UltraTech Cement stock slips 5% on wires and cables foray; KEI, Polycab hit lower circuit

UltraTech Cement shares declined over 4 per cent on February 27 after the company announced its entry into the wires and cables (C&W) segment with a capital expenditure of Rs 1,800 crore. The Aditya Birla Group's flagship cement manufacturer will set up a plant in Bharuch, Gujarat, which is expected to be operational by December 2026.

Market impact and investor sentiment

At 9:30 AM, UltraTech Cement shares were trading at Rs 10,552.85, down 3.75 per cent on the NSE. The stock later extended losses, slipping 4.7 per cent to Rs 10,448.65. Meanwhile, key players in the C&W industry, including KEI Industries and Polycab India, hit their 10 per cent lower circuit, with KEI trading at Rs 3,418.10 and Polycab at Rs 5,189.05.

UltraTech Cement's strategy behind the expansion

The company stated that its move into the wires and cables segment aligns with its broader vision to be a comprehensive building solutions provider. "UltraTech proposes to leverage its extensive manufacturing expertise coupled with its connect with the end-customers to deliver high-quality wires and cables, thereby targeting a higher share of the customer's wallet," the company said in a press release.

Brokerage views: Long-term impact limited?

Nuvama Institutional Equities noted that while UltraTech Cement's entry might cause temporary disruption in the industry, the overall impact on the C&W sector will likely be limited. The sector is expected to sustain a strong 13 per cent CAGR, and UltraTech’s presence may account for less than 5 per cent of the total industry size by FY28. The brokerage believes this move will further drive the shift from unorganised to organised market players.

Citi pointed out that the move could slightly dilute UltraTech's positioning as a cement pure-play, given that the Rs 1,800 crore investment accounts for 13 per cent of its free cash flows over two years. However, it also estimates that the segment could generate Rs 1,200 crore in revenue by FY27.

Investment outlook: Buying opportunity?

Jefferies suggested that any sharp stock correction might be a buying opportunity, as the C&W business does not significantly overlap with UltraTech’s core cement operations. Analysts will be closely monitoring any further capex enhancements by the company in this space.