If it is a pollution issue, I will be fixed quickly. A political issue ( because Amara Raja promoter is a politician ), is a serious overhang on the long term prospects of a company. Most of the politician owned companies behave like a cyclical stocks, same will be case of Amara Raja batteries. I strongly believe long term investors will shy away from such companies.
Political dynasties are not involved. He can be turncoat and all problems will gradually go away. It’s not like Heritage where first family is involved. Already they seem to have received a court stay
For Exide, there were 3-4 major issues wrt Amara Raja :
- Higher employee cost
- Lower margins due to higher OEM share and other
- Business support for Insurance company
I think management is working on 1 and this is being mentioned in their annual presentation for las t two years.
for <2> , they are working to recycle LEAD in their own plant which will hedge them against higher
LEAD prices. (Can hit margins when lead prices are softer) Apart from their share in replacement market is increasing . This can be seen from the numbers as the margins are increasing.
Now <3> , Insurance is also becoming profitable and has the required scale to be meaningful player.
So, I’m more confident over EXIDE rather than Amara Raja.
Please share your views on the same.
amaraja order to close factory has been on hold and i am sure they will come out of it.
i am not sure what you mean.If company can grow market will rerate irrespective of whether he is politician
Any update on why Stocks like Exide and amaraja is falling and have not generated any return in last 5 years ?
Can we say in a nutshell that these companies are loosing significance as everyone is making there batteries and we don’t need exide and amaraja ?
Whilst it’s a question that I have been thinking about as well - I am leaning towards technology obsolescence as being the potential reason.
Both the companies have are major players in the lead-acid battery segment with quite robust network of customers, dealers etc. While there has been a big evolution in battery storage technology in China and US Like lithium ion, there hasn’t been as much development in India around… in fact, only in the last few years companies are now trying set up capacity. At that, there are quite a few companies that are setting up and there are newer and more efficient technologies that are being developed (read Reliance investment in Ambri)
I think the Customer and dealer networks can be a decent advantage if they can keep up with the evolution just like other players in India.
I have recently invested since I feel the pace of change will be quite slow and will likely take 10-15 years for the new storage technologies to become mainstream in india…
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Did nyone found a mention of wat they vl do with the funds received from the sale? I didn’t found nythng in filing?
The valuations for the Battery business net of above proceeds looks quite attractive now. Would luv to hear thoughts from those already invested.
Disclosure :- not invested
I too was wondering the same thing.The market cap is 16000 crore,now they get proceeds of 6000 crore(most of which are shares only 800 crore is cash) from this sale.The total revenue is 16000 crore out of which insurance biz has a revenue of 5000 crore.The net profit excluding the insurance biz is 771 crore in 2020 and 734 crore in 2021.
Both Amarraja and exide are at p/e of around 15 right now.Do people think the shift to electric will be swift?
A perspective on EV & its impact & future of LAD batteries was best given by Amara Raja in thr recent investor call. Your EV queries will find some probable answers there.
U’ve covered the valuation part well, nothing more to add on that. Both ARBL & Exide are at reasonable valuations & Exide is a bit undervalued only post the deal. The returns here will be made on the basis of one’s reasonable estimate of how mch growth will be thr for LAB alongside LIB. Both cos. are currently pricing zero future growth.
Distribution of cash - This is first time in a decade I’ve seen the co. divesting. The previous decade went in buying this business, investing in PE & public equity albeit on a smaller scale. The capital allocation going fwd vl be the key.
On a side note - They might pay sm special dividend from the proceeds next yr as it vl be the 75th anniversary… 
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This is the statement from the latest annual report 2021,
“By 2030, India is expected to
experience an accelerated
adoption of electric mobility at
varying degrees across vehicle
categories - rising from about
6% of the on-road vehicle
population to about 33% in
2040. Even as India transitions
to e-mobility, Lead-acid battery
demand will continue to grow
alongside the ICE vehicle.
Moreover, the growing traction
of Electric Vehicles (EV) will
further enhance volumes
for lead-acid batteries. This
is because it will have a new
application - as an auxiliary
battery in the EV.”
Seems like 67 percent of the vehicles will still be non electric in 2040.Not to mention growth in the number of vehicles ,conversion of unorganized market into organized as well as usage as an auillary battery.
Seems like Amarraja is concentrated on battery segment whereas exide is pursuing other areas.
For Amarraja,
If we assume that the profits double in the next five years and the stock price remains same then the p/e drops to 8.7,which seems a little pessimistic.
I dont think the stock price of either exide or amarraja are reflecting their fundamentals ,but the potential returns also dont seem very excessive.
Disclosure:Not invested.
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My two cents :
- Exide now will have much better ROCE as they will probably divest the HDFC Life stake (and maybe invest in the Li-ion battery plant) in the future. Even if they do not, they will now own a much more efficient part of a market leader in a sector with huge growth (underpenetration in insurance + taking LIC share + consolidation ) which is a great thing
- LA batteries will be required for auxilliary power in all 4W at least even in 2040. And the penetration of that will continue to increase in absolute numbers. So a low single digit growth for auto segment (notwithstanding the degrowth in 2W LA business) can be assumed.
- 5G roll out will require a large number of additional towers with battery backup. Read that number of towers required will be 4 times more than the current number of towers. Amara Raja is a leader in telecom battery so they may take a larger share of the pie but with 4W Auto + 5G + backup requirements for renewable - there will definitely be more growth in the future for the sector which is a duopoly.
- The EV battery market is up for grabs - esp in 2W - but who will capture a good share of that remains to be seen. If it is the auto companies manufacturing in house, the battery players will lose out but if auto companies want to focus on their core business - brand, assembly and technology, they might let ARBL and Exide which have the network to fluorish - in which case the auto business will also grow at much higher rates. EV Batteries are very expensive at the moment (4W EV batteries last for 2-4 years and cost upwards of 2.5 lakhs to be replaced) and the reason (apart from the fact that the tech is not mature) is that auto companies are not efficient at this. I imagine that if each of the auto companies made lead acid batteries also for themselves, the cost of batteries would have been much higher than it is today.
Disc: Invested in Exide and Amara Raja
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Finally I put my money where my mouth is :- 
. Initiated a position in Exide today basis my valuation view mentioned for both the battery players. Exide didnt move much today & thr cheap valuation of battery business lured me to take the plunge. I’m taking this bet purely on basis of the LAB business sustaining & providing some growth to these players atleast for next 5-7 yrs. Maybe completely wrong in my estimate of disruption.
@rr2020 : -
Regarding Exide LI sale,the way I see it, HDFC Life made a smart deal by issuing thr overpriced shares to acquire the asset at slight overvaluation, or control premium as you say. The onus of capital allocation comes back to Exide now & it remains to be seen how they go abt allocating it. I refer back to thr invesment in Faering capital & checked out the investments made by this firm. Do check out the website : -
So, Exide mgmt is surrounded by plenty of capital allocator advisors, it seems
I also wont mind this becoming more of an investment holding\venture capital firm which also has a battery business on way to wound up over next 5-7 yrs. It’s a remote possibility, but u nvr know.
Disclosure : - Invested today. Allocated 2% of portfolio for nw
My main thesis is that they will make money in LA batteries for next 10 years with reasonable growth and improving margins.
Others are just options and I might not hold if they become a VC firm with multiple investments. There are better capital allocators available in the market. Why to buy Exide?
So true. The gist of why or why not a particular investment is wat matters in the end.
I also noticed ur disclosure now else the obvious question would have been why Exide over ARBL.
Now, the question will be more frm allocation point of view : -
-
Do u hold both Exide nd ARBL in equal %age allocation in ur portfolio?
-
If yes, do u plan to continue viewing this as a single theme on LAB sustaining as an industry?? Or is ur present invetlstment a wait-nd-watch whr the weightage in one or the other vl increase as thesis pans out??
Plz take this over DM if found irrelevant for this thread.
Disclosure :- Same as above
Since the insurance business is sold off,the stock might get rerated right?What i have observed is that exide has traded above 28 p/e for 6 times in the last 10 years.Right now the company is at 18 p/e .If the revenues double even in the next 5 years (along with profits),combined with rerating there might be significant upside.
Disclosure:Not yet invested.
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The biggest upside or decline can happen depends how it plays energy storage game . Pilots with Tata power and CESC are one the key developments
That is $460 billion market … Read story of CATL in China …
UBS estimates that over the next decade energy storage costs will fall between 66% and 80%, and that the market will grow to as much as $426 billion worldwide. Along the way entire ecosystems will grow and develop to support a new age of battery-powered electricity, and the effects will be felt throughout society.
CATL is experimenting with alternative like SODIUM which is more ideal for Indian market
https://balkangreenenergynews.com/catls-sodium-ion-batteries-threaten-to-take-over-world-market-from-lithium/
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Who is currently supplying the EV battery to Tata motors and other EV car makers ? My understanding is Amara Raja and Exide are still in early stages. Is it currently being imported ? Looking at Tata OEM supplier list in the internet , I couldn’t find any names of EV battery supplier
Energy storage has runway.
Growing Telecom, EV, Solar and auto after market will ensure future growth. Amaraja has planned 7000Cr Capex.
Exide, Amararaja are well priced. Once, auto sector gets an uptick they should start rallying.
Exide is flush with cash
Amara Raja is ambitious
And runway is good.
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