"Having mastered this technology, Finolex has been exporting JFTC and in the last two years having recorded a growth of more than 200% in exports." - Views on News from Equitymaster

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  • Mar 9, 2001 - "Having mastered this technology, Finolex has been exporting JFTC and in the last two years having recorded a growth of more than 200% in exports."

"Having mastered this technology, Finolex has been exporting JFTC and in the last two years having recorded a growth of more than 200% in exports."

Mar 9, 2001

Mr. Deepak Chhabria is the Managing Director of Finolex Cables Ltd. and is actively involved in the sister concerns Finolex Wire Products Ltd. and Finolex Technologies Ltd. Mr. Chhabria is an engineering graduate from University of Evansville, USA and has been in the cable industry for the past 16 years. In an interview with equitymaster.com, Mr. Chhabria spoke extensively on the cable industry and gave indications of the road ahead for Finolex Industries Ltd.

EQM:   Briefly, comment on the existing industry scenario and how you see it evolving over the next 3 years?

Mr. Chhabria:  The industry growth has been mixed and different in various sectors. Specifically in the cable industry there has been strong growth in the telecommunications and housing sector. The growth has been stagnant in the power cable sector. Further, due to intense competition, margins in the power cable segment have also come under pressure for the past many years. The overall cable industry is poised to see good growth for the next three years backed by strong demand in the telecommunications, housing and agricultural sector.

EQM:  Please describe the functionality of the various types of cables produced by Finolex Cables Ltd.?

Mr. Chhabria:  Finolex Cables Ltd. (FCL) manufactures a variety of cables and is the only company in India that offers such a wide range. Our aim is to provide a 'Total Cable Solution' to the consumer. We provide electrical wires for lighting homes, multicore flexible cables for appliances as well as panel wiring, auto and battery cables for automobiles, coaxial cables for cable television, switch board cables for the internal wiring of telephone exchanges, LAN cables for computer networking, variety of telecommunication cables for telecom services providers, winding wires for submersible pumps, 3 core flat cables for the agricultural sector and low voltage power cables for use in power distribution and by the industry.

EQM:  A dominant part of Finolex Cable sales are from jelly filled telecom cables (JFTC), which contribute more than 50% to the sales. However, there is a decline in JFTC demand as service providers shift to OFC. How does the company plan to cope in such an environment?

Mr. Chhabria:  There is strong growth taking place in the optic fibre cable segment. Optic fibre is mainly used for backbone networks and in areas where high bandwidth is required. Finolex Cables is producing fibre optic cables in our group company, Finolex Technologies Ltd. (FTL).

Even with the boom taking place in fibre there is no decline in demand for jelly filled telecom cables (JFTC). In fact, every year Bharat Sanchar Nigam Ltd. (BSNL) (erstwhile DoT) has been purchasing JFTC at a growth of approximately 20%. There is expectation of a 20% growth in next year's tender to be floated by BSNL as well. The cost per line in copper cables is very cheap as compared to fibre optic cables in the distribution segment as well as when the network is being spread to the rural areas. Hence, as the network keeps expanding there is continuous demand for additional capacity in JFTC. Finolex Cables Ltd. has simultaneously expanded its JFTC capacity by setting up a plant in Goa, which was commissioned in December 1999. By shifting to Goa, the company will be able to benefit from zero sales tax and advantages in income tax.

EQM:  With telecom services getting deregulated worldwide, what opportunities does it throw up for the telecom infrastructure export market? What is the potential of supplying cables to other developing countries?

Mr. Chhabria:  Finolex Cables has been manufacturing solid insulation as well as foam skin cables for many years. Worldwide the demand for copper telephone cables has been in foam skin cables and even today the African continent specifications demand foam skin cables, which provide better electricals and lower cost. Having mastered this technology, Finolex has been exporting JFTC and in the last two years having recorded a growth of more than 200% in exports.

EQM:  The company has diversified into the manufacturing of continuous cast copper rods. What is the capacity of this plant? How much of the copper is consumed in-house? Are there any plans of setting up a smelter?

Mr. Chhabria:  The company has set up a 100% subsidiary 'Finolex Wire Products Ltd.' (FWPL), which manufactures continuous cast copper rods. The plant is situated in Goa with a capacity of 60,000 tonnes per annum (TPA). At present 40% of the plant's production is consumed by Finolex Cables and the balance is sold to outside customers. With our plans for growth, we plan to soon use majority of the consumption captively. There are no plans for setting up a smelter. We backward integrated into copper rods to maintain quality of our main raw material. Due to a variety of cables produced by us, our process needs require that we control the quality of copper in close tolerances.

EQM:  What initiatives is Finolex Cables Ltd. taking to enhance shareholder value?

Mr. Chhabria:  Finolex Cables plans are to continuously provide a one-stop cabling solution to any customer. With this, we are focusing step by step to provide total solutions along with our cables. E.g. we are importing connectors and passive components from Leviton, USA and are offering our LAN cables fully tested and integrated with the passive components so that the customer can buy a system, which is guaranteed by us. In such a manner we intend to be close to the customer, improve the company's performance as well as enhance shareholder's value.

EQM:  Is there any person or book that has influenced you deeply?

Mr. Chhabria:  Our chairman, Shri P.P. Chhabria and my father, Shri K.P. Chhabria have continuously guided and shared their valuable experience with me, such that I believe today for our country to catch up with the developed countries, we have to work harder and longer to bridge the gap. Thinking smart is of course a necessity but we should not underestimate competition and working harder will bridge the gap faster.


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