Detailed Narrative
New Energy Pivot Reaches Revenue Milestone
The New Energy business crossed the ₹200 crore revenue mark this quarter, nearly doubling its performance from the previous year. This growth was primarily driven by the supply of 250 MWh of telecom lithium-ion packs, achieving a stationary capacity utilization of over 80%. Management views this as a critical validation of their transition strategy as lead acid volumes in the telecom sector continue to plummet.
BESS Expansion and Asset Turn Potential
ARE&M is aggressively entering the Battery Energy Storage Systems (BESS) market with a Board-approved ₹280 crore investment for a 5 GWh integrated solution plant. Management anticipates an exceptionally high asset turnover ratio of 9x to 10x for this business, projecting revenue potential between ₹2,700 and ₹2,800 crores once operational by the end of FY27. The strategy involves importing cells initially while providing the solution architecture, with plans to localize cell manufacturing as demand scales.
Lead Acid Margins Face Commodity Headwinds
Standalone operating margins were compressed to 11.2%, largely due to material cost increases in tin, antimony, and sulfuric acid. While a 2% price hike was implemented in January 2026 to mitigate these pressures, lead prices remain volatile, recently moving back to the 1,930 level. Management is targeting a return to the 13-14% margin range through operational efficiencies from their new lead recycling plant and better product mix.
Automotive Segment Performance Divergence
The 4-wheeler segment showed robust health with 25% growth in OEM volumes, though aftermarket growth was more muted at 3% due to a high base effect from the previous year. Conversely, the 2-wheeler segment remained flat with only 1% growth, impacted by temporary OEM factory shutdowns and a high base impact of 16-17% growth in the corresponding quarter of the previous year.
Strategic Response to Export Challenges
Exports faced a significant 15% decline, primarily attributed to tariff issues in the U.S. market and rising competitive intensity in the Middle East and Asia Pacific. To counter this, management is working on forming a small U.S. subsidiary to stabilize and improve their footprint in that geography. They remain hopeful that upcoming trade policy reviews will eventually smoothen these headwinds.