Cables and wire inventories catch fire and plummet by up to 20% during UltraTech’s entry into the market, according to Polycab, KEI to Havells.
Polycab’s shares dropped 17.6% to ₹4,751 each during today’s session, while KEI Industries’ shares dropped 20% to ₹3,038 apiece. Similarly, R R Kabel’s shares dropped 14% to ₹954 per share, a record low. UltraTech entered the C&W market at the same time as the decline.
Major players in the cables and wires market saw heavy selling pressure on their shares during today’s February 27 session after UltraTech, a company of the Aditya Birla Group, announced that it was entering the cables and wires (C&W) market as part of its plan to become a full-service provider of “Building Solutions.”
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Investor sentiment has been negatively impacted by UltraTech’s entry into the ₹845 billion Cables and Wires market (as of FY24). This is because the move raises concerns about increased competition, possible pricing pressures, and a change in market dynamics that could pose challenges to current competitors.
Havells’ share price falls 9%, Polycab’s by 18%. :
In light of this, shares of KEI Industries fell 20% to ₹3,038 during today’s session, while those of Polycab India, the biggest cables and wires company in India, fell 17.6% to ₹4,751 a share. Havells India, meanwhile, fell 9% in trading to ₹1,140 each. Similarly, R R Kabel’s stock fell 14% to a record low of ₹954 per share.
The Street seems dissatisfied with UltraTech’s meager investment in the sector as well, as UltraTech Cement’s stock fell 5% to ₹10,415 a share.
The implications of UltraTech’s entry into the C&W industry :
With a commitment of ₹18 billion in capital expenditure (less than 2% of its FY24 total gross block), UltraTech Cement (UTCEM) announced its entry into the Cables & Wires (C&W) segment as part of its strategy to become a comprehensive building solutions provider. Commissioning is anticipated by December 2026.
Based on publicly disclosed capital expenditures by major players and an industry revenue growth rate of 13% (similar to FY19–24), domestic brokerage firm Nuvama Institutional Equities predicts that the C&W sector is moving toward a balanced demand-supply scenario over the next three to four years.
Second, we predict that it will make up less than 5% of the C&W market at that time, assuming 60–70% capacity utilization (CU) in year three (as it expands wire distribution and obtains permits for various cable SKUs). As a result, the brokerage predicted that this entry would have a minor effect on C&W industry volumes and margins over the medium run.
The brokerage also believes that this move will accelerate the shift from unorganized to organized market share, which has likely increased from 68% in FY19 to 73% in FY24, and encourage healthy competition among organized businesses.
The fact that a 100 basis-point change in C&W margins might have a 3–9% impact on EPS further highlights how vulnerable C&W players are to margin fluctuations. The analysis indicates that this industry has a great deal of room for export growth, and some businesses may be able to move their capacity to exports, which would mitigate the impact of new competitors.