By Manvi Pant
(Reuters) – Shares of UltraTech Cement, India’s top cement maker by capacity, fell about 6% to hit an eight-month low on Thursday as its plan to foray into the cables and wires business led to concerns over capital allocation and debt reduction.
The cement maker, a part of the Aditya Birla Group, was the top percentage loser on India’s benchmark Nifty 50 index, which was little changed. Its shares were last down 6.16% at 10,288.30 rupees.
The company announced on Tuesday it would spend 18 billion rupees ($206 million) to start the wires and cables business.
Competition in India’s cement industry is intensifying, with leaders UltraTech and Adani Group companies striking a series of deals to acquire smaller firms and expand their market share.
“The key question is around diversification – is this spend justified at a time when its core business faces a larger, aggressive competitor,” analysts at J.P.Morgan said.
Billionaire Gautam Adani’s conglomerate entered the cement industry in 2022 and has snapped up several rivals.
Analysts, on average, have rated UltraTech stock a “buy”, same as the Adani Group’s Ambuja Cements and ACC, as per data compiled by LSEG.
Motilal Oswal analysts said they see near-term worries for the UltraTech stock as traders view the company as a ‘pure-play cement firm’, adding its capital allocation may be questioned.
Costs related to branding and setting up the distribution channel for the wires business would add to spending, which is estimated at 95 billion rupees for the year ending March, Macquarie said.
UltraTech’s standalone net debt rose to 152.83 billion rupees in December 2024 from 5.71 billion rupees in March 2024.
Still, the foray could cause some disruption in the wires industry, where shares of dominant players Polycab, Havells and KEI Industries fell 15%, 5% and 7%, respectively.
($1 = 87.3830 Indian rupees)
(Reporting by Manvi Pant and Bharath Rajeswaran in Bengaluru; Editing by Mrigank Dhaniwala)
