As I said, there is always an easy way out with such politically motivated cases. You can defect /change your loyalties and save your company. When one chooses to fight and not take the easy route, either one is confident or foolish. I believe that in this case, it is the former. Hope justice will prevail.
Anyway I just wanted to give more information and add value to the discussion. The posts can be deleted if it is otherwise.
@zygo23554 , would love to know your thoughts on Amara Raja. Looks really enticing
To me, it seems one major reason for large under-performance of stock for past 5-7 years has been the narrative around Li ion and Lead Acid batteries becoming obsolete (other than the huge run up in valuations prior to that).
Lead acid batteries are not going to vanish for number of reasons
- not enough Li and other metals needed for Li ion batteries (atleast not at reasonable price)
- no clarity/widespread adoption of recycling of Li ion batteries
- Lead acid technology proven and Li ion relatively new
I think the market realizes all this but the overall selloff hasn’t let this realization get reflected in the stock price.
Major negatives may be the Pollution Control Board uncertainty and large capex for Li-ion hurting potential free cash flow generation.
Company announces merger of plastic division of Mangal Ind into the public co. I think the acquisition is very fair (592 cr. being paid in shares based on today’s price on FY22 sales of 569 cr.). My notes from today’s call is below.
26.09.2022 (merger of plastic division of Mangal Industries)
1.22 cr. shares to be issued to promoters for merging plastic division of Mangal Industries Ltd. with Amara Raja. The plastic division did sales of 569.4 cr. in FY22 (412 cr. in FY20, 421 cr. in FY21). 17% EBITDA margins and 10% PAT margins. Asset turnover is 2.5x
CMP: 485 (valuation of 591.7 cr.) as on 26.09.2022 (net debt is 99 cr. and will be taken over by Amara Raja). Valuation exercise has been done on a relative basis where plastic division of Mangal Industries has been valued at a 25% discount on P/E vs Amara Raja
10% of raw materials in their current operations is plastic components
65 equity shares of Amara Raja is being issued for 74 shares of MIL
Caters exclusively to Amara Raja
Capacity of 37’000 MTPA (running @90% utilization) with 150 injection molding machines at 3 locations (Chittoor, Tirupati, Petamitta). Petamitta facility will be moved to Chittoor and Tirupati
Backward integration: Will bring plastic molding capabilities in-house
Will improve margins, bring recurring annual synergies of 5-6 cr. and is EPS accretive from first year
Expected to finish in 12-14 months
Low voltage components in an electric vehicle is serviced by an auxiliary battery which is lead acid based. Confident of growth in lead acid batteries for at least 15 years
For lithium ion business, mega scale plant will be setup using own balance sheet and bank debt. Currently not looking for any strategic investors
Seeing some shift to lithium ion batteries in telecom business
Disclosure: Invested (position size here, no transactions in last-30 days)
They are merging only the portion which is supplying battery moulds. Rest will continue to operate separately. Is it still a fair valuation? Why to invest 600 crores now on this considering the debt takeover?
CRISIL has mentioned some details about the fire incident in their latest report:
CRISIL Ratings has noted the announcement by ARBL on January 31, 2023, regarding the fire on the night of January 30, 2023, at its tubular battery plant at Nungundapalli in Chittoor, Andhra Pradesh. The plant, which caters to the home inverter battery segment (revenue of ~Rs 700 crore in fiscal 2022) was completely gutted in the fire caused by a short circuit.
Revenue from tubular batteries will be impacted in fiscal 2023 and for a significant part of fiscal 2024, though the company will look to mitigate the impact through sale of finished goods inventory and by stepping up trading in tubular batteries. Nevertheless, revenue growth in other automotive and industrial battery segments continues to be strong.
CRISIL Ratings believes the damage at the tubular battery plant will not have a major impact on the credit risk profile of ARBL, due to strong contribution from other segments and still healthy operating profitability, and cash generation. Besides, the company had taken a comprehensive insurance cover to cover the loss of assets, inventory including loss of profit.
With respect to the ongoing legal case pertaining to orders from the Andhra Pradesh Pollution Control Board (APPCB) for closure of the company’s plants at Chittoor and Tirupati, the Hon’ble High Court of Andhra Pradesh, vide its latest order dated January 19, 2023, has extended the interim suspension of plant closure orders until further orders without mentioning any date.
log9 materials are on the top of my list as li ion battery manufacturers
Amara raja recently took some stake here as they are into Lead acid batteries and not in Li Ion.
Log9 uses graphene to build fuel cells. This gives a 1000km distance. Green Clean tech. Graphene is their core expertise. Largest manufacuturers of Graphene in india right now. 35 patents by Log9 - most innovative startup by some top notch news channel too.
Fast charging is something they are working on which is rare from india.