Amara Raja outshines Exide’s performance

- Advertisement -

In a duopolistic situation, like in the branded battery market, one company’s gain is usually at the other’s expense. Exide Industries Ltd, which ruled the roost for decades especially in the automotive battery segment, cornering more than than half the market, lost ground on several counts in fiscal 2012 (FY12), says a Mint report.

The 52 week stock price data mirrors this as well. While Exide’s shares underperformed the Nifty mid-cap index, Amara Raja Batteries Ltd’s shares outperformed both the Nifty mid-cap and its competitors. Valuations corrected. Exide, which on an average trades at around 17-18 times one year forward earnings, is now trading at around 14 times. Meanwhile, Amara Raja valuations revved up to about 10 times forward earnings compared with the average of six seven times.

The turning point has been Exide’s market share loss. A report by Standard Chartered Securities (India) Ltd says, “In FY12, there was a dramatic shift—Exide lost almost 1,000 bps (basis points) of market share in the auto replacement segment on account of capacity constraints, hence losing pricing power and its valuation premium.” At this time, the competitor gained a share of around 250-300 bps. One basis point is one-hundredth of a percentage point.

- Advertisement -

Exide’s failing was its capacity constraint. When the auto industry grew at a scorching pace of 25-30 per cent across categories, Exide was unable to cope with a surge in after-sales market and original equipment (OE) demand. As it let go of the after-sales market share in favour of OE, margins suffered—the former segment enjoys a higher profit margin on account of greater pricing flexibility. As a result, Exide’s operating margin in FY12 plunged to 13.5%—almost 600 bps lower than the previous year. Amara Raja’s margin, on the contrary, expanded by around 120 bps to 15.7 per cent during the period.

Whether Exide will regain its power is hard to tell in the near term. Both firms may get a respite from falling lead prices—the international price is down 35 per cent to US$ 1,770 per tonne from a year ago. But the rupee decline would negate this by a large magnitude for the next two quarters.

- Advertisement -

Related Artcles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Buzz

German Electronics Manufacturer Hama Enters India

0
The company has tied up with various distributors and retailers; initially plans to launch over 300 products in India Germany-based Hama, a leading global manufacturer...

Irani Srivastava Roy: Signify’s New Chief HR Officer for India

0
The lighting company appointed the 23-years-of-experience holder for aligning the organization's people strategy with business objectives I look forward to further strengthening the...

MoS Inaugurates Digital India Startup Hub at STPI-Davanagere

0
The start-up hub was inaugurated at the 'Software Technology Park of India', which is the 63rd STPI centre in India and the fifth in...

Exclusive

German Electronics Manufacturer Hama Enters India

0
The company has tied up with various distributors and retailers; initially plans to launch over 300 products in India Germany-based Hama, a leading global manufacturer...

Irani Srivastava Roy: Signify’s New Chief HR Officer for India

0
The lighting company appointed the 23-years-of-experience holder for aligning the organization's people strategy with business objectives I look forward to further strengthening the...

Fujitsu Joins SettleMint to Utilize Blockchain Tech

0
The global strategic agreement aims to accelerate enterprise blockchain technology and promote its use cases Japanese ICT company Fujitsu and blockchain platform SettleMint recently announced...

Important Sectors

German Electronics Manufacturer Hama Enters India

0
The company has tied up with various distributors and retailers; initially plans to launch over 300 products in India Germany-based Hama, a leading global manufacturer...

Irani Srivastava Roy: Signify’s New Chief HR Officer for India

0
The lighting company appointed the 23-years-of-experience holder for aligning the organization's people strategy with business objectives I look forward to further strengthening the...

EVs Set to Drive Telematics Demand: Report

0
Telematics shipments in India to reach 50 mn units in 2030 The report expects that the rising Electric Vehicle (EV) demand, enhanced 4G...

Printed Electronics for Smart Building Solutions

0
The two companies will collaborate to scale novel water detection tape solutions based on printed electronics Sensor-maker LAIIER and Germany-based chemical and consumer goods company...

India Assumes Chair of Global Partnership on AI

0
MoS Rajeev Chandrasekhar represented India at the Global Partnership on Artificial Intelligence (GPAI) Summit He believes National Data Governance Framework Policy with Indian...

Manufacturing

First Private Company in India Builds its Own Mission Control Centre

0
Agnikul Cosmos is set to operate from this new facility at Sriharikota which was inaugurated by Shri S. Somanath,  Chairman, ISRO. India’s first launchpad and...

New Product Distribution Center by TI in Germany

0
The centre in Frankfurt enables same-day delivery to central Germany next-day delivery capabilities to most European-based customers.  Texas Instruments, a global semiconductor company whose presence...

Redwood to Supply High-Nickel Cathode to Panasonic

0
Despite the increasing demand, there is no cathode production at scale in North America today: Battery material maker Redwood As per the latest reports, Panasonic...
Infineon, CoolSiC

Infineon Planning New Factory in Dresden

0
The semiconductor major has enhanced its long-term financial targets after witnessing a remarkable FY22 Germany-based Infineon Technologies recently released its results for the fourth quarter...

Uno Minda To Invest Rs 400 Cr In New Light Plant

0
The plant is intended to be commissioned by Q4 FY24 The group registered its highest-ever quarterly performance recently As per the latest reports, the...