Birla pulls wire, shock pulses through stocks. What's ahead?
Aditya Birla Group firm UltraTech Cement, India's biggest cement company, has announced its entry into the sector with Rs 1,800 crore investment planned over the next two years which include a plant in Gujarat.
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The deep-pockets Birla Group aims to stretch itself further along the construction value chain after it launched Birla Opus last year to sell a range of exterior and interior building products from decorative paints to wood finishes.
Birla's likely price play in the wires and cables sector has delivered a shock to the smaller players. Shares of leading manufacturers Polycab, KEI Industries and Havells fell up to 20% on Thursday as investors fear Birla's huge capex plan can lead to de-rating and margin pressure for existing players, especially when many stocks are trading at high multiples.
Getting a hang of Birla's wires and cables play
Birla's foray into wires and cables business is in accordance with the company's strategy to strengthen its position as a comprehensive building solutions provider. From white cement to wall putty to paints and now to wires and cables, Birla Group is certainly expanding across the construction sector. Birla's copper and aluminium business of Hindalco can provide synergies to its wires and cables play. Volatile prices of copper, a key raw material, have plagued this sector.
While Birla Group can pose a big
