Big plans in automotive and solar segments are likely to push ARBL closer to its Rs 10,000-crore revenue target much earlier than expected.
Big plans in automotive and solar segments are likely to push Amar Raja Battteries closer to its Rs 10,000-crore revenue target much earlier than expected.
Hyderabad-based Amara Raja Batteries (ARBL) is aiming to be a Rs 10,000-crore company in the next two to three years. The company, which sells batteries under the Amaron brand, is bullish on its revenue as it clocks double-digit growth in its automotive segment. ARBL's revenue in 2016-17 was Rs 5,981.39 crore.
ARBL expects its automotive segment to contribute around two-thirds of its overall sales in the next two to three years as the vehicle sector grows. The remaining sales are set to come from the industrial segment, reveals ARBL CEO S Vijayanand. Besides, the company sees potential in the solar segment, which requires clean batteries for energy storage, as thrust on green energy is on the rise.
"Since we are in two different verticals, a lot depends on how these in- dividual verticals are likely to grow. But if we have our way and are able to realise plans which we have in blueprint, we should be getting there (Rs 10,000-crore revenue) in the next two to three years' timeframe probably," adds Mr Vijayanand.
The company is registering a compounded annual growth rate of around 15 per cent in its revenue over the past five years. Based on the past growth rate, it expects double-digit growth in the next three years.
The overall battery market in India is estimated to be around Rs 27,000 crore and dominated by two companies, ARBL and Exide. ARBL is the flagship company of the Amara Raja Group, with 26 per cent equity stake each from the Galla family and USbased Johnson Controls.
Johnson Controls, the US-based global automotive battery manufacturer, has given ARBL access to technology, innovation and cost advantages - the very advantages that have enabled ARBL to capture a huge market share, particularly in the last six years. In fact, at the dawn of the new millennium ARBL took a calculated risk to enter automotive batteries, much against what many felt was not a wise decision. That gamble paid off, and the battery-maker is a major player in the automotive segment, which accounts for around 60 per cent of its total revenue. Besides, two-thirds of the company's 60 per cent sales from the automotive segment come by way of replacement demand from four wheelers.
A dominant player in lead-acid battery segment, ARBL is looking to make a foray into other battery technologies, while keeping the cost factor at the core of its business strategy. Using its international partnerships and R&D, the company has launched new type of products, like AGM (absorbed glass mat) and gel platform-based batteries, within the lead-acid segment in the recent past.
The company continues to focus on further strengthening its existing business as lead-acid batteries are expected to be the cost-effective solution in several existing applications
"Our focus so far has been pretty much to grow in the domestic market, but going forward, in the next three to five years, there would be much more focus on exports to the identified countries where tariff structure is not a barrier." S VIJAYANAND CEO, ARBL
and will be used even in the new-age e-vehicles for ignition, lighting and other requirements. Lithium-ion batteries are going to be one of the obvious choices for the established battery-makers, like Amara Raja and Exide, who are closely watching the emerging opportunities in e-vehicle and solar storage segments. The government is also contemplating to provide incentives to set up lithium-ion battery manufacturing facilities on the back of its e-vehicle push.
ARBL opines that the entry into lithium-ion battery manufacturing will make sense when the number of evehicles in the country is large enough to sustain the domestic battery production. The company, in the meanwhile, is planning to source lithium-ion batteries from its partners for supply in domestic market in the initial phases before it sets sight on manufacturing.
Battery technologies are advancing on several fronts, such as longer run times, high-current load requirements, energy density and quick charging. The battery-maker's two manufacturing units near Tirupati and Chittoor in Andhra Pradesh - are accordingly churning out high-end batteries at affordable prices to retain its hold over the competitive mass market.
In the past couple of years, Amara Raja has steadily gained share in the automotive market, expanding at a rate faster than that of the industry. Outperformance of volume in the automobile segment is likely to continue in the next two years, underpinning earnings growth for the company.
"Our typical revenue historically split between automotive and industrial is 60:40 respectively. But if you look at the market potential, it should stabilise to two-thirds to one-third ratio. It will take a couple of years to reach there," points out Mr Vijayanand.
The industrial segment is driven by two large sub-segments - telecom in- dustry and uninterrupted power supply solutions - and solar has the potential to emerge as the third sub-segment. Today, solar energy capacity is being added, which constitutes a smaller percentage of the grid. But at some point of time, the solar component of the overall power generation will be at higher. "A new market will be created in the solar power sector by people who would store energy to avoid peak consumption points," points out Mr Vijayanand.
The company is also eyeing development of 100 smart cities by the government that require solar energy solutions and may participate directly, if there is a large order. "We would like to be neutral in providing our solutions to most players, but if there is a large project that requires a consortium bidding, we would be open to those project-specific associations," notes Mr Vijayanand.
Various ultra-mega solar parks are being set up in different States, and ARBL has big bidding plans. The company exports 12 to 15 per cent of its volumes to South-East Asia, South Asia, West Asia and some African countries in both industrial and automotive segments. "Our focus so far has been pretty much to grow in the domestic market, but going forward, in the next three to five years, there would be much more focus on exports to the identified countries where tariff structure is not a barrier," adds the ARL chief. Big plans in automotive and solar segments, especially solar energy solutions for smart cities, are likely to push ARBL closer to its Rs 10,000-crore revenue target much earlier than expected.
Amaron battery-maker is a major player in the automotive segment.
With top brand Amaron, the company is looking to make a foray into new battery technologies.