Priyanka Tiwari
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Amara Raja Energy & Mobility Ltd. (ARE&M), the flagship company of the Amara Raja Group, is one of the largest manufacturers of lead-acid batteries in India. With a market share dominated by the automotive sector (comprising 70% of total sales), ARE&M has established a strong presence in the telecom segment as well. Despite the growing shift toward lithium-ion batteries, the demand for lead-acid batteries is expected to remain strong in the near term.
In Q3FY25, ARE&M's revenue saw a 7.5% year-on-year (YoY) growth, driven by strong performance in both the aftermarket and OEM segments. The lead-acid battery segment continues to be the primary revenue contributor, making up 96% of total revenue, with a 9% YoY growth in this category.
Key Performance Metrics
Although EBITDA margin contracted by 195 basis points (bps) due to increased costs, the company is addressing these challenges by focusing on renewable energy solutions to mitigate power costs. This follows a revision in energy rates by the Andhra Pradesh government, which impacted operational costs.
Growth in the industrial battery segment was moderate, largely driven by slow recovery in the telecom and UPS segments. However, ARE&M continues to invest in the development of lithium-ion battery technology, focusing on 2W/3W applications, with successful lithium battery pack supply for three-wheeled (3W) applications already underway.
Strategic Outlook
The company is progressing as planned with its investments in lithium-ion battery technology for two-wheeler and three-wheeler applications. The SOTP (Sum of the Parts) valuation method has been used to determine the target price of Rs. 1,160 per share, with Rs. 1,029 for the standalone EPS and Rs. 131 per share for its new mobility and energy investments.
Despite short-term challenges in cost management, the overall outlook remains strong, with a clear strategic push towards energy-efficient and future-oriented battery technologies.
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