Amara Raja Batteries Ltd, India’s biggest manufacturer of lead acid batteries, reported a modest increase in revenue, and said it continued to face a demand slow down in its key markets of automobiles and telecom.
“The automotive sector is facing challenges of demand uncertainty due to social, regulatory and technological changes,” said Vice Chairman and MD Jayadev Galla.
Amara Raja supplies its batteries to nearly all the major automotive players in India, including Ashok Leyland, Ford, Honda, Hyundai, Mahindra & Mahindra, Maruti Suzuki and Tata Motors.
These companies have been hit by a severe slowdown in demand due to fears of an impending recession that have led consumers to postpone big-ticket purchases.
“However, the replacement demand for AMARON, POWER ZONE and QUANTA batteries across market segments helped the company achieve healthy volume growth,” said the company, which has a share of over 50% in the automotive market.
“The coming months will provide clarity on the medium and long term growth trajectory of this sector,” Galla said.
Telecom sector too has been under stress due to severe competitive pressures in the market.
The Hyderabad-based company said sales were supported by continued growth in exports to Indian Ocean Rim countries.
TECHNOLOGY SHIFT
The company continues to be focused on the lead acid battery market, even as a shift towards electric vehicles is driving demand for lighter batteries based on lithium ion technology.
However, lithium ion batteries are harder to make not only because of the more advanced technologies required, but also the requirement to import costly lithium.
Lithium is not manufactured in India, and most of the commercially available lithium in the world comes from a handful of South American countries like Chile.
So far, the biggest plans for setting up lithium ion battery manufacturing in India have been announced by a consortium of three Japanese companies, Suzuki, Toshiba, and Denso (Toyota).
They will invest Rs 3,715 cr in a plant in Hansalpur in Gujarat.
Other players who have announced plans in this area include the Tata group and the Adani group.
Galla said his company is also focusing on emerging opportunities.
“We are closely tracking the emerging opportunities and will continue to leverage our strengths to tap into these opportunities at the right time.”
The company also added that its planned investments in capacity enhancement and technology upgradation are “progressing as per schedule.”
Amara Raja Batteries managed to increase its net profit by Rs 33 cr to Rs 164 cr due to two factors: An increase in revenue by Rs 53 cr (3%) to Rs 1,747.5 cr, and a fall in tax epenses by Rs 14 cr.
“Our focus on operational excellence and cost efficiency is helping us stay competitive under difficult economic conditions,” CEO S Vijayanand said.