Havells poised to weather UltraTech's entry into cables business with diversified portfolio

ET Intelligence Group: Havells India is expected to weather the impact of UltraTech Cement's entry into the cables business better than its peers given the diversified nature of its activities. The company generates just over one-third of its revenue from the wires and cables segment compared with 85-95% exposure in the case of Polycab, KEI Industries and RR Kabel. Havells generates a major chunk of revenue from lighting and fixtures, switchgear, air conditioners, and washing machines.

While sales volume in the December 2024 quarter was flat, the fourth quarter is expected to improve. Its stock has lost around 7% since UltraTech's announcement on February 25 while its peers have lost 12-17%.

In the last week of February, UltraTech announced its foray into wires and cables undertaking a capital expenditure of ₹1,800 crore over the next two years to build a capacity of 35-40 lakh kilometres. The facility is expected to be operational by December 2026.


Havells' diversified nature of business may help in mitigating the impact of UltraTech's move. While the cables segment contributed nearly 33% to Havells' revenue in the nine months to December 2024, electrical consumer durables including fans, appliances and water heaters formed around 20% of the top line. Switchgears, and lighting and fixtures together comprised over 21%. The consumer durables business of Lloyd, which Havells acquired in 2017, formed 21% while the remaining was from sales of motors, pumps, water purifiers and other products.

The company's third-quarter performance remained moderate with 11-12% volume growth in cables offset by a decline in wires, leading to overall flat volume. However, the company expects restocking by dealers in the wire business during the current quarter to protect themselves from a further increase in copper prices. Additionally, the fourth quarter is generally strong for underground cables.

To capitalise on the potential in the wires and cables segment, Havells has been ramping up production capacity. The company has allocated ₹1,000 crore in FY25, with ₹350 crore already spent in the first half and an additional ₹450 crore allocated for the expansion of its Tumakuru facility. The plant, still in the ramp-up phase, has started contributing to revenue. Once the new unit is fully operational, the capacity of the medium-voltage cables will expand by 50-60%.

Elara Capital has reduced the earnings per share estimate by 5% for FY26 and FY27 citing intensifying competition. The brokerage, however, remains positive on Havells given the diversified product portfolio, investment in capacity creation across products and pricing power. It expects earnings to grow by 28% between FY24 and FY27. It has retained an 'accumulate' rating while reducing the target price to ₹1,750 from ₹1,930.