UltraTech Enters Wires & Cables: Should Polycab and KEI Be Worried?

The market has already reacted sharply, with Polycab and KEI stocks tanking. Does UltraTech’s entry signal a long-term shake-up in the sector?

Perhaps the biggest development of this week in corporate world is that the Aditya Birla Group’s Ultra Tech Cement is foraying into the Rs 70,000 crore Wires & Cables industry with an initial investment of Rs 1800 crores. The market isn’t taking this lightly. Polycab is down 15% today. KEI Industries is down 18%, and Finolex Cables if down 7%. Why such brutal reaction?

Well, remember that Grasim, which is the parent company of Ultra Tech Cement, had earlier entered the paints industry with a Rs 10,000 crore investment, following which all the existing players, namely Asian Paints, Berger Paints, Kansai Nerolac, Indigo Paints, and Azko Nobel, saw their market shares and stock prices erode heavily (we’ll discuss these numbers below).

In this post, I attempt to dissect why Ultra Tech is seeing potential in the Wires & Cables industry and what its entry may entail for the existing players like Polycab, KEI Industries, Finolex Cables, RR Kabel, and others.