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%.