Polycab India just delivered what looks like a knockout quarter.
Both numbers comfortably beat the CNBC-TV18 poll estimates of ₹8,889 crore and ₹821 crore respectively. EBITDA grew 39.4% to ₹1,423 crore, with margins contracting to 14.37%—still better than the feared 13.7%.
Why? Because the company is navigating a perfect storm of regulatory and market headwinds that have little to do with its actual business performance.
The wires and cables business, Polycab's core, grew 47% year-on-year to ₹83,005 crore, contributing roughly 84% of consolidated revenue. The domestic wires and cables business grew even faster at 50% year-on-year. This wasn't just about selling more—it was about selling smarter. Investor Presentation +1
Wires outperformed cables, and channel sales grew faster than institutional sales. About 90% of the business flows through channels, which means Polycab's retail distribution network is firing on all cylinders. The company attributes this strength to healthy demand across government and private sectors, sustained infrastructure activity, and strong execution under Project Spring. Transcript +1
The company is already operating at the higher end of this guidance, with Q2 margins at 14.2%.
The real story of the quarter, however, is the Fast Moving Electrical Goods (FMEG) segment. Revenue more than doubled, growing 124% year-on-year to a record ₹9,931 crore. This represents about 10% of consolidated revenue, up from roughly 6% a year ago. Investor Presentation
What's driving this explosive growth? Solar products. The solar segment grew multifold and remains the largest contributor to FMEG's topline. Management links this momentum to government initiatives like the PM Surya Ghar Yojana and central and state rooftop incentives, expecting strong growth over the next 2-3 years. Transcript
Even more impressive is the profitability turnaround. FMEG achieved a double-digit EBIT margin of 10.1% for the first time, up from just 0.5% a year ago. This surpasses Polycab's own long-term EBITDA margin target of 8-10% for FMEG by FY30. While still below the wires and cables margin of 14.2%, the gap is narrowing rapidly. Investor Presentation +2
Here's where things get interesting. EBITDA margins contracted by 150 basis points year-on-year to 14.37%, but this was significantly better than the market's fear of 13.7%. The contraction was driven primarily by gross margin pressure—cost of goods sold rose to 76.4% of revenue from 72.9% a year ago, cutting contribution margin to 23.6% from 27.1%. Investor Presentation
However, operating efficiencies and a favorable business mix helped offset some of this pressure. Employee and other operating costs fell as a percentage of revenue to 9.2% from 11.4%. The year-on-year comparison was also affected by a one-off gain in the EPC segment in Q2 FY26, which inflated the base. Investor Presentation +1
The wires segment outperformed cables in terms of margins, though the company doesn't provide separate margin figures for each. Channel sales growing faster than institutional sales likely contributed to better mix, as retail channels typically command healthier margins. Investor Presentation +1
The EPC division, while contributing only about 6% of revenue, saw margins compress to 7.2% from 18.1% a year ago. This reflects the high base from the one-off gain in Q2 FY26. Despite 53% revenue growth, the margin decline weighed on consolidated profitability, though the impact was modest given the segment's smaller size. Investor Presentation +2
Management expects EPC margins to remain in high single digits over the medium to long term, which is roughly where they currently stand. The division's healthy order book provides visibility for future growth. Investor Presentation
Polycab's international business grew 17% year-on-year to ₹4,931 crore, contributing 5% of consolidated revenue. This growth came despite a challenging global macro environment and geopolitical headwinds that had previously caused international sales to decline. Investor Presentation +2
The company has seen momentum return in the US market and has started serving parts of the Middle East, though some geographies in the region remain affected. Management expects a strong recovery in international business, supported by a healthy order book. Transcript +2
Now for the elephant in the room. Polycab is currently under Stage 0 of the Insolvency Resolution Process (IRP) framework following the admission of an insolvency petition by Asier Metals over an alleged operational debt of ₹2.79 crore. The National Company Law Appellate Tribunal (NCLAT) has stayed the NCLT order, and the appeal is listed for hearing on October 26.
Under exchange rules, stocks admitted to insolvency proceedings automatically move to restrictive trading categories, making them ineligible for futures and options trading. Consequently, NSE announced that Polycab will exit the F&O segment from December 30, 2026.
This brings two immediate consequences. First, a 100% margin requirement applies to existing open derivative positions and new positions from October 14. Second, no new F&O contracts will be issued after December 30, reducing liquidity and short-term trading participation.
The IRP Stage 0 status has triggered concerns about potential exclusion from MSCI indices. The MSCI India policy explicitly covers stocks in the Enhanced Surveillance Measures (ESM) and IRP frameworks. Such securities are excluded from the MSCI equity universe and cannot be added back for 12 months after deletion.
This is an analyst estimate, and MSCI has not announced any deletion yet, but the mere possibility is weighing on sentiment.
This creates a fascinating trade-off for investors. On one hand, Polycab is delivering exceptional operational performance across all segments. Revenue growth of 53%, profit growth of 42.6%, and margins beating expectations demonstrate strong execution and robust demand visibility.
On the other hand, regulatory and market headwinds are creating near-term volatility. The F&O exit reduces liquidity, potential MSCI exclusion threatens foreign investor outflows, and the ongoing insolvency proceedings—though stayed—add uncertainty.
The ₹2.79 crore dispute at the heart of the insolvency case is tiny against Polycab's roughly ₹28,185 crore of FY26 operating revenue. It's contested and stayed, but the exchange action remains in place regardless. This disconnect between the operational reality and the regulatory overhang is what's keeping investors cautious.
The immediate focus will be on the NCLAT hearing on October 26 and whether the stay is upheld. A favorable resolution could ease concerns about IRP status and potential MSCI exclusion. In the meantime, Polycab's business fundamentals remain strong, with management expecting H2 demand to be healthy and operating toward the higher end of wires and cables margin guidance.
For long-term investors, the question is whether the current regulatory headwinds present a buying opportunity in a fundamentally strong business, or whether the risks of index exclusion and reduced liquidity justify the caution. The answer likely depends on your time horizon and risk appetite, but one thing is clear: Polycab's operational story is far more compelling than its current stock price suggests.
