Wires & cables shares: Should shareholders of Havells, KEI, Polycab, RR Kabel & Finolex sweat because AV Birla Group is getting into their business?

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Synopsis

First it was the paint industry, and this week it was the turn of stocks of the wires & cable sector to suffer cuts because the heavyweight Aditya Vikram Birla Group announced its entry into the industry. The stocks of wires & cable companies saw dramatic drops as soon as the announcement was made. Is this an over-reaction, similar to what the street witnessed when the AV Birla Group recently entered the paint industry? Probably not. There is a big difference between the paint and the wires & cable industries, even though their products are related to home building.

The investment to be made by the AV Birla Group company UltraTech Cement to enter the wires & cable business is just Rs. 1,800 crore. The impact of that announcement: Over Rs. 40,000 crore of market capitalisation wiped out for both the new entrant and existing companies. In just one trading session. Is this investment of Rs. 1,800 crore so powerful that it will impact the working of companies in the sector so hard that they deserve to shed more

ETMarkets.com

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