Detailed Narrative
Automotive Segment Resilience Amidst Mixed Signals
The automotive segment showed strong domestic performance with 4-wheeler OEM volumes growing 12-13% and aftermarket volumes up 5%. 2-wheeler volumes across all segments grew 5-6%. However, this domestic strength was partially offset by a 7-8% decline in export volumes, which management attributes to competitive intensity and tariff challenges in key markets like APAC and the Middle East.
Industrial Segment: The Great Migration
The industrial segment is witnessing a significant shift as telecom customers migrate from Lead Acid to Lithium batteries, resulting in a 30% volume drop for Lead Acid in that sub-segment. Amara Raja is successfully defending its position, having sold nearly 100 MW of lithium packs to telecom, maintaining a >50% market share. Meanwhile, the industrial UPS battery segment remains a bright spot with 15% growth.
New Energy Pivot and Gigafactory Roadmap
Management has infused ₹350 crores into its New Energy subsidiary this quarter, bringing cumulative investment to ₹1,200 crores. They plan to invest another ₹1,200 crores to complete a research lab and a 1 GWh NMC cell gigafactory by the end of FY27. Notably, the company has scaled back its initial NMC capacity target from 2 GWh to 1 GWh to remain flexible for a potential shift toward LFP chemistry.
Margin Headwinds and the Path to 13%
EBITDA margins were subdued at 11.5% due to high material costs, particularly Antimony, and a higher mix of traded goods (23% of revenue). Management expects margins to recover toward the 13% range as they ramp up their own tubular battery manufacturing (replacing traded goods) and benefit from their new recycling and refining operations in Cheyyar, which are currently in trial runs.
Capex Intensity and Financial Strategy
The company is entering a high-capex phase, projecting ₹1,200-1,300 crores for FY26. Approximately 70% of this (₹800-900 crores) is dedicated to New Energy projects, while the remainder supports the core Lead Acid business. Despite the heavy investment, management remains focused on maintaining market leadership in telecom and expanding its presence in the emerging BESS (Battery Energy Storage System) market.