Amara Raja Energy & Mobility Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

2 Dilli Babu Y, Swajitha Rapeti

Analysts

8 Deepesh Joshi, Jay Kale, Kapil Singh, Mumuksh Mandlesha, Raghunandhan NL, Rishi Vora, Shubham Khandelwal, Vibhav Zutshi

Financials & KPIs

Geographic & Segment Commentary

• Automotive Aftermarket (Domestic): 4W and 2W aftermarket volumes grew ~15% YoY; management guided to sustainable lower-double-digit growth for 2W and 7-8% for 4W given the large base, with possible moderation as EV penetration rises.
• OEM Segment: 4W OEM volumes grew 24% and 2W OEM volumes grew >35% YoY; OEM momentum remains strong across both categories.
• Automotive Exports: Declined ~20% YoY predominantly due to lower Middle East shipments caused by costly alternative sea freight routes; management expects volume recovery in subsequent quarters contingent on geopolitical normalcy.
• Industrial (Lead Acid): UPS battery volumes grew ~10% YoY; telecom lead acid continued to degrow on migration to lithium-ion, though combined telecom market share held above 60% with lithium-ion telecom volumes up ~50%.
• New Energy Business: Revenue of ₹209 crores, +70% YoY; demand driven by telecom packs and three-wheeler packs, with EV and telecom pack volumes each growing >50% YoY; customer qualification plant with multi-form, multi-chemistry capability inaugurated July 26, 2026.
• Home Energy: Tubular batteries and home EPS segment grew >60% YoY; plant ran at 100% capacity, supplemented by traded inventory to meet demand.

Company-Specific & Strategic Commentary

• Amron Assist Pilot: Launched in Q1 FY27 in Hyderabad as a B2C automotive services pilot to deepen customer engagement; long-term business model will be formulated post pilot learnings.
• Factory of the Future & Brand Investment: Manufacturing excellence initiatives (capacity enhancement in automotive plants) and IPL brand sponsorship caused ~0.9% margin dilution in Q1; these are treated as revenue expenditure and expected to normalize over the next couple of quarters.
• New Energy Ecosystem Build-out: Giga 1 cell plant and 10 MWh BESS factory on track for commercialization H1 FY28; E-Positive R&D facility expected to commence operations in current quarter; FY27 cell R&D spend guided at ₹100-150 crores.
• BESS Foray: Initial CapEx of ₹250-300 crores for 10 GWh capacity; containerized solution pricing at $100-120 per unit; LFP chemistry with 314 Ah cells; ramp-up to 5 GWh utilization targeted within 6-7 months of completion; working capital cycle estimated at 90-100 days.
• Technology De-risking: NMC technology absorbed internally with own team improvements; no broad-based Chinese technology partnership possible given geopolitical restrictions; LFP development will leverage internal capability with plan B in place.
• Regulatory Resolution: Andhra Pradesh Pollution Control Board revoked closure order of April 30, 2021 on July 18, 2026; company withdrew writ petition from AP High Court.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Margin Pressure and Price Recovery

• Question: On gross margins, what price hikes were taken in Q1 and have cost pressures been fully recovered? (Kapil Singh, Nomura)
• Answer: 3% price hike taken in Q1; raw material jump not fully offset, additional 2-3% hikes rolling out in August. If current prices hold, this should suffice; however, poly, sulfuric acid, and tin still trending up. B2B pass-through will lag due to customer negotiations. Full recovery expected by Q2 or next quarter at the latest. (Dilli Babu Y)

Other Expenses – Split and Sustainability

• Question: Can you provide a split of the 0.9% margin hit (₹35 crores) from strategic costs, and where do other expenses stabilize as a percentage of sales? (Vibhav Zutshi, J.P. Morgan)
• Answer: The 0.9% comprises brand promotion (IPL), Amron Assist pilot, and Factory of the Future debottlenecking expenses (treated as revenue expenditure), plus one-time warranty provisioning and higher freight/fuel costs. Exceptional items will reduce once projects complete; however, freight and warranty costs will persist until fuel and raw material cost drivers come under control. (Dilli Babu Y)

BESS Economics and Competitive Position

• Question: What asset turns, CapEx requirements, and margin bands should we expect for the BESS business given heightened competition? (Kapil Singh, Nomura)
• Answer: Initial outlay of ₹250-300 crores for 10 GWh capacity; containerized solution prices at $100-120; asset turns will be higher than traditional business. Operating margin likely 5-6% conservatively, 7-8% at best, improving with localization. BESS will help bring cell production domestically and support the cell program expansion long term; LFP chemistry with 314 Ah cells. (Dilli Babu Y)

NMC Equipment Delivery and BESS Ramp-up

• Question: Status of equipment for the 2 GWh NMC line, and what will BESS utilization look like post commissioning? (Vibhav Zutshi, J.P. Morgan)
• Answer: Equipment due for delivery in Q3 FY27. BESS has clear visibility from major EPC players installing projects for power generating stations; reasonable domestic order book plus export potential. Expect 5 GWh utilization within 6 months of factory completion; line capacity itself is 10 GWh with ability to scale based on demand. (Dilli Babu Y)

Trading Revenue Mix and Recycling Impact

• Question: Trading was ~15% of lead acid revenue in Q1 – how will this trend, and what is the impact of new tubular and recycling plants on margins? (Mumuksh Mandlesha, Anand Rathi)
• Answer: Trading was high due to the tubular season with plant at full capacity; this percentage should decline in subsequent quarters as own manufacturing meets demand. Recycling battery breaking is in trial production; scrap prices have moved substantially higher, making reprocessing costs near or above LME lead prices, creating some cost pressure this quarter. Once stabilized, own battery procurement for EPR obligations should feed the plant and contribute to margins; specific cost benefit to be quantified post stabilization. (Dilli Babu Y)

Exports and Industrial Segment Outlook

• Question: How do export trends look going forward, and what is the performance across industrial segments? (Raghunandhan NL, Nuvama)
• Answer: Auto exports declined ~20% YoY (Middle East freight costs); expected to recover in coming quarters as routes normalize, subject to geopolitics. UPS batteries grew ~10% YoY; telecom is shifting to lithium-ion with new energy growing 60-70% YoY; other industrial segments (Railways, Power Control) growing 5-6% in line with estimates. (Dilli Babu Y)

Lithium Cell Qualification Timelines and Customer Acceptance

• Question: Is acceptance faster for telecom/stationary vs automotive applications, and when will clarity emerge on new orders? (Raghunandhan NL, Nuvama)
• Answer: 2170 NMC cells being produced as B samples for OEMs; EV customers will need extensive testing. The customer qualification plant serves dual purpose – accelerating approvals and understanding production processes to arrest ramp-up costs in the first gigafactory. Energy storage customers' acceptance time is substantially lower than EV customers, though critical installations like telecom will still demand extensive testing. (Dilli Babu Y)

Technology Partnerships and LFP Development

• Question: Has the NMC tech partner relationship also not gone through as planned, and are you looking for a non-Chinese LFP partner? (Shubham Khandelwal, Investec)
• Answer: There was always a plan B – NMC technology was absorbed and our own team improved the cell beyond what was originally taken, de-risking the technology. No broad-based Chinese partnership is possible given geopolitical restrictions, but case-to-case external help will be considered on a need basis. LFP development is being pursued with internal capability; R&D spend of ₹100-150 crores in FY27 will support this until commercialization. (Dilli Babu Y)

Capacity Roadmap and Funding

• Question: Is the 16 GWh by FY30 target still on track given delays and China challenges? How will future CapEx be funded? (Shubham Khandelwal, Investec; Deepesh Joshi, Indira Securities)
• Answer: 16 GWh was an initial strategy based on ₹9,000 crore investment to capture market share in a 100-130 GWh Indian market. Capacity build will be demand-driven – ESS cells may be prioritized over standard EV cells for faster demand uptake. The milestone can shift, but the strategic direction of 15-20% market share remains intact. Funding: initial risk capital of ₹2,500 crores covers the 5 facilities under discussion; post-tax cash generation of ₹700-800 crores minimum gives holding company enough firepower. Debt-to-equity limits will guide structured capital decisions at the time of new programs. (Dilli Babu Y)

Lithium-Ion Market Competition and Pricing

• Question: What is the competitive landscape in lithium cells over the next few years, and what pricing dynamics should we expect? (Deepesh Joshi, Indira Securities)
• Answer: Some OEMs are building own plants; 4 current lead acid players are also in lithium. Expect at best a 3-4 player market on the cell side. Indian players won't primarily compete with each other but with imports from China, where there is a 15-20% price disadvantage today due to the mature Chinese supply chain. Government support and local supply chain depth will be critical to stabilize the industry. (Dilli Babu Y)

Supply Chain Risk – Chinese Export Restrictions

• Question: Are there risks from Chinese restrictions on cathode materials or graphite exports? (Kapil Singh, Nomura)
• Answer: No specific restrictions currently known on battery cathode/anode material; restrictions were on certain core materials. The supply chain factor needs monitoring at industry level; localization efforts are underway by multiple players and the government's policy direction supports onshoring. Management will double-check and update if any new information emerges. (Dilli Babu Y)

Warranty Provisioning for Lithium

• Question: Will warranty provisioning for lithium packs differ from lead acid? (Rishi Vora, Kotak Securities)
• Answer: Lithium warranty obligations are at pack level today, with cell makers giving back-to-back warranty assurance; same structure expected even for domestic cells. Provisioning calculation details (material cost, failure percentages) cannot be disclosed until the first commercial cell is produced – premature to put a number. (Dilli Babu Y)

Key Takeaway

Amara Raja Energy & Mobility delivered robust consolidated revenue growth of 24% YoY to ₹4,215 crores in Q1 FY27, with the lead acid business growing 22% and the new energy business surging over 70% to ₹209 crores on strong telecom and three-wheeler pack demand. EBITDA margins moderated to 10.1% standalone and 9.6% consolidated, impacted by ~0.9% from strategic investments (brand/IPL, Amron Assist pilot, Factory of the Future), one-time warranty provisions, and elevated raw material costs; management has responded with price hikes of 3% in June and an additional 2-3% in August, targeting margin recovery by Q2-Q3 FY27. The New Energy program remains the key strategic focus: the customer qualification plant was inaugurated in July, E-Positive R&D facility commences this quarter, and Giga 1 cell plant plus 10 MWh BESS factory remain on track for H1 FY28 commercialization with BESS targeted to reach 5 GWh utilization within six months of completion. Management flagged flexibility in the 16 GWh capacity roadmap, prioritizing ESS over EV standard cells while maintaining a 15-20% market share ambition, and guided FY27 CapEx of ₹1,700 crores with ₹100-150 crores allocated to cell R&D. Key watch points include raw material inflation persistence, Middle East export recovery, Chinese supply chain restrictions, and the BESS margin band of 5-8%. The Andhra Pradesh PCB closure order revocation removes a long-standing regulatory overhang, and with lead acid revenue growth guided at 9-10%, the company is positioned for a margin normalization trajectory through FY27 as strategic investments annualize and price pass-through completes.