Initial feedback suggests that on this investment, the company could generate approximate revenues of ₹7,000 crore, with a margin of 10-12%.
While this diversification adds a new growth avenue for UltraTech, it also raises concerns regarding capital allocation, potential impact on valuations, and competitive pressure.
Here’s CNBC-TV18’s breakdown of three key factors at play:
1. Should this diversification have been done through Grasim?
The Aditya Birla Group already has a well-established holding structure for different businesses. UltraTech is predominantly a cement powerhouse, whereas Grasim has been used as a vehicle for diversification into paints and B2B (business-to-business) chemicals.
Given that the cables & wires segment is better aligned with Grasim’s existing portfolio of allied industries, the question arises: Would it have made more sense for Grasim to take on this diversification?
Investors may also question capital efficiency and argue that Grasim would have been better suited for this, as it has diversified into paints with Birla Opus.
2. A forward integration play for the Aditya Birla group?
That said, UltraTech’s move into the wires & cables segment may not be entirely out of sync with the group’s larger vision. Hindalco, another Aditya Birla entity, is a key producer of copper and aluminium — essential raw materials for the cables & wires industry.
So this move could result in better synergy within the group and help it leverage existing relationships with industrial clients. Whether this synergy will translate into a real competitive advantage remains to be seen.
3. A fragmented market with an opportunity to capture share
The unorganised segment accounts for around 30% of India’s wires & cables industry. This creates room for organised players to gain market share.
For UltraTech, this presents an opportunity to leverage brand trust and an established distribution network. Execution, however, will be key — established companies like Polycab, KEI, Finolex, and Havells already dominate the market, and UltraTech will need a strong strategy to carve out a space for itself.
Is this a ‘Paints Moment’ for cables & wires?
When Grasim entered the paints industry with Birla Opus, it disrupted the market, affecting the valuations of incumbents like Asian Paints and Berger Paints. Could UltraTech’s entry into the wires & cables space have a similar effect? Only time will tell.
For now, all eyes are on execution and strategic positioning — and that will determine whether UltraTech is able to disrupt and dominate this new arena, or simply end up diluting its focus.
Also read: UltraTech Cement plans ₹1,800 crore wires & cables foray
