Amara Raja Energy & Mobility Share Analysis: Growth, Risks, Vs Exide Industries Ltd & Future Outlook

Is Amara Raja Battery Ltd Would Become the Next Battery Giant?

With the rise in the electric vehicles & renewable energy revolution from the past few years. The battery industry becomes the most favorable destination for investments due to its robust growth. It has become the most crucial sector for any country to become carbon neutral as the EVs production and green energy storage solutions and their uses can’t be achieved without having a means to store the electrical energy. It's not just used for the automotives and grid energy storage but also for the industrial & domestic use purposes.

The Amara Raja Energy & Mobility Limited operates under the battery sector and is working & investing aggressively in the batteries for its booming industrial & consumer goods demand, especially for the Lithium-Ion batteries. The company is investing Rs 9,500 Cr. To set up its manufacturing facility for the Li-ion battery production in Telangana. The company is known for its high-quality products & strong customer relationships with over 1 lakh point of sale (POS) in India.

EV Sector Growth – The Major Contributor to the Company’s Revenue

The Indian government sets the target of net zero carbon emission for the country by the year 2070. To achieve this ambitious goal, the government targets to phase out the internal combustion engines (ICE). With its subsidiaries and incentives being offered to the common people, the government policy goal is to achieve 30% of 4-wheeler automotives to be EV, 40% of the buses & 80% of the entire country’s 2-wheelers and 3-wheelers as the EV by the year 2030 for the same. Due to which the EV sector might see a significant growth of nearly about 30% for the next 10 years.

About Li-Ion Battery Manufacturing Plant of Amara Raja Energy & Mobility Ltd

Before discussing about its upcoming Li-Ion plant in Telangana, it’s important to note that they already have a Lithium-Ion cell packing facility near Tirupati in Andhra Pradesh. The cells which are packed in this facility are sold for the use in telecom and three-wheelers.

As mentioned above that the company is investing Rs 9,500 Cr. for building its giagafactory in Telangana for the upcoming10 years that will support 12-16 Gwh of cell manufacturing and 5 Gwh capacity of the cell packaging. This plant would cover approximately of 262 acres of land. With the company’s brave leap on the li-ion battery manufacturing, it would start getting closer to the company’s top contender in the same segment called the Exide Industries Ltd.

Why Amara Raja Energy & Mobility Ltd is Working on Lithium-Ion Batteries?

The company is working on li-ion batteries as there are higher possibility of lead acid batteries which are used in non-electric vehicles to go out of fashion. This is because the use of lead acid battery is to only provide auxiliary power to non-electric vehicles for the lighting, dashboards and readings. Whereas the li-ion batteries are used to power the main propulsion & auxiliaries of the EVs. Li-ion batteries are lighter, efficient, durable and more cost effective than the traditional ones. And their uses are not limited to the EVs and storage for the green energy only, but they are also used for/in 5G towers with small cell technology, data centers, electronics, space and defense, etc. In upcoming 5-10 years the world is going to expect a large-scale transition of Lithium- Ion batteries.

About Companies Future Plans for the Lead-Acid Battery

Well, from the above facts about li-ion batteries, one might think that these batteries are going to dominate in the market in upcoming years. That's true but it simply doesn’t mean that there is no more scope for lead-acid batteries. As a matter of fact, Amara Raja Energy & Mobility Ltd has planned a capex of Rs 400 Cr. in FY 2025 for its lead-acid battery business which is similar to what they’ve done in FY 2024. This is because there is still a significant growth for the lead acid battery in coming years due to the opportunity for the company to export its product in the western countries like U.S. & Europe. They are keen to develop premium lead acid battery products for their market to be offered by the company.

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Strategic partnership of Amara Raja Energy & Mobility Ltd

Gotion High Tech Ltd is among the top Lithium-ion battery producer in China and ranked 9th on the global stage that holds significant global market share of 2.2% with its 20 manufacturing facilities across the world along with 3 of them in the United States alone in power batteries production. The company holds 8,000 patents, such a large number of patents only because of having a global network of its research and development centers in China, Japan, U.S., Singapore, Germany and in Europe. By the year 2025, the combined manufacturing capacity of the company is expected to reach 300 Gwh, comparing with the Amara Raja Energy & mobility Ltd, whose capacity would reach 12-16 Gwh when got finished. This company might be proved as an ideal match to help Amara Raja Energy & Mobility Ltd to dominate the entire supply chain and li-ion battery market of India.

Company’s New Energy & Mobility R&D Center

This laboratory is filled with product testing & material research, prototyping, product durability analysis & proof of concept demonstrations. It would not just address the company’s need for development & research but also offers resources to other companies as well. It also includes 2 Gwh of piloted manufacturing capability within 24 months. This facility would touch to 16 Gwh cell capacity in upcoming 10 years. Cell manufacturing would be accomplished partnering with Gotion High Tech Ltd for Lithium-Ion Phosphate (LFP) & for NMC 2170 with an unnamed partner sharing good credibility in south-eastern countries referred by management of Amara Raja Batteries & Mobility Ltd for 2-wheelers

Company’s Bold move on EV Charges

After the missionary plans of the company for its next-generation battery production facilities, it is looking forward for revolutionizing the EV charging infrastructure. For this bold move, the company has been manufacturing the EV chargers for 3 wheelers. As a matter of fact, they have signed a MoU with Piaggio India, under which it would supply charger for its 3-wheeler. Furthermore, they are also interested to start producing for other including the ones for the 2-wheelers.

Cell Packing Unit

The construction of their cell packing facility’s development in Telangana of 5 Gwh is concluded along with the commission of final set of equipment. It would not just allow the company to target the 2-wheeler market with their 2170 AMC cylindrical battery which is a proven design used by ola electric for their scooters but also helps to cater the customers for their li-ion cell packs. Furthermore, it also includes the manufacturing of LFP batteries in cylindrical & prismatic form factor, leveraging its joint partnership with Chinese company Gotion High Tech Ltd.

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Financial Ratios and Performance

With a market share of over 30-35% in the battery sector and lead-acid battery business being the main source for the company’s revenue, it has established it as a well-known brand in the automotive batteries. After so many years working on the lead-acid batteries, it has become the second largest battery manufacturer after Exide Industries Ltd. The major source for its revenue is from automotive sector contributing around 67%, whereas the industrial battery segment contributing approximately 30%.

The company has shown a compounded annual growth rate of approximately 11% for the sales perspective & 13% for the profit growth. ROCE being about 18.7%, shows that the company is able to well utilize its investors' money. Furthermore, Debt-to-Equity being 0.05 is another green flag indicating that the company can utilize more of its profits for the further expansion plans rather than exhausting its huge portion interest payments. Several such other parameters like P/E ratio, P/B ratio, interest coverage ratio looks fine, suggesting that the company has upheld its financial & can continue to do so in the future as per its aggressive push towards next-generation power batteries.

Amara Raja Batteries Vs Exide Industries Ltd : A detailed Comparision

As the demand for Li-Ion batteries are on surge, both the players are working hard to tap out this opportunity. While the Exide Industries Ltd, is pushing hard for its continues domination in the Indian market. Amara Raja Batteries on the other hand, proved itself to be a major- threat for Exide Industries with its mind-boggling growth over the last two decades. While the Amara Raja Batteries is partnering with a Chinese company known as Gotion High Tech Ltd for lithium-ion battery & cell packaging and manufacturing with an investment of over ₹9,500 crore. Exide Industries Ltd also entered into a partnership with a Chinese company called Svolt Energy Technology, supporting to a state-of-the-art, greenfield plant with additional tech transfer expertise. For the purpose, Exide Industries Ltd have committed $800 million with its new subsidiary called Exide Energy Solutions for 12 Gwh Li-Ion cell manufacturing. This plant is expected to be fully operational by 2027, but the first phase with 6 GW of capacity will be commenced by the end of 2025.

Frequently Asked Questions

1. How do they finance the cost for building its Lithium-Ion battery manufacturing facility?

Ans: - For the initial first 2 years, they would use their free cash flow to fund the construction of the li-ion plant, afterwards they are going to opt for raising either equity or debt for the further funding, according to the management.

2. How much revenue would this li-ion plant generates for the company?

Ans: - It could generate the same as its lead-acid battery business in upcoming 5-6 years. Moreover, it could bring the company with 2.5 billion dollars for its fully utilized capacity.

3. What are the challenges the company may face in the future?

Ans: - Several challenges like raw material prices, China’s supply chain monopoly, geopolitical factor and increasing competition from the global players, start-ups and oil giant exploring new sectors for their future source of revenue being the most concerning factor.

DISCLAIMER: we are not SEBI –registered, all the above information is for education purpose only, consult with your financial advisor or do your own research before investment.