UltraTech Cement’s ₹1800 Crore Bet Shakes Up Cables & Wires Industry, Stocks Plunge!

UltraTech Cement’s ₹1,800 crore investment in the cables & wires (C&W) industry triggered a sharp sell-off in sector stocks, with KEI Industries, Polycab, and RR Kabel plunging up to 20%. UltraTech’s stock also fell 6%, its steepest drop in three years, as investors questioned the strategic move. The company plans to start operations by December 2026, aiming to leverage its existing market presence. Analysts believe UltraTech’s entry will have minimal impact until FY28, given the sector’s 13% CAGR and high brand establishment requirements.

HSBC and Nuvama expect the move to accelerate the shift from unorganized to organized players. Despite stock corrections, valuations remain above historical averages, with Polycab and KEI trading at premium P/E ratios. HSBC has cut its price targets for major players but maintains a bullish stance on Polycab and Havells. Meanwhile, Jefferies views the market reaction as a buying opportunity for UltraTech Cement.

UltraTech Cement’s ₹1800 Crore Bet Shakes Up Cables & Wires Industry, Stocks Plunge!

Shares of major wires and cables manufacturers, including KEI Industries, Polycab India, and RR Kabel, tumbled sharply after UltraTech Cement announced its entry into the ₹845 billion C&W industry. Investors reacted negatively, fearing increased competition and pricing pressure, leading to a steep decline in stock prices. Despite concerns, analysts suggest UltraTech’s impact on the sector may not materialize until FY28.

UltraTech Cement’s Shares Decline Amid Cables & Wires Segment Entry

UltraTech Cement shares dropped 6% on February 27, marking their biggest decline in three years, following the company’s announcement of its ₹1,800 crore investment in the cables and wires (C&W) segment.

The Aditya Birla Group’s flagship firm plans to establish a C&W manufacturing facility in Bharuch, Gujarat, expected to be operational by December 2026. By 10:50 AM, UltraTech Cement shares were trading at ₹10,552.85, down 3.75% on the NSE.

Market Impact: Stock Declines Across the Sector

The announcement led to significant declines in major C&W stocks:

• KEI Industries plunged 17% to ₹3,132.85
• Polycab India dropped 14% to ₹4,976.9
• Havells India fell 5.1% to ₹1,468.95
• RR Kabel slipped 12% to ₹972.6

UltraTech Cement itself declined 5% to ₹10,415, as investors were unimpressed with its relatively small capital allocation to the segment.

UltraTech Cement’s Strategy & Market Position

UltraTech Cement stated that this expansion aligns with its strategy to become a comprehensive building solutions provider. The company aims to leverage its manufacturing expertise and direct customer connections to gain a larger market share in the segment.

According to Nuvama Institutional Equities, UltraTech’s entry is unlikely to significantly impact the C&W industry until FY28, given:

• The 13% CAGR growth of the industry
• The fragmented market structure
• The necessity of distribution approvals

Nuvama also expects the move to accelerate the shift from unorganized to organized players, with the organized market share increasing from 68% in FY19 to 73% in FY24.

Stock Performance & Valuations

Following the sharp correction, several stocks have declined significantly from their peaks:

• Polycab: -35%
• Havells: -30%
• KEI Industries: -38%
• RR Kabel: -49%
• Finolex Cables: -51%

Despite these drops, valuations remain above historical averages:

• Polycab: Trading at a 39.5x P/E for FY25 (above its five-year average of 31.5x)
• KEI Industries: Trading at 44.5x P/E for FY25 (compared to its five-year average of 28.5x)

Brokerage Views & Target Price Revisions

HSBC’s Outlook:

• Expects UltraTech’s entry to impact growth and profitability beyond FY27
• Revised price targets downward:
  • Polycab: ₹6,250 (from ₹7,840)
  • KEI Industries: ₹3,450 (from ₹4,500)
  • Havells: ₹1,730 (from ₹1,850)
• Ratings:
  • “Buy” rating on Polycab and Havells
  • “Hold” rating for KEI Industries

Jefferies’ View:

• Believes the market reaction presents a buying opportunity for UltraTech Cement
• Notes that while C&W has a similar customer base as cement, the sales channels differ significantly

Citi’s Analysis:

• Observes that this diversification could impact UltraTech Cement’s perception as a pure-play cement company

The brokerage estimated that the ₹1,800 crore investment represents around 13% of UltraTech’s free cash flows over the next two years but could generate ₹1,200 crore in revenue by FY27, contributing 14% to its estimated earnings for that year.

Long-Term Industry Outlook

Despite concerns over increased competition, the C&W sector remains resilient, driven by:

• Government infrastructure initiatives
• Rural electrification projects
• Rising nuclear families
• Domestic manufacturing incentives

Additionally, analysts note that while C&W margins are sensitive to fluctuations, the industry’s strong export potential could help offset domestic pressures.

Given these growth drivers, UltraTech’s entry is unlikely to impact existing players’ earnings until FY28.

Conclusion

Despite the short-term stock corrections, Nuvama remains bullish on KEI Industries, Polycab, and Havells, while keeping an eye on UltraTech’s future investments in the segment.