Amara Raja Batteries announces ₹500-cr capex plan

V Rishi Kumar Hyderabad | Updated on February 17, 2021 Published on February 17, 2021

A file photo of Amara Raja Batteries' Chittoor unit

To set up a greenfield lead recycling unit and solar plant.

Amara Raja Batteries Limited has announced a capex of ₹500 crore for setting up a lead recycling unit and a 50 MW solar power project to support sustainable development and meet a significant part of its power requirement through renewable energy sources.

According to the company management, which announced its financial results ib Saturday, it has recently inaugurated its Advanced Lithium Technology Research Hub with a pilot plant facility for cell development based on technology sourced from Indian Space Research Organisation (ISRO).

As a part of its backward integration plan, the company is setting up a greenfield lead recycling unit with a capacity of one lakh tonne (0.1mt) at a capital expenditure of ₹280 crore. It will start operations within two years.

Solar plant

The company has decided to set up a 50 MW solar power plant with ₹220 crore investment. This sustainable initiative aims to further reduce the overall power cost and about 30 per cent of its power requirement would be met with the solar plant once implemented.

After results for the third quarter, S. Vijayanand, CEO, Amara Raja Batteries Limited said, “The planned investments in Solar and lead recycling plants will further strengthen our resolve towards a cleaner environment through a sustainable circular economy and also aid reducing costs and provide long term support to our key raw material procurement.”

It already has an operational commercial-scale battery pack assembly unit and has developed a wide range of battery packs for e-Mobility and Energy storage applications. According to a Motilal Oswal report, it has secured approvals from various OEMs (2W and 3W) and Telcos for their storage applications.

Among the top two battery makers in the country, Amara Raja has been steadily ramping up its manufacturing capacities. These capacities have been fully ramped up to optimum utilization across all segments. And additional capacity of 1.5 million and 3 million units respectively of 4 Wheelers and 2 Wheelers would come on stream in 1QFY22.

Margin pressure

Lead prices increased steeply by over 15% in the last two quarters, and there is a lag in pass-through, resulting in margin pressure in the near term. The management is yet to decide on price increases in the aftermarket segment, while price pass-through is happening in the OEM segment, according to Emkay Global.

During the third quarter, while the 2W segment witnessed a healthy 26% growth, the 4W and industrials posted growth of 7% and 8% respectively.

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Published on February 17, 2021
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