No Winners: Cement Maker’s Ambition Triggers Free Fall in Cables and Wire Stocks, Wiping Off Rs 44,439 Crore Market Cap in just 2 Hours
After Disrupting the Paint Industry, Birla Marches into Wires and Cables: Polycab and KEI Industries Witness Heavy Sell-Off; UltraTech’s Entry May Not Alter Fundamental Business Dynamics but Could Trigger a Correction in Lofty P/E Multiples
The Indian stock market witnessed a dramatic sell-off in the cables and wires segment on February 27, 2025, as UltraTech Cement announced its ambitious foray into the sector. The move sparked panic among investors, leading to a staggering Rs 44,439 crore market cap erosion within just two hours of trading. The biggest losers were Polycab India Ltd, KEI Industries, and UltraTech Cement itself, with their stock prices plunging sharply.
Polycab India Ltd, the country’s leading cables and wires manufacturer, bore the brunt of the sell-off. The stock nosedived 14.78 per cent to Rs 4,913.65, erasing Rs 12,815 crore in market capitalization compared to the previous session. KEI Industries also witnessed a steep decline, shedding 17.85 per cent and losing Rs 6,478 crore in value. Even UltraTech Cement, despite being the catalyst of the turmoil, faced a decline of 5.95 per cent, wiping out Rs 25,146 crore from its market capitalization, together they wiped off Rs 44,439 crore from the market-cap of these three stocks.
The trigger for this market upheaval was UltraTech Cement’s announcement that it plans to enter the wires and cables business with a Rs 1,800-crore investment. The company will set up a new plant in Bharuch, Gujarat, and aims to commence operations by December 2026. This move echoes a similar disruption seen in the paint industry when Grasim Industries entered the segment, causing significant derating of existing players.
UltraTech’s entry could hurt the EBITDA pool of established players like Polycab and KEI Industries, affecting their margins in the long run. Currently, Polycab and KEI Industries maintain EBITDA margins of 13 per cent and 10 per cent, respectively. The possibility of a price war, given the lack of a clear winning strategy in the industry, further adds to investor concerns. However, experts argue that the impact on near-term earnings of existing players will be minimal, given that UltraTech’s plant will take a couple of years to become operational.
The sector is expected to sustain a strong double-digit CAGR, driven by the transition from an unorganized to an organized market and increasing export opportunities. This growth potential had led to rich valuations for companies like Polycab and KEI Industries, which have historically traded at median one-year P/E ratios of 55x and 62x, respectively. While UltraTech’s entry may not alter the fundamental business dynamics, it is likely to result in a correction of these lofty P/E multiples.
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At 12:35 PM on February 27, UltraTech Cement was trading at Rs 10,425, down 4.92 per cent on the NSE. Shares of Polycab India slumped 16.14 per cent to Rs 4,835, while KEI Industries plunged 19.67 per cent to Rs 3,050.
The market reaction underscores investor concerns about intensifying competition in the cables and wires sector. As seen in the paint industry, the entry of a corporate giant can significantly disrupt existing players and force a re-rating of stock valuations. Whether the wires and cables sector can withstand this shock remains to be seen.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice.