# 1. Financial Performance ## A. Key Figures * **Consolidated Revenue:** **₹3,410 Cr** (Q3 FY'26) (+2% YoY) * **Operating Margin:** **11.2%** stand-alone · **12.3%** adjusted (Q3) ## B. Revenue Growth * **Dominant Lead Acid Contribution:** Revenue mix remains heavily skewed, with **93% from Lead Acid** and only **7% from New Energy**, highlighting limited near-term diversification. * **Growth-EPS Decoupling:** Despite reaching a 10-year high in revenue, **low single-digit sales growth** is failing to drive proportional earnings expansion, signaling structural margin and cost challenges. ## C. Profit Margins * **Resilient LAB Margins:** Lead Acid business maintained **12% operating margins** amid rising input costs for tin, sulfuric acid, and antimony alloys, outperforming a compressed industry duopoly margin of ~11%. * **Margin Headwinds & Mitigation:** Sequential gross margin contraction driven by **raw material inflation**, **unfavorable OEM product mix**, and **tubular factory ramp-up costs**; partially offset by pricing actions with B2B clients. * **New Energy Drag:** Consolidated profitability pressured by **lithium-ion development expenses**, which are material despite minimal revenue contribution, weighing on net margins and EPS conversion. --- # 2. Product & Segment Performance ## A. Key Figures * **Lead Acid Revenue:** **₹3,174 Cr** (domestic 4W volume growth, 25% OEM) * **New Energy Revenue:** **>₹200 Cr** Q3 FY'26 (~2x YoY) * **Lubes Revenue:** **~₹50 Cr** quarterly ## B. Lead Acid Business * **Resilient Core Business:** Revenue growth underpinned by strong double-digit OEM demand in 4-wheeler segment despite broader market saturation. * **Market Structure Shift:** Lead battery market share poised to expand as competitive landscape consolidates to only **2 players**. * **Strategic Wind-Down:** Legacy lead battery capacity being actively retired, reflecting declining strategic relevance. ## C. New Energy Business * **Accelerating Traction:** New Energy segment achieved near-doubling in revenue, driven by robust telecom pack demand and **250 MWh supplied** in the quarter. * **Capacity Utilization:** Stationary battery capacity utilization exceeded **80%**, signaling operational scaling and strong order inflow. * **Strategic Focus Areas:** BESS strategy centered on **C&I and grid-level containerized solutions** using lithium and DC blocks, aligning with long-term cell ambitions. * **Technology Roadmap:** Active evaluation of **sodium-ion** and other emerging chemistries for future India-specific applications. * **Import-Dependent Model:** Current BESS and pack businesses rely on imported components, though aligned with government push for local content over time. * **LFP as Core:** LFP chemistry remains foundational for mobility, consistent with company’s strategic pivot. * **No Near-Term Cell Manufacturing:** No plans to produce lithium-ion cells for telecom/UPS; focus remains on pack integration. * **Dominant Telecom Share:** Holds **~55% combined market share** in telecom batteries, though lead-acid heavily weights the figure. * **Limited Export Exposure:** Despite growth, international sales remain minimal at **12% of revenue**, with **90% domestic** focus. ## D. Lubes Business * **Stable Performance:** Lubes segment maintains consistent quarterly revenue run-rate, contributing to diversified income stream. --- # 3. Demand & Volume Trends ## A. Key Figures * **4-Wheeler OEM Sales Growth:** **25%** YoY * **4-Wheeler Aftermarket Sales Growth:** **3%** YoY * **2-Wheeler Aftermarket Growth (Prior Year):** **16%-17%** YoY * **Industrial Lead Acid Volumes (excl. telecom):** **2%** YoY * **UPS Volumes:** **5%** YoY * **Home Inverter Volumes:** **10%** YoY * **Automotive Export Volumes:** **15%** drop YoY * **Overall Aftermarket Industry Growth:** **5%–6%** * **Lead Acid UPS Application Growth:** **~5%** * **Other Lead Acid Applications (Tubular, HUPS):** **~10%** growth ## B. OEM & Aftermarket * **Divergent Aftermarket Trends:** 4-wheeler OEM sales surged with **strong double-digit growth**, while aftermarket expansion remained muted due to high base effects and absence of U.S. exports. * **Lagging Aftermarket Response:** Aftermarket growth is expected to follow current OEM momentum with a **3-quarter lag**, suggesting potential recovery in late FY26 or FY27. * **Base Effects Weigh on Growth:** Softness in 2-wheeler and 4-wheeler aftermarket volumes reflects tough prior-year comparisons, particularly from elevated demand in the same quarter last year. * **Export Disruption Impact:** **No U.S. shipments** this quarter significantly affected YoY growth comparisons, especially in OEM and 4-wheeler aftermarket segments. ## C. Telecom Migration * **Structural Shift Underway:** Telecom operators’ migration from lead-acid to lithium batteries is expected to drive **proportional volume gains in lithium** and continued decline in legacy lead-acid demand. ## D. Industrial Applications * **Selective Industrial Strength:** Excluding telecom, industrial lead-acid volumes showed modest growth, with **tubular batteries and HUPS** contributing **~10% growth** driven by expanded in-house manufacturing. * **Headwinds in Exports and Telecom:** Performance was constrained by a **15% drop in automotive exports** due to tariff and geopolitical challenges, alongside falling industrial telecom lead-acid volumes. * **Stable UPS & Home Inverter Demand:** UPS segment demand grew in line with market trends (~5%), while the **home inverter segment achieved 10% volume growth**, indicating resilient domestic adoption. --- # 4. Capacity & Manufacturing ## A. Key Figures * BESS Capex: **₹280 Cr** for cell capacity expansion (FY '27 completion) · **₹200 Cr** infused in Q3, bringing total lithium subsidiary investment to **₹1,400 Cr** ## B. BESS Expansion * **Strategic Market Entry:** Expansion into BESS with a 5 GWh integrated plant approved, targeting a **25–30 GWh market by FY '31** driven by India’s **500 GW solar ambition**. * **Technology & Flexibility:** BESS operations to use **LFP cells (300Ah)**; production lines can transition from NMC to LFP with minimal capital outlay in a downside scenario. * **Phased Ramp-Up:** Initial BESS supply capped at **1 GWh**, but growing tender activity reflects alignment with national storage demand. * **Lithium Cell Manufacturing Caution:** In-house lithium-ion cell production remains under review, contingent on achieving **viable scale** to justify high capital intensity. ## C. Recycling Plant * **Circular Economy Push:** Recycling plant on track for **battery breaking launch in Q4 FY '26**, with refining already providing margin support ahead of full operations. * **Cost Advantage Pathway:** Full operation expected to reduce **lead costs** and enhance margins through internal material recovery. ## D. Utilization Rates * **Capacity Resilience:** NMC chemistry expected to maintain relevance in export markets, supporting sustained utilization despite potential domestic shifts. * **Efficiency Gains:** Margin pressure mitigated by increasing throughput organically, boosting output without significant new capex. --- # 5. Supply & Input Costs ## A. Key Figures * Lead Recycling Impact: +0.6% EBITDA margin accretion (quarterly) * **Lead Price Increase:** **INR 150,000 → INR 210,000** over 3 years * **Alloy Price Increase:** **INR 160,000–170,000 → INR 220,000** over 3 years ## B. Lead Price Pass-Through * **Structural Advantage:** Lead recycling boosted margins by **6 percentage points**, partially insulating EBITDA from commodity volatility. * **Contractual Protection:** OE contracts feature automatic lead price pass-through via PVC linkage, though other inputs lack similar mechanisms. ## C. Acid & Alloy Pressures * **Persistent Cost Headwinds:** Despite a **2% price hike**, acid costs remain a pressure point, while alloy inflation has been partially offset. * **Near-Term Relief Possible:** Stabilization or decline in acid prices this quarter could ease margin pressures. ## D. Price Adjustment Actions * **Proactive Pricing:** January '26 price increase of **2%** targeted rising raw material and EPR/warranty costs, supporting margin resilience. * **Flexible Response:** Management remains open to further price adjustments contingent on cost sustainability and competitive dynamics. --- # 6. Risks & Market Shifts ## A. Key Figures * **Telecom Segment Volumes:** **>45%** decline QoQ (shift to lithium) * **Telecom Revenue Share:** **<5%** of total (down from prior transition) * **Exports:** **15%** decline QoQ (tariff impact) * **Lithium Market Share:** **55–60%** combined lead acid and lithium (Amara Raja Group) ## B. Lithium Competition * **Structural Shift Underway:** Telecom battery demand is rapidly transitioning to lithium, driving steep volume and revenue share declines in legacy lead acid, though **no loss of market share** is occurring. * **Competitive Dynamics:** Despite low near-term entry barriers, leadership consolidation expected as **scale, integration, and value delivery** favor larger players over time. * **Unit Economics Uncertainty:** BESS pricing remains fluid due to variability in **lithium pack configurations** and **container sizing**, complicating standardization. * **Technology Diversification:** Growing LFP adoption in 2-wheelers and exploration of **sodium-ion** noted, though NMC utilization plans remain undefined. ## C. Telecom Decline * **Multi-Year Volume Erosion:** Lead acid telecom volumes expected to keep falling over **2–3 years**, particularly if lithium prices stabilize, accelerating replacement cycles. ## D. Export Tariff Risks --- # 7. Guidance & Outlook ## A. Key Figures * **Capex (YTD Dec):** ₹950 Cr (lead-focused) * **Lead Acid Capex FY26:** ₹750–800 Cr * **Lead Acid Capex FY27:** ₹300–400 Cr * **New Energy Capex FY27:** ₹1,000 Cr * **BESS Plant Capex:** ₹280 Cr (completion by FY27) * **Lithium-ion Development Spend:** ₹100 Cr * **BESS Revenue Potential (from ₹280 Cr capex):** ₹2,700–2,800 Cr (cell price-sensitive) ## B. Margin Recovery * **Seasonal Support Expected:** Q4 tubular battery demand anticipated to alleviate margin pressure through higher manufacturing utilization. * **ROCE Over Margins:** BESS segment to prioritize **ROCE improvement** over near-term operating margin expansion, which will remain low initially. * **Structural Margin View:** Management sees **16%–17% historical margins** as unsustainable long-term targets due to competitive dynamics in the lead-based market. * **EPS Growth Moderation:** Outlook suggests a shift toward **single-digit EPS growth**, reflecting reinvestment and market realities. ## C. BESS Market Share * **Large Market Opportunity:** BESS demand projected to reach **30–40 GWh** in 4–5 years, driven by solar intermittency and 24/7 power needs. * **Strategic Scale Target:** Company aims for **5 GWh BESS capacity** and **15% market share**, outpacing domestic growth by at least 100 bps. * **Asset-Light Model:** Targeting **9x–10x asset turnover** via solution-led architecture and future **localization of 314Ah cells**. * **Integrated Advantage:** Solar EPC capabilities enable access to private tenders and bundled energy solutions, differentiating offering. * **Export Ambitions:** International expansion continues despite near-term headwinds; **10%–15% export CAGR** remains a strategic goal.