Amara Raja Energy & Mobility Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Amara Raja delivered steady revenue growth led by strong performance in the two-wheeler and aftermarket segments, despite muted OEM demand in four-wheelers. Profitability faced temporary headwinds from a retrospective power levy in Andhra Pradesh and fair value losses on startup investments. The company is aggressively moving forward with its New Energy roadmap, including the NMC Giga factory slated for late CY26, while maintaining a dominant market share in the industrial and telecom sectors.

Highlights

  • Consolidated revenue reached ₹3,272 crores, representing a 7.5% YoY growth.

  • Lead-acid battery business grew 9% YoY, contributing 96% of total revenue.

  • Two-wheeler segment volumes surged 16-17% across both aftermarket and OEM channels.

  • Operating margins were impacted by 100-120 bps due to a retrospective power cost revision of ₹37 crores.

  • Other Comprehensive Income (OCI) reported a loss of ₹132 crores due to fair value reassessment of startup investments.

  • Lubes distribution business gained traction, contributing ₹100 crores in revenue during the quarter.

  • Management projected a total Capex of ₹1,000 crores for the next financial year.

  • Export volumes grew 8-9%, with management targeting a return to double-digit growth by year-end.

Concerns

  • Lithium Oversupply and Pricing

Key financials

  1. Revenue ₹3,272 Cr +7.5%YoY
  2. Lead-Acid Revenue Growth 9% +9%YoY
  3. Lubes Revenue ₹100 Cr
  4. OCI Loss (Fair Value) ₹-132 Cr

What they filed

Q1 FY27: revenue up 20.6%, net profit up 4.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,136 3,164 2,974 3,350 3,388 +8%3,351 +6%3,460 +16%4,041 +21%
EBITDA441 416 342 387 406 −8%374 −10%377 +10%407 +5%
Net profit241 312 167 194 302 +25%152 −51%322 +93%203 +5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue ShareRevenue Growth
Lead-Acid Battery96%9%
New Energy Business4%-20%
Telecom Segment10.5%-25%

Guidance & targets

Capex

  • Total Capex Outflow Capex · FY26 · High confidence ₹1,000 crores
    Next year may see a Rs. 1000 crore kind of outflow.

    — Y. Delli Babu, CFO

Capacity

  • NMC Giga Factory Commencement Capacity · CY26-27 · Medium confidence End of CY26 / Early 2027
    We expect that the first giga factory on the NMC side might commence its operations... either towards the end of next calendar year or beginning of 2027.

    — Y. Delli Babu, CFO

Revenue

  • Tubular Battery Annualized Revenue Revenue · FY26 · High confidence ₹1,100-1,200 crores
    Once we start converting, it should result in revenue on an annualized basis about Rs. 1,100 to Rs. 1,200 crores.

    — Y. Delli Babu, CFO

Margin

  • Power Cost Impact Q4 Margin · Q4 FY25 · Medium confidence 40-50 bps
    we may have to create some more provision for the current financial year in the Q4... which may have impact around 0.4% to 0.5% of operating margin.

    — Y. Delli Babu, CFO

Market context

  • Export Volume Growth Volume · by year end · Medium confidence Double Digit

    From 8-9% today

    I am sure by the year end we will again pick up a double digit growth in the export volumes.

    — Y. Delli Babu, CFO

Risks & concerns

  • Lithium Oversupply and Pricing

    high

    Global overcapacity (especially from China) and falling cell prices ($70-$75/kWh) pose a risk to the profitability of the upcoming Giga factory.

    Both acknowledged

  • Currency Depreciation

    medium

    INR depleting to 87.5-88 levels impacts lead import prices and overall cost structures.

    Management acknowledged

  • Retrospective Regulatory Levies

    medium

    State government power cost revisions are unpredictable and can materially impact margins post-facto.

    Both acknowledged

  • Telecom Segment Decline

    low

    Lead-acid volumes in telecom are falling (-25% YoY) as the industry shifts to lithium chemistry.

    Management acknowledged

Areas of evasion (2)

  • Specific EBITDA breakeven utilization for the NMC plant
  • Pricing decisions in the aftermarket following competitor hikes

Q&A highlights

1 direct, 1 evasive
Retrospective Power Levy Impact Direct
Out of that [Rs. 51 crore QoQ expense increase], about Rs. 37 crores is power... it's a post facto revision that every state government does.

Explains the primary reason for the margin contraction this quarter and sets expectations for a further hit in Q4.

Asked by Mumuksh Mandlesha

Lithium Giga-Factory Headwinds Partial
I think all these conditions around the oversupply and the pricing pressure... we don't mind delaying a bit, but ensuring that the capital that we put in is getting used as early as possible.

Management signals a calibrated, potentially slower approach to EV Capex to avoid the 'penalty' of overcapacity and low pricing from China.

Asked by Vaibhav Joshi

EBITDA Breakeven for NMC Cells Evasive
I don't think I can give a number around what EBITDA margin that I will immediately hit on the day one... it will have some bit of pressure at least for 2 to 3 years.

Reveals that the new energy cell business will likely be a drag on consolidated margins for the first 2-3 years of operation.

Asked by Kapil Singh

2 min read 5 chapters

Detailed narrative

Lead-Acid Core Remains Robust

The core lead-acid business continues to be the primary engine, growing 9% YoY and contributing 96% of revenue. Two-wheeler volumes were a standout, growing 16-17% across segments, while 4W aftermarket grew 11%. Management remains confident in maintaining a 33-34% market share in the aftermarket, supported by high capacity utilization of 85-90% in 4W and 2W lines.

Retrospective Levies Hit Margins

Profitability in Q3 was dampened by a ₹37 crore retrospective fuel purchase cost adjustment levied by the AP government for FY24. This resulted in a 100-120 bps hit to operating margins. Management expects an additional 40-50 bps impact in Q4 FY25 as further provisions are made, though they aim to mitigate this through increased renewable power procurement in the future.

Giga-Factory Roadmap and Headwinds

The company is proceeding with its NMC Giga factory, targeting commencement by late CY26 or early 2027. However, management acknowledged significant headwinds including global lithium oversupply and pricing pressure from China, where NMC cell prices have dropped to $70-$75 per kWh. Consequently, they are adopting a 'calibrated' Capex approach, with ₹500-600 crores allocated to New Energy for FY26.

Diversification into Lubes and Recycling

The Lubes distribution business, started last year, has reached a ₹100 crore quarterly revenue run rate. Additionally, the first phase of the lead recycling plant (50,000 tons refining capacity) has commenced commercial operations. Smelting and battery breaking operations are expected to start by the end of Q1 FY26, which will help in internal compliance with BWMR rules and scrap procurement.

Telecom Transition and Industrial Growth

The telecom segment is undergoing a structural shift from lead-acid to lithium, causing a 25% YoY decline in lead-acid volumes for ARE&M. Despite this, the company maintains a dominant 57-58% combined market share in telecom. The UPS segment remains a growth driver, with volumes up 15% YoY and market share steady at 42-43%.

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