A day after the Aditya Birla Group announced its ambitious foray into the Cable and Wire industry through Ultratech Cement, stocks across the sector have been witnessing significant declines. On February 28, major players such as Polycab India, KEI Industries, and Havells India continued to slide, reflecting the market’s apprehension about increased competition in the space.
Stock Market Decline Across the Segment
The announcement has had a cascading effect across the sector, with stock prices plunging:
- Polycab India fell 1.7%
- KEI Industries declined 3.2%
- Havells India lost 2.82%
- Ultratech Cement itself saw a 2% intraday drop on February 28
The market reaction underscores investors’ concerns over the impact of Ultratech Cement’s entry into the segment, even though analysts believe there may not be an immediate disruption in the industry’s competitive intensity.
Ultratech Cement’s Expansion Plan
On February 27, Ultratech Cement announced an investment of Rs 1,800 crore to establish a cables and wires manufacturing facility in Bharuch, Gujarat. The facility is expected to be commissioned by December 2026.
However, this strategic move triggered a sharp sell-off across the segment, with the biggest C&W companies seeing massive losses:
- KEI Industries, Polycab India, Havells India, and RR Kabel suffered declines of over 17% on February 27.
- Ultratech Cement itself dropped 6% at the market close, reflecting investor concerns about its diversification into an entirely new sector.
Market Sentiment: Why Are Investors Worried?
Despite analysts downplaying the immediate effects of Ultratech’s entry, stocks continue to remain under selling pressure for the second consecutive session on February 28.
- Valuation Pressure: Motilal Oswal noted that Ultratech’s entry could threaten valuation multiples of existing C&W companies, leading to erosion in stock prices even though earnings are unlikely to be impacted until the plant becomes operational.
- Increased Competition: The C&W industry comprises nearly 400 players, including SMEs and large enterprises, with revenues ranging from Rs 50 crore to Rs 400 crore. According to JM Financial, this fragmented nature of the industry makes it ideal for a well-funded new entrant like Ultratech Cement.
- Broader Market Sell-Off: The decline in cable and wire stocks is also occurring amid a broader stock market correction, exacerbating investor concerns.
Analyst Opinions & Future Industry Impact
Most analysts believe that Ultratech Cement’s entry won’t immediately impact C&W company earnings due to the long gestation period before production begins. However, concerns about valuation de-ratings persist, which could keep stocks under pressure in the near term.
- Motilal Oswal’s Take: Expect near-term valuation pressure but no fundamental earnings impact until plant commissioning.
- JM Financial’s View: The C&W industry is highly fragmented, allowing room for new entrants like Ultratech Cement, especially those with deep financial resources.
- Investor Sentiment: Stocks are likely to remain volatile as the market continues to digest the implications of increased competition.
What’s Next for the Cables & Wires Industry?
Short-Term Challenges:
- Stock price volatility is expected to persist until investors gain clarity on Ultratech Cement’s market strategy.
- Broader market corrections could continue weighing on sector performance.
- Competitive pricing pressure may arise in anticipation of Ultratech Cement’s plant becoming operational.
Long-Term Outlook:
- Industry growth remains robust, with rising demand for electrical infrastructure and smart cities fueling expansion.
- Consolidation may increase, as existing players seek to strengthen their market positions against new entrants.
- Ultratech Cement’s success will depend on execution, pricing strategy, and brand positioning within the segment.
Conclusion: Should Investors Worry?
While the near-term market reaction has been severe, analysts suggest that fundamental earnings of C&W companies are unlikely to take a hit until at least 2026. However, valuation concerns and competition fears will likely keep stocks under pressure in the coming months.
Investors should closely monitor Ultratech Cement’s next steps, especially how it plans to position itself in the cables and wires market. For now, the decline presents both risks and opportunities, depending on one’s investment horizon and risk appetite.
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