Polycab, KEI to Havells - Wire Stocks Crash Up to 20%: What’s Behind the Fall?

Shares of Polycab India, KEI Industries, Havells India, and RR Kabels nosedived on Thursday after the Aditya Birla Group company UltraTech Cement announced its foray into the wires and cables industry. The announcement triggered a sharp sell-off in all stocks from the industry, with shares falling up to 20% on the BSE in Thursday’s intraday trade.

Among the wires and cables stocks, Polycab India shares plunged over 18.5% to Rs 4,699.25, while KEI Industries saw a 20.5% drop. RR Kabel experienced a 19% decline, Havells India fell by 9%, and Finolex Cables tanked over 6%.

The proposed entry into this segment of the construction value chain, through its Building Products Division, is in line with the company’s strategy to strengthen its position as a comprehensive building solution provider, UltraTech said in an exchange filing on Tuesday, February 25, 2025. The company plans to enter the cables and wires business by investing Rs 18 billion.

Shares of UltraTech Cement slipped to Rs 10,420.65, down by Rs 547.80 or 4.99% on the BSE.

UltraTech will start its first plant in Bharuch (Gujarat), which is expected to be commissioned by December 2026. The company aims to meet the growing demand for wires and cables across various sectors, including residential, commercial, infrastructure, and industrial applications. According to the company, the wires and cables industry has witnessed a revenue compound annual growth rate (CAGR) of around 13% between FY19 to FY24.

Brokerages Cuts Valuation Multiples for C&W Companies

MOFSL cut valuation multiples for C&W companies under its coverage—20% for Polycab India Ltd, KEI Industries Ltd, and RR Kabel each, and 10% for Havells India Ltd, due to their diversified product portfolio and the highest total addressable market.

According to MOFSL, UltraTech may experience a slight negative reaction at first, as investors have traditionally seen the company as a cement-only business. However, there will be no change in earnings estimates for cables and wire companies over the next two years, but there could be a de-rating in their valuation multiples due to the entry of a sizeable player.

The brokerage downgraded its rating on KEI and RR Kabel to 'Neutral' from 'Buy', while maintaining the ratings for Polycab India (Buy) and Havells India (Neutral).

Analysts at ICICI Securities believe that there won’t be any material competitive advantages/synergies for UltraTech in cables and wires. “We believe UltraTech may benefit due to Birla Group’s relationships with real estate developers. Its 4,400 UBS stores and access to copper via group company Hindalco may also provide growth tailwinds,” analysts said in a research note.

“If UltraTech also offers lower pricing than incumbents in cables and wires, it can potentially gain market shares, at least in B2B segments. If it gains market share of 5% by FY30, growth rates (CAGR) for incumbents may decline by 100–150 basis points (bps) over FY24–30E,” it added.

According to the brokerage, cable and wire companies have also expanded their EBIT margins by 400 bps over FY14-24. Aggressive pricing by the Birla Group may cap the margins, and there is also a risk of a decline in the industry EBITDA pool.

“We do not model strong growth in the industry just due to the entry of an additional player. While there is a possibility of faster-than-expected formalisation of the sector, we believe the cables and wires industry can grow at a CAGR of 12% over FY24–30.”