Introduction:
The news article reports that Polycab India has overtaken Havells India as the most valuable wires and cables company in India by market capitalization. Polycab’s share price has surged 120% in 2023, boosting its market cap to nearly Rs. 85,000 crore compared to Havells’ Rs. 84,200 crore.
Analysis for a Layman:
Polycab and Havells manufacture electrical products like wires, cables, switches, and more. Polycab’s shares have performed very well recently, growing much faster in value than Havells’ shares. This has made Polycab more valuable than Havells based on the total market value of all its shares added together, referred to as market capitalization. Polycab seems to be gaining an edge with higher revenue from cables, adding manufacturing capacity, and expectations of strong growth. In contrast, Havells is struggling with its Lloyd consumer appliances acquisition and lighting segments. This shift between the top two players in the industry has notable impacts.
Original Analysis:
The change in leadership for market value between Polycab and Havells reflects positive business momentum for Polycab. Its strategic decisions like focusing more on the growing cables segment and expanding capacity have paid off. Havells may need to reassess parts of its product portfolio and turnaround plans. The divergence in stock performance shows investors favor Polycab’s potential over Havells in the near-term.
Impact on Retail Investors:
For retail investors, this signals Polycab’s stock price may continue rising faster than Havells in the short term. However, Havells is trading at a relatively lower valuation multiple, indicating fewer expectations priced into its stock. This could make Havells attractive for value investors if it addresses struggling business segments. Investors should also watch risk factors like high inflation, interest rates, and global growth potentially slowing wire/cable demand.
Impact on Industries:
The wires and cables sector must now contend with Polycab as the new market leader pushing expansion. Competitors will benchmark themselves more against Polycab. Related sectors like electrical components, power infrastructure, real estate, and automation systems that utilize these products extensively may need to adjust supplier relationships, pricing contracts, product qualifier lists, and strategic plans around the shifting competitive landscape.
Long Term Benefits & Negatives:
If Polycab sustains competitive advantages that propelled its steep share price rise, it could lead even more market share gain, sales growth, and capacity investment over the long term. However, such outperformance also attracts risks like overextension, management distraction, excessive investor optimism, and market saturation. Havells has potential for a turnaround which may renew close competition with Polycab in a few years.
Short Term Benefits & Negatives:
In the short term, Polycab seems poised to continue robust revenue, profit, and share price momentum. But its valuation multiple indicates high expectations, raising the risk of disappointing investors if growth meaningfully slows. Havells may struggle with weaker investor confidence and financial metrics until addressing troubled business segments. However, near-term negatives for Havells could drive management focus on turning performance around.
Companies that could gain:
- Bajaj Electricals: Supplier and competitor with portfolio adjacency that may benefit from industry growth.
- KEI Industries: Major wire and cable manufacturer that could gain from positivity towards the sector.
- Dixon Technologies: Contract manufacturer of LED bulbs, lighting products that may substitute Havells offerings.
- Crompton Greaves: Diversified electrical equipment provider that competes with Havells on several products.
- Schneider Electric: Industrial electrical component supplier that could gain orders from capacity expansion by Polycab and others.
Companies which will lose from this:
- Havells India: Directly losing the most valuable wires and cables company status, facing pressure to fix underperforming divisions.
- Finolex Cables: Competing cable manufacturer that risks losing more ground with Polycab’s rise.
- Surya Roshni: Makes competing building wires and cables where Polycab is growing share.
- Orient Electric: Competing switchgear and lighting manufacturer that vies for market leadership with Havells.
- V-Guard Industries: Third largest wires and cable manufacturer in India seeing market dynamics shift.
Additional Insights:
The change between Polycab and Havells shows investor preference evolving towards growth stories with strong momentum. However, Havells’ long successful track record suggests it could regain footing after navigating current headwinds. The split reminds investors not to overgeneralize an entire sector based on the largest companies. Tailwinds like urbanization, industrialization and vehicle electrification continue driving multi-year growth runway even as competitive dynamics shift between players.
Conclusion:
Polycab ascending as the top wires and cables firm signals the market favors its growth prospects over Havells currently. Investors reacting to the shift demonstrates the factors driving sentiment and valuations between competitors. All players face risks from economic fluctuations amidst robust long-term industry potential.
Citation:
D’Souza, Nigel. “Polycab dethrones Havells as the most valuable wires & cables stock in India: CNBC-TV18 Edge.” CNBCTV18. 11 Dec. 2022.