Amara Raja Batteries places a Large Investment on the EV Segment.

Amara Raja bets on EVs
Amara Raja bets on EVs

by 5paisa Research Team Last Updated: Dec 13, 2022 - 11:01 am 16.3k Views
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The rather low-profile Amara Raja Batteries, based out of the temple town of Tirupati in Andhra Pradesh, is a fairly large player in the battery segment. Amara Raja happens to be the second largest automotive battery player in India. However, with the changing patterns of auto demand in favour of electrical vehicles (EVs), there had been questions over whether Amara Raja was equipped and strategized to handle the shift. Now there is a clear cut plan with investment outlays put out by Amara Raja Batteries for its EV foray.

To begin with, Amara Raja Batteries has also fine-tuned its specific focus areas. It will focus on the complete gamut of EVs as against its current limited focus only on the 3-wheeler EV segment. Secondly, for the EV automobile sector, Amara Raja plans to offer a combination of renewable vitality markets and vitality storage techniques. One of the steps in that direction is the much anticipated merger of its infrastructure and energy enterprises. This merger is expected to be consummated by end of this calendar year i.e. December 2022.

The merger of the infrastructure and energy enterprises of the Amara Raja group will result in more than doubling of its turnover from the current Rs1,200 crore to Rs3,000 crore by the fiscal year FY25. To aid this top line and bottom line boost, Amara Raja is also investing heavily close to $900 million or Rs7,000 crore. While, it will continue its reinforce the strong franchise in lead acid batteries, Amara Raja Batteries plans to make aggressive investments to the tune of Rs7,000 crore on lithium-ion, which is the protocol for EV batteries.

The broad plan of Amara Raja group is to become a strong player in the new-age battery segment and also focus on the EV support infrastructure ecosystem as a whole. Therefore, along with providing its battery packs to battery electrical automobiles, Amara Raja Batteries also plans to provide battery packs for varied functions like vitality storage. The top management of Amara Raja also confirmed that their R&D centre in Tirupati had already developed a technologically superior energy electronics group.

The focus of the energy electronics group would be to concentrate on swapping and charging infrastructure as well as other futuristic enterprises. The first big trigger for growth would be the completion of the merger of Amara Raja Energy Methods and Amara Raja Infra. This was part of the overall restructuring plan for the group and is likely to make a significant difference to the performance of the group. As it stands, approval of shareholders and bankers is already done and only the NCLT final order is yet to arrive.

As the company envisions its future, there are likely to be several distinct growth levers. One is the railways enterprise; which incorporates electrification, signalling and telecom. The other is renewable and information centre enterprises. For instance, the renewables segment has a portfolio of 700 MW photovoltaic models, of which 200 MW is commissioned and the balance 500 MW is under execution. Amara Raja is also seeing a huge traction from the solar segment. Hopefully, these triggers should be enough to drive the big growth story.

The big growth story on the renewables could come from the franchise of Amara Raja Energy Methods. It is betting largely on inexperienced hydrogen within the mobility and industrial sector. This company has already bagged a contract from NTPC, India’s PSU thermal power generator. For NTPC, the company will arrange India’s first inexperienced hydrogen fuelling station at Leh in Ladakh. Their argument is that the industrial sector could be the low-hanging fruit in hydrogen; especially steel, cement and fertilisers. That may be an interesting strategy to begin with.

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