UltraTech Cement’s cables & wires entry: Will peer stocks face near-term pressure?

With Aditya Birla Group formally launching its cables and wires (C&W) business under the brand ‘Ultravolt’ and aiming to become one of the top two players in this segment within five years, listed C&W stocks could see near-term pressure, analysts said. They cited the group's paints foray Birla Opus, which achieved double-digit market share within two years of launch, saying  Ultravolt may adopt an aggressive strategy for capacity ramp going ahead.

MOFSL said UltraTech Cement's entry into C&W is strategically significant, given the group’s ability to deploy capital, build distribution and leverage its established relationships across the construction ecosystem.

Aggressive strategy

Its ambition of becoming the Number 2  player within five years suggests that Ultravolt is likely to adopt an aggressive strategy for capacity ramp-up, distribution expansion and brand building, similar to the group’s approach during initial years of its paint business, MOFSL said.

"There could be near-term pressure on the stock price of C&W players due to UTCEM’s ambitious target of becoming the No. 2 brand, though the industry’s underlying demand outlook remains constructive," MOFSL said while suggesting 'Buy' and a target of Rs 13,800 on UltraTech Cement.

6-7% market share by FY30

Nomura India said Ultratech's Ultravolt has the potential to reach 6-7 per cent market share by FY30 in the organized W&C segment, assuming an asset turnover of 5-6 times and the strong demand outlook persists.

This is likely to impact growth, especially for the unorganized segment, which accounts for 23 per cent of industry, it said.

"We believe the ramp- up in wires could be much faster given an already-established network, and strong brand franchise and reach, while the cable segment may need to acquire certifications/license agreements and further investment in R&D to become meaningful in the medium term," it said.

This, Nomura said, may remain a near-term headwind for industry margins due to heightened competitive intensity. Initial signs are already visible in the sharp ramp-up in promotional spending by players such as Havells India Ltd in 1Q, it noted, saying it had turned cautious on Havells India.

Polycab market leader, so far

The brokerage noted Polycab India held 37 per cent market share in FY26 organised market, followed by KEI Industries at 17 per cent; and Havells India Ltd and RR Kabel at 13 per cent each. Apar Industries and Finolex Cables had 8-9 per cent market share, it said.

Many analysts are coming Aditya Birla group's C&W foray with its paints foray. JM Financial noted that Asian Paints commanded a massive 50 per cent share against Polycab's. It said Opus’ investment was almost equivalent to Asian Paints’ gross block, which is not the case in C&W.

Also, paints being a B2C product saw a change in consumer sentiment given lower prices by a new entrant, which may not necessarily be the case with C&W.

"However, while analysing Asian Paints’ historical conference call transcripts, we saw a trend which was difficult to completely ignore. Asian Paints’ commentary on the potential impact of competition has an interesting story of transitioning from denial to acceptance to tell," JM Financial said.

Asian Paints & Birla Opus

JM Financial noted that Asian Paints' management commentary evolved from, “We must remember that Asian Paints doesn't really follow any competition,” in Q2FY21 to “we are very clear the best brands should always win. So, if competition does good stuff, possibly they will get results,” in Q1FY26.

ICICI Securities said the wires and cables segment appears to be an attractive industry with a high growth potential of 10-15 per cent CAGR over the next few years; high asset turns of 5-7 times and lucrative RoEs of 15-25 per cent for established players with Ebitda margins in the 8-14 per cent range.

"We have assumed Rs 3,000 crore revenue for FY28E, Rs 500 crore net working capital, and a valuation multiple of 2.5x price/sales (30 per cent discount to established peers). Accordingly, our TP for UTCEM stands revised by Rs 238 per share to Rs 12,138 (vs. Rs 11,900). Maintain HOLD," ICICI Securities said.

JM Financial said it is an undeniable conclusion is that competition in the Indian C&W space is clearly intensifying.

For now, Nomura prefers LG Electronics India with a 'Buy' and a target of Rs 1,662. It has 'Hold' on Havells India with a target of Rs 1,200.