Amara Raja Bat­ter­ies Ltd

Money Times - - Bull’s Eye -

(BSE Code: 500008) (CMP: Rs.719.35) (FV: Re.1) By Pratit Nayan Pa­tel

We had rec­om­mended this stock ear­lier at Rs.772.1 on 9 July 2018, where-af­ter it zoomed to Rs.907.75. The stock has cor­rected sharply in line with the re­cent mar­ket crash and there­fore, we be­lieve that this is a good op­por­tu­nity for in­vestors to en­ter or av­er­age.

Com­pany Back­ground: In­cor­po­rated in 1985, Hy­der­abad-based Amara Raja Bat­ter­ies Ltd (ARBL) man­u­fac­tures leadacid bat­ter­ies for both in­dus­trial and au­to­mo­tive ap­pli­ca­tions in the stor­age bat­tery in­dus­try. It is a pre­ferred sup­plier to ma­jor tele­com ser­vice providers, tele­com equip­ment man­u­fac­tur­ers, the UPS (Un­in­ter­rupt­ible Power Sup­ply) sec­tor (OEM and re­place­ment), In­dian Rail­ways, Power sec­tor, Oil & Gas, etc. It sells in­dus­trial bat­tery un­der the brands ‘Pow­erS­tack’, ‘AmaronVoltTM’ and ‘Quanta’ and au­to­mo­tive bat­ter­ies un­der the brands ‘Amaron’ and ‘Pow­er­zoneTM’. It sup­plies au­to­mo­tive bat­ter­ies to Ashok Ley­land, Ford In­dia, Honda, Hyundai, Mahin­dra & Mahin­dra, Maruti Suzuki and Tata Mo­tors. It ex­ports its prod­ucts as well. Its plants are lo­cated at Tirupati and Chittoor in Andhra Pradesh. In De­cem­ber 2017, it com­mis­sioned a two-wheeler bat­tery plant in Chittoor. Phase-I, which has been com­mis­sioned, has a 5 mil­lion unit ca­pac­ity. The man­age­ment plans to in­cur capex of ~Rs.700 crore to en­hance the plant’s ca­pac­ity to 17 mil­lion units, tak­ing the to­tal ca­pac­ity for two-wheeler bat­ter­ies to 29 mil­lion units.

Fi­nan­cials: ARBL is al­most debt-free. With an eq­uity cap­i­tal of Rs.17.08 crore and re­serves of Rs.2920.31 crore, its share book value works out to Rs.171.97. The pro­mot­ers hold 52.06% of the eq­uity cap­i­tal (26% eq­uity each from the Galla fam­ily and John­son Con­trols), Mu­tual Funds hold 8.16%, FPIs hold 20.33% and DIIs hold 2.1%, which leaves 17.35% stake with the in­vest­ing pub­lic.

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