one of the heroes. Our exports for the quarter was about INR 50 crores, almost the entire value that we did last year. Communication cables was one sector where the margin improvement was very, very, very visible.

4:20 I had mentioned in my earlier call at the end of the last year last financial year that fiber prices were hardening. And so to the extent that we had raw material from earlier on, we were able to get a higher margin on the sales that happened during the quarter. As and this has happened with most of the competition as well. And as this material gets consumed and new material, which will be at a higher cost comes in, the margin levels will come back to normal levels. They would still be in the double digits, but not as high as what you see today.

5:09 So basically, while the margins have expanded, expect this to settle down in the coming quarters once the existing RM gets consumed. On the expansion side, I had mentioned in the last call that preforms the preform production has commenced. It has. We are on the way to stability. Hopefully, in the next couple of months, that should happen. On the draw tower side, our original plan was to go from $4,000,000 to $6,000,000 and then to $8,000,000 in a phased manner. But in the meanwhile, we have decided to go ahead with the complete expansion right from four to eight in one go, seeing that there is a shortage of fiber across the globe, and that shortage is likely to continue for some time more.

6:05 So overall CapEx for the year will still be what I mentioned in the May call, approximately INR 300 crores for the year. The additional information that I would like to share with you is that I had mentioned that the JV was doing well and had posted a profit of 24 crores last year. That trend continues. In the current quarter, they generated a revenue of about 87 crores with a profit of about INR 7 crores. So that's the basic intro from my side. Sachin, you take over with the numbers. Thank you, Mahesh, and good afternoon, everyone, and thank you for joining us. I will briefly take you through the key financial highlights for the first quarter of FY twenty twenty seven.

6:55 We've had a strong start to the financial year with a healthy growth in both revenue and profitability. Our revenue from operations for Q1 of FY twenty twenty seven stood at INR 2,013 crores as compared to INR $13.96 crores in the corresponding quarter of last year. This represents a growth of approximately 44% in revenue. Profit before tax stood at INR $2.77 crores as against INR 171 crores in Q1 of last year, registering a growth of approximately 62%. And profit after tax stood at INR $2.21 crores compared to INR 139 crores in the corresponding quarter of last year, reflecting a growth of approximately 59%.

7:45 And as a result, the PBT margin has improved from 11.8% in quarter one of FY 'twenty six to 13.4% in the current quarter, while the PAT margin has improved from 9.6% to 10.7 during the quarter. Coming to segmental performance. Electrical Cable continues to be our largest business segment. And as we've reported a revenue of $17.67 crores compared to INR $120.06 crores in the corresponding quarter of last year. This represents a growth of approximately 47. And as Mahesh explained, there has been a change in the mix where segments like auto cable, solar cable, the agricultural cables have done very well.

8:40 Communication cable delivered a particularly strong performance during the quarter, with a revenue increase from 109 crores to INR 176 crores, which is a growth of approximately 62%, with margins close to 30%. Now the business has seen a significant improvement in profitability due to certain market factors, which we will continue to evaluate the sustainability of these margins as the year progresses. And therefore, we would refrain from annualizing the quarter one Communication Cables margin. Copper rods reported a revenue of only INR 8 crores during the quarter as compared to INR $40.03 crores in the corresponding quarter last year.

9:30 Copper rods were impacted by a continued restriction on the LPG availability, resulting in the rod plant being shut during the quarter. Overall, we are encouraged by the performance in quarter one. Our focus for the balance of the year will be on profitable growth in our key segments, building on the communication cables opportunity while maintaining a lot of financial discipline. With this, I would request the moderator to open the floor for questions. Thank you very much, sir. Ladies and gentlemen, we will now begin with the question answer session. Participants are requested to please use only handsets while asking a question.

10:28 The first question is from the line of from Asian Market Securities. Congratulations on great set of numbers. I have two questions. First is on the EBITDA front. So the margins you've delivered are close to 12.5% versus a 10.5% last year. I mean, it means last quarter and 99.4% in q one last year. So I just wanted to know how should we think about the underlying sustainable margins from here and how much of the q one expansion is coming from operating leverage, product mix and copper pass through versus one off. And if you could speak a bit more on the margin profile on the export front and the products that we are exporting? That's my first question. Okay.

11:14 So on the I'll take the export part first. On the exports this time, there were opportunities on the optic fiber side. So those provided a fairly large margin. Now those opportunities may not happen every month or every quarter. So in terms of sustainability, I would be a little conservative on that. But in terms of the opportunities for exporting, we are now more aggressive than we had been in the past. So we have been exporting in the last four months, five months, we've exported power cables, we've exported optic fiber cables and also the traditional products that we used to export like the submersible cables and so on. So that part is continuing, while the new opportunities around power cables and optic fiber cables are what we are exploring now.

12:16 There are potential leads there. I don't want to run the before the cart. So let's see as every quarter goes by. On the other side, on the domestic front, the margins at electrical cable side should be sustainable. We are about 10.5%, I think, and those should be sustainable. On the communication cable side, as I mentioned in my opening remarks, so long as the old raw material is available for use, the margins will be high double digits.

13:03 But as that consumption gets I mean, as that stock gets depleted, you will see a correction in the margins. I still believe that at the end of the year, provided the demand situation remains similar to what it is today, I still believe that you should have a double digit margin number. It will probably be in the low double digit numbers. Got it, sir. And sir, if you can call out the volume growth during the quarter across product different categories? So all those items that we talked about, whether it is agriculture or automobile or flexibles, all of them were in the high double digits.

13:51 Wires were around in the low single digit number. My second question is on the Communication Cable segment. So it has been an outperformer during the quarter. So could you please speak a little bit more on the outlook? And if you can quantify the contribution from volume and next the of line The opportunity here of was that if you went through my call of last quarter, there has been an explosion of demand from data centers and usage, which is riding on AI, which has resulted in a huge demand for fiber cables.

14:55 And this is a global phenomenon. So that is therefore throwing up opportunities for us, not just domestically, but also overseas. So part of the out of the INR 166 crores that has been INR 176 crores that has been reported as revenue, I think about INR crores is INR 30 crores to 40 crores is around exports. So there were opportunities to sell, which we cashed in on. But I see the I see as we as the time goes by, there will be a similar demand explosion around data centers in India as well.

15:41 And here, what we are seeing, we are seeing a phenomenon where the fiber count is not just 144 or two eighty eight fibers in a cable, that is expanding to thousands of fibers in a single cable. So the opportunity size can be substantial as large hyperscalers expand into India. So we see that trend, which is currently happening in The U. S. And in Europe to show up in India as well. Got it, sir. And sir, just incremental to this, any any update on the BharatNet project? No. Not really. I think with the prices as high as they are, the the the winners are waiting and watching.

16:36 That's helpful, sir. Thanks a lot and all the best. Thank you. Thank you. The next question is from the line of Sonali from Jefferies. Please go ahead. Sir, thank you for the opportunity. Congratulations on a great set of numbers. So my first question is on the fiber prices. So any indication as to what are the prices right now globally versus December 25? And your thoughts on where they will be heading from here on? Okay. I'm not able to predict where they will head from now on, but I can tell you where they are today. The standard fiber, which is the technical term there is G. Six fifty two. D, had was somewhere around $6 yes, about $5 to $6 back in December last year, had climbed up to $17.18 dollars over the last six, seven months.

17:38 I think currently, it's settling at about between $12 and $13 per kilometer. That's where it is today. That's the standard fiber. But more premium fibers are selling at much higher rates. So some of them have even been sold at $50 a kilometer. So some of the exports that we did were of the premium variety when the prices were around, I think, 25 a kilometer. So there's a mix of multiple types of fiber that have been used this quarter. And so that's where the range has been. I think it is now settling to around between eleven percent and thirteen depending on who's got what available and what the demand is at that moment in time.

18:33 So that probably gives you a picture of what it is. What it will likely to be, I'm not so sure. I am not able to predict that. But so long as the demand continues to be where it is today, I guess the price will remain in this range. Understood, sir. So my second question is regarding your exports. You did mention some numbers, which I missed out. Of your communication revenue, how much is contributed from export? And which geographies have you exported to? So we out of the communication cable revenue, about I think between 35% to 40 was exports. We were exported to The U. S, we were exported to Europe.

19:22 These are the two main places that we exported. Understood. Sir, on the preform, the backward integration, you did mention in your earlier call that you are expecting the additional support to margins from the end of September quarter as the facility becomes fully functional, sir, how much would be used captively and how much would likely be exported from this 100 metric ton facility? The intention is to use all of it for making cables. To draw the we our intention is not to sell the preform. Our intention is to draw fiber from that preform and cable that fiber. Understood.

20:08 So almost 100% captive. And how much would be the margin improvement? Any ballpark? Because right now, this quarter, your margin is already double digit, sir. Yes. I mean, I don't see it improving from here. But also, the current price levels of raw materials is kind of fluid. If you see if you look at the inputs that go into it, let's say, fuel, helium, for instance, was selling at approximately 1,600 per cubic meter. It is now it had gone up to 5,000 per cubic meter when the disturbances started in The Middle East.

21:00 It is now around INR 3,400, 3,500 levels. So there is a little bit of fluctuation. Stability is still not I'm just giving you one example. There are multiple inputs that go into it, and all of them have seen the input costs fluctuating widely. So to look at the price today and make an estimation is probably not going to give you the right results. So I would rather wait for some time before things stabilize. And you have a period of time where the Middle East stabilizes. Right now, it is a case of one day nice and two days, just the opposite of nice.

21:48 So I think we need to wait a little while before we predict those numbers. Got it, sir. So would it be fair to assume that because of the preform and once it's completely functional, almost 100 bps margin improvement can come from that because it's actually very good backward integration? It is. So but then today, the situation is that demand has far outstripped supply. And so that has pushed up the prices to certain levels, which may not sustain all along. Right now, data center requirements have boomed. AI driven requirements have boomed.

22:36 At some point in time, they will reach, if not a saturation level, they will reach a steady state period. Now when that will happen, whether that will happen in six months, one year, two years is anybody's guess. So at that point in time, then the selling prices will have to go down. And so to say that I will get 100 bps over and above what I'm doing today, I think is stretching things a little too much. Sir, actually, it was not over and above. Maybe the delta, which I was expecting from a normalized margin to backward, maybe, maybe. That might be possible. Yes.

23:23 Understood. Sir, last question from my end. I'm sorry, ma'am. Could you please return to the question queue? Thank you very much. Thank you. The next question is from the line of Achal Nohade from Numama. Am I audible? Yes, very clear. My first question is in the electrical cable, if you could probably for FY 'twenty six, if you could help us with the mix in terms of the wires and the various types of cable, if you could help us with that mix, a broad sense? So typically, our numbers have been like this.

24:12 Approximately twothree is construction related. And the balance has been more or less equal between automobile, agriculture and industrials. So last year, we introduced solar cables. So that's changed the profile a little bit. And so the split would probably now be 60% construction and the balance will be I mean, the older three would still have about 10%, 12% each, while solar would be a smaller number at this moment in time.

25:06 In this quarter, of course, auto cables has grown to more than 14%. But then we'll have to see it over a longer period of time. 0.25 is probably not the right time period to define how the split would be. But I still think that going forward, construction wire would still constitute a major portion of our revenue, followed by these four applications. And in terms of the... Whether it is wires or cables, it will be bulk of this will be effectively wires. Right? The lowest voltage conductor All of them are wires. All of them are wires. I've not included cables.

25:53 Okay. And what about cables? How much would that be, the LV cable? LV, HP put together will be maybe another if you add that, will probably be around 7% to 8%. Got it. My second question was with respect to the OFC. If you could help us with assuming the current price, what would be the potential revenue at peak capacity of the pre form plus drawing capacity, sir? So I think a similar question was asked last time around as well. So we will have a draw capacity of 8,000,000 kilometers. So at 8,000,000 kilometers and assuming average price of $11 per kilometer of fiber, so then you're looking at about $8,000,000 of revenue if I only sell fiber and if I sell all of it.

27:02 Sorry. If you sell only fiber, it is $88,000,000 If sell only fiber and if I sell all of it, it will be around $8,888,000,000. And if you want to use 100%... And is this 100 metric ton sufficient for 8,000,000 fiber kilometer? No. That's about 4,000,000. Okay. So you will still have to procure from all Yes. The So if you recall our earlier calls, we said that in Phase one, we are putting up a plant, which can manufacture 100 tonnes. And depending on how the market is, we would expand that to we would double that in the subsequent expansion. That is what we had said two years ago.

27:55 At that point in time, the boom in data center was not visible. This has happened in the past six months. So we will go back to our drawing boards to see what we need to do in terms of Phase II. We have taken one action on the fiber side that we didn't want to wait for some time before we came up with that expenditure. We are doing it together. As far as Phase II of the preform is concerned, we will study the situation and then as required, decide on whether we should spend for the expansion now or at a little later. Got it. Just to clarify, sir, you said $88,000,000 if you sell fiber, but what if it's an entirely approval?

28:47 There'll be a value addition, which will depend upon the cable design. How complicated the cable is? I mean, if I'm only selling small count fiber cables, then the value addition may not be very high. Whereas if I'm selling complicated designs where the fiber count is higher, 96, one forty four, two eighty eight, or for data center applications where, like I said, it runs into thousands of cables in one sorry, thousands of fiber in one cable, then the numbers can be substantially different. Then the value addition can be 20%, 30%. So it depends on what kind of designs we get.

29:42 The next question is from the line of Bala from Arihant Capital. Sir, I want to understand about our capability in data centers. I think we have a capability of 2,728 fibers per cable. But if you look at data center applications, it would start from thousands of thousands of fibers, as you mentioned. But if you look at some of the players are into, like, 7,000 range kind of fibers. They already achieved, and they already started supplying to hyperscalers. And they already are in the progress of making 14,000 to 16,000 range. So I just want to understand what is our capability as of now and whether we are doing any specific CapEx and R and D for data center cable side.

30:36 Also, could mention what are the current product portfolio, which is suitable for data centers? And what are the products are under pipeline? So some of these are in developmental stage, so I would rather not comment about them. But I understand the question that you had asked, and all I can say in return is, yes, all those designs, like you mentioned, whether it is 1,700 fibers or 7,000 fibers or even 14,000 fibers, we should be capable of making those and supplying those. Let me say it differently. We should be capable of supplying those in the not too distant future.

31:30 Are you making any steps for in terms of R and D and CapEx, sir? Yes to both. Sir. So my second question, the margin side, you mentioned about 30% for Communication Cables. But I just want to understand this kind of margins because of higher spot contracts where the realizations are higher. I just want to understand like what you... Okay. Let me give you an example. Let me give you an example. So the inventory that I had at the beginning of the quarter were all sourced sometime in November, December last year.

32:19 So those would have been sourced at, let us say, x dollars. But when I'm selling it, I am selling it at an equivalent of the current market price. So to the extent that I have an opening inventory, I'm benefited and therefore, my margins are where they are at this point in time, which is why we gave the cautionary statement to say this quarter was 30, but at some point, it will normalize. As and when I complete consumption of the existing inventory, my new cost will be what I'm buying it at today, whatever is my cost today. So the delta there will definitely not be 30, but it would definitely be in the double digits.

33:07 That's the example that I can give. Sir. Sir, follow-up on that, what is the mix of spot and long term contracts for communication cables? And also you could mention about the products supplied for data centers in our product portfolio. Sorry, what was your first point? The long term and spot market mix for communications and cables and the product portfolio for data centers. I think long term still would be more than half the revenue. And as far as data center products are concerned, technically, I'm not able to share that with you, but there are cable designs which have been supplied to people.

34:08 Okay, sir. Thank you. Thank you. Participants, please limit your questions to only two questions each. The next question is from the line of Patanjali from Sundaram Mutual. Please go ahead. Hello, sir. Thank you for the opportunity. Kamara is having a very good set of numbers. Just following up on a couple of things you mentioned in the previous quarter. I think you mentioned that our 8,000,000 capacity of the additional expansion will come q two. But you also mentioned today that we're planning for... To go from four to eight directly instead of four to six and then six to eight. So is this for the entire 8,000,000? Is that the correct way to understand it? Yes, the entire 8,000,000 will be ready by end of quarter two. Earlier on, what I said was we would first complete the 4,000,000 to 6,000,000 and that would happen by Q2.

34:59 And then we would wait and see how the market reacts before we go to the next level. But seeing the current market conditions, we thought it was ideal for us to invest in the additional raw capacity right away. Got it, sir. Sir, and just one more thing. So you mentioned that there'll be a bit of a repricing in terms of customers and all, right? So is this happening in Q2 beginning? Or when is this happening? You're talking about the long term one, that happened already. That's happened in I think it happened in June. So as in so is it there in this quarter's numbers in terms of revenues? That's what I'm trying to add. Some of it is. Whatever was sold in the month of June is.

35:47 Okay. Okay. Got it, sir. Just last related question is that your revenue should be much higher given that fiber price are full, that correct? Because what are we doing as revenue this quarter is on 4,000,000, and I think we've done around INR 1,000 sorry, 176 crores. So theoretically, should it be, like, closer to 300 crores per quarter? Yeah. So so, again, to take you back to the earlier question that somebody else had, if I was to sell only fiber and at $11 a kilometer, my annual sale of this product would be 88,000,000 per year. So that would be 22,000,000.

36:34 So 22,000,000 times 100, if it was only fiber, would be around INR250 crores, INR260 crores if it was only fiber. Then you add the cable value addition. Yes, somewhere around if I'm selling out everything that I have, INR300 crores is not a difficult number. And we also have some other cables, right, in this other than fiber in our communication. Right? So shouldn't the segment be much bigger? That's the part of the Okay. So there are other metal based cables there. But if you see many of the metal based cables are transitioning. Many of those applications are transitioning from metal to fiber. So whether it is coaxial, which was used in your DISH TV applications, those are all transitioning to fiber.

37:27 So while this will grow, something else would go down. Thank you. The next question is from the line of from Asian Market Securities. Please go ahead. Hi, sir. Thank you for the follow-up question. My next question is on the SME segment. You know, it has continued to be a weak link. I remember you have previously mentioned that, you know, we have set a target of 5,000,000,000 SME revenues by FY twenty eight. So given our current trajectory, I just wanted to check, is this is this target still realistic, and what needs to change over the period of twelve to eighteen months to achieve it? You know, I'm I'm just I'm just I'm just curious to know, you know, why, you know, this business is holding us back.

38:13 Is it some lack in the distribution phase or maybe product portfolio pricing or competition? Where are we lacking in this segment, sir? This particular quarter, we had a different issue. I don't know if you've seen this from other competitors. Fuel was an issue this quarter for many of the manufacturers. Commercial LPG was just not available. And therefore, lot of people a lot of the device manufacturers, especially fans and especially fans, they were not able to supply the kind of quantities that were required. We had a quite a hot summer, but in terms of being able to supply to the market, there was an issue.

39:07 So I think that was a reason why you don't see too much of growth in that sector. The second part of that group is also the conduit pipes, where, again, availability of PVC and the price of PVC that was available was a hindrance there. Those are changing now. Unfortunately, fans, it has changed now, but then the season is more or less one. So we will have to see how to catch up on those numbers. But the target of billion dollars by 'twenty eight still remains, and we are sure that we can get over there. Got it. So just lastly on the copper front, copper is again at 14,000 odd levels.

39:57 So just wanted to check with you how's the channel inventory and any pricing action during the quarter? During the quarter, we changed prices once. We revised it upwards once. That was, I think, in May. We took it up by about 3% or so. But like I mentioned in my opening remarks, the closing inventory at the channel was lower than the opening inventory. So there has been a certain amount of destocking, which should allow them to restock over a period of time now. But the copper levels are high.

40:43 I'm not sure if you will be able to see the likes of 8,000 anymore. Got it, sir. Thanks a lot and all the best. Thank you. Thank you. The next question is from the line of Vinit from Investec. Please go ahead. Vinit, your line is unmuted. Yes. Please go ahead and Am I audible now? Yes. Yes, sir. Okay. Thank you so much, sir. So just wanted to understand, on the demand side, as far as communication cable is concerned, I understand from an outlook, why it is quite healthy given given all the demand across data center AI related products.

41:31 But if you can quantify or maybe give us some sense around the order book which may... We may have or should we assume that we should be able to ramp up to 60, 70, 80% sort of utilization levels once the new capacity is also operational? How should we think about next one to two year demand on the communication cable side? Okay. The demand from in our country is going to be basically what it's telecom is still going to be a significant player because they will have to complete their many of them will still have to complete their five gs full rollouts and expansions.

42:18 AI and data center, especially the hyperscalers as they come into India and set up their shops, they all announced large numbers. So nobody is talking less than $5.6000000000 dollars So that kind of investment will require infrastructure port in the form of both communication cables as well as power cables. But how long would they take to set up their basic infra? I think maybe two years for sure. The demand should be fairly robust. Post then, we'll have to see what kind of use cases AI throws up and how one is able to capitalize on that.

43:09 Am I able to give you a number? Not really. But again, I will refer you back to the comments from earlier calls. Our consumption of fiber per capita is still pretty low. Our overall consumption in the country is still around 25,000,000 kilometers per year. Compare that with China at 400 plus or even higher than that. So there is still a long way to go. I'm not saying that we will reach 400, but given the size of both our geographies, factor of 20,000,000 is not we should is not something that we should aspire for.

43:57 I think our $25,000,000 consumption can easily go up to 50,000,060 Understood. Understood. Sir, if I may... If I if I put this question slightly differently, Then is it is it a case wherein in the next two years, maybe bulk of the growth will be driven by our consumer distribution plus telecom business, and domestic data centers will come in... Contribute... Start contributing maybe by FY '29 onwards? It depends on the speed of how quickly those hyperscalers are able to set up their infra.

44:45 So some of them are getting nearing completion. So we are in are in Pune, and I know that Microsoft is coming up here close by with their data center, and I think it is not very far away from being completed. So you would have some demand coming up in the next six, eight months for sure. How we are able to capitalize on that is what we need to work on. Understood. Understood. And just to understand how the utilization levels could be in consumer communication cables, would export be an equal opportunity or equal focus area at least in the near term till the time data come... Comes in in a real big way, just similar to what we had it in q one? I understand it may not be every quarter, but could it start contributing a lot more to communication cables revenues and consequently utilization levels?

45:52 We are hoping it would. Understood. And any any visibility you have on this where it's rejoin queue? Vinita, please rejoin the queue. Sure. Thank you. Sure. Sure. Thank you. The next question is from the line of Raman from Sequent Investments. Please go ahead. Hello, sir. Can you hear me? Yes. Yes. We can. Please proceed. Thank you for allowing me to ask a question. Sir, I have two questions. One, on the availability of our... Of Germany, which is basically raw material to fiber cables, Are we facing any issues with respect to it? Germanium tetrachloride is required for manufacturing preform. Mhmm.

46:37 Yes. There are some issues in terms of easy availability of that item. It is a restricted item. So the lead time is pretty long. While the usage is not extremely large quantities, nevertheless, it is a restricted item, so it has to pass through several loops before it lands up in your place. So it is a kind of a hand to mouth situation. But I think at this point in time, we have enough to take us through the calendar year and more is on the way.

47:26 So yes, it needs careful planning. It needs fairly tight follow-up almost on a daily basis to ensure that you have the material that you need. So I And do we... Yeah. Just a follow-up on this. Do we have any long term contracts or partnership with the player or with some with the the players which manufacture and sell these? Or is it, like, you know, on a year to year basis? No. Nobody signs up for multiple year contracts in this in this line. So you were... Yeah. We are working on the longest contracts that we can get.

48:12 Understood. And, sir, just a clarification. Earlier, you mentioned that you can do around 3,000 crores of revenue from fiber cable. Is my understanding right? Sorry. When did I say 3,000? Sir, earlier, you were explaining explaining some unit economics to one of the participants with respect to fiber cable. And you said with the capacity coming online, around INR 3,000 crores of revenue can be done. In today's call? Yeah, yeah. No, today's call I said, if I were to sell only fiber, then and the entire capacity as well at the current price of $11 a kilometer Mhmm. I will be able to generate a revenue of $88,000,000.

49:08 Okay. So that's the peak revenue from our fiber cable division. Right? No. No. That's only fiber. If I only sell fiber. Now if I cable it and sell it, that number will go up depending upon the design of cable that I sell it. There are certain cables where you carry only two fibers, where the value addition between fiber to cable is hardly anything. But there are other designs where the number of fibers inside can go up to standard is anywhere up to two eighty eight. But now with the data with the data center application, those can even go up in thousands.

49:54 So those will have a much higher value add. I said under... What I said was you can add on an average between 25% to 30% on top of the fiber fiber price. Yeah. When I'm extrapolating that, if I'm extrapolating what are the unit economics which you stated earlier of 8,000,000 USD... Sir, could you please return to the question queue? Is there a follow-up, Palu? Please return to your question queue, sir, and you can follow-up with that question. Thank you. The next question is from the line of Tej Patel from. Please go ahead. Hello. Am I audible, sir? Yeah. Go ahead.

50:43 Yeah. Perfect. Thank you so much for the opportunity. Couple of questions, sir. Sir, so when did our the expanded capacity of 8,000,000 is expected to sorry, the 6,000,000, which is on fiber expected to come online? Or has it already come online in June, July? No, no. We are going up to $8,000,000 and it will happen by August. Okay. Okay. Perfect. So for the first quarter, it was only $4,000,000 right? Yes. It will happen by September, not August. Great. Great. And on cable, right now, current capacity is of 8,000,000. Cabling capacity is 8,000,000. Got it. Great. And and are we expanding capacity there as well? Yes. We will go up to 10,000,000.

51:30 And this would be also by September? No. That would take a little more... That that would take a little longer. Great. And, sir, when you say you have probably exported for data center in yours, US and Europe, is it just fibers or cables as well? No. We have... So I... We have exported both. Okay. Have exported fiber. We have exported cable also. But then the reason... So so if you exported cable, you probably would have an IVR... It would be an IVR cable. Right? No. They also require other designs. Okay. Okay. Got it. Got it. And and I was just... So so if I... Is it right to say that the current 4,000,000 fiber capacity, almost 50, 70% would be utilized?

52:18 Currently? For Q1, I mean, on the Q1 number. Yes. We have in fact, yes, we have used up all the preforms that we had. There were difficulties in getting preforms because, you know, how tight the market is at this point in time. So to the extent that we had material, used up everything. Got it. And cabling, sir, utilization would be how much? Cabling utilization, I think one plant is full. The other plant is three fourths. Got it. And, sir, is it possible for... To, you know, split the revenue on cable versus fiber? It is possible, definitely, but I don't have the numbers with me. Right?

53:07 Okay. Okay. Not a problem. And and, sir, what will be the margins we we would have made in the domestic business? You you showed almost 30, 40% of the business came from exports. On 60%, what will be the EBIT we will be making? Not that 30% number. It will be slightly less because there were some contracts which were entered into last year, which continued on until June. So the incremental margin only came from the export business? Correct. Got it. Interesting. And and, sir, just in terms of preform sourcing, you know, have you entered into a low, you know, contract with someone, or are we buying it on spot from someone? I mean, how does the contractual terms in preform work?

53:58 And and just, you know, follow-up on the same question is, let's say, if Germanium is an issue right now and we probably foresee the issue to remain, let's say, a couple of quarters, do do we expect, let's say, even if our preform comes live, we'll probably keep sourcing preform from outside unless and until that capacities of our own preform goes live. See, our until our preform facility stabilizes, it is going live. It is... Got to stabilize. Yeah. Yeah. Yeah. Yeah. Mhmm. It's a new plant, it takes a little while to stabilize. No. No. But that... Then there's a germanium problem. Right? So we will be still sourcing preform unless and until the germanium problem goes off? Yeah. Okay. The germanium problem is there. It it is for... Not just for me, it is for everybody across the country. There are two of us who are making it. It is for both of us.

54:51 But but that has not stopped us from making brief form because we have some. So what I said was we are we are we are having what we need, but we need to follow-up on almost a daily basis to ensure that it doesn't stop at any point in time. So there is a lot more effort to make sure that you get that material. And the second part is the preform capacity that I have is equivalent of 4,000,000 kilometers of fiber. Yeah. Yeah. So to that extent, I will I will consume my own. The balance I will balance, if I have to draw 8,000,000 kilometers of fiber, I will have to buy preform from somewhere else. Correct. So so, yes, ideally, it would be it would be nice to have a long term contract, but nobody globally signs a contract for longer than a year.

55:48 Okay. So so your contract for Preform right now would be of a year, and that contract would have been entered at the start of this calendar year. Right? So so you're jumping ahead of me. So what I said to us, nobody globally enters into a contract for more than a year. So, yes, we have certain relationships with certain manufacturers, and they are able to support us to the extent that we need that support. Understood. So, I will just the reason I asked this question, I was just trying to understand, you know, once our preform contracts get revised, right, probably, the... Our raw material prices would go significantly up because the preform prices are also upwards, which probably right now we might be getting preform at lower level given our older contracts.

56:35 I was just trying to understand that, if you can give us clarity on this. Yes. To some extent, that is true, but not... But then there are also people who have there are people who have changed their contract pricing also. Okay. Some suppliers some suppliers have broken their contract with with one of changes. Got it. And, sir, last question, and I will join back in the queue. So so, of course, you're probably not commenting on the order or a or a long term contract. But if you want to understand, you know, what would be the export mix, you know, going forward in the quarters and and for one more question into this is once our fiber capacity comes live, do we expect to exit at full utilization in Q4?

57:24 If okay. If demand is as robust as it is today, then yes, that would be our effort to exit at full utilization, but we'll have to see how demand keeps up. Great. Great. And and and for exports, you know, what will be the mix? Do the mix continues towards 30, 40% in the upcoming quarters as well? See, export is a little longer negotiation involved. So you can't really say that. Sometimes you conclude negotiations this quarter and then the supply happens a little later. So very difficult to predict how that is going to be.

58:11 And, sir, are we looking to, you know, enter into IVR? So, I mean, there will be complete different... Some amount of CapEx going there as well. Right? Because there's a different machinery requirement for IVR. So so are we doing IVR right now? Are we planning to do IVR for cables? Whatever the designs the data center is looking for, we should be able to produce them, if not today, not in the not too distant future. Got it. And, sir, are we engaging with any customers as of today in data center for a long term contract? Yes. But I think By long term, I mean, it would be, let's say, more... Yeah. Those are those are things which I would not like to comment upon right now.

58:56 Okay. Okay. Got it. Got it. And sir, do we contemplate, you know, expanding maybe beyond eight also if if the demand stays robust by by the end of this year maybe? So which is what I said, any any... We will take a holistic view on all of that, whether we move to move to doubling our refund capacity, at what point in time, what else do we do? All this will be discussed and decided. I mean, it's not for me to talk in the call, right? No problem. Sorry, Thank you so much, and all the best. Thank you. Thank you. The next question is from the line of Prashar Dondev from Sandeep Family Office. Please go ahead. Hey. Am I audible?

59:43 Very clear. Yeah. Much of my questions are already answered. My questions was on the export side. Sir, in the opening comments, you did mention that you would be conservative basis the quarterly orders that we might be getting. I just want to understand the export that we made in this particular quarter. What was the nature of those exports? Were those kind of add off requirements by our customer? And we would be we were able to supply to them. And how are we thinking about building long term engagements over here so we can build a sustainable export visibility over here? Okay. So one of the remarks that I made was that we are more aggressive than before on the export front, which means that we have a revamped team now, which is focused only on exports.

1:00:38 So they're exploring multiple geographies to see what kind of relationships that we can are there that we can build and build on a long term basis. So there were immediate opportunities which came up from The U. S. And Europe, which we engaged upon. But that doesn't mean that those are the only two opportunities that we are following up there. We are working with finalizing relationships in multiple geographies. So I hope that answers your question. So it is not just a one off kind of a trade that we've done, one opportunity you saw and then you went and closed it. No. Beyond that, it is more systematic.

1:01:24 It is more focused. And there are people working on those relationships as we speak. Okay. Okay. And my second question was on the margins for the Communication Cable business. So you did mention that there would be some normalization of the margin. I'm presuming it would be significantly would it be still higher than the margins that we make in the electrical cable division? And in the last call, you had mentioned that there would be some repricing of the long term contracts, which will happen in the two h of the year. But I guess answering to one of the participant's question, you mentioned that that has happened in the post June quarter itself. Correct Am over here? Yes. So that change has happened in towards the end of June. So that is already factored in.

1:02:13 And what I mentioned what I meant while I said there will be some normalization was that I think 30,000,000 is not a number that is sustainable in the long period. That's what I meant. So it should come down to something more reasonable. And whether it will be higher or lower than the electrical cable margins, it will again depend on what the product profile is. If it is a complicated design, then the margins should be much better. But if it is, let's say, a simple design like an FTTH cable or a drop cable, then the margins are not going to be very high. The value add is not very high.

1:03:03 So it depends finally on what the end user wants and therefore, how complicated the product is to make. Okay, okay. That would be all from my side. All the best for your future. Thank you. Thank you. We will take that as the last question. I now hand the floor over to the management for closing comments. Thank you. That was quite an intense session. Thank you for following us, and we hope to keep in touch with you. Thank you, everyone. Thank you. On behalf of Finolex Cables Limited, that concludes this conference. Thank you for joining, and you may now disconnect your lines. Thank you.