Reality Check: EV supply prospects energise Exide Industries

On April 8, Hyundai and Kia signed an MOU with Exide Energy Solutions, the EV (electric vehicle) subsidiary of Exide industries, which will enable the OEMs to equip their EVs in the Indian market with locally produced Lithium Iron Phosphate (LFP) batteries. Consequently, the Exide Industries stock has rallied nearly 45 per cent since the announcement.

As per the company, Lithium-ion demand in India is expected to grow by nearly 3x-4x during 2025-30 (from 40-50 GWh in 2025 to 150-160 GWh by 2030), aided by strong Government policy and regulatory support, and increased market adoption. In order to capitalise on this opportunity, Exide had set up two subsidiaries — Exide Energy Private Limited (EEPL) in 2018 and Exide Energy Solutions Limited (EESL) in 2022. EEPL has an order book of ₹600-700 crore as of September ‘23.

With EESL, the newer entity, Exide intends to offer a more complete end-to-end solution. The company signed a long-term technical partnership with SVOLT Energy Technology (SVOLT), for manufacturing lithium-ion cells. SVOLT specialises in the development and manufacture of lithium-ion batteries and storage solutions for multiple applications. EESL is setting up a 12 GWh green field project for li-ion cell manufacturing at a total investment of ₹6,000 crore. Phase 1 of the project with 6 GWh capacity is expected to be completed by 2025.

The number of registered EV vehicles in India has been growing rapidly with a CAGR of nearly 77 per cent during FY18-24, going by data from Vahaan. With focused policy intervention and increased market adoption, the EV market is expected to continue this strong growth momentum. Nearly 70 per cent of Exide’s revenue is derived from the auto industry, with lead acid batteries being the primary product offering.

As a result of being largely tied to the domestic auto demand cycle, the company’s financial performance over the last few years has been muted. Its core revenue grew at a CAGR of nearly 9 per cent during FY18-23 with margins being under pressure.

During this phase, the stock was down nearly 20 per cent and underperformed the broader market and the auto sector. Recent developments have renewed investor optimism in the stock. Alongide, the valuations have moved up too. Bloomberg consensus estimates show an expected revenue CAGR of nearly 13 per cent during FY24-26 and EBITDA margin expansion of 50 bps. The stock is currently trading at a forward P/E of 30x, a premium of nearly 75 per cent over its two-year average.

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