The September quarter results reflect Polycab's ability to navigate a challenging macroeconomic environment whilst maintaining pricing power and operational discipline. Net sales grew 17.80% year-on-year to ₹6,477.21 crores, marking the company's strongest quarterly revenue performance. Quarter-on-quarter, sales expanded 9.67% from ₹5,905.98 crores in Q1 FY26, demonstrating sustained demand momentum across key product categories.
The standout feature of Q2 FY26 was the significant margin expansion. Operating profit margin (excluding other income) improved to 15.76%, up from 11.49% in Q2 FY25 and 14.52% in the preceding quarter. This 427 basis points year-on-year improvement reflects better product mix, operating leverage benefits, and effective cost management. Net profit margin similarly expanded to 10.70%, compared to 8.10% in the year-ago period.
| Metric | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 | Jun'24 |
|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 6,477.21 | 5,905.98 | 6,985.80 | 5,226.06 | 5,498.42 | 4,698.03 |
| QoQ Growth | 9.67% | -15.46% | 33.67% | -4.95% | 17.04% | -15.99% |
| YoY Growth | 17.80% | 25.71% | 24.93% | 20.40% | 30.37% | 20.79% |
| Net Profit (₹ Cr) | 685.46 | 592.12 | 726.67 | 457.56 | 439.81 | 395.95 |
| QoQ Growth | 15.76% | -18.52% | 58.81% | 4.04% | 11.08% | -27.48% |
| YoY Growth | 55.85% | 49.54% | 33.09% | 10.83% | 3.35% | -0.92% |
| Operating Margin (%) | 15.76% | 14.52% | 14.68% | 13.78% | 11.49% | 12.42% |
| PAT Margin (%) | 10.70% | 10.15% | 10.51% | 8.89% | 8.10% | 8.55% |
Financial Performance: Quality Earnings Drive Profitability
Polycab's Q2 FY26 financial performance demonstrates the company's ability to translate top-line growth into bottom-line expansion. Operating profit (PBDIT excluding other income) reached ₹1,020.75 crores, up 61.65% year-on-year from ₹631.55 crores in Q2 FY25. This substantial increase was driven by both volume growth and margin expansion, with the operating margin improving by 427 basis points to 15.76%.
On a half-yearly basis (H1 FY26), Polycab reported net sales of ₹12,383.19 crores, representing a 21.62% increase over H1 FY25. Consolidated net profit for the first half stood at ₹1,277.58 crores, up 52.51% year-on-year. The consistency in performance across both quarters of H1 FY26 indicates sustained operational momentum rather than one-off gains.
Employee costs in Q2 FY26 rose to ₹230.46 crores from ₹180.29 crores in the year-ago quarter, reflecting strategic investments in talent acquisition and retention. Despite this 27.83% increase, the company maintained strong operating leverage, with employee costs as a percentage of sales remaining well-controlled at 3.56%.
Interest expenses increased to ₹48.41 crores in Q2 FY26 from ₹45.30 crores in Q2 FY25, reflecting higher working capital requirements to support business expansion. However, the company's interest coverage ratio remains robust at approximately 19 times, indicating comfortable debt servicing capacity. Depreciation charges rose to ₹96.78 crores from ₹72.06 crores, in line with ongoing capacity expansion initiatives.
The quality of earnings remains high, with the effective tax rate at 24.76% in Q2 FY26, consistent with the normalised rate of around 24-25%. Profit before tax stood at ₹921.00 crores, up 56.02% year-on-year, demonstrating that the profit growth is broad-based and not dependent on tax optimisation strategies.
Operational Excellence: Return Ratios Reflect Superior Capital Efficiency
Polycab's return on equity (ROE) of 20.56% in Q2 FY26 stands as a testament to the company's efficient capital deployment and strong profitability. This metric, which measures how effectively a company generates returns for its shareholders, places Polycab well above industry averages and reflects superior operational execution. Higher ROE indicates better capital efficiency, and Polycab's consistent ability to maintain ROE above 20% demonstrates sustainable competitive advantages.
The company's return on capital employed (ROCE) reached 35.46% in the latest quarter, significantly higher than its five-year average of 31.68%. This exceptional ROCE indicates that Polycab generates ₹35.46 of operating profit for every ₹100 of capital employed, showcasing the company's ability to create value from its asset base. The upward trajectory in ROCE over recent quarters suggests improving operational efficiency and better asset utilisation.
✓ Zero-Debt Balance Sheet: A Rare Competitive Advantage
Polycab operates with a virtually debt-free balance sheet, with total debt of just ₹109 crores against shareholder funds of ₹9,825 crores as of March 2025. The company maintains a net cash position of ₹2,411 crores, providing substantial financial flexibility for growth investments, acquisitions, or shareholder returns. This pristine balance sheet positions Polycab favourably to capitalise on industry consolidation opportunities whilst maintaining operational independence.
The company's working capital management has been exemplary, with sales to capital employed averaging 2.14 times over the past five years. This metric indicates efficient asset utilisation and suggests that Polycab requires relatively modest capital investments to generate incremental sales growth. The combination of high ROCE and efficient working capital management creates a powerful foundation for sustainable value creation.
Polycab's asset-light model, reflected in its strong return ratios, enables the company to generate substantial free cash flows. Operating cash flow for FY25 stood at ₹1,808 crores, representing a healthy conversion of profits into cash. This cash generation capability, combined with the zero-debt balance sheet, provides Polycab with multiple strategic options including capacity expansion, new product development, and enhanced shareholder distributions.
Industry Leadership: Polycab's Dominant Market Position
As India's largest cable manufacturer, Polycab commands a significant market share in the organised cable and wire segment. The company's comprehensive product portfolio spans power cables, control cables, building wires, communication cables, and fast-moving electrical goods (FMEG). This diversification provides revenue stability and reduces dependence on any single product category or customer segment.
The Indian cable industry has witnessed substantial growth driven by infrastructure development, urbanisation, and the government's focus on power sector reforms. Polycab has capitalised on these secular trends whilst simultaneously gaining market share from unorganised players. The company's strong brand equity, extensive distribution network spanning over 200,000 retail touchpoints, and consistent product quality have enabled it to command premium pricing in the market.
Polycab's manufacturing footprint includes 25 state-of-the-art facilities across India, providing strategic geographic diversification and proximity to key markets. The company has invested heavily in backward integration, particularly in copper and aluminium wire rod production, which provides cost advantages and ensures quality control throughout the value chain. This vertical integration strategy has become increasingly valuable during periods of raw material price volatility.
FMEG Segment: The Next Growth Driver
Polycab's fast-moving electrical goods (FMEG) segment, which includes fans, LED lighting, switches, switchgear, and solar products, represents a significant growth opportunity. The company has been strategically expanding its FMEG portfolio, leveraging its strong brand recognition and distribution network. This diversification into higher-margin consumer products complements the traditional B2B cable business and provides multiple engines for growth.
| Company | Market Cap (₹ Cr) | P/E Ratio | P/BV Ratio | ROE (%) | Dividend Yield (%) |
|---|---|---|---|---|---|
| Polycab India | 114,000 | 51.46 | 11.61 | 20.56 | 0.46 |
| KEI Industries | ~45,000 | 50.46 | 0.64 | 1.28 | 0.10 |
| R R Kabel | ~22,000 | 42.89 | 6.72 | 14.48 | 0.27 |
| Finolex Cables | ~12,000 | 19.66 | 2.22 | 12.75 | 1.00 |
| Universal Cables | ~4,500 | 20.74 | 1.37 | 5.04 | 0.57 |
Polycab's valuation premium relative to peers is justified by its superior return on equity of 20.56%, significantly higher than the peer average of approximately 8-10%. The company's price-to-book ratio of 11.61 times, whilst elevated compared to peers, reflects the market's recognition of Polycab's exceptional ROE and sustainable competitive advantages. The company's ability to generate returns well above its cost of capital justifies this premium valuation multiple.
Valuation Analysis: Premium Multiples Reflect Quality Business
Trading at a price-to-earnings ratio of 50.49 times based on trailing twelve-month earnings, Polycab commands a significant premium to the broader market. The company's current market price of ₹7,432.65 reflects investor confidence in its growth trajectory and operational excellence. However, the elevated valuation multiples leave limited room for disappointment and require continued strong execution to justify current levels.
The price-to-book value ratio of 11.39 times represents a substantial premium to the company's book value per share of ₹653.14. This premium is warranted given Polycab's exceptional ROE of 20.56%, which significantly exceeds the company's cost of equity. The relationship between ROE and P/BV is economically sound—companies that generate high returns on equity deserve to trade at higher multiples of book value.
Polycab's PEG ratio of 2.08 suggests the stock trades at approximately twice its earnings growth rate, indicating a premium valuation relative to growth prospects. Whilst the company has delivered robust sales CAGR of 24.63% over five years, the current valuation multiples embed high expectations for continued growth. Investors should carefully assess whether the company can sustain this growth trajectory to justify the valuation premium.
The enterprise value to EBITDA multiple of 33.88 times places Polycab at the higher end of the valuation spectrum within the capital goods sector. This metric, which accounts for the company's debt and cash position, reflects the market's willingness to pay a premium for Polycab's quality earnings, strong balance sheet, and consistent execution track record. The company's net cash position of ₹2,411 crores provides some valuation support.
The dividend yield of 0.47%, based on the latest dividend of ₹35 per share, appears modest relative to the stock price. However, Polycab's dividend payout ratio of 25.26% suggests the company retains substantial earnings for reinvestment in growth opportunities. This capital allocation strategy appears appropriate given the company's high ROCE and numerous expansion opportunities in both core cables and the FMEG segment.
Shareholding Pattern: Institutional Confidence Building
Polycab's shareholding pattern reflects growing institutional interest, with total institutional holdings at 23.05% as of June 2025. Promoter holding stands at 63.01%, down marginally from 63.04% in the previous quarter, indicating stable promoter commitment. Importantly, there is zero promoter pledging, which eliminates concerns about financial distress or forced selling by the promoter group.
| Shareholder Category | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|
| Promoter | 63.01% | 63.04% | 63.05% | -0.03% |
| FII | 11.44% | 11.11% | 12.76% | +0.33% |
| Mutual Funds | 8.82% | 8.28% | 8.67% | +0.54% |
| Insurance | 2.27% | 1.85% | 1.21% | +0.42% |
| Other DII | 0.52% | 0.82% | 0.79% | -0.30% |
| Non-Institutional | 13.94% | 14.89% | 13.53% | -0.95% |
Mutual fund holdings increased to 8.82% in June 2025 from 8.28% in March 2025, representing a gain of 54 basis points. The number of mutual funds holding Polycab shares rose from 31 to 34, indicating broadening institutional participation. This increase in mutual fund ownership reflects growing conviction amongst domestic institutional investors about the company's growth prospects and quality of management.
Foreign institutional investor (FII) holdings stood at 11.44% in June 2025, up from 11.11% in the previous quarter. The number of FIIs holding the stock increased from 574 to 627, suggesting expanding global investor interest. This diversification of the FII shareholder base provides stability to the stock and indicates international recognition of Polycab's investment credentials.
Insurance company holdings witnessed a notable increase to 2.27% from 1.85% quarter-on-quarter, with the number of insurance companies holding the stock rising from 18 to 19. This steady accumulation by insurance companies, which typically take long-term investment positions, signals confidence in Polycab's sustainable business model and growth trajectory.
Stock Performance: Recent Volatility After Multi-Year Rally
Polycab's stock has delivered exceptional long-term returns, with a three-year return of 183.67% significantly outperforming the Sensex's 43.73% gain during the same period. The five-year return of 822.34% places Polycab amongst the top-performing stocks in the Indian equity market, reflecting the company's transformation from a traditional cable manufacturer to a diversified electrical goods company.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.81% | 1.76% | -5.57% |
| 1 Month | 1.02% | 1.52% | -0.50% |
| 3 Months | 8.10% | 2.06% | +6.04% |
| 6 Months | 40.38% | 6.87% | +33.51% |
| YTD | 2.22% | 7.44% | -5.22% |
| 1 Year | 4.65% | 3.64% | +1.01% |
| 2 Years | 35.96% | 26.38% | +9.58% |
| 3 Years | 183.67% | 43.73% | +139.94% |
| 5 Years | 822.34% | 109.97% | +712.37% |
However, recent performance has been more subdued, with the stock delivering a modest 4.65% return over the past year, marginally ahead of the Sensex's 3.64% gain. Year-to-date returns of 2.22% lag the broader market's 7.44% advance, suggesting some profit-taking after the substantial multi-year rally. The six-month return of 40.38% demonstrates strong momentum in the recent past, though this has moderated in the very short term.
The stock currently trades at ₹7,432.65, approximately 4.64% below its 52-week high of ₹7,794.70 but 63.09% above its 52-week low of ₹4,557.45. Technical indicators show a bullish trend, with the stock trading above its 50-day, 100-day, and 200-day moving averages, though recent sessions have seen the price slip below the 5-day and 20-day moving averages, indicating short-term consolidation.
Polycab has significantly outperformed its sector, with the broader cable sector declining 15.15% over the past year whilst Polycab gained 4.65%—an outperformance of 19.80 percentage points. This relative strength reflects Polycab's superior execution, market share gains, and successful diversification into higher-margin FMEG products. The stock's beta of 1.20 indicates higher volatility than the broader market, which is typical for mid-cap stocks with strong growth characteristics.
"Polycab's transformation from a pure-play cable manufacturer to a diversified electrical goods company, combined with exceptional return ratios and a pristine balance sheet, positions it favourably for sustained value creation."
Investment Thesis: Quality Growth at Premium Valuation
Polycab India presents a compelling investment case built on multiple pillars: market leadership in cables, successful diversification into FMEG, exceptional return ratios, and a fortress balance sheet. The company's five-year sales CAGR of 24.63% and EBIT CAGR of 29.46% demonstrate consistent growth execution. The ROE of 20.56% and ROCE of 35.46% place Polycab amongst India's most efficient capital allocators.
The company's quality credentials are impeccable, having maintained "Excellent" quality grade for nine consecutive quarters. Zero debt, no promoter pledging, strong institutional holdings of 23.05%, and consistent profitability over a decade underscore the business quality. The financial trend remains positive, supported by improving margins and sustained revenue growth across both core cables and the emerging FMEG segment.
However, the valuation remains a concern. Trading at a P/E of 50.49 times and classified as "Very Expensive," Polycab's current multiples embed high growth expectations. The PEG ratio of 2.08 suggests limited valuation comfort, requiring flawless execution to justify current levels. Investors must weigh the company's undeniable quality and growth potential against the premium valuation and limited margin of safety.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Market Leadership: Largest cable manufacturer in India with strong brand equity and extensive distribution network
- Exceptional Return Ratios: ROE of 20.56% and ROCE of 35.46% demonstrate superior capital efficiency
- Zero-Debt Balance Sheet: Net cash position of ₹2,411 crores provides strategic flexibility
- Consistent Growth: Five-year sales CAGR of 24.63% with improving profitability trends
- Diversification Success: FMEG segment provides growth optionality and margin enhancement
- Strong Cash Generation: Operating cash flow of ₹1,808 crores in FY25 demonstrates quality earnings
- Institutional Confidence: Growing FII and mutual fund holdings signal investor conviction
⚠ KEY CONCERNS
- Premium Valuation: P/E of 50.49x and PEG of 2.08 leave limited room for disappointment
- Copper Price Volatility: Raw material price fluctuations can impact margins despite hedging strategies
- Competitive Intensity: Cable industry remains fragmented with pricing pressures from unorganised players
- FMEG Execution Risk: Success in consumer goods requires different capabilities than B2B cables business
- Working Capital Requirements: Growth necessitates increased working capital, impacting cash conversion
- Modest Dividend Yield: 0.47% yield provides limited income for conservative investors
- High Beta: Stock volatility of 35.38% and beta of 1.20 indicate higher risk profile
Outlook: What to Watch
POSITIVE CATALYSTS
- → Sustained margin expansion above 15% driven by product mix improvement and operating leverage
- → FMEG segment revenue contribution reaching 20%+ with higher margins than core cables
- → Market share gains in organised cable segment as industry consolidation accelerates
- → Infrastructure spending boost from government capex providing volume tailwinds
- → Successful capacity expansion translating to revenue growth without margin dilution
RED FLAGS
- → Margin compression below 13% indicating pricing pressure or adverse mix shift
- → Slowdown in revenue growth to single digits suggesting demand weakness
- → Deterioration in working capital metrics with cash conversion cycle extending beyond 90 days
- → Significant promoter stake reduction or any introduction of pledging
- → FMEG segment losses or failure to scale this business profitably
The Verdict: Quality Business, But Wait for Better Entry
Score: 78/100
For Fresh Investors: Consider accumulating on dips towards ₹6,800-7,000 levels, which would provide better risk-reward. Current valuation multiples leave limited margin of safety despite excellent business quality. Use any market corrections to build positions gradually rather than chasing at current levels.
For Existing Holders: Continue holding with a long-term perspective. The company's consistent execution, market leadership, and diversification into FMEG justify retaining positions. Consider booking partial profits if the stock approaches ₹8,000 to manage portfolio concentration risk, but maintain core holdings given the quality of the business.
Fair Value Estimate: ₹7,200 (3.13% downside from current levels). The stock trades slightly above fair value, warranting patience for better entry points.
Polycab India exemplifies a high-quality business with exceptional return ratios, market leadership, and a pristine balance sheet. The Q2 FY26 results demonstrate continued operational momentum with 55.85% profit growth and meaningful margin expansion. However, the premium valuation multiples require sustained execution and limit near-term upside. The stock merits a position in long-term portfolios, but fresh investors should await more attractive entry points.
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
