India-US Trade Agreement Fuels Optimism for Cable and Internet Gear Sector
The recent announcement of a trade deal between India and the United States has injected fresh optimism into the Indian cable and internet equipment manufacturing industry. This bilateral agreement is expected to significantly enhance export opportunities and margin recovery for key players in this sector.
Stock Market Responds Positively to Trade Developments
Shares of prominent Indian companies including Sterlite Technologies Ltd (STL), HFCL Ltd, RR Kabel Ltd, Polycab India Ltd and Havells India Ltd witnessed notable gains of 3–3.3% during intraday trading on Tuesday. This upward movement reflects investor confidence in the potential benefits arising from reduced tariff barriers and anticipated stronger demand from American data center and telecommunications infrastructure projects.
Key Provisions of the India-US Trade Agreement
According to statements from US President Donald Trump, the two nations have reached an agreement that includes several important provisions:
- The United States will lower its reciprocal tariff on Indian goods from 25% to 18%
- India will reduce its tariffs and non-tariff barriers against US products to zero
- The US is eliminating the additional 25% duty previously imposed on Indian goods in response to India's crude oil purchases from Russia
While finer details of the agreement are still awaited, industry analysts believe this development will create a more favorable trading environment between the two economic powers.
Industry Experts Weigh In on Potential Benefits
Faisal Kawoosa, chief analyst at technology market research firm Techarc, highlighted the advantages for the cables industry: "There will be a rate advantage now with 18% tariffs from the earlier 50%. The cables industry, especially companies that supply optical fiber cables, will benefit from the data center and fiberization drive in the US."
According to Kawoosa, this bilateral trade deal will eliminate trade and tariff uncertainties that have plagued the industry. Vendors with existing US presence, such as STL, stand to gain significantly from the reduced tariffs.
Siddhant Cally, research analyst at Counterpoint India, emphasized the broader implications: "The reduction in US tariffs is a positive development for Indian cable and optical fibre companies, as it improves price competitiveness, lowers export risk, and provides better visibility into the US market. This should support a gradual recovery in exports and margins over time."
Addressing Previous Challenges and Future Opportunities
The trade deal comes as welcome relief for Indian manufacturers who have faced significant challenges in recent quarters. Since the imposition of stiff tariffs by the Trump administration, companies have experienced:
- Narrowing operating margins for STL
- Contracted exports for HFCL, Polycab, Havells India and RR Kabel
- Missed opportunities in lucrative American infrastructure projects worth billions of dollars
Cally noted that for companies already securing US orders but facing margin or execution challenges due to higher tariffs, this change offers immediate relief. "It improves contract viability by reducing landed costs and easing pricing pressure," he added.
Company-Specific Impacts and Strategic Considerations
Sterlite Technologies (STL) faced particularly acute challenges from the higher tariffs. Ajay Jhanjari, group chief financial officer at STL, revealed during a recent analyst call that the US tariff reset created temporary headwinds, reducing reported EBITDA by nearly 760 basis points in the third quarter of the current fiscal year and bringing reported margins down to 10.3%.
However, the new trade agreement has boosted investor sentiment for the company, with its shares surging 13.4% to ₹125 on the National Stock Exchange. Management reported that North America's share in STL's revenue has increased to 36% from 25% in the current financial year, attributing this growth to data center buildouts and demand for high-fibre-count cables.
For other cable and wire manufacturers such as Polycab India, RR Kabel, and Havells, exports to the US could rebound significantly with lower tariffs. These companies are primarily targeting opportunities in:
- Renewable energy sectors
- Power infrastructure projects
- Oil and gas industries
- Data center development
During an investor call, RR Kabel's management acknowledged temporary impacts on export growth opportunities due to tariff instability but expressed optimism that exports would improve substantially and the US market would open up more broadly. The company noted a 2-percentage-point decline in its share of exports to the US to 6% in the September quarter, directly attributable to the previous tariff regime.
Broader Industry Context and Challenges
Beyond tariff concerns, companies in the cable and internet gear sector have been grappling with additional challenges:
- Higher costs of copper and aluminum, essential raw materials for wire and cable manufacturing
- Competitive pressures in global markets
- Technological advancements requiring continuous investment
The India-US trade deal represents a significant step toward addressing some of these challenges while creating new opportunities for Indian manufacturers to participate more competitively in the American market.
