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Connecting and Communicating

Finolex Cables has cleaned up its management and is beginning to find favour in the market. But is it a worthy investment?

Why invest?
Finolex Cables has made a mark for itself by selling electrical and communication cables and is the third largest company in the domestic electrical wiring industry with a nine per cent market share. The company went from being the darling of the last bull run to a rogue when the sector went out of favour and forex derivative contracts that it had entered resulted in accumulated losses of ₹300 crore between FY08-13.

Cleaning up its management and its books has wiped those losses and the stock has started finding favour in the market. Margin-wise, Finolex commands one of the highest margins among the electrical cables peers and generated free cash flows amounting to ₹125 crore in FY13.

  • India's third largest electrical cable manufacturer
  • Legacy drags a thing of the past
  • Earnings per share grew by 41 per cent annually in the last three years
  • Valuations are still low

Caution: New constructions are where new electrical wirings are mostly in demand. A revival may take some time here as the sector faces over-supply in many key markets of the country. Also the communications business (market share 14 per cent) has been down for the last couple of years. A virtual standstill in the sector following the 2G mess put a break on fresh investments in the telecom division of the sector.