Cable and Wire Stocks Decline for Second Session Amid Aditya Birla Group's Market Entry

A day after the Aditya Birla Group announced its entry into the cables and wires sector through its flagship company, Ultratech Cement, stocks in the segment continue to witness a decline. 

As of February 28, the share price of Polycab India dropped by 1.7%, the share price of KEI Industries fell by 3.2%, and the share price of Havells India slipped by 2.82%. Additionally, Ultratech Cement's share price experienced an intraday decline of over 2%.

On February 27, Ultratech Cement revealed its plans to invest ₹1,800 crore over the next two years to establish a cables and wires manufacturing facility in Bharuch, Gujarat, which is expected to be operational by December 2026. This announcement led to a sharp sell-off in the cables and wires segment, dragging down Ultratech Cement’s shares as well, which closed over 6% lower.

Among the biggest losers on February 27 were KEI Industries, Polycab India, Havells India, and RR Kabel, all of which saw a steep decline of over 17% due to mounting selling pressure.

Despite analysts largely believing that the competitive intensity of the sector will remain unaffected in the near term, stocks in the segment continued to face pressure for the second consecutive session on February 28.

Analysts’ Take on Ultratech’s Entry

Motilal Oswal has pointed out that Ultratech Cement’s foray into the cables and wires industry could put pressure on valuation multiples of existing players, leading to erosion in stock prices. However, they emphasized that the earnings of these companies are unlikely to be affected until Ultratech’s plant is fully operational.

Similarly, JM Financial stated in a report that the cables and wires industry is highly fragmented, with around 400 players, including both SMEs and large enterprises, generating revenues between ₹50 crore and ₹400 crore. This makes it a favorable market for a new entrant with strong financial backing. The report also highlighted that while the sector has established leaders, Ultratech’s deep pockets and existing distribution network could give it a competitive advantage over time.

Market Reactions and Investor Concerns

The market reaction to Ultratech Cement’s announcement underscores investor concerns about increased competition in the cables and wires sector. Polycab India and KEI Industries, which have a significant market presence, faced heavy selling pressure as investors worried about potential margin compression in the long run.

Market experts suggest that while Ultratech Cement’s entry may not have an immediate impact, the long-term implications could be significant. The company’s strong financial position and ability to scale up production might lead to price competition, potentially affecting the profitability of established players.

Investors are also closely monitoring whether other large conglomerates follow suit and enter the cables and wires market. If more deep-pocketed companies venture into the space, existing players may need to re-evaluate their pricing strategies and competitive positioning.

Long-Term Outlook for the Sector

Despite the recent market volatility, analysts believe that the cables and wires industry will continue to see steady growth, driven by increasing demand from infrastructure projects, real estate development, and industrial expansion. The Indian government’s focus on electrification, smart cities, and renewable energy is expected to further boost demand for cables and wires.

For now, the sector remains under pressure due to the immediate market reaction to Ultratech Cement’s plans. However, the real impact of the company’s entry will only be seen once its facility in Bharuch becomes operational and starts competing with existing players. Until then, the market is likely to remain cautious, with investors weighing both risks and opportunities in the evolving landscape of the cables and wires industry.