With UltraTech Cement announcing its foray into the Cables and Wires (C&W) industry with a planned capex outlay of Rs 18 billion over the next 2 years, brokerage firms and analysts maintained that the move will have only a modest impact on the segment and on sector players. An analysis report by Nuvama stated, “Given C&W industry is likely to sustain strong 13 per cent CAGR (similar to FY19–24) and emerging opportunities in exports, entry of UltraTech may have only a modest impact, at best, in FY28 or onwards (less than 5 per cent of the total industry then), in our opinion.” This, it added, is on account of i) fragmented nature of C&W industry (largest player has less than 18 per cent market share); ii) distribution nuances; and iii) approvals for cables.
UltraTech Cement board has announced a planned capex outlay of Rs 18 billion over the next two years which is expected to be financed through a mix of internal accruals and debt. The plant will be set up near Bharuch, Gujarat, and the company aims to commission it by Dec’26. JM Financial said, “On full ramp-up, we estimate potential EBITDA accretion of 4-5 per cent on FY27E EBITDA base. Given the group’s growth ambitions and UltraTech’s robust cashflow generation, we also don’t rule out the possibility of the group entering into other building solution segments in future.” Even as the capex intensity is low and unlikely to stretch the balance sheet, the investment into a non-cement business is likely to raise concerns over capital allocation.
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Though capex intensity is low and unlikely to stretch the balance sheet, JM Financial said that the investment into a non-cement business is likely to raise concerns over capital allocation. However, it stayed positive on the company and its “return ratios are poised to improve structurally over the next 3-4 years owing to i) rising asset turnover; ii) low cost of expansions; and iii) rising profitability”.
Through this foray, UltraTech aims to meet the growing demand for wires and cables across various sectors, including residential, commercial, infrastructure, and industrial applications.
What it means for C&W industry?
The Indian C&W industry stood at Rs 800 billion (FY24),
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