In Focus: Leading Charge | Value Research Strong growth in auto sector augers well for Amara Raja
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In Focus: Leading Charge

Strong growth in auto sector augers well for Amara Raja

A strong brand image, global outsourcing opportunities and exploding domestic demand for automobiles hold great prospect for Amara Raja Batteries (ARBL), manufacturers of a wide range of industrial and automotive batteries. The company's automotive battery brand Amaron is the second-largest selling battery in the country. With clients like Ford, GM, DaimlerChrylser, Hindustan Motors, Tata Motors and Ashok Leyland, the company is expected to witness enhanced visibility and demand for its products. Amara Raja sources technology from Johnson Controls Inc, which has 26 per cent stake in the company. At present, Amara Raja exports batteries to Japan, Singapore, Australia, Taiwan, the UAE, Greece, China, Oman and Ghana.

The company has a single location manufacturing plant at Tirupati, with the capacity to produce 2,75,000 industrial batteries and 1.5 million automotive batteries.

Keeping the expansion plans of Indian auto giants in sight, the company is ramping up capacities for automotive batteries to 3.6 million per annum. The company will gain from its existing relationships with clients given the fact that most global auto makers have expressed their intention of making India a hub for small cars.

Over the years, Amara Raja has become strong in industrial battery segment where it has Railways and telecom companies as key clients. The company is enhancing capacities in the industrial batteries segment from 20 mm AH per month to 29 mm AH per month. The company's UPS battery brand Quanta has also witnessed robust growth of 24 per cent in 2005-06 over the previous year. This segment accounts for almost 40-45 per cent of the company's revenues.

The company registered a robust top line growth of 61 per cent to Rs 403.20 crore in 2005-06, bottom line jumped 175 per cent. However, volatility in lead prices could affect the company's profitability.

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