UltraTech Cement, part of the Aditya Birla Group, has made headlines with its bold foray into the wires and cables (W&C) sector, spurring significant responses from the market. The company announced on February 27, 2025, its decision to invest ₹1,800 crore over the next two years to establish a plant near Bharuch, Gujarat, with expectations to launch operations by December 2026.
This strategic move seeks to incorporate W&C products as part of UltraTech’s mission to reinforce its position as a comprehensive provider of building solutions, leveraging its extensive manufacturing expertise and connections with end customers. Kumar Mangalam Birla, Chairman of the Aditya Birla Group, stated, "We intend to expand our presence... through our foray..." highlighting the vision behind this expansion.
Following UltraTech's announcement, immediate market reactions were palpable, with stocks of Polycab India, KEI Industries, and Havells India plummeting. For example, shares of Polycab fell dramatically by around 14.5%, closing at ₹4,928, whereas KEI was locked down at 15%, highlighting the erosion of investor confidence. Havells also witnessed significant losses of nearly 9%, closing at ₹1,410.60.
Market analysts attribute this sharp decline to fears of intensified competition and potential pricing pressures within the lucrative cables and wires market, estimated at ₹845 billion by FY24. The industry has been experiencing strong growth, averaging around 13% CAGR due to factors such as increasing electrification and infrastructure development trends driven by the government.
Research firms have diverse takes on UltraTech’s impact on existing market players. Analysts from Jefferies remained optimistic, positing, "Any knee-jerk negative reaction should be used as... buying opportunity..." They anticipate UltraTech could capture between 10-12% of revenue from this new segment, contributing to its overall growth.
Conversely, CLSA expressed concerns about increased competition stating, "UltraTech's entry will increase competition..." showcasing the apprehension among current players. Nuvama Institutional Equities reported expectations for the W&C industry to stabilize demand-supply dynamics over the next few years, projecting reach within the organized sector, which has seen growth from 68% market share to 73% just between FY19 and FY24.
Despite the jittery market response, Nuvama maintained positions on notable players like KEI Industries, Polycab, and Havells, indicating long-term potential for these stocks. They noted, "This entry is expected to have... modest impact on C&W industry volumes and margins..." reinforcing the notion of UltraTech facing steep challenges with establishing market share quickly.
The industry outlook remains optimistic amid shifts from unorganized competitors to those entrenched within structured frameworks. This movement could benefit larger players, positioning them favorably for future ventures. The entry of UltraTech, albeit significant, may merely add complexity to current valuations and expected growth trajectories and lead to stricter margins for existing industry leaders.
The broader sentiment appears guarded, with firms like Motilal Oswal adjusting projections for companies under its coverage due to the impending pressure from UltraTech's entrance. Firms are left weighing the risks and rewards of competition alongside the need for significant capital to scale operations.
Looking forward, many analysts suggest the W&C sector still holds potent growth avenues, driven by government policies aligning with domestic manufacturing and market consolidation trends. With strong growth expectations, the industry may very well adapt to the new competition ushered by UltraTech's strategic expansion, but investors will need to take measured approaches based on future market developments.