Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄Amara Raja Batteries: penetration tailwinds
Leader in the domestic market: Amara Raja Batteries Ltd (ARBL) is
the second-largest manufacturer of lead-acid batteries in India, with
~23% share of the organised battery market. Johnson Controls, the
global leader in lead-acid batteries, owns 26% of ARBL; the association
has made ARBL technologically advanced and thus enabled it to
maintain and increase its market share.
Rising market penetration offers upsides: The Indian battery
market is set for strong volume growth and margins for the next 5-6
years. Low penetration levels and rising incomes would drive healthy
double-digit growth across segments in the auto industry. Meanwhile,
the high-margin replacement segment is set for a surge, as strong
growth in vehicle sales in the last few years (12% CAGR in the last five
years) translates to replacement demand for batteries, and users
increasingly opt for branded batteries.
Organised penetration to enable margin expansion: Margin
expansion would be driven by a shift in market-share in the
replacement segment, from unorganised battery manufacturers to
organised ones. This shift will help expand battery manufacturers’
margins for two reasons: 1) margins in the replacement segment are
intrinsically higher than in the OEM segment; and 2) raw-material costs
will fall as prices of scrap batteries come down.
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