For a while when Amara Raja Batteries was on everyone's shopping list, Exide was largely ignored. Amara Raja was touted for its domination of the VRLA batteries segment, commanding a 40 per cent market share. But following the debacle of a pathetic performance for two consecutive quarters in the current year realisation has dawned that the company bears the overwhelming risk of being a single product company (industrial batteries) with an overwhelming reliance on Government departments and PSUs for it business.The delay in receiving routine orders from the Department of Telecom (DoT) in the first half has resulted in losses. In addition, the entry of Exide Industries into the VRLA segment last year is beginning to have an impact on Amara Raja as selling prices have taken a hit, in the absence of too many orders. It is quite likely that it will bounce back in the second half only if volumes and prices improve.
On the other hand, Exide becomes a good example of a balanced approach to the business; and the stock market's focus has shifted here. Exide has managed to report a small growth in net profit, despite a slight contraction in margins. Second quarter revenues and profit increased by 10 per cent excluding extraordinary expenditure, and the same growth rate was maintained for the first half.
The stock has broken out of a short-term downtrend. While since the beginning of the current financial year it returned 50 per cent at its peak price of 307 and still yields a 30 per cent return after adjusting for the short-term correction. The stock hit the upper circuit during trading on Friday
The Amara Raja stock, in contrast, has lost nearly 50 per cent of its peak value since the beginning of the financial year. Exide is a leading player controlling close to 70 per cent of the OEM market for automotive batteries. Exide has benefited tremendously from the upsurge in automobile manufacturing. Besides, a number of manufacturers have opted for Exide batteries to power their new launches.
It entered the VRLA market last year in a big way in order to diversify its product range (it has sourced technology from Shin Kobe of Japan) as well as utilise the capacities available with the Standard Batteries division. It is also planning to manufacture submarine batteries with German technology. The dichotomy in the performance between the two companies is stark. Exide's performance. While Amara Raja reported losses in both quarters.
Amara Raja also has an automotive battery facility (the capacity can manufacture 2 million batteries per year) coming up but this will be fully operational only sometime in the year 2000. Even then, the company faces an uphill task of first establishing its brand and only then taking market share away from Exide.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.