Rising replacement market demand helps recharge Exide Industries

Pratim Ranjan Bose Kolkata | Updated on January 24, 2018

Power push: An aggressive marketing strategy saw a jump in sales.   -  Business Line

Company says it has regained lostmarket share

Exide Industries is planning fresh capacity addition in both the automotive and industrial battery segments, primarily to address the rising replacement demand.

“We will expand capacities in both the segments,” managing director and CEO, PK Kataky told BusinessLine, without disclosing details on the investment as the proposals in this regard are yet to be firmed up by the board.

Replacement sales

According to Kataky, the company regained its lost market-share in the replacement segment over the last one-and-a-half years, which helped improve margins.

In the auto-ancillary industry, original equipment (OE) sales help achieve cost-economics at the plant by ensuring volumes. The high-margin replacement sales, however, have a direct impact on profit growth.

“There is no independent data on the replacement market. But our internal assessment says that whatever replacement market share we had lost to competitors (primarily Amara Raja) now stands regained. From now on our focus will be to protect this market share. We will not try to increase it,” he said.

Exide lost this market share as a result of going slow on capital expenditure at the end of the last decade, when the financial crisis had hit global markets. The next few years saw Exide’s capacity locked in meeting the original equipment demand, even at the cost of replacement sales.

By the time fresh capacities were on stream in 2012, Exide suffered from the double whammy of low OE demand and lower share of replacement market.

Kataky says the imbalance is now corrected.

According to him, there has been no improvement in market sentiment in the industrial battery segment. Overall demand from the telecom sector (mainly for mobile towers) has not picked up. However, an “aggressive marketing” strategy saw Exide’s sales rising.

The seasonal demand for inverter batteries has just started rising. It will peak in the summer months.

According to Kataky, the company will feel the full impact of crude price meltdown in the January-March quarter. Ideally that should leave a positive impact on the bottomline.

Crude oil price impact

Crude oil prices directly impact plastic ingredients, including the kind used by battery makers.

It also has an indirect impact on the commodity market, which includes lead, that accounts for 70 per cent of the production cost of batteries.

In response to the improved outlook, the Exide scrip touched a 52-week high at ₹206.50 on the BSE on Tuesday. The ₹1 face value stock closed 0.6 per cent lower at ₹191.45 on Thrusday.

Kataky attributed the stock movement to topline growth of the company.

Published on February 05, 2015

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