Polycab shares nosedived 15% to Rs 4,894.80, while KEI Industries was also locked in 15% lower circuit at Rs 3,226.65. Havells India dropped 7% to Rs 1,442.55, and RR Kabel followed suit with a 13% slide. The sudden erosion of investor confidence reflects the market’s concern over potential pricing pressures and intensified competition in an otherwise lucrative sector.
UltraTech’s Game Plan
UltraTech, an Aditya Birla Group company, is a behemoth in the cement industry, but its decision to diversify into wires and cables took investors by surprise. As part of its strategy to become a holistic building solutions provider, the company has committed Rs 1,800 crore in capex for this venture, aiming for commissioning by December 2026.
According to Jefferies, UltraTech’s entry should not be seen as a major disruptor in the short term. The firm notes that while UltraTech shares a similar customer base with cement, its sales channel is not identical. It views any knee-jerk negative reaction in the market as a potential buying opportunity.
For years, companies like Polycab and KEI Industries have dominated the wires and cables space, benefiting from strong demand driven by infrastructure and real estate growth. However, UltraTech’s entry raises fears of margin compression and aggressive competition.CLSA believes UltraTech has the potential to generate four to five times revenue growth in this segment, with margins estimated at 11%-13%. The research firm, however, warns that the sector is already witnessing Rs 100 billion in capex over the next 2-4 years, and UltraTech’s foray will only add to the expansion pressure, making an 11%-13% CAGR demand growth necessary to absorb the additional capacity.
A Buying Opportunity or a Structural Shift?
Nuvama Research remains bullish on existing players like KEI, Polycab, and Havells, arguing that UltraTech’s market share by FY28 is unlikely to exceed 5%, given the fragmented nature of the industry and the need for regulatory approvals for cables. The research firm also highlights that the sector has significant export opportunities, which could help mitigate competitive pressures.Also Read: Muthoot Finance shares rise 3% after RBI approves opening 115 branches“We estimate the C&W industry is heading for a balanced demand-supply scenario over the next three to four years based on publicly announced capex by leading players and a 13% CAGR in industry revenue (similar to FY19–24). Secondly, assuming 60–70% CU in year 3 (as it builds distribution for wires and secures approvals on various cables SKUs), it will be less than 5% of the then C&W market, in our estimate. Hence, this entry shall have a modest impact on the C&W industry’s volume/margins in the medium term,” Nuvama said.
UltraTech shares, in the meantime, also fell 3.5%.
