Rich valuation could loosen Amara Raja’s connection with investors

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Services PMI: Steep price hikes could take the wind out of companies' sails On the flipside, industrial volume fell around 5%, led by subdued performance of its telecom segment owing to a high base. These misses caused some brokerages to downgrade their earnings forecasts. Motilal Oswal Financial Services Ltd cut its FY25 and FY26 earnings-per-share estimates by 10% and 16%, respectively, to factor in the increase in commodity prices.

For now, Amara Raja’s core business, manufacturing lead-acid batteries, is expected to be steady. However, the industry’s gradual shift to lithium-ion batteries poses a long-term threat. The company is investing in building lithium-ion capacity to meet the growing demand, mainly from electric vehicles.

It has plans for ₹9,500 crore of capital expenditure (capex) over 10 years to increase its lithium-ion cell manufacturing capacity to 16 GWh. To scale the business, Amara Raja formed a technology partnership with Gotion InoBat Batteries EnergyX Slovakia in June, which boosted the stock to a new 52-week high that month. The company has also brought on Ather Energy as one of its OEM anchor clients.

Also read: Why SBI is comfortably placed despite slow growth in deposits In FY25, Amara Raja is looking to invest ₹1,000-1,500 crore as capex for lead-acid batteries and new energy projects. The company is currently debt-free, but may need short-term debt this year. It also has plans for long-term financing, management said during the earnings call.