UltraTech Cement, part of the Aditya Birla Group, is India’s largest cement manufacturer. Traditionally known for cement and concrete, the company has gradually expanded into other building materials. Now, it has made a bold move—announcing its entry into the wires and cables market with a ₹1,800 crore investment to set up a manufacturing facility in Bharuch, Gujarat. The plant is expected to be operational by December 2026.
This move aligns with UltraTech’s vision of becoming a one-stop building solutions provider, leveraging its retail distribution network of 4,500+ UltraTech Building Solutions stores across India. The wires and cables industry has been growing at around 13% CAGR, making it an attractive space for expansion.
Market reaction: A shockwave across the industry
The announcement triggered massive sell-offs in the stock market. Investors reacted strongly to the potential disruption UltraTech’s entry could bring:
- Polycab India and KEI Industries, two major players in the segment, saw their shares plunge by 15-20%.
- Havells India, a leading electrical goods company, saw a drop of nearly 9%.
- RR Kabel and Finolex Cables also experienced a 5-13% fall in stock prices.
Interestingly, UltraTech Cement’s own stock also faced a 5% decline, as investors questioned whether venturing into a new sector might divert focus from its core cement business.
Also read: KEI Industries vs Polycab: Electrifying competition in cables
Why is UltraTech cement entering the wires & cables business?
UltraTech Cement aims to leverage its extensive retail distribution network (4,500+ UltraTech Building Solutions stores) to sell wires and cables alongside its core cement business. The wires & cables industry in India is expected to grow at a 13% CAGR, making it a lucrative expansion area.
Potential benefits for UltraTech
- Diversification: Moves beyond cement, strengthening its position as a one-stop building solutions provider.
- Retail network synergy: Utilises existing UltraTech retail channels to push wires & cables products.
- Market growth: With an industry size of ₹1.8 trillion (as of FY23), there’s ample room for UltraTech to establish itself.
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How will this affect existing players like Polycab, Kei & Havells?
UltraTech’s entry into the wires & cables space raises concerns about increased competition, potential price wars, and margin pressure. Here’s what it means for current market leaders:
Challenges for existing players
- Margin compression: More competition could lead to price cuts, reducing profitability.
- Market share pressure: UltraTech’s brand power and distribution network might challenge existing players.
- Expansion pressure: The sector is already undergoing ₹10,000 crore in capex over the next 2-4 years.
Mixed brokerage reactions
Brokerage firms have divided opinions on UltraTech’s move:
Optimistic Analysts (Jefferies, Nuvama):
- Believe UltraTech’s move should not be seen as a major disruptor in the short term.
- Expect the company to capture only 5% market share by FY28, keeping existing leaders strong.
- View the stock correction as a buying opportunity.
Cautious Analysts (Citi, CLSA):
- Warn that UltraTech’s ₹1,800 crore investment will dent its free cash flows.
- Expect increased competition to weigh on margins for all players.
- Highlight that UltraTech lacks experience in the cables & wires industry.
Ultratech’s game plan: Will it succeed?
UltraTech Cement has a proven track record of scaling businesses, but its entry into wires & cables faces key execution risks:
Market penetration: Can UltraTech establish a strong distribution network beyond its cement buyers?
Regulatory approvals: The cables segment requires certifications & safety approvals, which could delay its launch.
Brand trust: Will consumers switch from established players like Polycab & KEI to UltraTech?
You may also read: Finolex Cables: Projects, financials and investment scope
Long-Term outlook
While short-term volatility is expected in the stocks of Polycab, KEI, Havells, and UltraTech Cement, the real impact will unfold over the next 3-5 years. If UltraTech executes well, it could reshape the industry. However, if challenges persist, it may struggle to gain traction.
