Shares of major players in the Indian cables and wires industry, including Polycab, RR Kabel, and KEI Industries, experienced sharp declines on Friday, with some stocks falling by as much as 8%. This market reaction came after the Aditya Birla Group announced its foray into the competitive wires and cables sector with the launch of its new brand, Ultravolt.
Major Stocks See Significant Drops
Polycab Ltd, a market leader, saw its shares plunge 5.85% to Rs 8308.55. KEI Industries experienced an even steeper decline, losing 8.25% to trade at Rs 4855.75. RR Kabel shares also fell 5% to Rs 2475. Other industry participants like Finolex Cables, Universal Cables, and Dynamic Cables also saw their stocks dip by 5%, 5.35%, and 7.90% respectively.
This widespread selling pressure occurred despite a generally positive sentiment in the broader market, highlighting the immediate impact of the new competitive threat.
Aditya Birla Group's Ambitious Entry
The Aditya Birla Group's entry into the wires and cables market with Ultravolt marks its fourth new business initiative in the past three years. The new brand, housed under UltraTech Cement Limited, has outlined ambitious goals, aiming to become one of the top two cables and wires (C&W) players and the second-largest wires player by capacity.
Ultravolt plans to rapidly expand its reach, targeting over 100,000 retailers and leveraging more than 5,000 UltraTech Building Solutions (UBS) outlets to enhance product availability across the country.
Nuvama's Analysis and Outlook
Brokerage firm Nuvama commented on the development, stating that the new launch signifies an aggressive posture in terms of capacity additions, portfolio expansion, and distribution. This move, Nuvama noted, could lead to an interim de-rating for the entire cables and wires industry.
Ultravolt currently boasts an installed capacity of 1 million km and has plans to scale this significantly to 3.5–4.0 million km. The company has already incurred Rs 880 crore out of a total planned capital expenditure of Rs 1800 crore, underscoring its commitment to rapid market penetration.
"To achieve the top-two position, we estimate that UltraTech could eventually need to invest Rs 5000 crore – Rs 6000 crore (assuming an asset turn of 5–6x), substantially above its initial Rs 1800 crore investment guidance," Nuvama analysts stated, also noting UltraTech's ample financial flexibility with Rs 15,320 crore in operating cash flow in FY26 to fund such expansions.
While Nuvama believes that C&W stocks will face near-term pressure due to UltraTech Cement's stated intent, it also offers a positive long-term outlook. The brokerage suggests that C&W companies are well-positioned for healthy revenue and profit growth in the medium term, driven by factors such as rising copper and aluminium prices, as well as increased demand from domestic and global power transmission and distribution, solar, and data center capacity additions.
Preferred Picks Amidst Competition
Despite the immediate market jitters, Nuvama identified Polycab and KEI Industries as its preferred picks within the industry, suggesting they are better positioned to navigate the increased competition.