Investing in Indian Battery Manufacturers in 2021: Good or Worst Idea?

With all the talk about sustainability, mass transport, and electrification, two companies that have stood the test of time have gone silent….

Yes, I am talking about

  1. Exide Industries
  2. Amara Raja
Giants in the Indian Energy Storage Space: Exide and Amara Raja

The genuine question here will be – Why are these pioneers not tapping into the EV race by being a part of the ecosystem through rechargeable battery packs, charging stations, and storage systems?

EV Industry Growth in India: Spurred by Policy Intervention

The answer is not as trivial as it seems:

  • Despite a lot of breaks from the FAME and PLI scheme of the government, building infrastructure without knowing the underlying demand is suicidal for the private sector
FAME(India): Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles
  • EVs despite the economy of scales playing, the cost is still higher than IC Engine based transport
  • Reliance on a Few Countries(like Chile, China) for Lithium. This can be again a repeat of Crude Oil where the entire dependency of ~80% Hydrocarbons is through imports
Lithium Deposits: Distribution Around the World
  • In the case of China where is an entire ecosystem with state subsidy in place, linking to the Chinese market or manufacturers can be disruptive in the case of another border flare
Border Conflict: India and China
  • Support by the Government & Industry(Reliance, OMC’s, Adani etc.) to the National Hydrogen Mission
National Hydrogen Mission: Launched in August 2021 by Indian Government
  • There is a huge market still existent for rechargeable battery packs that are not Lithium Based (which is the traditional niche of Exide and Amara Raja)
Exide Industries: Products across different verticals
  • NITI Aayog’s ‘Methanol Economy’ program takes a very different approach as compared to ethanol(blending), Li-Ion Batteries or Green Hydrogen converting coal reserves and municipal solid waste into methanol for reducing emissions & Greenhouse gas (GHG)
Methanol Generation & Blending: NITI Aayog Approach

Both the companies have been battered severely by investors,

Exide Industries: Stock Performance in the past year
Amara Raja: Stock Performance in the past year

Despite this, the management is treading cautiously. They have indeed ventured into the Li-Ion space in a staggered manner & with tie-ups.

One thing can be said with certainty- They have thrown the idea of complete migration without seeing visibility out of the window

Conclusion:

  1. Both the businesses are amazing and know where to head for sustainable growth
  2. Stay invested as the mobility business is going through flux & once it settles, it will be a different ball game in terms of returns
Exide Industries: Stock Performance since listing

PS: This is based on the overall industry and how things are moving. Do your individual research and/or consult your investment advisor

References:

  1. Ideas For Profit | What Makes Amara Raja & Exide Good Long-term Investment Bets
  2. Are EV-ready Indian markets punishing Exide and Amara Raja stocks for being old school?
  3. Why Are Indian Battery Companies Reluctant To Take Up Li-ion Battery Manufacturing?
  4. National Hydrogen Mission launched
  5. What is the National Hydrogen Mission?
  6. Budget 2019: Govt Hikes Allocation under FAME Scheme by 34.5%
  7. Infographic: Is Chile the New Saudi Arabia?
  8. India-China border flare-up: What’s behind renewed Beijing aggression
  9. India’s top-selling automotive battery
  10. Methanol Economy | NITI Aayog

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