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    Amara Raja Ener.

    ARE&M
    Automobile and Auto Components·7 Nov 2025
    Management Summary

    Amara Raja Energy & Mobility reported a 6.5% YoY revenue growth to INR 3,467 crores in Q2 FY26, driven by strong OEM demand and over 50% growth in its New Energy business. Operating margins, while improving QoQ, were subdued YoY due to one-time EPR provisions and higher warranty expenses. The company is investing significantly in its lithium subsidiary and expects operational improvements from new plants in upcoming quarters.

    Highlights

    7

    • Total consolidated revenue stood at INR 3,467 crores, marking a 6.5% growth over the previous year.

    • Lead acid business registered a revenue of INR 3,297 crores, a growth of around 5% on a Y-o-Y basis.

    • OEM volumes across 4-wheeler and 2-wheeler segments grew about 30% during the quarter on a year-on-year basis.

    • New Energy business delivered healthy quarterly performance with a revenue of around INR 170 crores, a growth of more than 50% compared to the previous year.

    • Lithium telecom volumes registered substantial growth during the quarter on a Y-o-Y basis.

    • UPS volumes have grown by around 5% during the quarter.

    • Antimony prices saw at least about 10% reduction, contributing to gross margin improvement.

    Concerns

    5

    • Aftermarket volumes remained stable across product segments on account of procurement delays following the revision in GST rates.

    • International volumes remained flat with no growth compared to the previous year on account of tariff uncertainties.

    • Lead acid industrial volumes degrew during the quarter by around 11% over the previous year, primarily on account of decline in telecom volumes.

    • Operating margins are subdued on a year-on-year basis, primarily due to provisions with respect to higher warranty expense and EPR liability provisions, with a one-time impact of around INR 35 crores.

    • Potential minor delays in procuring lithium-ion equipment due to China restrictions, though alternatives are being explored.

    Key financials

    Single quarter

    05 metrics
    1. 01Consolidated Revenue₹3,467 Cr+6.5%YoY
    2. 02Lead Acid Business Revenue₹3,297 Cr+5%YoY
    3. 03New Energy Business Revenue₹170 Cr+50%YoY
    4. 04Standalone Operating Margin12%+0.5%QoQ
    5. 05Adjusted Operating Margin12.4%

    Segment breakdown

    • Lead Acid Business₹3,297 Cr95.1%
    • New Energy Business₹170 Cr4.9%
    Donut· Share of Revenue

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    ₹1,400 crores

    Liquidity

    Cash ₹250 crores

    Lithium subsidiary carries cash of around INR250-odd crores.

    Guidance & targets

    6
    CategoryTargetPriority
    Profitability
    Standalone Operating Margin
    13%
    		High
    Profitability
    Original EBITDA Margin
    14%
    		Medium
    New Energy Business Contribution
    Overall Revenue Share from New Energy
    5%
    		High
    New Energy Business Contribution
    Overall Revenue Share from New Energy
    7% to 8%
    		High
    Lead Acid Battery Revenue Growth
    Revenue Growth
    8% to 10%
    		High
    Gigafactory Commercial Production
    Commencement of Commercial Production
    H1 of calendar year '27
    		High

    EPR Credit Cost Impact

    Next quarter and subsequent quarters
    CurrentINR 35 crores one-time provision in Q2 FY26
    TargetMonthly impact not more than INR 1 crore, or zero if collection improves

    Why it matters

    To verify if the EPR cost becomes a recurring expense or if management's efforts to improve collection mitigate it.

    But going forward⏳, the impact on a monthly basis will not be more than INR1 crore depending on the sales volume. So this is not going to be a recurring expenditure.

    How to verify

    key_financials.metrics[label='EBITDA Margin']

    Risks & concerns

    7
    RiskSeverity

    EPR Credit Cost

    INR 35 crores one-time provision for EPR liability due to increased collection obligation (90% vs 70% previously). — Management acknowledged

    medium

    Subdued Operating Margins

    Margins subdued YoY despite QoQ improvement, attributed to higher warranty expense and EPR liability provisions. — Management acknowledged

    medium

    Flat International Volumes

    International volumes remained flat compared to previous year due to tariff uncertainties. — Management acknowledged

    low

    Decline in Lead Acid Industrial Volumes

    Lead acid industrial volumes degrew ~11% YoY, primarily due to decline in telecom volumes (lithium migration). — Management acknowledged

    medium

    Potential Delays from China Restrictions on Lithium-ion Equipment

    China's restrictions on equipment for lithium-ion cell manufacturing could cause minor delays, but alternatives are being explored. — Management downplayed

    low

    Competitive Pressure in Lithium Telecom

    Higher competitive pressure in the lithium pack side for telecom applications due to more players (6-7) compared to lead acid (3). — Both acknowledged

    medium

    Lead Price Volatility and Higher Procurement Cost

    Lead prices seen going up, potential for higher procurement costs next quarter, with no immediate pricing action taken. — Both acknowledged

    medium

    Q&A highlights

    8

    “No, no, Raghu. I think this is a onetime cost that we have factored considering what could be the total liability till date... But going forward, the impact on a monthly basis will not be more than INR1 crore depending on the sales volume.”

    Clarifies that the INR 35 crores provision is a one-time adjustment for past liability, and future impact is expected to be minimal, potentially zero if collection improves.

    asked by Raghunandhan N. L.

    3 min read6 chapters

    Detailed Narrative

    01

    Q2 FY26 Consolidated Performance Overview

    Amara Raja Energy & Mobility reported a consolidated revenue of INR 3,467 crores in Q2 FY26, marking a 6.5% year-on-year growth. The lead acid business contributed approximately 95% of this revenue, while the New Energy business accounted for the remaining. Standalone operating margin stood at around 12%, improving by 0.5% quarter-on-quarter, though it remained subdued year-on-year due to higher warranty expenses and a one-time📎 EPR liability provision of INR 35 crores.

    02

    Lead Acid Business Performance

    The lead acid business achieved a revenue of INR 3,297 crores, growing 5% YoY. This growth was primarily driven by robust OEM demand in both 4-wheeler and 2-wheeler segments, with OEM volumes increasing by about 30% YoY. However, aftermarket volumes remained stable due to procurement delays and GST rate revisions. Industrial lead acid volumes declined by approximately 11% YoY, mainly due to a shift in telecom towards lithium solutions, while UPS volumes grew by about 5%.

    03

    New Energy Business Momentum

    The New Energy business demonstrated strong growth, with revenue reaching INR 170 crores, an increase of over 50% YoY. This was supported by increased demand for telecom packs and chargers, with telecom volumes growing substantially, supplying 150 megawatts. The company also commenced supplying 3-wheeler packs with LFP cells during the quarter. The order book for AC and DC chargers has surpassed 5,000 units, and the company aims for the New Energy business to contribute 5% of overall revenue by the end of FY26, and 7-8% by FY27.

    04

    Capital Expenditure and Lithium Investment

    The company's consolidated capex for H1 FY26 was approximately INR 650 crores, split between New Energy and lead acid businesses. For the full year, the total capex is projected to be between INR 1,400 crores and INR 1,500 crores, with a significant portion allocated to the New Energy segment in H2. An additional INR 350 crores was infused into Amara Raja Advanced Cell Technologies (the lithium subsidiary) in Q2, bringing the total investment to INR 1,200 crores. The subsidiary currently holds about INR 250 crores in cash.

    05

    EPR and Warranty Provisions Impact

    A one-time📎 provision of INR 35 crores was made for EPR credit costs in Q2 FY26. This provision accounts for the increased obligation to collect 90% of batteries sold three years prior, up from 70%. Management expects the future monthly impact to be less than INR 1 crore, potentially diminishing if scrap collection improves. Additionally, higher warranty expenses contributed to the subdued year-on-year operating margins, stemming from increased overall warranty offerings and actual replacements.

    06

    Operational Initiatives and Future Outlook

    The tubular manufacturing plant is expected to reach full capacity in Q3 FY26, with volume impact anticipated in Q4, which should aid margins. Power cost issues have largely been resolved, except for an electricity duty issue. The scrap recycling battery breaking operations are slated to commence in January, which is expected to be margin accretive. The company aspires to achieve a 13% EBITDA margin in the near term and eventually return to its original 14% margin in the long term.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.