Polycab May Not Be Disrupted the Asian Paints Way

When two of India’s major conglomerates announced electrical cable market entries in early 2025, investors dumped Polycab India shares as if the company were about to face an Asian Paints-style disruption.

The announcements came in quick succession. UltraTech Cement, part of the Aditya Birla Group, unveiled plans in February for ₹18 billion investment over two years. In March, Adani Group announced its own entry. The Polycab stock fell over 6% the day after that announcement, with investors fearing a repeat of the paint industry carnage where Grasim's Birla Opus crushed Asian Paints' margins and market share.

The fear wasn't irrational. Birla Opus leveraged UltraTech's cement dealer network to grab paint market share, sending Asian Paints' margins down 480 basis points as market share fell from 59% to 52% in just 12 months.

The perception took root that the paint playbook would be repeated with cables.

Different Strokes
The paint disruption succeeded because of structural vulnerabilities. The industry's four-player oligopoly—Asian Paints, Berger Paints, Kansai Nerolac, and AkzoNobel—has nearly 70% dealer overlap with cement distribution, making rapid market penetration possible. Birla Opus could immediately access established relationships and compete on price.

But cables present different challenges. UltraTech itself acknowledges the timeline reality of three-five years to build plants, five-eight years for brand credibility, plus stringent regulatory approvals. This isn't rapid disruption territory.

More importantly, cables operate across 400+ fragmented players requiring specialised distribution and technical expertise that cement sector relationships can't provide. Electrical contractors need product education and technical support, not just competitive pricing.

Tightening Grip
Rather than retreat in the face of looming competition, Polycab's first-quarter results read like a direct challenge to its new rivals. The company delivered what amounts to a defiant performance statement with revenue in April-June up 26% year-over-year to ₹59 billion, with the core cables business growing 31%. Consolidated net profit reached ₹6 billion as EBITDA surged 47%, EBITDA margins expanded 210 basis points to 14.5% even as competitive threats mounted—exactly when conventional wisdom suggested margins should compress.

Cables revenue hit ₹52 billion, up 31% on-year with domestic growth at 32%, demonstrating the company's grip on its home market remains unshaken. The fast moving electrical goods, or FMEG, division delivered its second consecutive profitable quarter while solar products doubled to become Polycab's largest category in that segment, showcasing successful diversification precisely when competitors are entering core markets.

For a company supposedly facing imminent disruption, these metrics look less like defensive positioning and more like a market leader daring competitors to match its performance. Polycab appears to be using the competitive spotlight to demonstrate why displacing an entrenched incumbent requires more than deep pockets and good intentions.
 
Defensive Moats
Polycab's resilience reflects advantages Asian Paints never possessed. The company operates an integrated electrical ecosystem, cross-selling switches, lighting, fans, and solar equipment alongside cables. This creates switching costs and multiple revenue streams from single customer relationships.

The integration strategy is accelerating at an opportune moment. Solar revenue doubled as India targets 500 GW renewable capacity by 2030. Manufacturing synergies mean quality copper processing serves both cable and motor applications while certifications transfer across product lines.

The cable market's projected growth from $10 billion to $17 billion by 2032 also changes competitive dynamics. When markets double, established leaders can grow alongside new entrants rather than surrender share in zero-sum battles.

None of this means Polycab faces no competitive threat. UltraTech brings substantial resources and construction industry relationships. Pricing pressure will intensify, and some margin compression seems inevitable as new capacity comes online.

But the structural differences matter. Cable industry fragmentation favours technical expertise over financial firepower. Unlike paint's oligopolistic vulnerability, cables reward specialisation and integrated offerings.

The paint industry taught investors to fear conglomerate entry. The cable industry may teach them that market structure and defensive positioning matter more than balance sheet size. Polycab's post-announcement performance suggests the disruption playbook that worked in paints may not translate to cables. At least not yet.