This is new:
7 Likes
Amara Raja didn’t win Advanced Chemistry Cell (ACC) Battery Storage Manufacturing PLI biddings both the times. Reliance won both the times (25% of its bid the 1st time, 100% of its bid the 2nd time)
24 March 2022 - Press Release:Press Information Bureau
4 September 2024 - Press Release:Press Information Bureau
3 Likes
Q2 FY25 Press.pdf (506.0 KB)
Result is flat …wait and watch of management commentary
Battery Recyling Plant at Cheyyar- Tamil Nadu
1.5 Lac MTPA (Phase I and Phase II) State-of-the-art Advanced Green field Lead Acid Battery Recycling plant
• Refinery construction completed and Commercial production to commence in Nov/Dec 2024
Tubular Battery Plant at ARGC- Chittoor
1 Mn+ Battery/ Annum Advanced Tubular Manufacturing plant
• Plant Redesigned with improved Fire Safety Measures
• Commercial production expected to commence during Q4 FY25
11 Likes
AMARAJABAT_09022025153258_InvestorPresentation_Q3FY25.pdf (2.8 MB)
Read Financial after adjusting Insurance claims of Rs 111.1 Cr!!! Result is very flat and margin pressure on the operating level!!!
Battery Recyling Plant at Cheyyar- Tamil Nadu
*1.5 Lac MTPA (Phase I and Phase II) State-of-the-art Advanced Green field Lead Acid Battery Recycling plant
• Phase I with 50K MTPA refinery capacity (eventual capacity of 1Lac MTPA) commercial production commenced in December 2024. Battery breaking
expected to commence from Q1- FY26.
Tubular Battery Plant at ARGC- Chittoor
1 Mn+ Battery/ Annum Advanced Tubular Manufacturing plant
• Plant Redesigned with improved Fire Safety Measures
• Commercial production expected to commence from Q4
FY25/Q1 FY26
Almost ONE Quarter will be delayed of the projects.
3 Likes
Concall notes for Q3 below
FY25Q3
- Lead acid contributed 96% with rest from new energy business
- Lead acid
- Revenue grew by 9% YoY from strong volume growth from automotive and industrial segments. Revenue is expected to grow at 11-12%
- 4W volumes: aftermarket 11% OEM muted
- 2W volumes: aftermarket and OEM ~ 16-17%
- Export volume: 8-9% due to order changes during 3QFY25 and expected to grow in double digit by end of 4QFY25
- Industrial segment: UPS and exports have grown significantly while overall volume growth was muted due to dip in the telecom segment (-25% YOY)
- Don’t expect growth in the telecom segment in near term
- Trading business was 10% and telecom segment was 10-11% of revenues
- Tubular plant will come online in Q1FY26 with 1100-1200 cr. revenues.
- Received cumulative insurance claims of 275 cr. for tubular plant reinstatement post-fire, leading to exceptional gain of 111 cr.
- Recycling plant commenced first phase of commercial operations, refining 50,000 tons, with smelting operations to begin by end of Q1 FY26.
- Market share of 33-34% in the automative aftermarket with higher share in 2-W (35-36%), 25% in OEM 2W, 57-58% in telecom segment (lithium+ lead), 42-43% in UPS, 10-11% in inverter batteries
- Current capacity utilization of 4W is 85-90% and 2W is 90%
- Current capacity for AGM batteries is 2 mn.
- New energy
- New energy business revenue decreased by (-20% YoY) due to some change in OEM side and is expected to recover with localization plans
- In FY24, lithium packs and chargers generated ~ 500 cr. with ~10% growth expected in FY25
- The first gigafactory for NMC cells is expected to commence operations between late 2026 and early 2027
- Initial revenue expectations for the NMC cell plant are based on $70 to $75 per kilowatt hour pricing, with a phased capacity ramp-up.
- Lubes distribution revenue was 100 cr.
- Gross margin impacted due to increased costs of alloy metals (tin, antimony) and power cost revisions from last year from AP government (35-37 cr.). Power cost revision will be ~14 cr. in FY25 in Q4 and should reduce margins by 0.4-0.5%. By Q4 all previous year levies will be over
- They plan to rampup renewable energy sourcing to reduce power costs
- There was comprehensive income of -132 cr. due to the fair value reassessment of investments made in some startups
- FY25 capex ~ 400 cr. (excluding tubular plant) + 200-300 cr. on new energy business
- FY26 capex ~ 1000 cr.
Disclosure: Invested (no transactions in last-30 days)
17 Likes
Hi all, I just re-valued Amara Raja after the Q3 FY25 results:
Details can be found here: 20250323_ARE&M_valuation_OpenSource_Investor.xlsx (41.7 KB)
Competitive environment
Amara Raja and Exide are the two major players in the Indian automotive and industrial battery segments, controlling over 50% of the production. Exide had a clear majority prior to 2008 but had put their CAPEX on hold due to the 2008 financial crisis, which allowed Amara Raja to rapidly gain market share.
Today, Exide is still larger, but both are at comparable volumes in the automotive segment. In the industrial segment, Exide is far larger, with more than twice the production capacity compared to Amara Raja. Both companies have announced plans to ramp up Li-Ion cell production, which is expected to be the fastest-growing segment.
Other domestic competitors
Several other competitors operate in the Indian battery market across various segments:
- Reliance recently won a PLI award for 10 GWh and have announced 30 GWh total production capacity
- Tata Green Batteries - announced 20 GWh Li-ion capacity plant
- HBL Power Systems Ltd - Specializes in batteries for aviation, railways, defense, and heavy industries
- Eveready Industries India Ltd - Known for dry cell batteries and lighting products
- Indo National Ltd - Offers a range of battery products
- Okaya Power Pvt. Ltd - Focuses on solar and inverter batteries
- Luminous Power Technologies Pvt. Ltd - Provides home solutions including inverter and UPS batteries
- Base Corporation - Manufactures batteries for various industries
- Su-Kam Power Systems - Specializes in solar power solutions
- Some OEMs like Ola Electric and TVS have also announced that they will add Li-ion capacity, to secure the supply for their EV production
International competitors
Some international competitors include:
- Clarios ( formerly Johnson Controls**) is the largest Lead-Oxide battery producer**
- Panasonic, Duracell, Energizer and Eveready are the largest zinc-carbon producers
- Alcad, Enersys and HBL Power Systems are the largest nickel cadmium producers
- The largest Li-Ion producers are shown below; The biggest player, CATL, has 242 GWh of capacity, almost 10 times India’s entire capacity (approx. 25 GWh as of 2025)!
Moat
-
Established Market Position : high market share in various battery segments:
- Automotive aftermarket: 33% ~ 34%
- Automotive OEMs: 25% in two wheelers & 35% in four wheelers
- Telecom batteries: 57% ~ 58%
- UPS batteries: 42% ~ 43%
- Inverter batteries: 10% ~11%
-
Distribution Network : 39 Distribution points across India, 550+ Amaron franchisees and 100k+ POS locations. Provides a great platform to launch new product lines and service existing customers
-
International Presence : The company exports to over 50 countries
-
Strategic Partnerships : The technical licensing agreement with Gotion High-Tech (Lithium-Ion technology), €30m EUR investment in InoBat and venture investment in log9 (Amphion)
-
First-Mover Advantage : By establishing India’s first lithium-ion gigafactory, Amara Raja is securing a leadership position in the country’s emerging EV battery market
-
Manufacturing Excellence : With eight advanced manufacturing facilities across India, the company has developed considerable expertise in battery production, quality control, and operational efficiency. These capabilities can be leveraged as it expands into lithium-ion technology.
-
Large CAPEX requirements : A 3 GWh Li-ion plant costs $300mn (₹25bn), and subsequent 1GWh takes $100mn (₹8.3bn). So, small players find it difficult to compete with large scale incumbents in the space
Financials
Amara Raja has grown revenues at 12% CAGR in the last 6 years, outpacing Exide, which managed only a 3% growth in the same period. In terms of operating margins, Amara Raja’s 12%~16% operating margins since 2019 are also slightly better than Exide, who averaged around 10% margins.
This has translated to better ROCE & ROE figures for Amara Raja , as compared to Exide:
Capital allocation and dividend
Over the last 10 years, majority of cash flow was used for capacity expansion.
Break-up of capital allocation:
- 78% - capex (majority of which was for capacity addition)
- 16% - dividend (have commented that they will maintain around 15% dividend payout in the future)
- 3% - debt repayment
- 4% - build-up of net-cash position
Their CAPEX has been well spent, resulting in an average ROCE of around 19% in the last 5 years, even though they are only operating at 65%~80% utilization at their existing plants.
ROCE among leading global Li-ion producers has shown substantial variability, ranging from 5% to as high as 20%:
Apart from the Li-Ion Gigafactory corridor in Telangana, the company has various other avenues for growth:
Transportation
- Passenger vehicles (2 / 3 / 4 wheelers)
- Commercial vehicles
- Railway
- Marine
- Off Highway Equipment
- Defense
Industrials & Utilities
- BESS (Battery Energy Storage System)
- EV Charging
- Telecom
- Data centres
- Renewable energy storage and grid supply
- Hybrid power generation
- Microgrids
The company is also active in battery recycling, with a dedicated recycling facility in Tamil Nadu, which began operations in November 2024. This facility has an initial recycling capacity of 150,000 metric tons per annum, with plans to increase capacity in phases.
Risks
- Competitive Intensity : there is currently oversupply in Li-Ion batteries in India , as India’s EV production volumes are in the nascent stages. Global battery manufacturers are aggressively expanding capacity, potentially creating oversupply situations and pricing pressure in the future as well. There are also non-traditional players like Reliance looking to aggressively expand in battery production
- Environmental Compliance:
- In 2021, the Andhra Pradesh Pollution Control Board (PCB) issued closure orders for Amara Raja Batteries’ plants in Karakambadi, Tirupati, and Nunegundlapalli, alleging violations of environmental regulations. The PCB claimed excessive lead contamination in nearby water bodies and elevated lead levels in employees’ blood samples. However, the company has refuted these claims and seems to have been successful in defending their case.
- in Jan 2023, a fire broke out at one of the manufacturing facilities of the Company at Chilloor, Andhra Pradesh which caused damages of ₹4.4bn, but no human casualties
- Execution Risk : Establishing gigafactories and scaling lithium-ion production involves complex manufacturing processes that differ significantly from traditional lead-acid battery production. Any execution missteps could delay production ramp and market penetration.
- Low utilization of new energy plants, leading to low ROCE.
- Equity dilution to fund capacity expansion - the company has grown the number of shares outstanding by 7.1% in 2024 to fund their acquisition and CAPEX
- Raw Material Supply : Lithium-ion batteries require specific raw materials that face supply constraints and price volatility. The company is looking to reduce its dependence on China for raw materials, exploring alternatives such as buying lithium and cobalt from countries like Australia. However, the reality is that China dominates the supply chain, and companies may be forced to deal with them for the next decade, despite efforts to invest in domestic production and sourcing
- Technological Disruption : Newer battery technologies (e.g. Hydrogen, Sodium-Ion) could emerge that render current investments obsolete
- Traditional Business Erosion : As the market shifts toward EVs, the traditional lead-acid battery business could face declining demand faster than anticipated, potentially affecting cash flows needed to fund new initiatives
- Management team : Jayadev Galla and the current team at the helm have over 20 years of experience scaling up their battery business. However, the next stage of growth is highly complex. So, it will require continued rational decision making and course correction, as it is difficult to predict the demand-supply equation in 5~10 years from now. They also have a complicated relationship with the Telangana and AP governments, having previously been active in politics. However, with My. Galla’s exit from politics in Jan 2024, some of these conflicts seem to have been resolved.
Valuation
The two main factors influencing future value are the re-investment rate and ROCE - I’ve simulated 3 cases above to determine a valuation range.
The stock seems reasonably priced at 19x earnings (5% earnings yield). The current valuation seems to assume a growth rate of 9~11% in the next 10 years, which is fairly conservative given the various growth avenues available to the company.
Conclusion
Amara Raja seems to be one of the best-run businesses in India with a promising runway ahead. For a long-term investor, this represents an opportunity to gain exposure to India’s energy transition at a reasonable price. However, there are multiple risks involved and strong execution is needed to capitalize on the tailwinds. I personally like the risk-reward equation, and the company forms around 5% of my India portfolio, with an average investment price of ₹868.
Thanks for reading and let me know what you think!
Best,
Sharad
OpenSourceInvestor @ Substack
18 Likes