Rama Krishna Vadlamudi, MUMBAI. firstname.lastname@example.org. Sep. 18, 2009
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Mounting power deficit, enhancing the need for back-up batteries in critical equipmentand processes
India has emerged as a hub for automobile manufacturers, like, Ford, JLR, Honda,Toyota, Nissan, etc
Household sector’s usage of batteries is also going up due to severe power outtages
Replacement market, which is around 20 per cent, is expected to drive the auto segment
Hybrid vehicles are becoming popular worldwide following a growing concern overprice volatility and depleting fossil-fuel reserves. These cars can be powered withmultiple energy sources (gasoline, diesel, LPG and bio fuels); and
E-Bikes are not popular yet; but, the e-bike segment is expected to grow over the nexttwo years
PLDEGE OF SHARES BY PROMOTERS:
The promoters have not pledged any of their shares.
RISKS ASSOCIATED WITH THE COMPANY:
Raw material procurement
: The key input and major cost element – around 55 to 65 per cent – inbattery manufacture is lead and lead alloys. Any rise in lead prices will adversely impact thecompany’s profitability. Around 60% of the Company's lead requirement is sourced fromAustralia and Korea. The strength of Australian Dollar against rupee will be a concerndepending on the cross-currency hedges. The company enjoys reliable supply arrangementswith major lead suppliers linked to the LME average monthly price.
Forex losses on account of net forex outgo
: Net foreign exchange outgo during 2008-09 was Rs362 crore. Rupee depreciation against USD will have adverse impact on the landed input cost oflead and lead alloys. The co suffered forex losses to the tune of Rs 32.2 crore during 2008-09(previous year gain of Rs 3.35 crore) due to rupee depreciation against USD on ECBs andbuyers’ credit foreign currency loans for import of lead and lead alloys. The co did not opt forleeway given by the Government for forex accounting losses under AS-11 with respect to foreigncurrency borrowing. Net foreign exchange exposure, as of March 31, 2009, was around USD30 million.
: The co’s profitability margin suffered during FY 2008-09 on account of forexloss, volatility in lead prices, slowdown in automotive business and surge in expenses.
Rising interest rate scenario
: Interest rates till now have been benign due to the emphasis onGDP growth given by RBI and Government of India. Any hardening of monetary policy stance byRBI will have adverse implications for the automobile industry and the company.
The co’s manufacturing facility is located in Tirupati, Andhra Pradesh, India.
Exide Industries is the leading player in batteries market in India. The co with second highestmarket share is Amara Raja Batteries. Exide is a fully integrated player with some backwardintegration into smelters. Exide enjoys better brand power compared to Amara Raja Batteries.