Finolex Cables Ltd Management Discussions.

Global economic Scenario

The year 2019-20 was quite a challenging one for the world economy, with sluggish growth in manufacturing and trade in

2019, and the unprecedented novel coronavirus pandemic throttling almost all economic activities in the first half of 2020.

Trade policy uncertainty, geopolitical tensions, and stress in key emerging markets were among the primary factors. Global GDP growth stood at 2.9%1 in 2019 compared with 3.6% in 2018, as per the IMF World Economic Outlook.

Despite the headwinds of 2019, there were positive indications at the beginning of 2020, such as monetary policy easing in several economies and receding of trade tensions.

However, all projections had to be revised drastically once the scale of the Covid-19 contagion became clear, and trade and commerce were pushed to the background as concerns over public health came to the forefront. IMF has revised the growth outlook in April 2020 and estimated the global economy to contract by 3% in 2020. Advanced economies are projected to register a negative growth of 6.1%, while EMDEs are projected to see a 1% decline in growth. Only India and China are expected to remain in the positive growth zone, at

1.9% and 1.2%, respectively. The global economy is likely to rebound and grow by 5.8% in 2021, with the normalisation of activities and the support of fiscal stimulus.

Covid-19 Impact

Social distancing and largescale lockdowns to prevent the spread of Covid-19, plus the 300,000+ deaths worldwide till May 2020, have caused governments to become overwhelmed by the extreme pressure on healthcare and the task of supporting national economies. According to the World Trade Organization, global trade is likely to drop between 13% and 32%2 in 2020 during and after the pandemic.

Experts have already projected a recession, considering the pandemics impact on global financial and consumer markets, with purchasing powers severely eroded in many countries. According to the Asian Development Bank, the coronavirus outbreak could cost the global economy US$4.13 trillion.

Extensive multilateral co-operation and targeted fiscal, monetary, and financial measures will be required to prevent the economy from plunging further in the next two years.

Indian Economic Scenario

Growth sentiments in India were impacted by the global slowdown and the Covid-19 outbreak, alongside a few country-specific factors. The deceleration in growth was mainly attributed to a fall in three key economic parameters: consumption, investment, and export. Distress in the Non-

Banking Financial Company (NBFC) sector, lower Goods &

Services Tax (GST) collections and strain on fiscal deficit put still more pressure on economic activities. The situation

1 2

3 became aggravated by the coronavirus outbreak and Indias nationwide lockdown starting from the last week of March 2020, estimated to be the largest and the strictest lockdown in the world. According to IMF, Indias GDP grew at 4.2% in FY2019-20, down from 6.1% in FY2018-19, affected by these factors.

A few positives in FY2019-20 indicated a growth pickup for the next fiscal. The Reserve Bank of Indias reporatecuts wires and by a total 135 basis points were intended to give a liquidity boost to the economy and credit support to the NBFC sector. The year also saw recovery of real consumption supported a significant

Further, the amendment of the Insolvency and Bankruptcy Code4 (IBC) to ease financial stress on the real estate was a was also significant fuelled by Indias jump to 63rd rank5 in the World Banks

Ease of Doing Business in 2020, making it more attractive for Foreign Direct Investments. Above all these, the National

Infrastructure Pipeline with a budget of Rs 102 lakh crore and the healthy allocations for infrastructure seen in the Union Budget 2020-21 raised hopes for an upswing.

As with the whole world, the pandemic and the non-availability of a vaccine has upset most of Indias economic calculations for 2020. But the countrys fundamentals being very strong, it is projected by the IMF to be among the best performing economies in 2021, with a growth rate of 7.4%, second only Chinas 9.2%. Export and manufacturing in India may even benefit from the contagion, as some companies look at it as a viable alternative to China for cost-effective outsourcing.

Growth Outlook and Covid-19 Impact

As the coronavirus crisis rolls well into FY2020-21, the Government has been focusing on containing the infection and ramping up healthcare infrastructure. The nationwide lockdown saved lives but caused massive income loss and production loss, and an overall weak financial performance. As an umbrella support, a Rs. 20 lakh crore all-inclusive stimulus package called ‘Atmanirbhar Bharat has been announced by the Government. This includes extensive support packages for industries, including MSMEs and cottage industries, labourers, middle class, and urban and rural poor. RBI slashed the reverse repo rate by 25 bps to 3.75% in April 2020 so that commercial banks could lend to companies instead of parking the cash with RBI. A return to normality is expected only by the second half of FY2020-21 if infection containment measures work.

Company Overview

Finolex Cables Limited (hereinafter referred to as "Finolex" or "the Company"), is a leading manufacturer of electrical and telecommunication cables in India. Operating for more than

50 years, Finolex has been able to maintain its leadership position as one of the most diversified companies in the country. The Company climbed on the growth trajectory by virtue of its continuous focus on product quality, manufacturing expansion, technological knowhow, and robust customer service. Besides manufacturing a wide variety of wires and cables, Finolex has also forayed into the manufacturing of Fast-Moving Electrical Goods (FMEG) and home appliances in order to move beyond the B2B segment and tap the B2C market for revenue augmentation. Over the years, the Company has established itself as a preferred electrical solutions provider for retail and institutional markets in India and created a strong brand name.

As a backward integration strategy, the Company manufactures Continuous Cast Copper Rods (CCC rods) at its rod plant in Goa. Besides serving the captive requirement of copper rods for producing copper-based electrical and communication cables, the Goa plant also ensures raw material quality control. A small portion of the CCC rods is sold to third-party customers, which is covered under the ‘Copper Segment results.

The Company is focused on enhancing production efficiency and product quality through innovative technology. It caters to the growing and changing market demands through its innovative range of products.

Major Products and Segments

Finolex has a comprehensive product portfolio for diverse electrical requirements across commercial, industrial, and consumer markets. The Company has been recognised as the ‘Total Cable Solutions provider because of its wide range of electrical and communication cables. Its FMEG product range complements the electric cables segment and is well positioned to drive business growth. The four major broad product groups of the Company are: Electrical Cables,

Communication Cables, Others (Consumer Electrical and Home Appliance), and Copper rods.

Product Portfolio and Applications

Group Product Covered Application
Electrical Cables 1100V PVC insulated cables Motor winding PVC insulated cables Electrification of industrial establishments, used by construction industry, electrical panel wiring, and consumer electrical goods Submersible pumps and electrical motors
Automotive/battery cables Wiring harness for automobile industry and battery cables for various applications
UPS cables For providing power from the UPS to the computer/ appliances in the networking environment
Heavy-duty, underground, low- voltage, power and control cables Connection to the user point from main supply of power
Heavy-duty, underground, high- voltage, power cable Intra-city power distribution network
Elevator cables For use by the elevator industry
Solar cables Specially insulated cables for use in solar parks
Communication Cables Optic fiber cables Networks requiring high-speed transfer of large bandwidth for voice image and data transmission
Optic fiber Principal raw material for optic fiber cables
Coaxial cables Cable TV network solutions, microwave communications, mobile towers
Local area network (LAN) cables Indoor and outdoor networking, voice and data transmission, broadband usage
CCTV cables CCTV cables for better quality of CCTV images
Speaker cables Jelly-filled telephone cables (JFTCs) Broadcasting applications in buildings and electronic goods Telephone line connections to exchanges and users
PE insulated telephone cables (Switchboard cables) Telephone instrument connections to EPABX
V-SAT cables For connecting V-SAT dish to base station
Copper Rods CCC rods of 8mm diameter Raw material for manufacturing copper-based cables
Electrical Premium and classic switches, sockets, regulators, etc. For power supply to equipment in domestic, commercial and industrial environment
Lamp Retrofit/non-retrofit CFL lamps and T5 tube lights and fittings, LED based lighting solutions Lighting for homes, hotels, shops, offices and factories (both indoor and outdoor applications). Also available for street light applications
Electrical Fans Ceiling fans, table fans, wall fans, pedestal fans, exhaust fans For use in domestic, commercial and industrial Environment
Switchgear Miniature circuit breaker (MCB), residual current circuit breaker (RCCB), moulded case circuit breaker (MCCB), distribution boards (DB) For use in voltage surge protection and safety applications in domestic and commercial environment
Water Heater Instant and storage water heaters For use in domestic and commercial environment

Operational Review


Electrical Cables: 60,651 MT as compared to 62,483 MT in the previous year.

Communication Cables: Metal-based at 7,773 MT as compared to 8,091 MT in the previous year.

Communication Cables: Optic fiber cables of 1,295,500 fiber kilometre (FKM) as compared to 1,850,493 FKM in the previous year.


Electrical Cables: Rs. 2,361.1 Crores as compared to Rs. 2,494.4 Crores in the previous year.

Communication Cables: Rs. 408.9 Crores as compared to Rs. 488.9 Crores in the previous year.

Copper Rods: Rs. 19.1 Crores as compared to Rs. 28.3 Crores in the previous year.

Other Products: Rs. 88.2 Crores as compared to Rs. 71.0 Crores in the previous year.

The Company registered a total revenue of Rs. 2,877.3 Crores in FY2019-20 as against Rs. 3,077.8 Crores in the previous year, registering a 6.5% YoY de-growth with contraction registered across major segments, predominantly due to challenging macro-economic factors. Of this, segment-wise revenue contraction was: Electrical Cables by 5.3%,Communication Cables by 16.4%. Other products segment registered a growth a YoY growth of 24.2%. Total Income (segment revenues and other income) for the year stood at Rs. 3,049.2 Crores as against Rs. 3,199.6 Crores in FY2018-19.

The Electrical Cables segment, which contributed approximately 82% of the Companys total revenues in FY2019-20, mostly caters to the real estate industry. The real estate industry has undergone a virtual catharsis since 2014 with the imposition of the Real Estate (Regulation and Development) Act, 2016 (RERA), Goods and Services Tax Act (GST) and demonetisation, in the midst of a prolonged correction in demand and prices. Measures such as the consecutive rate cuts by the RBI, reduction of GST rates to 1% for affordable housing and 5% for others and the setting up of an Alternative Investment Fund (AIF) to provide relief to developers with unfinished projects have had little impact in supporting the already weak end-user sentiments in a landscape clouded by the ongoing Non-Banking Financial Companies (NBFC) issues and the resulting funding crisis for developers. All these factors eventually reflected in the Companys performance this year.

With poor economic data from all quarters, the government has been announcing various reforms/ stimulus measures for economic revival. In that regard, the specific measure for real estate sector in the form of AIF of Rs. 250 bn is a step in the right direction. Hence, the Governments formation of

AIF to fund the last mile credit requirement will help ease the logjam in the sector. This last mile funding avenue for stuck projects will be a big relief for the developers as well as the homebuyers committed to these projects. In the process, revival in the construction activity will also have a multiplier effect on economic growth given its linkages to various industries. The Company expects substantially higher growth in revenues from the electrical cables segment in a few years.

Revenue from the Communication Cables segment declined due to slowdown in the domestic public and private telecom sector. The fall was driven by lower revenue from Optical Fiber Cables, the largest revenue contributor to this segment.

This scenario is expected to change with the stabilisation of trade tensions across the globe, improvement in domestic scenario, and the development of Digital India projects and 5G infrastructures. But, the fallout of the Covid-19 pandemic on all economic activities has to be taken into account for growth estimates, and the outlook must be tempered with caution.

Finolex registered a healthy revenue growth in the Others segment (FMEG) on the back of its strong brand recognition and well-spread sales and distribution network.


The sluggishness in the global economic activity continued to reflect on the Companys exports which stood at a modest Rs. 25.7 Crores as against Rs. 30.4 Crores during the previous year.

For more details on the operations, a reference may please be made to the financial statements

Key Financial Ratios:

Schedule V to the SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015 requires reporting of to significant the immediately previous year financial) in the key financial ratios, along-with detailed explanations thereof. During the i.e.year, none of the key ratios registered significant a change of 25% or more as compared to the immediately previous financial year. Financial performance and key financial ratios for the last ten years are included elsewhere in the Annual Report and are available on the Companys website

Key Strengths


Wide product portfolio in Finolex has more than 50,000 diversified into the FMEG business wires and cables, FMEG, and home appliances. The Company serves as a one-stop-shop for electrical and communication cable solutions for institutional customers and government-owned entities. Its FMEG segment caters to the retail sector and has been steadily increasing its share in the revenue mix.

Brand Recognition

Finolex has leveraged its strong brand equity to extend its product offerings, foraying into FMEG and home appliances. This is well supported by its sales and marketing team and pan-India distribution network.

The Companys unique tagline ‘Finolex Gets People Together over the five decades of its operations has been receiving impressive response. Today, the

Company has firmly established itself as a consumer validated ‘Superbrand. The Finolex brands visibility in the visual and digital media has further strengthened its presence.

Manufacturing Knowhow and Backward Integration

The Company owns and operates 5 manufacturing sites and 28 depots to maintain a smooth supply chain and optimum product inventory. It also manufactures its key raw materials PVC compound and copper rods, optic fiber, and FRP rods as part of its backward integration strategy. This has given the Company greater control over its bottom line, secure its raw material supply, maintain high quality, and offer the final products at a competitive cost.

Pan-India Distribution Network

The strength of Finolex lies in its widespread channel network of 5,000+ Distributors and 50,000+ retailers.

In addition, the Company has 8 exclusive retail stores, named ‘Finolex House. The Company has also launched its own e-retail site to cater to the new age e-commerce consumers and penetrate the retail segment further. The huge network enables the Company to supply products in significant volumes across the country and grow its brand presence.

Product Quality

True to its tagline ‘Behtar ElectriKAL Ke Liye, product quality and customer satisfaction remain key focus areas for Finolex. Supported by its state-of-the-art manufacturing facilities, continuous research and development (R&D), and superior technological expertise, the Company ensures delivery of high quality, reliable, and durable products at a competitive price, creating a strong value proposition.

To de-risk the dependence on a single business segment,

Finolex diversified manufacturing LED lamps, low-duty switch gear, fans, water heaters, and other electrical accessories. These products have been well accepted because of Finolexs brand name and quality.

Joint ventures and technical collaborations

Finolex has a joint venture with J-Power Systems Corp., Japan (a Sumitomo Group company) for EHV (extra high-voltage) cables. The Company also has a marketing JV with Corning for optic fiber collaboration with NSW, Germany, for the manufacturing of submersible cables. These JVs offer resource and technology access, along with financial support to grow the business profitably.

Development Drivers

The Companys goal to safeguard and increase the interests of its customers, channel partners, retailers, stake-holders and employees drives the Company towards betterment all the time. As such, continuous efforts for improvement of the following development drivers has been of utmost importance:

Undying penchant to over-come adversities with its five-decades long experience and preparedness for the future

Innovation and first mover advantage within offered product ranges Betterment of product quality as per developing standards and expectations In-house development of new products with its experts Best Cost efficiencies

Competitive pricing structure

A growing India-wide distribution network and chain of exclusive ‘Finolex House stores

Customer-centric approach with best quality products

Business Environment for Product Segments with outlook

The segment-wise business review along with the markets served by the Company is provided below with a brief outlook:

electrical Cables

Electrical Cables is the core business of Finolex with the largest revenue share. Its electrical cables range adheres to the international standard benchmarks and its sub-segments include light duty electrical cables, and power and control cables.

The key application of light duty electrical cables is for general lighting purposes. They also have other applications such as electrification of industrial establishments, electrical panel wiring in industrial plants and equipment, as well as consumer durable goods, automobiles, agricultural pump sets and generator sets.

The Company has the capacity of manufacturing cables within the range 1.1 kV to 66 kV under power cables category. These high-voltage cables are exclusively designed for underground usage. Power and control cables up to 3.3 kV rating are used for connecting user points to the main supply of power. Power cables above

3.3 kV rating have applications in underground intra-city electricity distribution network. Finolex manufactures insulated power cables only.


Revenue from the Electrical Cables segment in FY2019-

20 stood at Rs. 2,361.1 Crores against Rs. 2,494.4 Crores in the previous year. It accounted for 82% of total sales for the year under review. Volumes sold remained at par with the previous year. However, reduction in commodity prices resulted in reduction in the total sales value. Such volatility in the commodity prices was addressed by suitable pricing policies. Electrical Cable EBIT margin increased from 15.3% in

FY2018-19 to 16% in FY2019-20 due to a better product mix.

Since the Electrical Cables business is mostly driven by the real estate sector, slow growth in that sector impacted the Companys wires and cables business. Despite this, the

Company managed to register earnings growth in the year under review, performing well in the general electric wire subsegment, which caters to construction space and automobile wire. In the construction sector, the growth was mostly driven by improved distribution network. In the automobile sector, the Company has added new customers, which has resulted in an increase in volume.

Growth Drivers

Progressing on its roadmap to become a USD5 trillion economy over the next five years, the Government of India has lined up a strong development and investment strategy, supported by sustained resource allocation and policy stimulus. Widespread investments in infrastructure, strong emphasis on universal electrification, urbanisation, and housing sector growth, and renewable energy push would propel the growth in electric cables.

Growing Power Demand

Based on data from the Ministry of Power, power generation capacity is projected to grow to 480.4 GW by the end of FY2021-22 from 370 GW in FY2019-20. According to the Central Electricity Authority (CEA), about 1,10,000 circuit kilometres (CKM) of transmission lines are required to be added by FY2021 to meet the demand. This indicates the kind of demand expected in Transmission and Distribution equipment, including electric cables.

All-India Installed Power Capacity (in GW) (as on March 2020)

Thermal nuclear Hydro Renewable Energy Sources Total
230.6 6.7 45.6 87 370.1

Source: installedcapacity/2020/installed_capacity-03.pdf

Universal Electrification

The Government of India has been promoting universal electrification with a number of successful schemes such as Ujjwal Discom Assurance Yojana (UDAY), Deendayal Upadhyay Gram Jyoti Yojana (DDUGJY), the Integrated Power Development Scheme (IPDS), and the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya). These are propelling demand for electrical cables and wires like never before. Improved electricity availability has also pushed up the demand for house wires.

Renewable Energy

Carrying forward Indias commitment to renewable energy, the Union Budget 2020-21 has allocated Rs. 22,000 Crores to the clean power and renewable energy sector; it has provided Rs. 2,516 Crores for the solar power sector and incentives for wind energy for the projects. This will be a significant solar cables of the Company.

Real Estate and Housing Growth

The Indian real estate sector is expected to reach a market size of USD1 trillion by 2030. A series of reforms such as the enforcement of Real Estate Regulatory Authority (RERA), introduction of GST and Insolvency and Bankruptcy Code (IBC), and relaxation in FDI norms have benefited the sector, which is seeing encouraging investor interest. Big-ticket government programmes such as Housing for All and Smart Cities will continue to create a demand push for housing wires and cables. This will augur well for leading private players like Finolex with both wire and cables and FMEG capabilities.

National Infrastructure Pipeline

The Government increased its infrastructure budget to Rs. 102 lakh Crores for the next five years under the

National Infrastructure Pipeline. NIP has lined up 6,500 projects across 23 sectors to be funded by government and private sector. Projects in road and highways, urban infrastructure, telecommunication and power are likely to drive demand for Finolex B2B as well as retail segments.


Owing to diverse applications across multiple sectors, growth in the Electrical Cables segment is likely to be driven by massive infrastructure spending and urban development schemes. Factors like GST implementation, preference for reputable brands, technology, and quality are to the advantage of established organised players such as Finolex.

However, the continuing Covid-19 outbreak is likely to have a short- to medium-term impact on industry growth and revenues.

The real estate and construction markets are expected to stabilise in the second half of the year, with a ‘U-shaped economic recovery. The loss of productivity during and immediately after the pandemic is almost certain to be followed by a brief period of recession before business picks up again. But the core segments of the economy, to which

Finolex makes a vital contribution, will remain fundamentally stable and strong.

Within its Covid-19 support package, the Government extended the deadline for the affordable housing Credit Linked Subsidy Scheme (CLSS) to March 2021. The extension is expected to give a Rs. 70,000 Crores boost to the housing sector. Furthermore, NBFCs are substantially supported with liquidity to boost the manufacturing and real estate sector. Demand pick-up, combined with government monetary support, is likely to lift growth for the industry and the Company.

The Company faces competition risks, operational risks and price volatility and monetary risks in this segment, as it caters to big projects involving largescale orders, long durations, and stringent quality checks. The Company takes required measures to mitigate such risks.

Source: Report ‘COVID-19: Impact and key measures to mitigate risk by JLL

Communication Cables

The Communication Cables segment includes state-of-the-art, new generation communication cables and traditional telephone cables.

The state-of-the-art communication cables segment is categorised into Copper-Based Cables and Optical Fiber (glass-based) Cables (OFC). Copper-based cables are again sub-divided into LAN cables, coaxial cables, PE insulated switchboard cables, and V-SAT cables used for last-mile connectivity. LAN cables are used for data transfer in high-speed networks and coaxial cables are used in microwave connections, mobile towers, and to provide content input to TV receiving sets. PE insulated switchboard cables find applications in telephone instruments and EPABX system.

V-SAT cables are used for connecting the V-SAT dish to the base station. The new innovative product variants of special cables are used in image capture, power solutions as well as CCTV cameras.

Optical fiber cables are capable of carrying the maximum bandwidth and speed. Some variants of OFCs are used as trunk cables for long-distance networks, while others are used by telecom companies, multi-service organisations and other service providers for data distribution. As they are utilised for high-speed and high-bandwidth digital data transmission, communication cables are a key requisite for infrastructure development. With the Digital India Mission at the forefront, OFC remains one of the most in demand wire and cable products.

Finolex is expanding the optical fiber capacity at its

Urse facility in Maharashtra in order to be ready for the

37 growing demand. This will also strengthen the backward integration for its OFC business.

Traditional telephone cables include copper-based

JFTCs to be laid underground for landline telephone connections. The Company is slowly cutting down the scope of its JFTC business because of the growing penetration of mobile connections in India. The

Company continues to manufacture JFTCs with broadband features for limited domestic supply and for export, depending on customer preference.


The communication cables segment (including optical fiber) recorded sales of Rs. 408.9 Crores in FY2019-20 against Rs. 488.9 Crores in FY2018-19. Communication Cable EBIT margin declined due to the slump in Indias telecom sector in FY2018-19. EBIT levels for the year stood at 6% in this segment as compared to 13.5% in the previous year. Finolexs marketing JV with Corning for Optical Fiber technology, Corning Finolex Optical Fiber Private Limited, achieved revenue of Rs. 150.0 Crores during FY2019-20 as against Rs. 327.6 Crores in the previous year.

The telecom sector was negatively impacted by two factors.

First, the fall in international fiber prices led to lower selling price across all segments of communication products, impacting the total profit margins. Second, most of the communication cable projects moved slowly in the domestic market due to liquidity crunch. The state-run telecom player BSNL has been severely cash-strapped because of huge outstanding dues, leading to the suspension of many projects. Adding to that, major telecom companies in India reported record losses in the year under review after making provisions for adjusted gross revenue (AGR). They were charged a huge sum towards licence fee and spectrum usage fee based on the AGR. All of these developments and the coronavirus outbreak in the fourth quarter of FY2019-20 put huge pressure on the industry performance.

Growth Drivers Digital India

The quick expansion of the telecom sector and the

Digital India Mission, which aims to provide digital infrastructure as a core utility to every citizen, is driving demand for OFC cables significantly. Under project

BharatNet, the government plans to provide broadband connectivity to a total of 250,000 gram panchayats in the country, connecting nearly 625,000 villages digitally.

Under Budget 2020-21, a sum of Rs. 6,000 Crores was allotted to BharatNet and link 100,000 gram panchayats in FY2021. Additionally, the Budget also announced a proposal for private sectors to build data centre parks throughout the country.

5G Infrastructure

India has been rapidly working towards commercial deployment of 5G telecommunication network in sync with the global timelines. Deployment of necessary network infrastructure will require rolling out optical fiber cables (OFC), leading to more opportunities for cable manufacturers. Demand for high-speed data connectivity and advent of 5G are also expected to push demand for undersea cables, connecting the telecom networks of various nations. Industry estimate projects the undersea fiber optic cable business to generate up to Rs. 3,000 Crores revenue opportunity in the Indian market in the next five years.


The Company expects its OFC revenue and profit margin to increase substantially in the coming years. Collaborations such as the one with Corning enable the Company to benefit from the technological capabilities of its partner and increase competitiveness. Resumption of the deferred telecom projects will be determined by a possible improvement in the financial health of the public and private telecom service providers in the next fiscal.

Competition from unorganised players, copper price movement, and volatility in the price of optic fiber risks for the Company in this segment. The Company insures against these risks through backward integration for OFC, quality upgradation, bulk purchase, and passing on some costs to customers.

Source: Delloitte report ‘5G: The Catalyst to Digital Revolution in India,

Copper Rods

The Company manufactures Continuous Cast Copper Rods (CCC rods) at its Goa plant, which are used as high-quality captive input materials for its copper-based electrical and communication cables. The Company procures copper cathodes, the raw material for copper rods, in bulk, from local manufacturers and imports the additional amount. Surplus produce is sold to third-party customers.


The Copper Rod division registered sales of Rs. 558.8 Crores during FY2019-20 compared with Rs. 940.0 Crores in FY2018-19. Third party sales stood at Rs. 19.1 Crores compared with Rs. 28.3 Crores in the previous year. The remaining volume was transferred intermediately. The business of copper rods for Finolex was impacted by higher premiums on copper cathodes and lower premiums on copper rods, which lowered margins for third-party sales of copper rods. The Company restricted its third-party copper rod sales to already committed parties or contracts with acceptable margin levels.

Growth Drivers and Outlook

Copper rod demand will continue to gain traction because of the steady demand growth in copper-based electrical and communication cables. Demand from power, industrial, and digital communication sectors will support the consumption of copper-based cables, thereby driving demand for copper rods. The Company expands its cable manufacturing capacity at regular intervals in line with market requirements.

Additionally, the Company expects to stay profitable from selling of copper rods to third parties under the GST regulations.

Others (FMEG and Home Appliances) a) Electrical Switches, Switchgears and Lighting

Branching out from B2B to B2C, Finolex ventured into the consumer electrical segment, and now produces lighting products, electrical switches, and low duty switchgears. The diversification was a strategic move to capitalise on the Companys strong brand image and its widespread distribution and sales network. This was supported by its manufacturing knowhow and raw material availability.

In November 2019, Finolex launched electrical wire accessories like doorbell, extension box, spike guard, angle holders, batten holders, etc. to take a share of the quality electrical products market. After this, the Company ventured into the MCCB product category in

January 2020 to strengthen its presence in the domestic and industrial switchgear market.

The electrical switches, switchgears, and lighting products recorded healthy sales in the year under review, supported by strong branding and marketing strategies. The segment registered sales of Rs. 44 Crores during FY2019-20, as against Rs. 39.9 Crores in the previous year.

The Company is aggressively focusing on expanding its distribution network to reach out to more and more consumers in this segment. Adoption of latest technology and best practices is helping it continually improve quality and deepen engagement with the channel partners.

b) Fans and Water Heaters

Moving beyond the consumer electrical segment, the Company made a strategic entry into the home appliances segment with the introduction of fans and water heaters. The move was driven by the strength of its brand recall and distribution reach, and the changing consumption pattern among Indians, especially in viewbusiness will of rural electrification and growing urbanisation.

Finolex offers a wide range of domestic and semi-commercial fans with high quality, aesthetics, and value for money and performance. The Companys range of electric water heaters has already been well accepted. The water heaters and fans segment is backed by a nationwide doorstep aftersales service.

The Company reported a strong performance in this segment, with sales of Rs. 44 Crores in FY2019-20, as compared with Rs. 31.1 Crores in the previous year.


Finolex projects a positive growth outlook for its FMEG segment once the problems caused by the Covid-19 pandemic recede. The urban Indian population is expected to be around 42% of the total population by 2030, up from the current 31%. Along with this, improved availability of electricity among rural and urban consumers, growing consumer income and preference for quality and branded products are other enabling factors. More women coming into the workforce would mean more household spending power and a higher demand for appliances for home comfort.

Digital connectivity, online influence, and e-commerce are important for the growth of this segment.

The launch of Finolexs exclusive retail store, Finolex House, and its foray into e-commerce will further push the sales of this segment. The Company expects that its focused efforts will make it a well-recognised player in the FMEG segment and strengthen revenues from this vertical.


As one of the leading wires, cables, and FMEG manufacturers in India, Finolex is at the threshold of a growth spurt powered by strategic government investments and national programmes. The infrastructure sectors that drive the business for Finolex are going to remain key focus areas for investment, consumption, and job creation. The Company sees a steady growth for its electrical and communication cables business, which remains the backbone of its business.

The Companys recent foray into FMEG targets a new-age consumer market characterised by nuclear family culture, higher income, consumer involvement in electrical purchase, buying comfort, and brand and quality preference. Potentially highly profitable, this segment has higher margin and lower capital and inventory cost.

The Company is also well supported by its strong balance sheet, experienced management, business continuity plans, and loyal investors to survive a crisis like the pandemic. Constant efforts to widen its reach and create a diversified the Company further along the growth path.

Financial Performance

(Rs. in Crores)

2019-20 2018-19
Revenue From Operations (Net) 2,877.3 3,077.8
Other Income 171.9 121.8
Total 3,049.2 3,199.6
Material Costs 2,083.4 2,264.9
Employee Benefit Expenses 149.5 140.7
Finance Costs 1.6 0.9
Depreciation, Amortization and impairment 38.9 40.6
Other Expenses 274.5 220.6
Total 2,547.9 2667.7
Profit Before Tax 501.3 531.9
Tax Expenses:
Current Tax 123.2 165.7
Deferred Tax (24.4) 22.1
Total Tax 98.8 187.8
Profit After Tax 402.5 344.1
Total Other Comprehensive Income / (Expense) for the year (40.6) (24.6)
Total Comprehensive Income for the year 361.9 319.5


Revenue achieved during the current year was Rs. 2,877.3 Crores as against Rs. 3,077.8 Crores in the previous year resulting in a 6.5% de growth.


Material Cost: Material costs during the year were lower as compared to the previous year due to better product mix.

Staff Cost: Employee expenses increased in proportion to inflation as well as on account of new hires.

Other Expenses: Other expenses increased due to higher spends on advertisements which the Company undertook, in-line with its new market approach. Other expenses also included expenses like electoral bonds and Impairment of investment.

Depreciation for the year was marginally lower since some of the assets completed their useful life.

Finance Cost: Your Company is debt free and finance costs during the year pertained to bill discounting and other finance charges.

(Rs. in Crores)
Summary of Statement of Balance Sheet 2019-20 2018-19
Sources Of Fund:
Shareholders Fund 2,718.7 2,439.7
Non-Current Liabilities 54.2 68.1
Current Liabilities 238.9 261.2
Total 3,011.8 2,769.0
Applications Of Fund
Fixed Assets 413.8 414.6
Investments 725.9 1,381.8
Loan & Other Non-Current Assets 49.5 48.5
Current Assets 1,822.6 924.1
Total 3,011.8 2,769.0

Capital Expenditure and Investments in JV: During the year, Your Company incurred Rs. 32.3 Crores towards capital expenditure, predominantly towards sustenance of existing capacity, product development activities and Land in Gujarat. Your Company has invested Rs. 43.4 Cores in its Joint Venture.

Liquidity: Your Company continued with the "cash and carry" system of sales for all retail customers during the year. For Institutional & OEM customer the Company continued with credit period mutually agreed as per purchase order contract. Your Company manages its liquidity through rigorous weekly monitoring of cash flows.

Profitability: Your Companys profit before tax reduced in financial year due to lower sales volume lead by weak demand in infrastructure sectors and DE affirmed of government procurement orders Credit Rating: Presently, your Companys debts have been rated by CRISIL. Details are as follows:

Agency Long Term Loan Short Term Loan
CRISIL AA+/stable A1+

During the year, your Company has serviced all its debt obligations on time.

Results of Operations: Your Company registered a net cash inflow of Rs. 259.0 Crores from its operations as compared to Rs. 154.1 Crores generated last year. Profit before tax and exceptional items stood at Rs. 501.3 Crores as against Rs. 531.9 Crores in last year. Taxation: After reckoning a current and deferred tax liability of Rs. 98.8 Crores, profit after tax for the current year stood Rs. 402.5 Crores which is higher than the previous years Rs. 344.1 Crores. In September 2019, the Government of India promulgated the Taxation Laws (Amendment) Ordinance 2019, announcing major slashes to the corporate tax rates in the Income Tax Act, 1961. The existing Companies were provided an option to pay tax at a concessional rate of 22% (plus

Surcharge/Cess), with consequential surrender of specified deductions/incentives. The Company opted for the new scheme, which resulted in the reduction of total tax outgo.

Cash Flow
(Rs. in Crores)
Particulars 2019-20 2018-19
Profit from operations before tax 501.3 531.9
(Inc)/Dec in Net working capital (132.6) ( 216.2)
Income tax Paid (109.7) (161.6)
Net cash inflow from operating activities 259.0 154.1
Cash inflow/(outflow) for investing activities 637.0 (110.0)
Cash (outflow) for Financing activities (86.4) (74.5)
Net cash inflow / (Outflow) 809.6 (30.5)

Risk Management

Risk management is a key part of business strategy in any established organisation identifies,prioritises as and addresses the potential risks to minimise consequences into arising from unexpected incidents. Finolex has a strong risk management framework that undertakes the identification, assessment, monitoring and mitigation of risks associated with the operations of the Company. The Company has a Risk

Management Committee that identifies the crucial risks and manages them. The committee ensures that the entire risk mitigation process is streamlined at the senior management and execution level at various stages for smooth business execution. The Company also appoints external advisors for manage risk identification and formulation of required mitigation strategy.

While the ‘Business Environment for Product Segments with

Outlook section mentions some of the risks specific to those segments, some general risks identified by the Company are as follows:

Competition Risk

The Company operates in a fiercely competitive market, which is being ruled by both organised and unorganised players. Thus, failure to supply quality products in time at a competitive price may result in loss of market share.


The Companys manufacturing knowhow and backward integration have been instrumental in delivering top quality products at reasonable prices, offering a competitive edge in its product segments. Besides, a rationalised GST regime has narrowed the cost gap between the organised and unorganised players, creating a level playing field.

The Company continues to invest in product innovation and technology to maintain a product range aligned with the changing market demand and latest technological requirements. Furthermore, the Companys entry into the

FMEG segment has created avenues for additional revenue generation.

Policy Risk

The sectors that are key business drivers for Finolex, are predominantly dependent on government policies and grants. The Companys institutional sales are critically exposed to risks arising on account of changes in government legislation, policies and regulations. The Companys business may be impacted by monetary policy changes which might affect borrowing terms.


The Company has diversified the overall business from the negative impacts of government policy changes. The Company has also diversified sectors to leverage on the governments allocation focus. Along with that, it has increased its exports to reduce major dependency on the domestic market.

Raw Material Fluctuation Risk

Fluctuations in the prices of key raw materials like copper, aluminium and fiber optics may have an impact on the production costs and prices of cables and wires manufactured the by the Company. Inability to effectively fluctuations in the prices of the raw materials may have a negative impact on the Companys margins and profitability.


The Company maintains optimal inventory level and takes necessary price hikes or cuts to balance commodity price fluctuations. Efficient production forecasting based on past and present trends and procuring raw materials in bulk from its long-term suppliers at optimal prices insures the Company against raw material price volatility.

Currency Fluctuation Risk

Being a major exporter of wires and cables to international markets, and having import dependence for raw materials, the Company is exposed to foreign exchange fluctuation. This may adversely impact the Companys profit margins.


The Company takes the help of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts.

The Company undertakes adequate hedging to minimise impact of adverse exchange rate fluctuations. Long-term agreements help the Company protect itself from currency fluctuation risks.

Geopolitical Tensions and Global Pandemic

The Companys export segment can be negatively impacted by geopolitical tension among different geographies. Similarly, a global pandemic like the Covid-19 crisis can seriously impact the business and profitability of the Company.


The Company actively monitors its cashflows and implements various financing channels to insure against the risk of impairments. It also undertakes extensive analysis before taking decisions on investments and expanding to new geographies. The Companys business continuity planning and experienced management ensure smooth functioning of operations during crisis.

Internal Controls

The Company maintains an efficient and adequate system internal controls proportionate to the size and nature of the business it operates in. The internal control system ensures timely and accurate reporting of all financial, commercial and operational transactions. It also ensures safeguarding of assets and stringent compliance with the applicable laws and regulations, accounting standards, procedures and policies through its robust control mechanism.

The Company has constituted an internal team of auditors to monitor these controls, and an external team to oversee the internal controls, including the design and maintain ability of systems. These teams conduct audits on a regular basis to ensure the adequacy and efficacy of the internal control system. The Company has an efficient Audit Committee that acts as a link between the management, external and internal auditors, and the Board. The Audit Committee oversees the financial reporting process of the Company and monitors the scope and quality of internal controls and statutory audit. The Audit Committee of the Company meets on a quarterly basis to evaluate the audit reports submitted by the internal audit teams and suggests necessary actions to be taken with the management. During FY 2019-20, the Audit Committee met 5 times.