Company Overview
Dynamic Cables Limited is a manufacturer of power infra cables that includes LT, HT,
EHVC, power control & instrumentation cables, flexible & industrial cables, solar
cables and railway signalling cables. Our products are widely used for projects in power
generation, electricity transmission and distribution, airports, railways and residential
projects. The Company supplies cables to government distribution companies (discoms),
private discoms, private EPC contractors, and industrial and export clients. Dynamic
Cables has 3 manufacturing plants situated at Jaipur and Reengus. Business operations are
managed through a corporate office in Jaipur and 5 regional sales offices across India. In
the last 20 years, the Company has showcased its capabilities & focus on developing
new products to meet the market requirements in line with the evolution of the industry.
Sector Basics
Cables involve one or more conductors which are used for the transmission of
electricity, data, or signals. Demand for cables and conductors are directly linked to the
growth of the manufacturing and infrastructure sector like power, telecommunications, and
residential and commercial real estate.
The Indian wire and cables market is estimated to have surged to around Rs. 600 billion
in FY 2021-22 from Rs. 430 billion in FY 2020-21 and from Rs. 490 billion in FY 2019-20.
It is estimated that the industry registered a volume growth of around 12% in FY 2021-22
and similar growth is expected in FY 2022-23 on the back of higher infrastructure spending
by the government.
The cables industry can be broadly segmented into extra high voltage power cables
greater than 66 KV, medium voltage power cables up to 33 KV and low voltage power cables
up to 1 KV, instrumentation and control cables, light-duty cables, fibre optic cables,
copper telephone cables, elastomer rubber cables and speciality cables.
Economic Review Global Economic Review
The global economy contracted by 3.1% in Calendar Year 2020 due to the global outbreak
of the Covid-19 pandemic. However, the Calendar Year 2021 saw the global economy bounce
back
sharply by around 6% as economic activities resumed across the globe backed by
favourable fiscal and monetary policies.
However, supply-side pressures, rising inflation and geopolitical tensions continued to
weigh on global economic recovery. The Russia-Ukraine war since February 2022 has induced
fuel and food price pressures across the globe. Central banks are hiking interest rates to
rein in inflation, which can take a toll on economic growth in the near term.
For Calendar Year 2022, the International Monetary Fund (IMF) has slashed its global
growth outlook to 3.6% from 4.4% projected earlier. Beyond 2023, global growth is
forecasted to stay at about 3.3% over the medium term.
Indian Economic Review
India was hit with a deadly second wave of the Covid pandemic in the early part of FY
2021-22. The last quarter too saw some disruption due to the spread of the third wave of
the Omicron variant of the virus. However, the economic impact was not as severe as the
first wave of the pandemic in 2020 due to partial lockdowns and higher vaccination
penetration.
In FY 2021-22, Indias economy grew by 8.7% after contracting by 6.6% in FY 2020-21.
Positively a rebounce in capex, both from the private sector and the government, was seen
in FY 2021-22. Investments in the economy measured as Gross Fixed Capital Formation (GFCF)
grew by 15.8% in FY 2021-22 after having contracted by 10.4% in FY 2020-21.
In FY 2021-22, the industrial sector grew by 10.3% led by a 9.9% growth in
manufacturing, 11.5% growth in construction, and electricity and other utility sector
growth of 7.5%.
In FY 2022-23, while many high-frequency indicators show that the economy is on the
growth path, inflation has raised its head. The prospects for economic growth in FY
2022-23 will depend on trends in the global economy, settlements of geo-political tensions
and the pace of monetary tightening by the RBI. In FY 2022-23, Indias GDP is expected to
grow by 7-7.5%.
High-frequency indicators like PMI and IIP and capacity utilization, which reached
around 74% in Q4 FY 2021-22, is estimated to have increased further to the 75-80% range in
Q1 FY 2022-23. This augurs well for demand from end market for the cables industry.
Key structural drivers for the sector
The cables industry is at the cusp of a new growth era on the back of a robust capex
cycle, both by the government and private sector, and the normalization of business
activities post the Covid pandemic. The governments initiatives on various fronts like -
power, housing, infrastructure and digitization will generate a lot of business for the
wire and cable industry in the medium to long term.
Here is a list of a few structural drivers for the sector.
1) Consumption - demographic dividend, rising disposable income, trend towards nuclear
families, evolving consumer behaviour.
2) I nfrastructure - Indias infrastructure market is expected to remain bullish on the
back of flagship schemes such as the National Infrastructure Plan, Gati Shakti program,
Sagarmala, Bharatmala, Jal Jeevan Mission, etc.
3) Capex push - Annual Budget 2023 outlined a notable boost for capex revival in India
to invigorate the virtuous cycle of investment. Private Capex is also expected to pick
up on the back of the PLI scheme and Make in India program.
4) Emerging levers - digitalization, renewable energy, electric vehicles, IoT.
5) Exports - Traction in electricity transmission & distribution to continue in the
Middle East, SAARC and America.
Financial performance
Business overview
Corporate India has used the Covid-era to deleverage its balance sheet. Fresh Capex is
at multi-decade high levels and the cables and wire industry is witnessing robust demand
from both government and private sectors. Inflation is triggering corporates to revive
their paused capex plans. This bodes well for our business.
Thus, despite sharp inflation witnessed in the last two-quarters of FY 2021-22, the
overall business environment remained quite supportive for the Company. Projects delayed
due to Covid have started to materialize in FY 2021-22. For the Company, the demand
environment continued to remain encouraging from metro and railway projects, oil &
gas, steel, and cement sectors and due to the push towards transitioning to renewable
energy.
During the latter part of FY 2021-22, inflation in our raw material basket was in the
mid-single digits. We continuously endeavour to safeguard our business model from raw
material cost inflation.
Operating revenue in FY 2021-22 grew by 64.5% as compared to FY 2020-21 and around 32%
as compared to FY 2019- 20. Operating Margin improved to 10.62% in FY 2021-22 from 7.48%
in FY 2020-21 and 10.5% in FY 2019-20. PAT increased to Rs. 3089.98 lakhs in FY 2021-22 as
compared to Rs. 984.50 lakhs in FY 2020-21 and Rs. 1820 lakhs in FY 2019-20. Recently, the
company has received an upgrade in its rating from BBB (Brickwork) to BBB+ (CRISIL). The
benefit of moving towards a better credit rating agency will be easy access to debt
markets.
|
|
2021-22 |
|
2020-21 |
|
| Debtors Turnover Ratio |
Revenue from Operations |
56356.91 |
3.93 |
34266.2 |
2.47 |
|
Average Debtors |
14351.82 |
|
13898.2 |
|
| Inventory Turnover Ratio |
Revenue from Operations |
56356.91 |
6.34 |
34266.2 |
5.03 |
|
Average Inventory |
8883.66 |
|
6819.03 |
|
| Interest Coverage Ratio |
EBITDA excluding Other Income |
5984.03 |
4.60 |
2562.8 |
2.16 |
|
Interest Cost |
1300.46 |
|
1188.91 |
|
| Current Ratio |
Current Asset |
29398.54 |
1.66 |
24073.73 |
1.64 |
|
Current Liabilities |
17659.01 |
|
14658.00 |
|
| Debt Equity Ratio |
Total Debts |
7657.75 |
0.52 |
11761.82 |
1.00 |
|
Equity |
14762.05 |
|
11717.03 |
|
| Operating Profit Margin |
EBITDA excluding Other Income |
5984.03 |
10.62% |
2562.80 |
7.48% |
|
Revenue from Operations |
56356.91 |
|
34266.20 |
|
|
|
2021-22 |
|
2020-21 |
|
| Net Profit Margin |
Net Profit After Taxes |
3089.98 |
5.48% |
984.50 |
2.87% |
|
Revenue from Operations |
56356.91 |
|
34266.20 |
|
| Return On Equity |
Net Profits After Taxes |
3089.98 |
23.34% |
984.50 |
8.75% |
|
Average Shareholder Equity |
13239.54 |
|
11250.88 |
|
| Return on Capital employed |
EBIT |
5451.10 |
23.75% |
2527.38 |
11% |
|
Avg Capital Employed |
22949.00 |
|
22976.00 |
|
| Return On Asset |
Net Profits After Taxes |
3089.98 |
8.83% |
984.50 |
3.32% |
|
Total of Balance Sheet |
35011.92 |
|
29675.88 |
|
Segment-wise or product wise performance Customer segment wise sales break-up:
| Segment |
Sales (Rs. In lakhs) |
| Domestic |
|
| - Government |
12863 |
| - Private |
36788 |
| Fxport |
6184 |
| Others |
521 |
| Total |
56356 |
Product wise sale break-up:
| Product |
Sales (Rs. In lakhs) |
| HT Cables |
28513 |
| LT Cables |
18127 |
| Railway Signaling Cable |
785 |
| Conductors |
8191 |
| Others |
740 |
| Total |
56356 |
Going Ahead
The Company continues to believe that there is a huge opportunity in the institutional
business on the back of capex- led demand revival in the economy.
Dynamic Cables which was largely a discom supplier has explored new markets in the
power sector. Even, exports and railways are expected to have high growth rates and will
contribute significantly to our growth journey in the future. The Company also plans to
explore the EV and Renewable cable market in the future.
We are focused on deploying efforts towards the development of new products as
extensions to our core products. The current capacity of the Companys plants can generate
Rs.8000 million to Rs.10000 million of revenue with marginal capex.
Here are our focus areas.
Product mix: The management is focused on creating a resilient business model for
sustainable growth by diversifying its product mix and market. This will help reduce our
concentration risk. The Company has been tweaking its product mix towards high- margin
accretive products like high voltage cables. Consequently, the share of low-margin
conductors has come down from 44.6% in FY 2016-17 to 14.5% in FY 2021-22. Consequently,
shares of HT products have increased from 16.2% in FY 2016-17 to 50.5 in FY 2021-22.
Export Market: Exports received better than expected traction for the Company in recent
years. We continue to explore the global opportunity. Key growth opportunity for the
Company is driven by power infrastructure investments in Africa and Asia. Export
contributed a 10% share to overall sales in FY 2021-22, despite
the previous year being disrupted and fractured by Covid and global supply chain
issues.
Indian Railways & signalling: The Company recently got a major breakthrough in the
signalling segment for Indian railways. The railway signalling business may have a sizable
share in the overall business that may bring higher than expected growth in the next 3-4
years.
Power sector: The governments thrust towards additional power distribution
infrastructure and revamping of existing distribution infrastructure augur well for the
Company. Increasing privatization of the power distribution sector and focus of the
government to support the state power discoms and improve their financial and operational
health will ensure the required investment in power infrastructure.
New segments: Such as electric vehicles, exports, railway electrification,
import-substitution, etc. will evolve as sizable business opportunities for the Company.
The Company has deployed its R&D team efforts towards development of special- purpose
cables.
Union Budget 2022-23 - starting of investment cycle
The Union Budget 2022-23 presented by the Finance Minister on 1 February 2022, laid a
great emphasis on public capital expenditure to invigorate the virtuous cycle of
investment and thereby create employment. With a 35% jump in capex from Rs. 5.50 lakh
crores in FY 2021-22 to Rs. 7.50 lakh crores in FY 2022-23, the push to crowd-in private
investment includes the announcement of a master plan for expressways, expanding national
highway by 25,000 km, new multi-modal parks, 100 PM Gati Shakti cargo terminals, new
trains, and ropeways and 50% rise in budget allocation to roads.
Railway reforms & Signalling cable demand
Technology augmentation for modernization of Indian Railways is a continuous process.
Indian Railways is on a mission mode to electrify its entire Broad-Gauge network to
provide environment friendly, green & clean mode of transport under the Mission 100%
Electrification - Moving towards net Zero Carbon Emission plan.
Indian Railways have prepared a National Rail Plan (NRP) for India - 2030. The Plan is
to create a future ready Railway system by 2030. As part of the National Rail Plan,
Vision 2024 has been launched for accelerated implementation of certain critical projects
by 2024 such as 100% electrification.
In order to boost investment from the industry in the development of additional
terminals for handling rail cargo, a new Gati Shakti Multi-Modal Cargo Terminal (GCT)
policy has been launched on 15.12.2021 and the target is to commission 100 Gati Shakti
Cargo Terminals (GCTs) within the next three financial years, i.e., 2022-23, 2023-24 and
2024-25.
Fifty-eight Super critical Projects of a total length of 3750 km costing Rs. 39,663
crores and 68 Critical Projects of a total length of 6913 km costing Rs. 75,736 crores,
have been identified for completion by 2024.
SCOT analysis Strength
In the mid-tier cables suppliers segment, the Company has consolidated its position on
the back of its strong ability of order execution, high-quality product range and robust
investment to build its R&D capabilities. In the last 20 years, Dynamic Cables has
showcased its capabilities & focus on developing new products to meet the market
requirements in line with the evolution of the industry. Recently, the Company has
developed railway signalling cables and has received RDSO approval. The management has a
track record of calculative capital allocation and rational capital structure.
Challenges
The raw material prices like PVC, copper and aluminium are volatile. This can have an
impact on the margins of the Company. While payment is certain, a weak financial position
of power discoms can also lead to delays in payments. Further, the performance of the
sector and the Company is contingent on macroeconomic developments, both domestic and
global.
Opportunity
The Indian wire and cables market surged to Rs.600 billion in FY 2021-22 from Rs. 430
billion in FY 2020-21 and Rs. 490 billion in FY 2019-20. The industry is likely to see a
healthy growth rate of 11-12% in the near to medium term. Various Indian government
initiatives on housing, smart cities, telecom and a major focus on the infrastructural
sector will lead to a huge opportunity for the cable and wire market growth. According to
an estimate by research firm TBRC the global wires and Cables market is expected to reach
worth US $292 billion by the calendar year 2024 from the current US $236billion.
Threats
Stiff competition within the sector, fast changes in technology, unfavourable policy
changes by the Indian government, the introduction of trade barriers globally and scarcity
of local technical skilled labour are major threats to the Company.
Risk and mitigation
Geopolitical Risks
Some recent and ongoing geo-political events like turmoil in Afghanistan, the US-China
trade war and the Ukraine-Russia war are some of the risks that have direct and indirect
implications on the sector and the Company. Geo-political tensions can disturb the supply
chain and also lead to demand compression.
Mitigation
The Company has exposure to over 40 countries. We regularly assess the geographical
risks and feasibility of operating in a particular country or region. To mitigate supply
risk, we constantly evaluate the various strategic sourcing options.
Commodity Price inflation
The Company deals with various commodities, such as steel, zinc, copper, aluminium and
PVC, among others. The cable and wire sector, typically, passes on any raw material
inflation to the customers.
Mitigation
For the Company, sales contracts have a price escalation clause built-in into the
contract. Alternatively, the Company also sometimes books the raw material at the time of
receiving the order to avoid margin volatility. Raw materials hedging is a key mitigation
action that the Company undertakes.
Currency depreciation
Indian currency has shown a depreciating bias against the US Dollar over the years.
While this helps competitiveness in the export market, raw material prices tend to become
expensive. Indian Rupee has depreciated by 3.5% in FY 2021-22.
Mitigation
The Company tries to pass on any inflation in raw material cost to customers through an
in-built clause in the sales contract. Further, the Company undertakes currency hedging
practices of optimum levels to minimize any downside. We are also focusing more on exports
to exploit the situation.
Pandemic Risk
The Covid pandemic has impacted the industry and the Company on multiple levels: risk
to health and safety of the employees and workers, risk of disruption in production due to
lockdown and demand loss from the serving sectors.
Mitigation
The safety of its workers and all the Companys stakeholders is paramount and the
Company abides by required Covid protocols as mandated by the Central and State
governments.
Demand Risk
Slower investments in infrastructure and manufacturing and in end market users like
railways, telecom and real estate can lead to lower order intake and lower sales.
Mitigation
The Company is particular in choosing its business. The Company is focusing and seeing
traction in exports. Dynamic Cables global presence in over 40 countries helps it to
minimise any demand loss from the domestic market. Further, the Company has diversified
its business portfolio to include emerging sectors like telecom and renewable energy to
counter any demand loss from traditional sectors.
Human Resources
The Company believes that its competitive advantage lies in its people. The people at
Dynamic Cables possess multi-sectoral experience, technological experience and domain
knowledge. The HR culture of the Company is embedded in its ability to disrupt legacy
norms to enhance competitiveness. The Company takes decisions aligned with employees
professional and personal goals, achieving an ideal work-life balance. The Companys
permanent employees count stood at 595 people as of March 31, 2022.
The Company implemented HRMS Module, a digital HR tool in 2022 to enhance its HR
capabilities. Employee training is at the heart of the Companys HR strategy. Across all
employees, training man-days jumped by 91% to 2827 in FY 2021-22 from 1479 in FY 2020-21.
A 329% rise in staff training man- days at 1364 was seen in FY 2021-22 as compared to 318
in FY 2020- 21. For workers, a 26% jump was seen in training man-days in FY 2021-22 at
1463 as compared to FY 2020-21.
Another highlight on the HR management front in FY 2021- 22 was that 75% more topics
were covered as compared to FY 2020-21. A 50% increase was also witnessed in training
sessions in FY 2021-22 from FY 2020-21 levels. Broadly, training hours increased to 186 in
FY 2021-22 from 111 FY 2020-21, a 68% jump.
Internal Control System and their adequacy
The Company maintains a robust framework of internal controls commensurate with the
nature and size of its operation. This framework addresses the evolving risk complexities
and underpins the Companys strong corporate culture and good governance. The Internal
Audit plan is approved by the Audit Committee at the beginning of every year. The conduct
of an internal audit is oriented toward the review of internal controls and risks in the
Companys operations and covers factories, warehouses and centrally controlled businesses
and functions.
Cautionary Statement
The Management Discussion and Analysis may contain certain statements that might be
considered forward looking. These statements are subject to certain risks and
uncertainties.
Actual results may differ materially from those expressed in the Statement as important
factors could influence the Companys operations such as Government policies, local,
political and economic development, industrial relations, and risks inherent to the
Companys growth and such other factors. Market data and product analysis contained herein
has been taken from internal Company reports, Industry & Research publications, but
their accuracy and completeness are not guaranteed and their reliability cannot be
assured.
For and on behalf of Board of Directors For Dynamic Cables Limited
Rahul Mangal
Chairman (DIN : 01591411)
Registered Office:
F-260, Road No. 13, VKI Area, Jaipur 302013 (Rajasthan)
+91-9892691696
