UltraTech had announced its foray into the wires and cables sector
Ultratech Cement, a major player in the cement industry, has recently announced its foray into the wires and cables sector. This also marks a significant shift for the cement manufacturer.
According to brokerage firm Nomura, the company has made an investment of Rs 1,800 crore ($210 million) over the next two years, with its first plant expected to be operational by December 2026.
The brokerage has maintained a ‘Buy’ rating on Ultratech. The firm in its report noted, ” Our sensitivity analysis suggests ~10% lower W/C revenue/100bp lower W/C margins impact EPS by 3-4%. With a diversified revenue profile, focus on ramping-up of exports, and margin recovery driven by operating leverage, we maintain Buy on the stock.”
As per the brokerage estimates, achieving this goal would require a 12% compound annual growth rate (CAGR) from FY24-31. However, this market entry is relatively modest compared to Grasim’s aggressive foray into the paints sector, which accounted for 23% of listed players paint capacity.
“While the Rs 1800 crore capex for the W&C segment is <3% of the FY24F capital employed, we estimate it to generate >20% post-tax ROCE assuming a 12% EBITDA margin,” added the brokerage in its report.
Looking at the wires and cable industry in India, this segment is on a steady growth, with listed players expanding at a 16% CAGR over the last six years. The industry is projected to reach Rs 90,000 crore by FY25, with the share of unorganised players shrinking from 45% in FY15 to an estimated 15% by FY30.
Despite this growth, Ultratech’s initial contribution will remain limited compared to established players like Polycab and Havells.
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