UltraTech’s entry into cables & wires shocks KEI, Polycab and Havells stocks

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Subscribe to enjoy similar stories. UltraTech Cement Ltd’s decision to enter the cables & wires (C&W) industry has caused jitters across stocks in the sector on fears of heightened competition. Shares of Polycab India Ltd, KEI Industries Ltd, Havells India Ltd, RR Kabel Ltd and Finolex Cables Ltd fell by 5% to 20% on Thursday.

It is also likely that valuations of some stocks were steep to begin with and just needed a trigger. A primary concern is that the C&W sector could have a similar fate to that of the paints industry, which has seen new companies enter in recent years, weighing on valuation multiples of incumbents. UltraTech’s capex for the C&W endeavour is ₹1,800 crore over the next two years.

It will set up a plant near Bharuch in Gujarat, which is expected to be commissioned by December 2026. Also read: Cyient’s earnings revival distant even as new CEO announcement is positive As such, the impact on the profitability of C&W companies is expected to be nil in the near-to-medium term. “While the earnings of C&W companies will not be impacted until the plant is commissioned, multiple erosion could occur earlier (unlike with paints companies, where this happened after the commissioning of Grasim’s plant)," said a Motilal Oswal Financial Services report dated 27 February.

“Additionally, paints companies have historically traded at higher multiples than C&W companies, which have experienced multiple re-rating in the past few years," it added. Grasim launched its paints brand in the March 2024 quarter, more than two years after it entered the paints business in January 2021 with an initial investment of ₹5,000 crore, which was later doubled. Sure, the C&W industry is fragmented (unlike paints, which is an oligopoly),