Amara Raja bucks automotive sector slowdown with strong performance in replacement market, exports – The Hindu BusinessLine

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A file photo of Amara Raja Batteries’ Chittoor unit

A file photo of Amara Raja Batteries’ Chittoor unit×

Aided by strong performance in the replacement market and exports, Amara Raja Batteries Ltd achieved positive numbers during FY20.

The company’s good show during the financial year ended March 31, came despite a slowdown in the automotive sector and a tough fourth quarter due to Covid-19 and related lockdown.

The company reported a net profit of ₹660.82 crore for the year 2019-20, up 37 per cent from ₹483.49 crore in the previous fiscal. Revenue for FY20 was at ₹6,839.46 crore (₹6,793.11 crore).

During the fourth quarter (Jan-Mar 2020), revenue was a tad higher at ₹1,581.39 crore (compared to ₹1,566.73 crore in the comparable quarter of the previous year) and profit was up at ₹136.65 crore (₹119.34 crore).

Jayadev Galla, VC & MD, Amara Raja, said, “FY20 saw us performing strongly against odds in the overall business environment and helped us emerge stronger. The automotive sector is dealing with a lot of challenges due to regulatory changes, technology shifts and demand uncertainty due to Covid-19 lockdown. The accelerated digital adoption and increased data usage by public during the lockdown period also resulted in a silver lining in the telecom sector after many years of uncertainty and demand slow down.”

The Automotive Business Division substantially overcame the demand slowdown in auto OE segment aided by significant traction in volume growth in domestic replacement market and exports The UPS segment was moderate as the seasonal demand for inverter batteries was severely impacted by the lockdown restrictions in March.

The Industrial Battery Business improved its performance in FY20. The volumes grew in all other segments of the business, barring the telecom segment. Export sales in industrial battery division sustained momentum registering strong growth in West Asia and Africa while South East Asia sales were subdued.

According to Emkay Global, “Amid the overall weakness in the auto sector in FY21, a quicker recovery is expected in the battery segment, driven by an improvement in aftermarket demand stemming from the replacement of old and discharged batteries post the removal of lockdowns.”

Duopoly market

It expects Amara Raja to outpace industry growth over one-two years, led by market share gains. In the duopoly batteries’ market, it continues to be a formidable player behind Exide Industries.

The company’s strong cash flows and healthy liquidity position is of great support to navigate the current crisis.

Motilal Oswal in its report stated exports (10 per cent of revenues) grew strongly in FY20 in both auto and industrial segments in the Indian Ocean Rim markets. With a presence in most of the markets, it has a premium positioning and serves 25–30 per cent of the addressable market.

Amara Raja tied up with Gridtential Energy for bipolar batteries for application in low-end traction batteries, commercial UPS etc. as it offers better reliability. The company’s capex of ₹350-400 crore in FY21 would be for automotive capacity expansion, debottlenecking and maintenance.Published on June 02, 2020

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