UltraTech’s entry and its ramifications
UltraTech, part of the Aditya Birla Group, unveiled plans to invest ₹1,800 crore in setting up a cables and wires manufacturing facility in Bharuch, Gujarat, which is expected to be operational by December 2026. The move aligns with its broader strategy to become a comprehensive ‘building solutions’ provider, much like its recent foray into the paints sector. The Indian wires and cables industry, valued at ₹84,500 crore in FY24, is already seeing significant expansion, with major players committing substantial capital expenditures. However, UltraTech’s entry introduces fresh competitive pressures that could reshape the industry’s landscape over the next decade.
Sharp market reaction
The immediate fallout from UltraTech’s announcement was a widespread sell-off in wires and cables stocks, with Polycab, KEI Industries, and RR Kabel tanking up to 21%. Investors fear that UltraTech’s deep pockets, extensive distribution network, and established brand equity could translate into aggressive pricing strategies that may squeeze existing players’ margins. Analysts at CLSA suggest that UltraTech is likely to focus more on wires than cables, given the shorter time-to-market for wires and the stringent approval processes required for cables.
Despite these concerns, some brokerages argue that UltraTech’s entry is unlikely to significantly impact the earnings of existing wires and cables players until FY28. Nuvama Institutional Equities estimates that even with 60–70% capacity utilization by UltraTech in three years, its market share in the wires and cables industry would still be under 5%. Furthermore, the ongoing shift from the unorganized to the organized sector—expected to accelerate with UltraTech’s entry—could ultimately benefit established players like Polycab in the long run.
Fundamental strengths amid market jitters
Before the 27 February crash, Polycab was enjoying a strong run in the market. The stock had gained 32% in 2024, driven by robust earnings and sustained growth across its business segments. However, with the recent plunge, Polycab has effectively wiped out all its gains from the past year, making 2025 its first year of negative returns since its 2019 stock market debut.
Despite the setback, Polycab remains a dominant force in the industry. The company accounts for one in every four cables and wires sold in India and has consistently outperformed competitors. In Q3FY25, Polycab reported its highest-ever third-quarter revenue of ₹5,226 crore, marking a 20% year-on-year growth. Its profit after tax stood at ₹464.3 crore, while Ebitda rose 26.4% year-on-year to ₹719.9 crore, with margins improving to 13.8%.
Polycab’s strength lies in its diversified revenue streams and expanding global footprint. Nearly 80% of its revenue comes from its core wires and cables segment, with exports contributing more than 10% of its total business. The company has secured large orders, including a ₹5,600 crore contract from BSNL, reinforcing its leadership position. Additionally, its fast-moving electrical goods (FMEG) business is growing rapidly, with a 45% year-on-year increase in Q3FY25.
Strategic play for future growth
Polycab’s response to increasing market competition is rooted in its ‘Project Spring,’ its ambitious roadmap for the next five years. The initiative aims for a 1.5x industry growth rate in the cables and wires segment and 2x growth in the FMEG business, with a projected Ebitda margin of 11-13%.
To achieve these targets, Polycab plans to invest ₹6,000–8,000 crore in capital expenditures, all funded through internal accruals. The company is leveraging its nearly debt-free status and strong cash flow position to fuel expansion while maintaining a healthy dividend payout of over 30%. With India’s urban infrastructure development expected to surge in the coming decades, Polycab is well-positioned to capitalize on growing demand from the power, telecom, and industrial sectors.
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What brokerages say
Prior to UltraTech’s announcement, analysts were largely bullish on Polycab. Over 65% of brokerage firms covering the stock had issued a ‘buy’ rating, with price targets ranging from ₹7,500 to ₹9,200, implying a significant upside from those levels. Jefferies, one of the most optimistic voices, saw a 50% potential upside, setting a target price of ₹9,220.
However, following UltraTech’s entry into the market, some brokerages have adjusted their valuation multiples. HSBC, for instance, has cut Polycab’s price target by 20% to ₹6,250, citing potential margin pressures. Motilal Oswal Financial Services (MOFSL) has also reduced valuation multiples for Polycab, KEI, and RR Kabel by 20%, acknowledging the likelihood of increased competition affecting pricing power.
Despite this, many analysts remain optimistic about Polycab’s long-term prospects. Citi, UBS, and Macquarie continue to rate the stock as a ‘buy,’ with price targets exceeding ₹8,000, citing the company’s dominant market share, strong financials, and robust expansion plans. They argue that while UltraTech’s entry will bring short-term market jitters, Polycab’s brand loyalty, extensive distribution, and export momentum will help it weather the storm.
What lies ahead for Polycab?
While UltraTech’s entry has rattled investor sentiment, Polycab’s fundamentals remain intact. The company’s ability to navigate pricing pressures, sustain its leadership position, and continue its export momentum will be key determinants of its long-term success. Moreover, as UltraTech builds out its distribution network and gains regulatory approvals, it will face its own set of challenges before becoming a formidable competitor.
Polycab’s commitment to innovation, cost efficiency, and global expansion will likely act as crucial buffers against any price wars UltraTech may initiate. Additionally, the company’s strong foothold in both the B2B and B2C markets gives it a competitive edge that a new entrant like UltraTech will take years to replicate.
For now, Polycab’s strong order book, strategic expansion plans, and robust financial health provide a cushion against short-term market volatility. As India’s infrastructure boom continues, Polycab is well-positioned to remain a leading player in the industry, provided it executes its growth strategies effectively. The coming quarters will be crucial in assessing how the company adapts to the evolving competitive landscape and whether UltraTech’s foray truly poses a long-term threat or merely a temporary market disruption.
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About the author: Suchitra Mandal is a proficient financial writer with expertise in delivering well-researched insights and detailed analyses of companies’ performance and market trends.
Disclosure: The author does not hold any shares of Polycab India at the time of writing this article. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.
