Why Birla may not be able to repeat the paint hack into cables

A thread on why Birla may not be able to repeat the paint hack into cables

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In Feb 2024 Grasim announced the entry into the paints segment after which the paint stocks eroded investors' wealth. In Feb 2025, Ultratech (again owned by Birla) announced entering into the cable industry. However, the paint disruption technique may not work in cables and the reasons are outlined below

1. Margins

The wire industry ($17.25B) is bigger than the Paints industry ($14.41B) in India but the gross margins of the paint industries (40%-50%) are much higher than what the cable companies enjoy (25%-35%). As Bezos said "Your margin is my opportunity", The lower the margins, the lesser the chances of disruption. The paint price of Birla Opus is around 20% lower than Asian paints bringing the gross margin of Opus to roughly 30%. A large-scale company cannot operate in a Gross margin lower than 25-30%

2. Elasticity

Both industries demand some level of safety standards. However, the safety standard in cable business is much higher in the long run in comparison to Paints. Launching a cheaper paint may make the consumer switch to it but the same may not work for Cables. Paints are …

3. R&D Costs

The R&D cost of the cable industry could be much higher than the paint industry. The largest cable company in India Polycab allocated $260 million in R&D costs as compared to $13.89 million by the largest paint company in India – Asian Paints. Higher the company spends in R&D, lower are the chances for disruption

Originally posted as a thread on X.