Amara Raja Batteries is betting big on new age batteries, the company recently had an analyst meet where they talked about focusing on two areas, new energy solutions and lead acid business value maximisation.
In an interview with CNBC-TV18, Executive Directors of Amara Raja Batteries, Harshavardhana Gourineni and Vikramadithya Gourineni, spoke about their focus on energy and mobility for the next decade.
Vikramadithya, who manages the new energy and mobility business said, “When we talk about new energy, if you look at the history of the company, we've been quite successful in the manufacture and sale of lead acid batteries. As we see a lot of trends start to emerge, the electrification of mobility, large scale energy storage and all come up. One thing that we feel is that we don't really want to be boxed in, looked at as just a battery manufacturer as we evolve into the newer chemistries like lithium.”
“While we would make significant investments into making lithium cells and packs here in India, we would start also looking at the balance of the system. For example, we've built up quite an aggressive portfolio in EV charging, we have a very strong power electronics division that has all in house battery management systems and other control softwares. So we'd be looking at a very holistic way of deepening our relationships with our customers and giving an entire solution in addition to just the battery," said Vikramadithya.
When asked what is the ideal revenue mix that you would target between the traditional business and the new EV/lithium ion, Harshavardhana said, “As you know, we've traditionally been known as a lead acid battery player, we have grown ahead of the market in recent times, and will continue to do so, going forward. But we'd really like to also capitalise on the runway we see ahead for lead acid, we strongly feel that we'll see at least another decade of strong growth. And we're looking at opportunities to expand outside India as well. You'd be aware that we right now have strong positions in the automotive aftermarket, and also industrials and telecom. So we would also like to address those markets internationally.”
We have significant exports into Southeast Asia and the Middle East at the moment and would like to continue to push there. Also, there are some countries we haven't been able to address due to customs duties and tariffs. So those prohibitive factors we can address with a local presence. We are actively exploring that as well, said Harshavardhana.
On revenue mix, he said it would be hard to comment right now as we're just starting a new energy journey. But in the long run, that'll be a very large growth engine for us. So it'll be a little hard to speculate but very significant over the next 10 years.
When asked about the investments needed for expansion into new energy solutions and the impact it would have on ROI, Vikramadithya said, “Any sort of investments we talk about now, with the PLI tender coming up the minimum ticket size of five gigawatt, and in our investor call, we've been communicating that we feel that we probably have to be more like a 10 gigawatt scale, which our chairman at the time told us that it's about a billion dollars over the next eight to 10 years. But we don't need all of the capital put upfront, it's over the next decade or so. And we're not going to do anything that could be value diluted to our shareholders. So we have not really finalised on what the exact structure or fundraising path we would like to follow.
When asked what kind of investment they were talking about for lead acid business, over the next one to two years and capacity utilisation levels and if they would have to add capacity soon, Harshavardhana said, “Yes, we will have to add capacity just to keep up with domestic market growth. The level of investment we require for international expansion is still not something I can comment on immediately, as opportunities are still being explored. But I will say that we're very keenly looking at inorganic means, acquiring market share, because we want to make sure that we use this time to take advantage and consolidate wherever possible, both domestically and internationally.”
Talking about funding acquisitions, Harshavardhana said, “We are a debt free company. So we do have the ability to raise funds and leverage when needed. But as far as ticket sizes, and all that is concerned, I can't comment as yet.”
For the entire discussion, watch video.