Another shock for cable makers, Adani enters fray

Synopsis

Kutch Copper, a wholly-owned subsidiary of group incubator and flagship, Adani Enterprises, has formed a joint venture with Praneetha Ventures to manufacture and sell metal products, wires and cables.

Mumbai: The Adani Group is set to enter the estimated ₹75,000-crore wires and cables business, its proposed foray denting the stocks of incumbents Thursday, as competitive intensity increases in an industry that saw the entry of another large conglomerate a few weeks ago.

Kutch Copper, a wholly-owned subsidiary of group incubator and flagship, Adani Enterprises, has formed a joint venture with Praneetha Ventures to manufacture and sell metal products, wires and cables.

In February, the Aditya Birla Group announced its entry into the wires and cables sector, through its group company UltraTech Cement - the country's largest producer of the commodity.

"Entry of deep-pocketed players such as Aditya Birla and Adani will increase the competitive intensity in the C&W space and is likely to impact growth and profitability of the large incumbent players after two years. The similar story is playing out in the Paints industry," said Sunny Agrawal, head of fundamental equity research - SBI Securities. "Moreover, C&W as a category has relatively less brand affinity and, hence, large incumbents are likely to be affected due to the entry of new big players. Valuation de-rating is likely for the industry."

Incumbents Polycab India, Havells India, Finolex Cables, KEI Industries and RR Kabel slumped 4-14% on NSE in Thursday's trade. Shares of Adani Enterprises ended nearly 1% higher, while benchmark indices ended over 1% higher.

The Aditya Birla Group will invest ₹1,800 crore on capital expenditure, and aims to commission its plant by December 2026. The Aditya Birla Group's plant will be set up in Gujarat.

Agencies

The Adani Group, though, is yet to announce where it will be setting up its plant. Its joint venture with Praneetha Ventures will be called 'Praneetha Ecocables', and both the entities will hold 50% each in the joint venture.

"The formation of PEL aligns with Kutch Copper's expansion strategy to strengthen its presence in the metal and cable manufacturing sector," Motilal Oswal Securities said in a note. The Aditya Birla Group's plant will be set up in Gujarat.

The wires and cables segment, which has seen strong demand in the last few years, is expected to continue its strong run, and is likely to see a double-digit compounded annual growth rate over the next few years, analysts said.

Estimated at ₹75,000 crore in 2024, the C&W market is dominated by organised players, with a two-thirds share. According to analysts, investors should wait for a clear roadmap from the existing large players to tackle the increased competition and should approach this sector cautiously.

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