Wire and cable stocks came under heavy selling pressure on Friday as the Aditya Birla Group announced its foray into the sector with the launch of ‘Ultravolt’ — just 18 months after the announcement. This marks the group’s fourth new business foray in three years, following its launches in paints (Birla Opus), B2B e-commerce (Birla Pivot), and jewellery retail (Indriya).
RR Kabel and Havells India shares fell 3.5 per cent and 2.7 per cent to trade at ₹2,523 and ₹1,167, respectively, while Finolex Cables shares lost over 2 per cent to trade at ₹1,243.
Meanwhile, shares of UltraTech Cement, the cement flagship company of the Aditya Birla group, traded largely flat with positive bias at ₹11,325.
According to a statement by the Aditya Birla group, Ultravolt, backed by an investment of ₹1,800 crore, will be the second-largest player in the wires segment by capacity. Housed under UltraTech Cement, Ultravolt aims to build a scaled national brand and become one of the top two players within five years.
Intensify industry competition
After this, analysts at Nuvama said UltraTech’s scale ambition could intensify industry competition, and its aggressive posturing on capacity additions, portfolio, and distribution expansion could likely drive an interim de-rating for the C&W industry.
To support its ambition, Nuvama said that UltraTech has plans to reach over 100,000 retailers, while leveraging more than 5,000 UltraTech Building Solutions (UBS) outlets to further expand product availability. The company currently has an installed capacity of ~1mn km and plans to scale this to 3.5–4.0mn km.
Out of ₹1,800 crore total planned capex, ₹8,800 crore has already been incurred. This underscores the company’s strong commitment to rapidly scaling its presence in the market.
Considering UltraTech’s intent, Nuvama said that aggressive pricing and higher channel investments could result in pricing/margin pressure for incumbents. It sees 150–250bp gross margin impact vs earlier expectation of 100–150bp. This can, however, be partially offset by product mix and operating leverage, depending on individual company positioning/strategy.
“We believe C&W stocks shall be under pressure in the near term on Ultratech Cement’s stated intent of becoming the number 2 player in the C&W segment,” the brokerage said.
Financials of wires and cables players
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