A charged-up Amara Raja juggles margin pressure and lithium-ion ambitions

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Subscribe to enjoy similar stories. Amara Raja Energy and Mobility Ltd’s weak margin performance in the September quarter overshadowed its 12% year-on-year jump in standalone revenue. The revenue, which was in line with analysts’ expectations, was driven by increased traction in three segments: two-wheeler and four-wheeler aftermarket, two-wheeler original equipment makers, and exports.

But rising input costs, particularly lead prices, and a higher proportion of lower-margin traded products hurt profitability. Standalone gross margin contracted by 100 basis points (bps) year-on-year to 32.4%, and Ebitda margins saw a slight year-on-year dip at 14.1%, lower than expectations. Also read | Batteries included: Amara Raja's game plan Despite this squeeze, the company’s management reiterated their near-term margin guidance of 14-14.5%, assuming lead prices remain stable around ₹200 k/tonne.

This outlook is also bolstered by anticipated export growth and ongoing process improvements. To protect margins, Amara Raja implemented a 1.5% aftermarket price hike. Even so, earnings estimates were trimmed by some brokerages.

Nuvama Research cut its Ebitda estimate for Amara Raja in FY 2025-27 by 3-4%, factoring in lower margin assumption. The battery industry, meanwhile, is gradually shifting from lead-acid—the core of Amara Raja’s business—to lithium-ion batteries. Amara Raja has started assembling lithium battery packs and manufacturing chargers and is investing in building lithium-ion capacities to meet demand, mainly from electric vehicles.