UltraTech Cement, India’s leading cement manufacturer, has officially announced its entry into the wire and cable business with an investment of INR 1,800 crore over the next two years. This strategic expansion has triggered significant fluctuations in stock markets, with investors reacting strongly to the news.
Stock Market Reactions
Following the announcement on February 27, 2025, key stocks in the wire and cable sector witnessed sharp declines:
- KEI Industries: Down by 18%
- Polycab India: Declined by 15%
- RR Kabel Limited: Fell by 12%
- UltraTech Cement: Dropped by 6%, marking its biggest intraday fall in three years
The sharp corrections indicate investor concerns over heightened competition in the segment.
Industry Leaders’ Take on UltraTech’s Entry
Despite the market turbulence, industry veterans maintain a positive long-term outlook.
- Anil Gupta, CMD of KEI Industries, told CNBC-TV18 that the industry has room for new entrants, and UltraTech’s entry won’t significantly disrupt pricing. He noted that production could take at least three years to commence and three to four more years to establish brand dominance.
- RR Kabel’s management echoed similar sentiments, highlighting that UltraTech’s impact may be overestimated in the short term.
Stock Declines Across Leading Companies
Since the announcement, most sector leaders have witnessed major corrections:
- Polycab, KEI Industries, and Havells India: Declined 30-40% from their recent highs.
- RR Kabel & Finolex Cables: Dropped nearly 50% from their peak levels.
Valuation of Key Wire & Cable Stocks
Despite the corrections, several stocks still trade at high valuation multiples:
- Polycab India: Trading at 39.5x P/E for FY25 estimates, above its five-year average of 31.5x.
- Havells India: Currently valued at 62x P/E, aligning with its five-year average.
- KEI Industries: Trading at 44.5x P/E, above its five-year average of 28.5x.
- Finolex Cables: Valued at 18.3x P/E, exceeding its five-year average of 15.7x, despite the 50% stock correction.
Brokerage Firm HSBC’s Insights
Investment firm HSBC has adjusted its outlook post UltraTech’s announcement:
- Polycab India: Target price cut by 20% (from INR 7,840 to INR 6,250).
- KEI Industries: Target price lowered by 23% (from INR 4,500 to INR 3,450).
- Havells India: Target price reduced by 6.5% (from INR 1,850 to INR 1,730).
- HSBC Ratings:
- Polycab & Havells: Rated ‘Buy’.
- KEI Industries: Rated ‘Hold’.
Future Outlook: What Lies Ahead?
Analysts predict that UltraTech’s market influence will become more prominent post FY27, potentially affecting growth and margins of existing companies. However, with well-established players having strong brand equity and distribution, experts believe sectoral dominance won’t shift overnight.
Conclusion
UltraTech Cement’s move into the wire and cable sector signifies a major diversification strategy. While its entry has caused short-term volatility, industry leaders expect a gradual transition, with limited immediate impact on pricing and margins.
Stay updated with the latest market trends, stock movements, and business insights. Follow us for real-time updates on UltraTech Cement’s expansion and industry developments!