Amara Raja Energy & Mobility Limited
Q1 FY26
Call date · August 18, 2025
1 · Management Commentary
Key Positives
- Consolidated revenues at INR3,401 crores, up 4% YoY and 11% QoQ.
- Lead Acid Battery business grew 4.5% YoY; 4-wheeler OEM volumes up 12–13% YoY, aftermarket up 5% YoY.
- 2-wheeler volumes grew 5–6% YoY.
- Tubular batteries showed substantial QoQ growth; Lubes sales volumes doubled YoY.
- Industrial UPS batteries grew 15% YoY.
- Lithium pack volumes crossed 100 MW in telecom, maintaining >50% market share.
- New Energy business revenue at INR122 crores, with strong storage-side growth.
Key Negatives
- Export volumes declined 7–8% YoY due to market and tariff challenges.
- Industrial Lead Acid volumes declined 3–4% YoY; telecom Lead Acid batteries down ~30% YoY.
- Margins subdued at 11.5% (standalone), impacted by material costs, power, employee costs, and higher warranty provisioning.
- Trading revenue mix increased to 23% (from 19% YoY), diluting EBITDA margin.
- EV side of New Energy business slowed due to lower OEM demand.
Forward Guidance
- Capex of INR1,200–1,300 crores for FY26; INR800–900 crores for New Energy projects, rest for Lead Acid.
- Tubular battery plant (Chittoor) ramping up; full capacity (150,000 batteries/month) expected in 2–3 months.
- Battery recycling plant (Cheyyar) refining operations ramping up; battery breaking to be fully online by Oct–Nov 2025.
- Lithium cell gigafactory (1 GWh NMC, 21700 cells) construction started; expected operational by end-FY27.
- Further INR1,200 crores investment required for New Energy subsidiary to complete research lab, CQP, and gigafactory.
- Exploring BESS (Battery Energy Storage Systems) across retail, C&I, and grid segments.
- Margin improvement expected as trading mix normalizes, power costs stabilize, and recycling operations ramp up.
- No new major client wins disclosed; ongoing discussions with OEMs for lithium business.
2 · Q&A Highlights
Q 1 (Export Volumes & Outlook): What is the outlook for export volumes given the recent decline?
A (Management):
• Export volumes declined 7–8% YoY due to weakened demand in far-off markets and tariff challenges; expect challenges for 1–2 more quarters, with growth revival targeted through market expansion.
Q 2 (Margins & Cost Pressures): Will margins improve as input costs stabilize and trading mix normalizes?
A (Management):
• Antimony costs stabilizing; no price hikes in Q1, last taken in Q4 FY25.
• Margin improvement expected as trading mix reduces and power costs settle; Q1 and Q4 FY25 likely the margin trough.
Q 3 (Capex & Lithium Cell Project): Update on lithium cell project timelines, investment, and product focus?
A (Management):
• First phase: 1 GWh NMC (21700) cell capacity by end-FY27; possible future LFP expansion.
• Additional INR1,200 crores investment required for research lab, CQP, and gigafactory.
• Initial focus on 2-wheeler and power tool applications.
Q 4 (Tubular & Recycling Plant Ramp-up): Status and challenges in ramping up new plants?
A (Management):
• Tubular plant commercial production started July 2025; full ramp-up in 2–3 months.
• Recycling plant refining operations smooth; battery breaking to be fully operational by Oct–Nov 2025.
Q 5 (Market Share & Unorganized Segment): Trends in unorganized market share and competitive landscape?
A (Management):
• Unorganized market remains at 10–15% in both 4W and 2W aftermarket; no significant change in recent years.
Q 6 (GST Rationalization Impact): How would GST rate changes affect the business?
A (Management):
• Lower GST on Lead Acid would put it on par with lithium (both at 18%); would reduce working capital burden and potentially streamline scrap collection and recycling.
Q 7 (Demand Outlook by Segment): What is the growth outlook for key segments?
A (Management):
• Automotive aftermarket: 4W to grow 6–7%, 2W at 10–11%.
• Industrial UPS: 5–6% growth expected.
• Exports: Targeting 15% growth, but FY26 may be subdued due to supply chain/tariff issues.
• Telecom: Maintaining >50% market share; migration to lithium ongoing.
Q 8 (Talent for New Energy/R&D): How is the company building talent for advanced chemistry and R&D?
A (Management):
• Three-pronged approach: global talent acquisition, expat recruitment, and partnerships/internal upskilling; currently 150–200 engineers in cell tech/R&D.
3 · Other Key Numbers
- Consolidated revenues: INR3,401 crores (Q1 FY26)
- Lead Acid Battery revenue: INR3,270 crores
- Lead Acid Battery business growth: 4.5% YoY
- 4W domestic aftermarket volume growth: 5% YoY
- 4W OEM volume growth: 12–13% YoY
- Export volumes: 7–8% YoY decline
- 2W volumes: 5–6% YoY growth
- Tubular battery Y-o-Y growth: 3–4%
- Lubes sales: Volumes doubled YoY
- Industrial UPS batteries: 15% YoY growth
- Telecom Lead Acid batteries: ~30% YoY decline
- Industrial Lead Acid volumes: 3–4% YoY decline
- Lithium pack sales to telecom: 100 MW+
- New Energy business revenue: INR122 crores
- Cumulative investment in Amara Raja Advanced Cell Technologies: INR1,200 crores
- Q1 capex infusion into New Energy subsidiary: INR350 crores
- Standalone EBITDA margin: 11.5% (adjusted: 11.7%)
- Trading revenue mix: 23% (vs 19% YoY)
- FY26 capex guidance: INR1,200–1,300 crores (INR800–900 crores for New Energy)
- Tubular battery plant capacity: 150,000 batteries/month
- Unorganized market share: 10–15% (4W/2W aftermarket)
- Telecom revenue share (Lead Acid): 6–7%
- GST rates: Lead Acid batteries 28%, lithium batteries 18%, scrap batteries 18%
- Indian Lead Acid battery market size (company estimate): INR40,000 crores
- Lithium cell gigafactory initial capacity: 1 GWh (NMC, 21700 cells)
- R&D/engineering talent: 150–200 engineers in cell technology and related areas