Polycab, KEI, Havells, RR Kabel, UltraTech Drop Up to 15% – Here's Why

The shares of Polycab India, KEI Industries, and Havells India, as well as R R Kabel, plunged nearly 15 percent on the BSE during intra-day trading on Thursday on large volumes after UltraTech Cement's press release regarding its entrance into wires and cables with a planned investment of INR 1,800 crores over the next two years. 

UltraTech Cement shares were selling at INR 10,411.90 during intra-day trades, marking a 5 percent drop. Among the W&C stocks, Polyab India shares were selling at INR 4,894.80 (15 percent drop) and KEI Industries shares were selling at INR 3,226.65 (15 percent drop). R R Kabel also fell to INR 962.20 (13 percent drop), all recording losses exceeding 10 percent. Havells India too was down almost 9 percent and Finolex Cables down to INR 850, a 5 banner drop from the previous session. Of these, Havells India and R R Kabel suffered most having traded at their respective 52 week lows. At this point, the BSE Sensex was trading 0.01 percent higher at 74,612.66 at 09:33 am.

On UltraTech’s notice to shareholders on Tuesday, February 25, 2025, post-market, the company revealed its intentions and rationale for entering this construction market segment. UltraTech intends on expanding its footprint as a Building Solutions provider in India through its Building Products Division. 

The first facility will be located in Bharuch, Gujarat, where it expects the plant is expected to become operational by December 2026. The company proposes to cater to the increasing demand for wires and cables in the residential, commercial, industrial, infrastructure and other use segments. According to the company, the wires and cables industry has seen revenue CAGR of approximately 13% from FY19 to FY24.

The Reserve Bank of India (RBI) has targeted select non-banking financial companies (NBFCs) for granular loan book growth data.

RBI’s reduction of risk attached to loans caused shares of NBFCs and MFIs to increase by as much as 15%, anything above that is purely speculative. 

The fears regarding growth pick up and swallow a chunk of what TCS has been trying to earn all year, much to the company’s discomfort, TCS thus finds itself nearing its growth low for the last 52 weeks. 

Why did this BSE500 stock drop below its 46 month average but for some reason is still retaining bullish sentiments? 

What’s interesting is that this recently listed SME stock has increased over 6% today, so I ask myself, why? 

This company is saying that this proposed move into this sector is probably going to create good worth for shareholders value. 

The analysts at CLSA say that UltraTech will put more focus on wires than cables due to their increased dependence on retail (housing) and lower time to market. For the wires and cables sector, the firm will be required to achieve a growth CAGR of around 11 percent to 13 percent over the next four to five years to accommodate the announced expansion. The brokerage said the sector’s profitability could be weighed by slower growth over the medium term.

UltraTech is comparatively expected to perform better in wires as opposed to cables because, with its retail focus and brand recall, the chances to break into wires look promising. Moreover, the time that is likely to be taken to market wires is shorter and approvals and tender wins for cables are complicated.

Of India’s Wires and Cables market worth USD 9 billion ($80,000), two-thirds is made up of Cables and the remaining Wires. The market is relatively disorganized, with branded players accounting for 70 percent of capacity. For the wires segment, housing construction drives 80 percent demand and there is higher dependence on new home sales.

Incumbents in the wires & cables industry are well on track to invest Rs 10,000 crore in new capacity over the next 2-4 years. Assuming adds a capex of UltraTech of 1800rs(while not considering additional expansions from other companies) the entire industry will need an 11-15 percent CAGR over the next 5 years to fully utilize this asset without dipping past the 4x-5x asset turn. If the demand fails to rise to this extent it might hurt the industry’s profitability, according to CLSA.