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UltraTech W&C expansion barely cements an impact

UTCEM informed the exchanges that its wires & cables (W&C) plant in Bharuch, Gujarat, has commenced commercial production from 1st Sep’26. The facility has an installed capacity of 1.1mn km for wires and light-duty cables, with total estimated Phase I investment of INR8.9bn as of Jun’26.

We believe that UltraTech’s entry will not have a significant near-term impact on the financials of existing market leaders. However, it will be sentimentally negative for wire heavy companies in the long term. We are positive on cable heavy companies, and thus, continue to value cable heavy companies under our coverage at 40x P/E for KEII/POLYCAB, with TP of INR6,001/10,764, and at 35x P/E for RRKABEL with TP of INR2,596, which has wires accounting for 70% of its W&C business and higher export contribution (29% W&C Segment) compared with peers.

* Based on 1.1mn km capacity and optimal utilization of 70%, we estimate revenue potential of ~INR19bn, assuming average copper price of INR1,300/kg.

* Integrated wire and LT cable capacity typically generates an asset turnover of 2.5x4.0x. Based on Phase I investment of INR8.9bn, we estimate potential revenue of INR22-35bn at peak utilization.

* UltraTech plans to generate ~60% of its W&C revenue from wires through its UltraTech Building Solutions (UBS) stores. Its strong relationships with industry stakeholders and the large pan-India UBS network of ~5,800 stores could enable faster ramp-up. We therefore see a higher competitive risk for wire-focused companies compared with cable-heavy players.

* Domestic W&C sector is expected to reach INR1,467bn by FY29E, implying ~13% CAGR over FY26-29E, with wires accounting for ~33% of the industry. Based on these industry growth estimates, we expect UltraTech to achieve <2% market share by FY28E at optimal utilization of its Phase I capacity. However, with the completion of its planned INR18bn capex, UltraTech aims to reach 5-7% market share in the W&C sector, which could significantly increase competitive intensity over the medium term.

* The INR18bn capex could generate revenue of ~INR72bn at optimal capacity utilization, assuming gross asset turnover of 4.0x.

* Increased focus on the building solutions segment suggests that UTCEM’s capacity will be more concentrated toward wires and LT cables, rather than HT cables. In terms of product mix, the business is therefore likely to be more comparable with players such as Havells, Finolex Cables and RR Kabel.

* We estimate UltraTech to generate INR10bn revenue from the W&C segment in FY28E, with EBITDA margin of -5.0% initially. As production and sales ramp up, we expect the segment to turn profitable in subsequent years.

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