UltraTech Cement Shares Fall 4% Amid Entry into Cables & Wires Business; KEI, Polycab Hit Lower Circuit

UltraTech Cement Ltd. saw its shares decline nearly 4% in early trade on February 27 after announcing its foray into the Cables & Wires (C&W) segment with a capital expenditure of ₹1,800 crore. The company plans to establish a new wires and cables manufacturing facility in Bharuch, Gujarat, which is expected to be operational by December 2026. This diversification move comes as UltraTech Cement aims to strengthen its position as a comprehensive building solutions provider.

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Market Reaction and Stock Performance

The market reacted negatively to UltraTech Cement's announcement, with its UltraTech Cement shares dropping 3.75% to ₹10,552.85 on the NSE at 9:16 AM. More significantly, existing players in the cables and wires industry, KEI Industries share and Polycab India Share, saw their shares hit a 10% lower circuit. KEI Industries' stock fell to ₹3,418.10, while Polycab India declined to ₹5,189.05, reflecting investor concerns over increased competition in the sector.

UltraTech Cement’s Strategy and Industry Impact

UltraTech Cement stated that the expansion aligns with its long-term strategy of leveraging its strong manufacturing expertise and deep customer connections to expand its market presence. The company aims to capture a higher share of customers’ spending by offering high-quality wires and cables.

The C&W industry in India is expected to maintain a strong 13% CAGR in the coming years, driven by growing infrastructure and electrification demands. However, according to Nuvama Institutional Equities, UltraTech Cement’s entry into the segment may have only a limited impact in the near term. The brokerage estimates that UltraTech’s presence in the C&W industry will account for less than 5% of the total market by FY28.

One key factor limiting UltraTech’s immediate impact is the fragmented nature of the C&W industry, where even the largest player holds less than an 18% market share. Additionally, distribution challenges and regulatory approvals for cables are likely to slow UltraTech’s penetration into the market.

Brokerage Views on UltraTech Cement’s Expansion

While some analysts view UltraTech Cement’s diversification as a strategic move, others remain cautious. Jefferies noted that any knee-jerk market reaction should be considered a buying opportunity for UltraTech shares, as the C&W segment does not follow the same sales channel as cement. Citi, however, raised concerns that the company’s foray into a non-core business might dilute its positioning as a cement pure-play.

From a financial perspective, Citi highlighted that the ₹1,800 crore investment represents approximately 13% of UltraTech Cement’s cumulative free cash flows over the next two years. Despite this, the business could contribute around ₹1,200 crore in revenue by FY27, accounting for nearly 14% of the company’s estimated revenue for that year.

Conclusion

UltraTech Cement’s entry into the cables and wires industry has created ripples in the stock market, impacting both its own share price and those of key industry players like KEI Industries and Polycab India. While the long-term impact of this move remains uncertain, the company’s diversification strategy signals its intent to expand beyond cement. Investors will be closely watching UltraTech’s future capex plans and execution in this new venture.