Finolex Cables Ltd Management Discussions.

Management Discussion and Analysis


Global Economic Scenario

The global economy in Calendar Year (CY) 2020 witnessed an unprecedented crisis as the outbreak of the novel coronavirus (COVID-19) pandemic in China towards the end of CY 2019 spread rapidly across the globe. While ensuing lockdowns announced by all major economies played a critical role in saving lives, they inflicted severe damage to the economic activities forcing the world economy into a recession.

As per the International Monetary Fund (IMF), the global Gross Domestic Product (GDP) is estimated to have undergone a significant contraction of 3.3% vis-a-vis 2.8% growth in CY 2019. While Advanced Economies (AEs) declined by 4.7%, with the United States (US) and Europe contracting by 3.5% and 6.6% respectively, Emerging Markets and Developing Economies (EMDEs) registered a relatively lower decline of 2.2%. This was on account of recovery in the Chinese economy in the second half of CY 2020 post successful containment of virus spread in the country.

Global Economic Growth: Actual and Projections (%)

Global prospects continue to remain uncertain one year into the pandemic. New virus mutations and the accumulating human toll raise concerns, even as growing vaccine coverage lifts sentiment. Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support. The outlook depends not just on the outcome of the battle between the virus and vaccines, it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis.

The sharp fall in the demand for energy worldwide in the wake of the coronavirus pandemic is expected to severely impact the wires and cables market growth. However, market size across Asia Pacific in 2019 stood at USD 76.50 billion and the region is expected to dominate the market share going forward. Its leading position is mainly attributable to the massive investments made by India and China in strengthening and modernizing their power infrastructure over the past few decades. The continued surge in global demand and tightness in supply due to supply-side issues and production curbs in China has helped regional metal prices in Asia to inch up further.


On the positive side, substantial fiscal and monetary stimulus packages released by the governments and central banks across the globe will play a pivotal role in the economic recovery. Backed by improving business environment post lockdown relaxations, increasing labour and product market availability, and governments thrust on augmenting economic and trade activities, the global recovery is expected to gain traction moving forward. Successful vaccination programmes are expected to further boost investor sentiments leading to kickstart private capital inflows and fixed capital formation. Backed by the improving macro-economic indicators, the IMF estimates the global economy to grow at 6.0% in CY 2021.

Indian Economic Scenario

India witnessed major economic disruptions in Financial Year (FY) 2020-21, as the outbreak of COVID-19 perversely impacted human health and safety of the countrys inhabitants. This prompted the government to undertake one of the worlds tightest lockdowns, bringing manufacturing and trade activities to a screeching halt. Prolonged lowdown exacerbated existing vulnerabilities of the country including the weakened financial sector, private investments, and consumption demand. This forced the Indian GDP to contract by 8.0% as against a growth of 4.0% recorded in FY 2019-20, marking a recession since 1980, as per IMF estimates.

The government announced a special economic and comprehensive package of Rs. 20 lakh crores, equivalent to 10% of Indias GDP, to revive the countrys languishing economic activity. The package provided benefits in the form of financial aid, provision of food, and ensuring security to enable the country to tackle the prevalent crisis. A few of the measures included:

• Direct cash transfer benefits to over 8.7 crores Indian farmer families Development of 2,500 km access control highways, 9,000 km of economic corridors, 2,000 km of coastal and land port roads and 2,000 km of strategic highways to be undertaken

• It is proposed to allocate Rs. 22,000 crores for power and renewable energy sector and the government has urged state governments to implement smart meters

• To encourage domestic production, the government has also increased duty on solar inverters from 5% to 20%, and on solar lanterns from 5% to 15%

An additional capital infusion of Rs. 1,000 crores to Indias Solar Energy Corporation and Rs. 1,500 crores to Indian Renewable Energy Development Agency

Import duty on copper scrap reduced from 5% to 2.5% to boost recycling of copper

• 1,000 more mandis to be integrated into the E-NAM marketplace

Supported by recovery in investor sentiment and manufacturing and construction, investment focused government spending and massive vaccination drive, Indias GDP growth is likely to rebound sharply to 12.6% in FY 2021-22, making it the fastest-growing economy in the world, as per Organization for Economic Co-operation and Development (OECD).

The pandemic has drastically impacted the wires and cables market with minor shifts in communication technologies. Online courses and classes conducted by universities and colleges due to the worldwide closure, introduction of telehealth in the healthcare industry to reduce in-person visits, and companies working remotely and abiding by WFH (Work from Home) policy are some of the prominent trends that have been witnessed across the globe. Thus, connectivity and communication technologies have accelerated in the span of the pandemic. The telecommunications industry has highly benefited from the situation as the pandemic has highlighted the true value of connectivity. 5G progress in connections and deployments has continued despite the pandemic and the resulting economic downturn. Further, the wires and cables market are estimated to grow owing to factors including infrastructure development, economic growth in developing countries, and increasing internet penetration.

Other factors that influence the growth of low voltage cables are the growth in power generation and distribution sector from renewable energy sources, and demand from automotive and non-automotive industries. Urbanization and industrialization are the major reasons for augmenting the overall market growth. The need for power grid interconnections in areas with a dense population is creating a demand for underground and submarine cables.

Company Overview

Finolex Cables Limited (hereinafter referred to as "Finolex" or "the Company") was established in 1958 and has emerged as Indias largest and leading manufacturer of electrical and telecommunication cables. By leveraging the latest technology, state-of-the-art manufacturing facilities, and technical knowhow, it has created a distinctive identity for itself as a manufacturer of the highest quality Cable and Wire (C&W) products. The Company recently forayed into the Fast-Moving Electrical Goods (FMEG) segment as well with an ambitious goal of becoming a one-stop shop solution for all electrical products requirements. The addition of a broad range of FMEG products to its well-established cables and wires portfolio has further bolstered its presence in the margin accretive B2C market.

The Companys Goa plant manufactures Continuous Cast Copper Rods (CCC rods) that form a key raw material input for producing copper-based electrical and communication cables. This backward integration facilitates the Company in achieving superior control over the quality of the final products and better margins through minimized raw material cost. While most of the production in Goa plant is used to fulfil the captive requirement of the Company, the surplus share is sold to third parties, results of which are covered under Copper segment results.

The Company continues to invest in upgrading its technologies and manufacturing facilities to be able to consistently provide higher quality products and adapt to the changing business dynamics. Further, it strives to enhance operational efficiencies and market reach to capitalize on the emerging growth opportunities in the C&W and FMEG industry.

Major Products and Segments

The Company is well-recognized as a Total Cable Solutions provider and caters to diverse electrical requirements of commercial, industrial, and consumer markets through its wide range of electrical wires and cables. Furthermore, its FMEG product portfolio comprising LED lights, electrical switches, fans, water heaters, and switchgear is well-positioned to provide new growth opportunities to the Company.

Product Portfolio and Applications

Group Product Covered Application
Electrical Cables 1100V PVC insulated cables Electrification of industrial establishments, used by construction industry, electrical panel wiring, and consumer electrical goods
Motor winding PVC insulated cables Submersible pumps and electrical motors
Automotive/battery cables Wiring harness for the 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 the 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 The 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 a better quality of CCTV images
Speaker cables Broadcasting applications in buildings and electronic goods
Jelly-filled telephone cables (JFTCs) 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 a base station
Copper Rods CCC rods of 8mm in diameter The raw material for manufacturing copper-based cables
Electrical Switches 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 streetlight 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 the domestic and commercial environment
Conduits Conduit Pipes and Fittings For use in domestic and commercial environment

Operational Review


Electrical Cables: 52,248 MT as compared to 60,651 MT in the previous year.

Communication Cables: Metal-based at 6,457 MT as compared to 7,773 MT in the previous year.

Communication Cables: Optic fiber cables of 1,233,952 fiber kilometre (FKM) as compared to 1,295,500 FKM in the previous year.


Electrical Cables: Rs. 2,309.9 crores as compared to Rs. 2,361.1 crores in the previous year.

Communication Cables: Rs. 321.5 crores as compared to Rs. 408.9 crores in the previous year.

Copper Rods: Rs. 23.1 crores as compared to Rs. 19.1 crores in the previous year.

Other Products: Rs. 113.6 crores as compared to Rs. 88.2 crores in the previous year.

Finolex registered total revenue of Rs. 2768.1 crores in FY 2020-21 as against Rs. 2,877.3 crores in the previous year, registering a 3.8% YoY de-growth with contraction registered across major segments, predominantly due to challenging macro-economic factors. The segment-wise revenue contraction was - Electrical Cables by 2.2%, Communication Cables by 21.4%. Other products segment registered a growth a YoY growth of 27.4%. Total Income (segment revenues and other income) for the year stood at Rs. 2,845.1 crores as against Rs. 3,049.2 crores in FY 2019-20.

Electrical Cables segment which contributes approximately 83% of the Companys total revenue, caters to the Real Estate market and therefore the segments performance depends on the performance of the Real Estate sector.

The Real estate sector which had started recovering after setbacks from demonetization, GST, RERA and the NBFC crisis, went into an oblivion during the lockdown. Although the last quarter showed signs of revival, uncertainties surrounding the economy hampered declaration of newer projects. While the completed residential projects experienced sluggish net absorption with uncertainties in the job market, the commercial space market showed major disruptions with existing commercial spaces viz. office spaces used by the services/IT & ITES sectors, hospitality sector, education sector and shopping malls/retail sector experiencing low to negligible footfall, thereby posting negligible demand. This scenario, however, is expected to be of temporary nature and the real estate sector is expected to bounce back in the following years. (Source: JLL India Real Estate Outlook 2021)

The Government has been aggressively announcing relief and stimulus measures for various sectors and has come up with an Alternative I nvestment Fund of Rs. 25,000 crores for revival of the real estate industry. 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 as the slowdown in the domestic public and private telecom sector continued to prevail throughout the year. Although the Bharat Net, Digital India, 5G projects provide a strong outlook to this sector, the prevailing challenges with the pandemic results in uncertainties regarding revival of this sector.

The Company has 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.

Union Budget 2021 benefits to various segments

Apart from the financial features offered by the Government through the Atmanirbhar Bharat package, the Union Budget 2021 inter alia also consisted of the following provisions which provide positives for the Company:

Import duty on copper scrap reduced from 5% to 2.5% to boost recycling of copper and increase availability of raw material An aid of Rs. 3.05 lakh crores for the power distribution, to be released over five years. Funds will be released based on financial performance and viability demonstration by the distribution companies (DISCOMs). This provides prospects to generate more demand for electrical cables and accessories Vehicle scrapping policy will generate higher demand for Auto cables Agriculture infrastructure fund made available for APMCs will facilitate healthy revenue growth in Optic Fiber Cable & other segment


Despite the slowdown in the global economic activity, Finolex total exports stood at Rs. 30.9 crores as against Rs. 25.7 crores during the previous year, registering a growth of 20.2% Y-o-Y.

Key Financial Ratios

Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires reporting of significant changes (change of 25% or more as compared to the immediately previous year financial) in the key financial ratios, along with detailed explanations thereof. During the year, none of the key ratios registered significant changes i.e., 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 Strong Brand Recall

Over its five-decade-long journey, the Company has created a unique brand presence by consistently investing in attracting the best talent, deploying the latest technology, and supplying the highest quality products. Furthermore, leveraging its brand recall, competent sales and marketing team, and pan-India distribution network, it has successfully forayed into FMEG segment. This has enabled the Company to establish itself as a consumer validated Superbrand. The Company continues to augment its brand visibility through visual and digital media marketing, further strengthening its tagline "Finolex - Gets People Together" and thereby maintains its unique presence.

Comprehensive Product Portfolio

Over the years, Finolex has achieved a wide product diversification in wires and cables, FMEG, and home appliances segments. While it stands a comprehensive solutions provider for all cabling requirements across institutional and government clients, it has de-risked its dependence on C&W industry by diversifying into FMEG business. Its FMEG products have been generating encouraging market traction and the segment has been steadily increasing its share in the revenue mix.

Product Quality

The Company endeavours to achieve customer satisfaction by providing products that adhere to the highest standards of quality, reliability, and durability. High-quality products coupled with their availability at competitive prices provide a compelling value proposition to the Companys customers. Additionally, the Company strives to stay consistent with its tagline Behtar ElectriKAL Ke Liye by proactively investing in sophisticated plant, machinery, and technology and focusing on increasing the product quality through R&D efforts.

Extensive Distribution Network

The Companys wide distribution network has a pan-India presence, which enables it to supply huge volumes of products to all the key markets efficiently. While the Company has a robust network comprising 5,000+ channel partners and over 90,000+ retailers, it has also launched an e-retail site to capitalise on the growing e-commerce trend and increase its presence in the retail segment. Furthermore, to provide end-to-end electrical solutions, the Company launched a retail brand store under the name Finolex House in FY 2019 and plans to launch 24 stores by FY 2021-22.

Backward Integration

The Company has judiciously undertaken backward integration and manufactures key raw materials such as PVC compound, copper rods, optic fiber, and FRP rods in-house. Backward integration ensures the availability of key raw materials at a lower cost and desired quality. This, in turn, enables the Company to supply high-quality products at competitive prices while simultaneously improving its bottom line.

Joint Ventures and Technical Collaborations

The Company has extensive joint venture agreements with several competent and technologically superior companies.

A few of these include J-Power Systems Corp., Japan (a Sumitomo Group company) for EHV (extra high voltage) cables, marketing JV with Corning for optic fiber technology. Through these ventures, the Company expects to create new growth avenues and achieve superior profitability moving ahead.

Growth Drivers

The Company emphasizes continuous improvements to achieve its aspirationai goals while safeguarding the interests of its key stakeholders such as customers, channel partners, retailers, employees, and capital providers. To meet this end, it focuses on following key areas:

• Overcoming obstacles and preparing for the future by leveraging experience of over five decades

• Unequivocal focus on maintaining and raising standards of product quality Constantly upgrading technical expertise and thrust on providing innovation-led solutions

• Competent in-house development team to consistently launch new and technically-advanced products

• Achieving cost efficiencies to ensure profitability while maintaining competitive pricing

• Expanding and strengthening the distribution network along with growing Finolex House retail brand stores

• A customer-centric approach through high-quality value-add products

• Work from home has increased demand and prominence of FTTH cables

Business Environment for Product Segments with Outlook

Electrical Cables

The electrical cables segment forms the core business of Finolex commanding largest share of the revenue mix at 83% in FY 2020-21. Under this segment, the Company manufactures high-quality, light-duty electrical cables and power and control cables that meet stringent international standard benchmarks.

While light-duty electrical cables are primarily used for general purpose lighting, they are also utilized for electrification of industrial establishments and electrical panel wiring in various industrial facilities. Furthermore, these cables also find application in consumer durable goods, automobiles, agricultural pumps, and small generators

The Company manufactures high voltage power and control cables that are designed exclusively for underground applications. These cables are insulated with fire retardant compound and meet the international technical and quality specifications. The Company can manufacture cables from 1.1 kV to 66 kV While power cables below 3.3 kV are used for connecting user point with the main power supply, cables above this threshold find extensive applications in intra-city electricity distribution network


Revenue from the Electrical Cables segment in FY 2020-21 stood at Rs. 2,309.9 crores against Rs. 2,361.1 crores in the previous year. It accounted for 83% of total sales for the year under review. Volumes sold reduced by 6% as compared to the previous year. However, increase in commodity prices resulted in restricting total sales value reduction to 2.2%.

The consistent increase in the commodity prices was addressed by suitable pricing policies. Electrical Cable EBIT margin decreased marginally from 16% in FY 2019-20 to 15% in FY 2020-21 due to a nationwide lockdown in 1st quarter of financial year.

The Electrical Cables business is directly related to the performance of the real estate sector which witnessed a slow growth. Despite this, the Company managed to register decent earnings in the year under review, performing well in the general electric wire sub segment, 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

The Cables and Wires (C&W) industry is estimated to grow at a compound annual growth rate (CAGR) of 5% in the period FY 2020-25. Growth will be primarily driven by the governments spends in augmenting the countrys power transmission and distribution (T&D) capabilities, thrust on infrastructure and energy-intensive sectors, and focus on reviving housing sector. Furthermore, rapidly growing urbanization, increasing prominence of renewable energy, and rising rural incomes are expected to increase power consumption and thereby increase demand for electrical cables.

a. Thrust to enhance reach and efficiency of T&D network

While India is the third-largest producer and consumer of electricity in the world, its per capita electricity consumption stands significantly lower than the global averages. Backed by this structural growth headroom and the government policy support through Power for All Mission, the energy consumption of the country is expected to rise substantially going ahead. With T&D capacity significantly lagging power generating capacity of the country, there stands huge demand potential for the electrical cables.

b. Power generation addition vs. T&D addition in India

Power and infrastructure form the most critical end-user segment and are crucial for the sustained growth of the C&W industry. The T&D sector continues to remain in focus with an impetus on high voltage transmission lines along with the governments objective to provide 24x7 power. The government is aiming to make higher investment targets for the T&D sector over the 13th Plan (2017-22) at Rs. 3 to Rs. 3.25 trillion compared to Rs. 2.1 to Rs. 2.2 trillion over the 12th Plan to 93 gigawatts (GW). Governments measures to enhance railways infrastructure, increasing focus on renewables, and rising energy needs in the power sector have been augmenting demand for electrical cables and wires.

c. Rural electrification and distribution expansion

The government launched several 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) with an aim to provide affordable electricity supply to all villages in India. After successfully electrifying ~99% of the villages and towns in FY 2019, the government has launched ADITYA scheme to focus on sustaining power distribution and reducing power loss, which will further drive the demand for technically advanced and efficient cables.

d. Rising demand for renewable energy

The government has been promoting solar power through well-targeted schemes such as Jawaharlal Nehru National Solar Mission (JNNSM); subsidies for incentivizing the installation of rooftop PV systems; development of Solar Parks and Ultra Mega Solar Power Projects; and allowing 100% FDI in the solar sector through automatic route. Its ambitious target to reach 175 GW and 500 GW of renewable energy by 2022 and 2030, respectively, are expected to create considerable demand for speciality elastomeric solar cables going forward.

e. Revival in the housing sector

Favourable reforms such as Real Estate Regulatory Authority (RERA), GST, Insolvency and Bankruptcy Code (IBC), and Benami Property Act are helping streamline and boost the real estate sector of the country. Further, government has been supporting the Housing for All by 2022 mission with a slew of schemes and incentives such as Credit Linked Subsidy Scheme (CLSS), Alternative Investment Fund, and tax benefits to both affordable home buyers and developers. These initiatives are expected to drive a significant demand for housing wires and cables in the medium to long run.

f. National Infrastructure Pipeline

The government has announced an investment of Rs. 111 lakh crores over the next five years through National Infrastructure Pipeline with an aim to kickstart economic growth of the country. This scheme has been expanded to cover 7,400 projects across 23 sectors with 71% of the total capital outlay targeted to augment energy, road and highways, railways, and metros, and urban infrastructure. With cables and wires providing crucial power inputs to these sectors, C&W industry will be one of the key beneficiaries of National Infrastructure Pipeline investments.


Backed by significant growth drivers, the electrical cables segment is well-poised to witness strong demand growth in the coming years. The larger pie of this demand will be captured by organized players such as Finolex due to further consolidation of the market towards organized companies. This will be driven by factors such as superior products of the organized market both in terms of quality and technical specifications, rising preference for well-known brands, and increasing price competitiveness post GST implementation.

While the advent of the pandemic heavily impacted the real estate sector in FY 2020-21, demand for affordable housing is expected to remain robust. It will be driven by all-time- low EMI/Income ratios due to lower interest rates, stagnant property prices, small unit sizes, and governments monetary support. With larger and organized players increasing their market share, demand for good quality housing wires and cables is expected to rise, making Finolex one of the key beneficiaries of the trend.

Given large-scale order size, lucrative margins and long gestation period, the Company faces competitive, operational, and cash flow risk. Finolex is well positioned to ward off competitive pressures by leveraging its brand equity, an extensive portfolio of topnotch products and pan-India presence. By diversifying into multiple industries, it has de-risked customer concentration risk. Further, backward integration, economies of scale, and price variation clause in vendor contracts have enable it to exercise superior control over manufacturing costs.

Communication Cables

Under the communication cables segment, Finolex manufactures state-of-the-art, new generation communication cables and traditional telephone cables.

The state-of-the-art communication cables include Copper-Based Cables and Optical Fiber (glass-based) Cables (OFC). Copper-based cables are further categorized into LAN cables, Coaxial cables, PE insulated switchboard cables and V-SAT cables. While LAN cables are used for high-speed data transfer, Coaxial cables find application in microwave connections, mobile towers, and feeding content to TV receiving sets. PE insulated switchboard cables are used in telephone instruments and EPABX (voice communication) systems, whereas V-SAT cables enable last-mile connectivity by establishing a connection between V-SAT dish to a base station. Considering the growing demand for surveillance, the Company has also launched innovative special cables used for image capture and CCTV cameras as well as in power solutions

Optic Fiber Cables (OFC) are glass-based cables having the ability to carry maximum bandwidth and transmit data at high speed. While they are primarily used for data distribution by telecom companies and multiservice organizations, they are also used as trunk cables for long-distance networks Communication cables play a critical role in the infrastructure development of the country due to their demonstrated abilities in transmitting digital data at high speed and high bandwidth. Considering the growing demand for optic fiber cables, the Company has undertaken capacity expansion at Urse facility in Maharashtra Traditional telephone cables include copper-based JFTCs which are laid underground and are primarily utilized for achieving landline telephone connectivity. The Company is gradually reducing its focus on this segment as growing penetration of mobile phones and technically-advanced substitute OFC are affecting demand for JFTCs. However, the Company continues to manufacture JFTCs having broadband features for public and private telecom companies as well as for export markets as per the client requirements


The communication cables segment (including optical fiber) recorded sales of Rs.321.5 crores in FY 2020-21 against Rs. 408.9 crores in FY 2019-20. Communication Cable EBIT margin declined due to challenges faced by Indias telecom sector which has been struggling for the last three years.

EBIT levels for the year stood at 12% in this segment as compared to 6% in the previous year. Finolexs marketing JV with Corning for Optical Fibre technology, Corning Finolex Optical Fibre Private Limited, achieved revenue of Rs. 160 crores during FY 2020-21 as against Rs. 150 crores in the previous year.

International fiber prices experienced volatile movements through the year while the same could be said for the supply of raw material required for the product. Further, communication cable projects in the domestic market faced severe liquidity crunch. While state-run telecom players BSNL and MTNL have been struggling to generate cash, other major telecom companies in India reported record losses in the year under review after making provisions for adjusted gross revenue (AGR).

Growth Drivers

a. Digital India

The government launched the flagship Digital India programme with an aim to transform India into a digitally empowered society and knowledge economy. It further launched BharatNet programme aiming to connect more than 2,50,000 Gram Panchayats with an optic fiber network across India and provide high-speed broadband connectivity across all the rural regions by 2022. In the light of rapidly increasing data requirements, the government is pushing for telecom reforms and augment the countrys data transmission capacity. This is expected to auger well for the demand for optic fiber cables.

b. 5G Infrastructure

The government is eyeing to make 5G services commercially available across India to accelerate the countrys economic growth. However, for a successful rollout of 5G, the country would need densification of the transmission network through provisioning of OFC, small cells, and mobile towers. The government aims to increase fiber footprint to 7.5 million kilometres by 2022, from the current 1.75 million kilometres, which will create a massive opportunity for the OFC segment. The growth of 5G is expected to trigger demand for undersea fiber optic cables, which is estimated to reach around Rs. 3,000 crores in the next five years.


The COVID-19 pandemic has impacted the India structured cabling industry adversely. Key industries, including IT & telecommunication, construction, automotive, and manufacturing, are severely impacted due to the lockdown implemented by the central and state governments, thereby lowering the demand for structured cabling in the country. However, government initiatives to construct 100 smart cities, offer free Wi-Fi services in trains, increasing demand for Intelligent buildings, Bharat Net Programme are seen augmenting the growth of communication cables.

Finolex has partnered with US-based Corning Inc which stands a world leader in glass and fiber manufacturing. Leveraging its technical expertise, the Companys operational efficiencies, and robust demand in both domestic as well as export market, the OFC segment is expected to provide notable growth opportunities to the Company in the coming years.

In the OFC segment, Finolex faces two principal risks that may affect its pricing power and profitability.

These are intensifying internal competition, especially from the unorganized players and market rate fluctuations in copper prices, which forms a key raw material input. The Company mitigates the adverse impact of these risks through backward integration, efficient and bulk procurement, and linking product prices with changing input costs. The Company manufactures products that are in sync with local and international quality standards. Propelled by these positive developments, it is well positioned to leverage the growth opportunities.

Copper Rods

Finolex integrated backwards to manufacture Continuous Cast Copper Rods (CCC rods) which in turn are used in the production of copper-based electrical and communication cables. The Company contracts long-term and bulk purchase agreements with local players to cost-effectively procure Copper cathodes, the key raw material for copper rods. Production over and above captive requirement is sold to third-party customers.


Majority of the production of the Copper rod division was consumed in-house by the Company. During the year, third-party sales of Copper Rods stood at Rs. 23.1 crores as compared to Rs.19.1 crores in the previous year. 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

Being a key input for all copper-based electrical and communication cables, the demand for copper rods is expected to grow in line with the growth in C&W industry. The demand for copper rods in the electrical segment is expected to bank on to the growth of the infrastructure sector. Furthermore, the Company looks forward to benefit from selling surplus copper rods to third parties under the GST regime. The rising output of entities such as domestic and consumer appliances, transportation equipment, industrial machinery and an array of other durable goods has been leading to an increased demand for copper rods.

Others (FMEG and Home Appliances)

a. Electrical Switches, Switchgears and Lighting

Finolex strategically diversified into margin accretive FMEG segment with an aim to establish new growth avenues for the Company and reduce dependence on C&W industry. The FMEG product portfolio is comprised of lighting products, electrical switches, and low duty switchgear. Its electrical wire accessories include doorbell, extension box, spike guard, angle holders, and batten holders, among others.

The Company intends to leverage its strong brand equity, technical expertise, extensive distribution network, and competent sales team to grow FMEG segment. It continues to deepen its distribution network and nurture relationships with channel partners to increase its reach further. Additionally, it continues to focus on wining customer trust and satisfaction by supplying high-quality products.

The segment registered sales of Rs. 60.80 crores during FY 2020-21, as against Rs. 44 crores in the previous year. The increasing outreach with an ever-expanding distribution network and quality products provide positive outlook.

Fans and Water Heaters

Given the growing opportunity in the home appliances segment backed by increasing urbanization, rural electrification, and changing consumption patterns, the Company introduced fans and water heaters. The Companys products are well accepted in the market owing to attributes such as quality, performance, aesthetics, and value-for-money proposition. While the Companys strengths of brand and reach are supporting better product offtake, the Company has also aftersales service available at the customer doorstep across the country.

The Company reported a strong performance in this segment, with sales of Rs. 48.5 crores in FY 2020-21, as compared with Rs. 44 crores in the previous year.


Despite COVID-19 led disruptions in FY 2020-21, the domestic demand for branded FMEG products is likely to remain robust.

It will be driven by the governments thrust on supplying and ensuring energy supply across the nation, rising rural disposable income levels, growing urbanization and shift to value-added branded products. Furthermore, increasing share of women workforce in the countrys demography has been resulting in improving spending power, triggering demand for household appliances.

To capitalize on the rapidly growing penetration of e-commerce and digital influence, Finoiex has developed an in-house dedicated online retail store. To improve its offline visibility, it has also launched exclusive retail store named Finoiex House and has received good traction for both e-commerce and Finoiex House channels.

The Companys electrical and communication cables cater to the critical requirements of the core sectors of India such as Energy, Transportation, Real Estate, and Building Materials, among others. Recognizing the key role these industries play in achieving the holistic economic development of the country, the government continues to provide growth impetus through substantial capital outlay and pro-policy support. Finoiex with its strong track record, technical expertise and business acumen stand well-poised to benefit from these strategic investments by the government.

The Companys successful entry into FMEG segment is expected to create new growth opportunities while enhancing profitability metrics as well due to the higher-margins, faster inventory churn, and lower working capital requirements in the B2C business. The growth in the FMEG business is likely to be driven by growing income levels, increasing nuclearization, rising brand and quality awareness and increasing digital and distribution penetration in the country.

It continues to upgrade its technologies, expand geographical presence, and diversify business to achieve sustainable growth moving forward. These growth objectives are well supported by its robust financial condition, management bandwidth and competent workforce.

Financial Performance

(Rs. in Crores)


PARTICULARS 2020-21 2019-20
Revenue from Operations (Net) 2,768.1 2,877.3
Other Income 77.0 171.9
Total 2,845.1 3,049.2
Material Costs 2,051.4 2,083.4
Employee Benefit Expenses 137.9 149.5
Finance Costs 0.8 1.6


(Rs. in Crores)


PAR TICULARS 2020-21 2019-20
Depreciation, Amortization, and Impairment 39.0 38.9
Other Expenses 224.0 274.5
Total 2,453.1 2,547.9
Profit Before Tax 392 501.3
Tax Expenses:
Current Tax 112.6 123.2
Deferred Tax (3.4) (24.4)
Total Tax 109.2 98.8
Profit After Tax 282.8 402.5
Total Other Comprehensive Income/(Expense) for the year 33.3 (40.6)
Total Comprehensive Income For the year 316.1 361.9


The Company achieved a revenue of Rs.2,768.1 crores as against Rs. 2,877.3 crores in the previous year, marking a de-growth of 3.8%. Other income was significantly lower due to negligible dividend income during the year as against Rs. 80 crores received in the previous year on account of an associate declaring regular and interim dividend during the previous year. This was on account of many companies declaring interim dividends during FY 2019-20 owing to the change in the taxability of dividends declared which would later be taxable in the hands of the recipients.


Material Cost: Although raw material prices increased significantly during the year, total material costs during the year decreased marginally owing to volumes and product mix.

Staff Cost: Employee expenses decreased in proportion to decrease in production activity in the first two months of the year and due to change in expenses based on manpower categories.

Other Expenses: Other expenses decreased due to lower expenditure on overheads during the lockdown period in the first quarter of the year.

Depreciation: Depreciation expenses did not see any significant change during the year.

Finance Cost: The Company remains debt-free and finance costs during the year pertain to bill discounting and other finance charges.

(Rs. in Crores)
Shareholders Fund 2,950.7 2,718.7
Non-Current Liabilities 50.3 54.2
Current Liabilities 250.7 238.9
Total 3,251.7 3,011.8
Fixed Assets 420.1 413.8
Investments 937.2 725.9
Loan & Other Non-Current Assets 60.0 49.5
Current Assets 1,834.4 1822.6
Total 3,251.7 3,011.8

Capital Expenditure and Investments in JV: During the year, the Company incurred Rs. 55 crores towards capital expenditure, predominantly towards sustenance of existing capacity and product development activities. During the year, the Company invested Rs. 24.5 crores in its Joint venture.

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

Profitability: The Companys profit before tax reduced during the year due to lower sales volumes due to reasons discussed under revenue performance and decrease in dividend income.

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

Results of Operations:

The Company registered a net cash inflow of Rs.114.3 crores from its operations as compared to Rs. 308.8 crores generated last year. Profit before tax and exceptional items stood at Rs.392.1 crores as against Rs. 501.3 crores in last year.

Taxation: Tax outflow during the year decreased proportionately with the decrease in profit before taxation.

Cash Flow

(Rs. in Crores)
PARTICULARS 2020-21 2019-20
Profit from operations before tax 392.1 501.3
(Inc)/Dec in net working capital (160.7) (82.8)
Income tax paid (117.1) (109.7)
Net cash inflow from operating activities 114.3 308.8
Cash inflow/(outflow) from investing activities (859.4) 587.2
Cash (outflow) from financing activities (86.3) (86.4)
Net cash inflow/(Outflow) (831.4) 809.6

Risk Management

Finolex has deployed a comprehensive risk management framework which is responsible for identifying, assessing, monitoring, and mitigating key risks that may adversely affect the Companys operational and financial performance. The Company has instituted a Risk Management Committee which oversees the risk management framework. It ensures that risk management processes are strictly followed across all hierarchies from the top management of the Company to managers operating at various execution levels and thereby facilitates uninterrupted business operations. As an added layer of safety, the Company also appoints external advisors responsible for formulating mitigating strategies for identified risks. While the segment-specific risks have been covered under Business Environment for Product Segments with Outlook, key general risks have been enumerated below:

Competition Risk

Finolex operates in an industry characterized by intense competition from both organized as well as unorganized players. The Companys failure to supply differentiated products having consistently superior quality and competitive pricing may result in the loss of market share and profitability.


The Companys resolute focus on product innovation by leveraging its technological expertise enables it to consistently launch products that fulfil dynamic market requirements in terms of quality parameters and technical specifications. Furthermore, backed by superior control over key raw materials through backward integration, the Company is also able to sell its products at competitive prices.

With its recent foray into FMEG segment, it has become a one-stop shop solution for all electrical requirements.

These attributes give a distinctive advantage to the Company vis-a-vis its competitors.

Policy Risk

The changes in government regulations, legislations, and policies pertaining to housing and infrastructure sectors may materially hamper the Companys revenues, order book and growth opportunities. Unfavourable changes in monetary policy may also result in a rise in borrowing costs significantly affecting project viability and profitability.


The Companys products cater to crucial requirements of diverse industries supporting housing and infrastructure development of the country. While this lowers its dependence on the individual sector, it also positions it well to take advantage of several sectorial allocations announced by the government. The Company has also diversified into FMEG segment to lower its dependence on C&W industry and continues to focus on increasing exports to reduce domestic market exposure.

Raw Material Fluctuation Risk

Fluctuations in prices of the raw materials such as copper, aluminium and fiber optics, and failure to procure these at competitive costs may significantly impact the Companys ability to supply products at competitive rates. This may lead to loss in business and market share and affect the margins of the Company.


The Company strives to maintain margin levels by linking product sales price to the raw material costs and thereby mitigate the impact of unforeseen price fluctuations. Long-standing relationships with key suppliers enable the Company in procuring bulk quantities at competitive rates.

Furthermore, it has established an agile procurement policy by leveraging efficient production forecasting based on past and present trends enabling it to maintain adequate inventory levels at optimal costs.

Currency Fluctuation Risk

The Company exports final products and imports key raw materials from the international markets, exposing it to foreign exchange rate fluctuation risk. An adverse change in the currency exchange rate may result in lower realizations or higher production costs leading to lower profit margins.


The Company has a well-defined hedging policy in place and engages in appropriate forward contracts to safeguard revenue and margins from the adverse impact of currency rate fluctuations. Furthermore, the Company is actively engaged in both import and export from the international markets and thereby enjoys natural hedging to a certain extent. Further, it also undertakes long-term contracts with foreign customers and suppliers to lower currency rates risk.

Geopolitical Tensions and Global Pandemic Risk

Rising international trade barriers and political disputes between India and other countries may negatively impact the Companys exports business. A pandemic outbreak of deadly virus such as COVID-19 may disrupt all business activities, supply chains, and end-customer demand, thus inflicting severe damage to the operational and financial performance of the Company.


The Company conducts extensive market analysis on macroeconomic, political, social, regulatory, and profitability parameters before expanding into new geographies. It follows lean operational and cost structure while proactively monitoring cash flows to ensure low impairment risk. Furthermore, it has established a comprehensive business continuity by leveraging the deep experience of its top management team to ensure agility and resilience in the crisis period.

Internal Controls

The Company has a robust internal control system in place commensurate with the size and nature of its business. The internal control system ensures the reliability of financial information through timely and accurate recording of all financial, commercial, and operational transactions, safeguarding of assets from unauthorized use or disposition and stringent adherence to the applicable laws, regulations, and accounting standards. While the Companys internal team is responsible for continuous monitoring of these controls, it has also appointed an external team to oversee and improve the adequacy and efficacy of the control mechanism. The Companys audit committee conducts a quarterly review of audit reports submitted by the internal audit team. Key observations are discussed and communicated to the management who undertakes corrective actions to further augment the efficiency of the internal control system. The statutory auditors in the Annexure A to the Independent Auditors Report comment on the internal financial controls of the Company. The auditors have issued a clean report for the current year.