Having been rivals in the cement industry, Gautam Adani's Adani Group and Kumar Mangalam Birla's Aditya Birla Group are now poised to compete with one another in the wires and cables manufacturing sector. Whereas Aditya Birla Group's UltraTech Cement rules the cement industry, Adani Group, recently becoming prominent with the Ambuja-ACC Cement acquisition, is expanding aggressively. Experts forecast the same rivalry in the wires and cables sector, affecting smaller players. The share prices of a number of such companies have already begun to decline.
A Market Worth ₹80,000 Crore
India's wires and cables sector is worth ₹80,000 crore, of which ₹56,000 crore is from the cable segment and ₹24,000 crore from the wire segment, according to Jefferies, an international brokerage firm. Around 30% of the industry is unorganized, offering a chance for new entrants into the market. The sector grew at a compound annual growth rate (CAGR) of 13% from 2019-20 to 2023-24. As awareness of quality products grows, the industry is shifting towards organized and branded markets. Analysts believe that the entry of large corporations could lead to mergers and acquisitions of smaller companies.
Industry Impact Already Visible
On February 25, Aditya Birla Group's flagship company UltraTech Cement declared a ₹1,800 crore investment to foray into the wires and cables business in the next two years. Within less than a month, Adani Enterprises made its joint venture with its subsidiary Kutch Copper Limited (KCL) and Pranitha Ecocables to produce metal products, cables, and wires. Share prices of some of the existing players in the industry fell after these announcements.
On March 19, as Adani Enterprises formally announced the entry into the wires and cables segment to the stock exchanges, the effect was felt by the other companies too. On March 20, Polycab India and KEI Industries stocks touched a 52-week low, while Havells dipped 5% and Finolex Cables decreased by 4%.
An Industry of 400 Companies
India's wires and cables sector includes about 400 companies, from small and medium-sized enterprises (SMEs) to large-scale enterprises. Their revenues from a year can vary between ₹50 crore and ₹400 crore.
The Role of Quality Assurance
To be competitive with large-scale companies, SMEs have to emphasize quality assurance. With the growth of modern houses, multi-storeyed buildings, and smart home systems, there has been greater demand for quality electrical wires and cables. Organizations that provide higher quality at competitive prices are more likely to succeed in this changing scenario.
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