Cables and wires stocks remained under severe pressure on Monday, extending the selloff triggered by UltraTech Cement's entry into the segment, after Citi warned that the new competition could weigh on near-term valuations of incumbent players. According to Citi, UltraTech's ambition to become at least the No. 2 player in India's wires and cables market within three to five years could put pressure on near-term valuations across the sector. The brokerage expects competitive disruption to be greater in wires than in cables, with RR Kabel and Havells seen as relatively more exposed to UltraTech's entry than Polycab. Citi estimates that UltraTech's previously announced ₹1,800-crore capital expenditure plan could support around ₹12,500 crore of revenue at full utilisation, translating into an estimated 7-8 percent market share over the next four to five years.
UltraTech's entry into the wires and cables business has set off a sharp selloff in listed players, wiping out about ₹21,500 crore in market value in just two trading sessions. According to The Economic Times, Polycab India suffered the biggest rupee erosion, losing ₹8,766 crore in market capitalisation in two days, while KEI Industries followed with a ₹5,158 crore decline. Havells India, RR Kabel, APAR Industries and Finolex Cables lost a combined ₹7,501 crore. The selloff reflects growing investor concern that UltraTech's ₹1,800-crore Ultravolt investment could intensify competition, pressure margins and force established cable makers to spend more on distribution, advertising and engaging electricians. JM Financial noted that "competition in the Indian C&W space is clearly intensifying" and warned that the possibility of "sector-wide derating" could not be ruled out.
On Monday, shares of wires and cables companies remained under pressure, extending the selloff triggered by UltraTech Cement's entry into the segment. According to Moneycontrol, RR Kabel fell 3.19 percent to ₹2,375.70, while KEI Industries declined 3.06 percent to ₹4,701.50. Universal Cables was down 3.79 percent at ₹1,516.50 and V-Marc India lost 3.48 percent to ₹308.95. Polycab India declined 1.27 percent to ₹8,195, while Havells India was down 0.87 percent at ₹1,144. However, some stocks bucked the trend, with Laser Power & Infra gaining 3.28 percent to ₹305.35 and Finolex Cables rising 0.74 percent to ₹1,229.20. UltraTech Cement shares were also lower, falling 1.23 percent to ₹11,268 around noon.
According to The Financial Express, Jefferies believes UltraTech's entry into wires and cables could add a significant new earnings stream to the company's portfolio. The brokerage estimates that the business could generate around ₹1,000 crore of revenue by FY30-FY31, assuming asset turns of 4-5 times and EBITDA margins of 10-12%. At scale, this could contribute around 3-7% of UltraTech's FY30 revenue and EBITDA, although Jefferies has not yet factored the opportunity into its estimates. UltraTech plans to launch Ultravolt across more than 500 districts and 6,000 pin codes, using its existing network of more than 5,000 UltraTech Building Solutions outlets and over 20 warehouses. The initial portfolio includes home wires, flexible wires and light-duty cables, with the company focusing on residential demand, while UltraTech also plans to expand into other electrical products such as wire conduits over time.
Cables and wires stocks Polycab India, KEI Industries, and RR Kabel were trading with losses between 1% to nearly 9% on Friday, following brokerage firm JM Financial's downgrades. According to reports from CNBC TV18, JM Financial has downgraded Polycab and KEI Industries to 'add' from their previous 'buy' recommendations each, while maintaining a 'reduce' rating on RR Kabel from its previous 'add' recommendation. At 2:08 pm, Polycab was trading 0.8% lower at ₹8,825 apiece, KEI Industries was down 3.2% at ₹5,177.5, and RR Kabel was down 7.5% at ₹2,654 apiece. The latest trading session on Friday, September 4, saw continued pressure with KEI Industries, Polycab, RR Kabel, and Finolex declining in morning trade on the BSE amid concerns over increased competition in the sector.
As reported by CNBC TV18, JM Financial has set a target price of ₹9,550 on Polycab, indicating an upside of 7.4%; a target of ₹5,750 on KEI Industries, indicating an upside of 7.5%; and a ₹2,750 price target on RR Kabel, indicating a downside of 4.2% from its previous close. The brokerage noted that at present, the cables and wire stocks are trading at a 4-5% premium from their five-year and a 25% premium to their long-term average price-to-earnings multiple. JM Financial's valuation comparison showed that cable stocks were trading at premiums of about 4%-5% to their five-year averages and around 25% to their longer-term average price-to-earnings multiples, leaving less room for any disappointment in growth or margins. Nuvama has retained Polycab and KEI Industries as its top picks despite the competitive threat, believing the C&W sector is well poised for healthy revenue and PAT growth in the near and medium term.
According to JM Financial's analysis reported by CNBC TV18, after a strong growth rally, it is time to question the absence of volume growth, with revenue growth potentially looking weaker over the next 12 months. The key question remains whether the street is underestimating new competition. JM Financial estimates that Ultratech and Diamond Power will cumulatively command ₹17,000 crore revenue by financial year 2029, having 11%-12% of the total market share in this space. The brokerage also noted that adjusting for new competition, the industry size could be ₹1.35 lakh crore, squeezing the domestic opportunity to an estimated CAGR of 10.5% between FY26-29. Nuvama has now intensified its concerns, stating that UltraTech's scale ambition could intensify industry competition and its aggressive posturing on capacity, portfolio, and distribution could drive an interim de-rating for the C&W industry. The brokerage sees 150-250bp gross margin impact versus earlier expectation of 100-150bp, which can be partially offset by product mix and operating leverage depending on individual company positioning.
