Finolex Cables FY26: 19% Sales Growth, Margins That Won’t Budge

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1. At a Glance

Finolex Cables closed FY26 with ₹6,321 crore in revenue—a 19% leap from FY25’s ₹5,319 crore. The headline was volume-driven muscle in electrical cables, especially auto cables (+30%) and power cables (+21%). Yet profit barely budged: PAT rose only 2% to ₹714 crore while EBITDA margin sank to 9.8%, the lowest in a decade.

The year’s story was one of quantity over quality. Copper price swings, Middle East supply shocks, and aggressive repricing by management (14 upward adjustments in FY26) kept the business running at velocity but crushed the payoff. Electrical cables—84% of revenue—is now splitting from retail-heavy (80/20 split historically) toward project-led work (two-thirds project, one-third retail), which brings scale but thinner spreads.

Communication cables stayed dead-flat in revenue (₹626 crore both years) until Q4 exploded +30% YoY when fiber prices hardened globally. The company doubled fiber capacity by July and commissioned its preform plant in March—a backward-integration bet that won’t pay till Q3. Working capital blew out: inventory climbed ₹305 crore year-on-year as the company pre-stockpiled post-geopolitical shocks.

The balance sheet is fortress-like. Zero debt, ₹168 crore cash on hand, ₹4,195 crore in investments. Yet that fortress guards nothing if ROCE stays stuck at 16% and capex burns ₹240 crore annually.

Does ₹6,321 crore revenue justify a P/E of 21.5 when the margin is contracting and the multiple is already 1.8x the peer median?

2. Introduction

Finolex Cables has been twisting copper for 70 years. Founded in 1956, it’s the second-largest organized electrical cables player in India (24.9% market share as of FY24), sitting uneasily behind market leader Polycab India. The company operates across electrical, communication, and specialty cables, with a sprawling distribution network: 5,000+ channel partners, 225,000+ retailers, and 600 distributors as of late FY25. It also dabbles in FMEG (fans, switches, LED lights), which contributed 4% of revenue in FY26.

The past 18 months have been marked by three uneasy transitions. First, copper volatility (LME prices swung wildly through FY26) forced the company to reprice products monthly and live with destocking cycles. Second, Q4 FY26 brought a “shock from the Middle East,” cited by management, that inflated raw material costs and inventory even as global fiber markets tightened due to U.S. data center demand and geopolitical supply constraints. Third, the Chhabria family dispute—a long-standing legal battle between Deepak Chhabria and Prakash Chhabria over control—added a shadow to the board.

In May 2026, Mahesh Viswanathan stepped in as CEO and Sachin Naik as CFO, marking the first external leadership appointment. The board voted a 450% dividend on FY26 earnings (₹9 per share against ₹2 face value), signaling excess capital but also a lack of organic growth optionality.

3. Business Model: WTF Do They Even Do?

Finolex is a cable company that manufactures cables. This is not a metaphor.

Electrical cables dominate: 84% of revenue, serving residential wiring, automotive underbody harnesses, industrial flexibles, solar installation, and agricultural pump wiring. The company is backward-integrated—it makes its own copper rods in-house, feeding a sprawling manufacturing footprint across Maharashtra (Pune, Pimpri), Goa, and Uttarakhand (Roorkee).

Communication cables (10% of revenue) pivot on optic fiber. Until late FY25, this segment was a zombie—fiber prices collapsed for 7–8 months as Chinese and Japanese capacity flooded the market. From October onward, prices recovered as U.S. data centers and European geopolitical rearmament sucked up supply. The company’s JV with Japan’s J-Power Systems (now called Finolex J-Power Systems, 49% stake) manufactures ultra-high-voltage power cables and turned profitable in FY26 with ₹450 crore revenue and ₹21 crore EBIT.

The FMEG and copper rod segments (5–6% combined) are margin-negative or break-even. Fans got battered by BIS norm changes and unseasonal monsoons. Lighting margins continue to erode.

The real backbone is still electrical cables in the organized retail channel and now expanding into project work (transmission lines, metro rail installations, power plants). But the company faces a structural problem: organized electrical cables are a fragmented, commodity-like market where volume matters and pricing power evaporates monthly.

4. Financials Overview

Figures are consolidated, in ₹ crore.

Quarterly Progression: Q4 delivered the strongest quarter in company history on electrical segment volume, but EBITDA margin compressed to 12.1% (vs. 14.3% in Q3) due to late-quarter raw material cost shocks. Operating leverage showed up (revenue +22%, EBITDA +22%, PAT +19%), but the margin beat came from a low base in Q3.

Full-Year Trajectory: FY26 saw revenue accelerate from the trailing 12-month pace (TTM sales +19%) while profit growth flatlined (TTM PAT +2%). This split reveals the crux: management is chasing volume at the cost of margin. The company implemented ~14 price resets during FY26; despite that, customers at the end-consumer level pushed back. Electrical cables’ effective market price move was 24–25%, meaning raw materials absorbed most of that bounce, not profits.

Management Commentary (Concall): The company attributed margin compression to three drivers:

1. Copper price volatility and frequent repricing (distribution channel reluctance to stock; trade stocking at “conservative levels”).
2. Non-copper raw material cost hikes (aluminum, PVC, etc.) post-Middle East disruptions.
3. INR depreciation (small offset, but material).

Management expects “higher cost of production than before” to persist but believes pricing power will normalize. No formal guidance on FY27 was given due to “war-driven volatility.”

5. Market Expectations & Historical Multiples

This section describes how the market is currently pricing the company and how that compares with its own history and peer group. It is descriptive, not predictive.

The market pays 21.5x earnings here, against a peer median of 26.9x. This suggests the market is pricing in lower confidence relative to peers like Polycab (P/E 53.8), KEI Industries (54.2), and R R Kabel (48.6).

Historical P/E hovers at 20.2 over five years. The current 21.5 sits slightly above that band, suggesting a modest premium.

The real gap surfaces in returns: ROE at 12.3% (FY26) sits below the 5-year median of 13.5% and the peer set’s 19.31%. ROCE of 16% has compressed from the 5-year historical 18% and sits below peers’ 20.71%. The company appears to be generating incrementally lower returns on capital despite higher revenue.

Profit growth of 2% (TTM) against sales growth of 19% (TTM) signals that the market may be pricing a gradual margin recovery. Electrical cables are a volume play; incremental volume at lower margin is not a quality outcome.

6. What’s Cooking

Fiber Capacity Doubling (July 2026): Communication cables capacity expanded from 4 million km to 8 million km run-rate. Currently utilizing 3.2–4 million km. Management expects “full ramp” in Q3 FY27. Risk: raw material availability (germanium dopant, high-purity silica) remains a bottleneck due to export controls and defense-related supply restrictions.

Preform Plant Commissioned (March 2026): In-house preform manufacturing (Phase 1, 100 MT capacity) went live mid-March. Requires 3–4 months stabilization; earliest tangible EBIT benefit expected Q2–Q3 FY27. Strategic intent: reduce fiber cost vs. market by 5–10% (self-consumption only, as external fiber sales lack attractiveness given supply scarcity). No milestone on phase 2 expansion yet.

Solar Cable Ramp: Introduced Q4 FY25, now “nearing capacity utilization” per management. Company plans doubling of solar capacity within current capex plans (₹300 crore FY27 capex announced, including ₹200 crore for “new capacity enhancement”—solar, power cables, potentially JV). Demand tailwinds from India’s renewable energy push.

JV Profitability Inflection: Finolex J-Power Systems (EHV cables, 49% stake) turned profitable in FY26: ₹450 crore revenue, ₹21 crore EBIT (~5% margin). Order book started the year at ₹380 crore. Margin improvement driven by shift toward pure supply contracts (faster cash cycle, no project execution delays) vs. turnkey work. Equipment utilization rose above 80%; management targeting 70–75% overall utilization post capacity enhancements. Market size currently $0.5–0.75 bn, potentially expanding to $4–5 bn over 3–4 years as utility capex accelerates. Competitive risk noted: peers now investing in similar vertical insulation technology.

GST Demands (Red Flag): Two GST assessment orders in FY26: December 2025 (₹22 crore demand, ₹11.8 crore tax + ₹9 crore interest + ₹1.2 crore penalty) and March 31, 2026 (₹29.5 crore demand, ₹29.4 crore tax + ₹1.9 crore penalty). Both are under appeal. No material financial reserve impact cited, but demonstrates tax authority scrutiny.

7. Balance Sheet

Assets = 5,635 + 6,287 + 6,990. Liabilities (Equity + Borrowings + Other) = 4,945+18+671 = 5,634 ✓; 5,495+20+771 = 6,286 ✓; 6,085+19+885 = 6,989 ✓. Validates.

Three Brutal Truths:

1. The company is essentially debt-free and sitting on ₹168 crore cash + ₹4,195 crore in investments (mostly liquid funds), yet profits barely budged. Capital efficiency is the elephant.
2. Inventory bloat is real. Working capital surged: inventory climbed from ₹717 crore (FY25) to ₹1,023 crore (FY26)—a 43% jump in one year. Management justified this as a deliberate pre-buy to “protect plant continuity” post-Middle East disruptions. The company believes these costs will pass through over time, but “should not be a very long drag on margins.” That’s management-speak for “we absorbed margin compression to protect volume.”
3. Receivables (trade credit days) expanded from 17 days (FY25) to 21 days (FY26), suggesting distribution channel liquidity stress or slower payment cycles amid volatility. Not dire, but a signal of weakening negotiating power downstream.

Wisdom: A balance sheet with nothing to hide doesn’t guarantee the business underneath it works at acceptable returns.

8. Cash Flow: Sab Number Game Hai

The Story: FY26 operating cash flow cratered to ₹49 crore, down 76% from FY25’s ₹207 crore. The culprit? Inventory build of ₹305+ crore, trade receivables expansion, and the typical timing drag of working capital. Despite higher profits (PAT +2%), CFO imploded because balance sheet cash was intentionally redirected into inventory stockpiles.

FY24 and FY25 saw robust operating cash (₹577 cr, ₹207 cr) because the company was managing inventory conservatively. FY26 blew that up.

Investing activity shifted to positive ₹153 crore (vs. -₹82 cr FY25), largely due to lower capex spend (₹240 cr booked) and modest divestment of short-term investments.

Financing activity stayed minimal (dividends + debt reduction near-zero). The company clearly has no debt to repay and is happy running on zero external finance.

Wisdom: Cash flow is the final arbiter. When operating cash craters despite rising profits, the balance sheet is being used as a shock absorber, not a profit engine.

9. Ratios: Sexy or Stressy?

ROE of 12.3% means every ₹100 of shareholder equity returned ₹12.30 in earnings. Over five years, the company has returned 13.5%, so this year was underperformance. The delta is small but directional: the capital base (now ₹6,085 crore) is growing faster than profits can keep pace.

ROCE of 16% is the company’s answer to “what return are we generating on the capital we’ve invested?” Five years ago it was 18%. Today’s 16% sits above cost of capital but below industry leaders (Polycab ~34%, KEI ~20%). For a company that borrows nothing, a 16% ROCE on an expanding equity base signals that incremental capital deployed last year delivered weaker returns than the base. Uncomfortable.

PAT margin contracted from 13% (FY25) to 11.3% (FY26). The mix-shift toward project work (lower ASP, faster volume) vs. retail wiring (high-margin, slow-moving) explains some of this. The other culprit is the commodity nature of electrical cables in a high-copper-volatility year.

10. P&L Breakdown: Show Me the Money

Revenue is climbing 18% CAGR (FY24–26). EBITDA is +14% CAGR. PAT is +4.5% CAGR. The business is decelerating in profit growth even as top-line accelerates. This is the inverse of healthy scaling.

FY24 to FY25 saw a margin buffer (PAT margin 13%, EBITDA margin 14.3%). FY25 to FY26 saw margin compression (EBITDA margin down to 13.7%, PAT margin down to 11.3%). The reason: copper and raw material volatility, frequent repricing that didn’t fully translate to end-customer pricing, and the shift toward project work with lower unit economics.

Management’s thesis that margin will normalize depends on (a) raw material prices stabilizing or falling, and (b) pass-through mechanisms maturing. Neither is assured in a commodity-like market.

11. Peer Comparison

Finolex is half the size of R R Kabel and one-quarter the size of KEI Industries. It’s the smallest in the top tier by revenue. Yet it trades at the lowest P/E (21.5x vs. 48–54x for peers) and the lowest margin (9.8% OPM vs. 10–14% for peers).

The narrative is clear: Finolex is the scrappy, undifferentiated player. It has scale but not dominance. It has volume but not pricing power. It competes on distribution breadth and brand loyalty, not on margin or technology moats.

Polycab’s 13.87% OPM with 28x higher revenue suggests network effects, brand value, and execution superiority that Finolex has not matched. Finolex is in a dogfight with KEI and R R Kabel in the mid-tier and losing margin share.

12. Miscellaneous: Shareholding & Promoters

Promoter Base: Dominated by the Chhabria family. Orbit Electricals Private Limited (a family vehicle) holds 30.7%. Individual family members (Deepak Chhabria, Prakash Chhabria, Katara Aruna Mukesh, et al.) hold the remaining ~5.2%. The Finolex Group itself (via Finolex Industries Ltd, a related company) also holds ~14.5% of public shareholding, muddying the line between promoter and public.

The Dispute: Deepak Chhabria and Prakash Chhabria have been at loggerheads over management control. The matter is sub judice (court-pending) but has not derailed operations per management. The appointment of external CEO Mahesh Viswanathan (May 2026) suggests the board is insulating the company from family drama. The CRISIL rating report (Nov 2025) flagged the dispute as a “key risk” and stated Crisil will monitor outcomes; no downgrade yet, but a yellow card.

Institutional & Retail: DIIs (primarily mutual funds and insurance houses) hold 16.4%, a modest share suggesting limited mutual fund enthusiasm. FIIs hold 9.6%, down from 11.25% in Q2 FY26, hinting at foreign portfolio outflows as margin pressure became clear. Retail public holds 38%, a large base but typically passive.

13. Corporate Governance: Angels or Devils?

Auditors: Deloitte Haskins & Sells LLP (Big 4). No qualified audit opinion; clean bill of health.

Board: As of Oct 2024, four new independent directors were appointed via postal ballot (a governance safeguard used to sidestep family disputes). The board now includes external directors, likely diluting pure family control. Mahesh Viswanathan’s appointment as CEO (May 2026) further signals an influx of external governance.

Pledging: 0% of promoter shares pledged. No promoter financing stress.

Related-Party Transactions: The company transacts with Finolex Industries Ltd (an associate, held by the same family). Total transactions remain modest (disclosed separately in statutory filings). Standard monitoring required, not alarming.

Tax Demands: Two GST assessments in FY26 totaling ~₹52 crore (both under appeal). Both relate to classification disputes and ITC (input tax credit) reclamation, not fraud. CRISIL and the company assert no material impact given appeal prospects. This is a red flag for tax risk, not insolvency.

Resignations: One Assistant Company Secretary (Gayatri Kulkarni) resigned in November 2025, citing personal reasons. No material impact signaled.

14. Industry Roast & Macro Context

Electrical cables in India are a fragmentation party. You have organized players (Finolex, Polycab, KEI, R R Kabel, Universal Cables, V-Marc) and a sprawling unorganized sector that manufactures to loose quality specs and undercuts on price. The organized market is ~60% of the total; the unorganized ~40% is a dumping ground for cheap imports and corner-cutting startups.

Copper volatility is the structural killer. When LME copper swings 15–20% in a quarter, a cable company with monthly repricing is stuck in a pricing ratchet: either absorb the hit or lose customers to inventory-conscious distributors. Neither option is attractive. This creates a perpetual margin squeeze in commodity cycles.

Fiber pricing is an even weirder beast. Until FY26 Q3, global fiber was in a deflationary spiral (Chinese overcapacity, Japanese dumping). Management had to live with depressed communication cable margins while competitors (Polycab, which has less fiber exposure, fared better margin-wise). Now that fiber is hardening (U.S. data center boom + geopolitical supply tightness), Finolex has a small window to capture margin recovery—but only if it can stabilize preform production and absorb the capex.

The e-commerce of retail electrical products is also evolving. Amazon and Flipkart have begun direct distribution of cables, eroding traditional distributor margins and channel power. Finolex’s 225,000-retailer network is an asset but also a liability if online cannibalization accelerates.

Regulation is slowly tightening. BIS (Bureau of Indian Standards) norm changes have whipsawed FMEG (fans, switches). The government’s push for renewable capacity means solar cable demand is real but unsustainable at current capacity utilization; once the solar capex cycle cools, volumes compress.

15. EduInvesting Verdict

A company trading at 21.5x earnings with 16% ROCE and 2% profit growth is no longer a growth story—it’s a value trap dressed in volume metrics. The balance sheet is pristine, but pristine balance sheets don’t fix broken unit economics. The preform plant and fiber capacity doubling are real, but their payoff lies 6–12 months out, in a market where geopolitical shocks (supply lockdowns, defense restrictions) could halt benefits.

The market’s discount relative to peers (Polycab at 53x, KEI at 54x) reflects a judgment: Finolex is a commodity volume player in a commodity game, and commodity players don’t deserve premium multiples. Management’s assertion that margins will normalize rests on raw material stabilization and pricing power recovery—neither guaranteed.

The dividend (450%) is a signal that the board is out of high-return organic capex ideas. Returning 12% of market cap to shareholders is a confidence statement, but it’s also an admission: this business doesn’t generate sufficient incremental returns to justify retention.

A balance sheet with nothing to hide, a multiple with everything to prove.