The cables and wires (C&W) segment is in focus this year having reported stellar growth from strong domestic demand and improved export potential. Investors have accounted for the growth, and also adjusted for longer-term threats from competition and raw material prices.

At this juncture, we look at KEI Industries, the second-largest player. The company is likely to sustain its 20 per cent top- and bottom-line growth in the next two years. The stock has corrected 35 per cent from its peak in August 2026 and is trading at 28 times one-year forward earnings — which is 20 per cent lower than its last five-year average. While noting the long-term overhang, we consider the reasons why long-term investors can consider a exposure to stock.

Growth characteristics

KEI Industries reported revenue growth of 19.3 per cent CAGR in FY23-26 to ₹11,747 crore in FY26 and reported revenue of ₹6,962 crore in H1FY27, which is a 31 per cent year-on-year growth. The company reported a mere 6.2 per cent volume growth for FY26 and similarly smaller contribution from volume growth in H1FY27. Despite this, revenue growth has been on the back of a robust domestic demand, which has absorbed the strong prices — as copper prices have rallied 50 per cent in the last five years.

The cable and wire industry is supported by the Central government’s capex budgets with the outlay having grown at 15-17 per cent CAGR in the last five years to ₹12 lakh crore in FY26-27. This has supported demand for C&W from a range of sectors: power generation and transmission, railway electrification and metro rails, solar cables and wind power ecosystem, EV infrastructure and the second-order drivers of private investments and emerging sectors of data centres.

The company reported 24 per cent PAT CAGR in FY23-26 to ₹918 crore in FY26 with a stable EBITDA margin of 10.2-10.5 per cent range in the period. Despite the raw material price volatility and the logistics cost volatility, the stable margin performance reflects the efficient price pass-through mechanism of the company along with minor product mix improvement, which will further improve margins.

Growth outlook

On the revenue front, the next two-year growth will be supported by volume growth with KEI Industries hoping for 25 per cent revenue growth in FY27 and 20 per cent CAGR growth for the next two-three years. This will be supported by the Sanand facility that has been commercialised in FY27.

The company raised ₹2,000 crore through a QIP in November 2024 to develop the facility and ₹200 crore remains to be spent even as Phase-I has started revenue contribution. The company expects to add ₹1,500 crore revenues in FY27 from the facility and ₹6,000 crore from full utilisation in FY28-29 period. Compared to ₹11,747-crore revenue base, this represents a 15-17 per cent growth from the Sanand facility alone. Along this, the company intends to spend ₹600-700 crore in capex (largely development) in the next three years to sustain the demand. The company has negligible debt, but has a high working capital requirement.

On the margin front, the company expects to improve margin by around 100 bps in the next one-two years. First, the product mix will have a higher contribution from higher margin products of extra high-voltage and high-voltage cables from Sanand and existing facilities. The company has increased dealer distribution contribution (from 40 per cent to 60 per cent now), which should also improve margins (by way of lower working capital needs). The higher volume operations with the Sanand facility will add to the operating leverage contributing to the overall improvement of margins. A higher proportion of exports is also expected to aid margin improvement. The US and West Asia exports were hampered in the last one year on account of export tariffs and shipping costs respectively. As both accounts are now nearing normalisation for the company, export share in consolidated revenues is expected to increase from 13 per cent in FY26 to 20 per cent.

Long-term overhang

KEI Industries and the C&W industry could face two major overhangs in the the next few years.

First, copper prices have been volatile on account of surge in demand from AI and allied industries. While rising prices that are passed through have driven revenues, investors must consider possible corrections impacting the momentum. KEI Industries reasons that value can be consistent even as volume or pricing are volatile. As government capex is increasing, the value for development capex shall follow through, allowing for volume growth when prices correct or vice-versa. But a copper price correction, while not a certainty and can further rise or fall as well, should be considered. While volume may increase on price correction, it may not fully compensate for the drop in prices if the correction is in the high 30-40 per cent range.

Second, competition is set to intensify. In September, Aditya Birla Group announced its foray into the segment with Ultravolt and a ₹1,800-crore investment. The company expects to become the second-largest player in the industry within five years. The immediate threat is not high as plant stabilisation and ramp-up, dealer network and customer acquisition should take three-four years even in a favourable case scenario. But over a longer-term, market shares can be under pressure and the 20-30 per cent growth CAGR the industry players faced can shrink meaningfully for some and to a moderate extent for the others.

The strong demand along with higher export opportunities are supportive of the industry despite the two overhangs. KEI Industries has increased dealer share and should be able to face higher competition. While value versus price and volume remains uncertain, the strong demand should ease the pressure to an extent. With new capacity ramping up and domestic infrastructure needs are on a growth path, the company should secure strong earnings growth despite the uncertainty with volume added from Sanand. The valuation correction in the last one month also accommodates the industry risks sufficiently.

Published on October 31, 2026