Havells Q2: Cables Grow 48%, Their Margin Falls
Havells India sold 34.6% more in the September quarter than a year ago, and EBITDA rose 30.5% to ₹576 crore. The growth came mostly from cables, which grew 47.9% and are now almost half of revenue. But the company kept less of each rupee of cable sales: the contribution margin fell to 13.9% from 17.7% a year ago, and Havells blames a fall in aluminium prices. A day earlier, KEI Industries, a cable maker, also reported a sharp drop in margin.
The quarter
| Standalone, ₹ crore | Q2 FY26 | Q1 FY27 | Q2 FY27 |
|---|---|---|---|
| Net revenue | 4,767 | 6,510 | 6,417 |
| Contribution, % of revenue | 20.1% | 18.3% | 18.2% |
| Advertising, % of revenue | 2.7% | 4.4% | 2.1% |
| EBITDA | 442 | 474 | 576 |
| EBITDA margin | 9.3% | 7.3% | 9.0% |
| Net profit | 317 | 298 | 353 |
Source: [U]. Profit grew less than EBITDA (11.1% against 30.5%) partly because the year-ago quarter's other income included a one-time gain of ₹45.27 crore on selling the Faridabad land and building ([U]).
The update's own summary: "Healthy EBITDA growth as operating leverage offset softer contribution margins" ([U]). Advertising fell back to 2.1% of revenue from 4.4% in June, which helped.
Where the margin went
| Contribution margin | Q2 FY26 | Q1 FY27 | Q2 FY27 |
|---|---|---|---|
| Switchgears | 37.3% | 36.7% | 38.1% |
| Cables | 17.7% | 16.1% | 13.9% |
| Lighting and fixtures | 30.5% | 31.2% | 26.6% |
| Electrical consumer durables | 21.7% | 24.0% | 22.8% |
| Lloyd (air-conditioners, appliances) | 1.7% | 9.2% | 2.6% |
| Total | 20.1% | 18.3% | 18.2% |
Source: [U].
- Cables: revenue ₹2,999 crore, up 47.9%, about 46.7% of the total (our arithmetic). The update says contribution margins were "softer YoY mainly due to cables, where fall in aluminium prices during Q2 weighed on margins" ([U]). The margin fell 3.8 points on last year and 2.2 points on June (our arithmetic). Havells adds that the half-year cable margin of about 15% is "in line with long term average".
- Switchgears: revenue up 31.3%, margin up to 38.1%. The segment's profit rose to ₹198 crore from ₹133 crore ([U]).
- The rest: the update says "rest of the portfolio held margins as calibrated price hikes offset raw material inflation", except lighting, where margins were "soft due to certain project orders" ([U]).
- Lloyd lost ₹104 crore at the segment level on revenue of ₹615 crore, against a ₹99 crore loss a year ago ([U]).
KEI Industries reported a similar pattern the day before: its cost of goods sold rose to 78.2% of revenue from 75.2% in June, without a stated reason ([K]).
Where the cash went
| ₹ crore | 31 Mar 2026 | 30 Sep 2026 |
|---|---|---|
| Inventories | 4,398 | 4,992 |
| Cash, cash equivalents and bank deposits | 2,351 | 1,190 |
Source: [U]. Operating cash flow for the half year was –₹160 crore, after ₹1,091 crore went into working capital; capex was ₹654 crore and dividends ₹377 crore ([U]). Inventory rose ₹594 crore, or 13.5% (our arithmetic), "mainly in Cables, in line with revenue growth and commodity prices"; inventory days fell to 72 from 81 a year ago ([U]). Havells expects full-year capex of about ₹1,400 crore, mainly for cable capacity and a new R&D centre ([U]).
Moat and margin
Focus moat: brand and distribution pricing power. The filing supports it in switchgear, where Havells raised its margin while growing 31%, and in most consumer products, where price rises covered inflation. Cables behave differently: their price follows copper and aluminium, so a metal price fall flows through to the margin. Havells does not claim pricing power there; it calls the half-year cable margin "in line with long term average".
Margin: down on last year, flat on June. The total contribution margin was 18.2%, 1.9 points below a year ago (our arithmetic). The EBITDA margin was 9.0% against 9.3%.
MoatSCORE (Moat Screener, first pass): Havells India 5.88, AMBER; for comparison, KEI Industries 5.91, AMBER, and Polycab India 5.25, AMBER+ ([MS]).
The bear case
- The fastest-growing business has the thinnest margin. Cables went from 43% to almost 47% of revenue (our arithmetic) while their margin fell; mix alone pulls the company's margin down.
- Cash turned negative. The half-year's operating cash flow was –₹160 crore, and cash fell by half in six months.
- Lloyd still loses money, ₹155 crore at the segment level in the half year ([U]).
- Half-year profit fell 2.8% to ₹651 crore, despite revenue up 26.7% ([U]).
The case for
- Switchgear, the high-margin core, is strong: revenue up 31.3%, margin up 0.8 points on last year (our arithmetic).
- Return ratios held: ROE 17.9% and ROCE 23.5%, against 17.6% and 23.6% a year ago ([U]).
- Working capital days fell to 44 from 49 ([U]).
What to watch
- The cable contribution margin in the December quarter: back towards 15%, or lower?
- Whether operating cash flow turns positive in the second half.
- Lloyd's losses through the air-conditioner off-season.
- Polycab's results, the third large cable maker, for the same aluminium effect.
Sources
- [U] Havells India, information update on Q2 FY27 results (NSE)
- [R] Havells India, unaudited results for the quarter ended 30 September 2026 (NSE)
- [K] KEI Industries, Q2 FY27 earnings presentation (NSE); our earlier article: KEI Q2: Sales Up 39%, Margin and Cash Down
- [MS] Moat & Margin, Moat Screener and How MoatSCORE works
Educational research, not investment advice. Every figure above is drawn from Havells India's and KEI Industries' own filings, read from the primary documents on 23 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 23 October 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.
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