Amara Raja Energy & Mobility Limited — Q2 FY26

Amara Raja Energy & Mobility Ltd Q2 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=H_9Qj0X46E0 Published: 6 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the Amara Raja Energy and Mobility Limited Q2 H1 FY26 earnings 0:09 9 seconds conference call hosted by IFL Capital Services Limited. As a reminder, all participant lines will be in the listenonly mode and there will be an 0:18 18 seconds opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an 0:26 26 seconds operator by pressing star then zero on your touchstone phone. 0:30 30 seconds Please note that this conference is being recorded. I now hand the conference over to Mr. Joseph George from IFL Capital. Thank you and over to you sir. 0:41 41 seconds Thank you Sarak. Uh hello everyone. On behalf of IFL Capital I welcome you all to the 2Q FI26 results conference call 0:49 49 seconds of Amar Raja Energy and Mobility Limited. From the company we have Mr. 0:54 54 seconds Why Di Babhu chief financial officer and Miss Swajitta Raeti, head corporate finance. Now I'll hand over the call to 1:01 1 minute, 1 second the management for opening remarks. Over to you. 1:07 1 minute, 7 seconds Hi, good evening everyone. Thanks for joining the call. Uh I'll give a quick uh brief of the performance of Q2. So 1:14 1 minute, 14 seconds during Q2 the total consolidated revenue stood at 3,467 cr which is a growth of around 6 and a half% over the previous 1:22 1 minute, 22 seconds year. out of which lead acid business contributes to around 95% and rest comes from new energy business. 1:29 1 minute, 29 seconds Lead asset business registered a revenue of 3,297 crores during Q2 which is a growth of around 5% on Y basis. The 1:37 1 minute, 37 seconds revenue growth is supported mainly by August OEM demand across four-wheeler and two wheeler segments. OEM volumes 1:44 1 minute, 44 seconds have grown about 30% during the quarter on a year-on-year basis whereas aftermarket volumes remained stable 1:51 1 minute, 51 seconds across product segments on account of procurement delays following the revision GST rate. 1:58 1 minute, 58 seconds International volumes have remained flat with no growth compared to previous years on account of tariff uncertainty. 2:04 2 minutes, 4 seconds However, this is expected to recover in the subsequent quarters. With respect to the other applications, loops continued to gain momentum in the market and we 2:12 2 minutes, 12 seconds have a issued a revenue of 50 cr during the quarter. 2:16 2 minutes, 16 seconds Let industrial volumes have degrown during the quarter by around 11% over the previous year primarily on account of declining telecom volumes. While the 2:25 2 minutes, 25 seconds lead acid telecom volumes are declining, the lithium telecom volumes have registered substantial growth during the quarter on a vy basis. With respect to 2:34 2 minutes, 34 seconds UPS, the volumes had grown by around 5% during the quarter. With respect to the new energy business, the Q2 delivered 2:42 2 minutes, 42 seconds healthy quarterly performance with a revenue of around 170 crores, which is a growth of more than 50% compared to previous year. This growth is supported 2:50 2 minutes, 50 seconds by increased demand for telecom packs and charges. Telecom volume grew substantially with 150 megawatt of supply whereas three wheeler volumes 2:59 2 minutes, 59 seconds remain largely stable during the quarter. Further, we also commenced supplying three-wheeler packs with LSP sales during the current quarter. 3:08 3 minutes, 8 seconds While we continue to supply offboard chargers, AC and DC charges order book had crossed 5,000 members. 3:15 3 minutes, 15 seconds And during Q2, we introduced 350 crores into Amarrage Advanced Cell Technologies, which is a lithium subsidiary and with this the overall 3:22 3 minutes, 22 seconds investment is now at around 1,200 crores. 3:26 3 minutes, 26 seconds On coming to the profitability, the standalone operating margins today around 12%. However, if you adjust the lithium telecom batteries, the margins would be around 12 12.4%. 3:37 3 minutes, 37 seconds Though the margins are improved by.5% on pure quarter and quarter basis, they subdued on year-on-year basis primarily due to provisions with respect to higher 3:46 3 minutes, 46 seconds warranty expense and EPR liability provisions. 3:50 3 minutes, 50 seconds AR is running a waste battery collection program over a period of years and today we are able to collect 75 to 80% of the 3:57 3 minutes, 57 seconds battery sold as per the BWM regulations from the current financial year we have an obligation to collect 90% of the 4:04 4 minutes, 4 seconds battery sold 3 years ago this percentage was 70% till last financial year and we met our obligations we also buying a EPR 4:12 4 minutes, 12 seconds credit wherever there is a shortfall and we anticipate the demand for this EPR certificate may go up in future 4:20 4 minutes, 20 seconds Hence on a prudent basis we have provided for EPR credit cost in our books based on revised estimates on scrap collection program going forward 4:29 4 minutes, 29 seconds as we ramp for collections provided the scrap recycling price is completed with the LMA rates these provisions may come down or even may not be required hence 4:38 4 minutes, 38 seconds in the current quarter there's an overall impact of around 35 crores with respect to the skeptic outlay 4:45 4 minutes, 45 seconds during the H1 consolidated at a consolidated is spent around 350 crores between new energy business and lead asset business for the full year we 4:54 4 minutes, 54 seconds expecting a total outlay of 14 to 1500 crores with a major outlay towards new energy business during uh H2. So that's 5:02 5 minutes, 2 seconds a brief on the future performance. We are happy to take any questions. 5:08 5 minutes, 8 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 5:17 5 minutes, 17 seconds telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. 5:27 5 minutes, 27 seconds Ladies and gentlemen, we will wait for a moment while the question queue assembles. 5:34 5 minutes, 34 seconds Our first question comes from the line of Rahul Andan NL from Noama Research. 5:42 5 minutes, 42 seconds Please go ahead sir. Uh thank you sir for the opportunity. 5:48 5 minutes, 48 seconds Good to see the strong performance in the new NSD research. Uh sir firstly on the volume growth for the lead acid 5:56 5 minutes, 56 seconds battery can you share some numbers for four-wheeler two-wheeler how is the OEM replacement export and also on the 6:05 6 minutes, 5 seconds industrial side how much is the growth with respect to the OEM volumes there 6:13 6 minutes, 13 seconds has been a strong demand so it has grown by around uh 30% during the quarter whereas aftermarket on both on for on 6:20 6 minutes, 20 seconds the four-wheeler side it is pretty uh stable. We didn't find much of a growth over there on account of this GST uh rate division and the on the two-heer 6:29 6 minutes, 29 seconds slide is a slight uh stable growth of around 1 to 2%. Coming to the industrial volumes uh the telecom volumes have seen 6:37 6 minutes, 37 seconds a as because of the lithium migration there has been a decline in telecom volumes by around 35%. Whereas UPS has gone by around 5%. 6:47 6 minutes, 47 seconds Uh thanks for that. And OEM volume uh 30% this is for four-wheeler or two wheeler 6:56 6 minutes, 56 seconds both have grown significantly uh at a similar rate. Uh got it. Thank you. And uh also in terms 7:06 7 minutes, 6 seconds of uh uh EPR credits uh which you indicated at uh 35 crores would this 7:13 7 minutes, 13 seconds sustain at these levels uh for coming quarters. How do you see this uh panning out? 7:20 7 minutes, 20 seconds Uh no no Rahu I think this is a one-time cost that we have factored considering what would be the total liability delay. 7:30 7 minutes, 30 seconds uh we expect uh because while we are as we have explained in the opening remarks almost 80 to uh 75 to 80% of the total 7:40 7 minutes, 40 seconds target we are able to collect through our regular scrap collection program that we are running. So since uh until 7:47 7 minutes, 47 seconds last year there was no problem and this year the number has gone up to 90%. 7:52 7 minutes, 52 seconds While we hope to achieve even the 90% collection as well but the prudence in the accounting demands that uh if there 8:00 8 minutes the existing run rate were to prevail in the future uh and also considering the fact that the EPR certificate cost also 8:09 8 minutes, 9 seconds is expected to increase in the future depending on uh the demand from other competitors as well which is where we 8:16 8 minutes, 16 seconds have taken a one-time provision of about 35 crores in this quarter but going forward But the impact on a monthly basis will not be more than a cr of rupees uh depending on the sales volume. 8:29 8 minutes, 29 seconds So this is not going to be a uh recurring expenditure. But once for all we have estimated the provision and then 8:36 8 minutes, 36 seconds we have taken it and if the scrap prices were to be competitive enough so that we get in comparison with the LM 8:44 8 minutes, 44 seconds procurement even this provision may not be required in future but as a prudent measure we have taken this uh in this quarter. 8:54 8 minutes, 54 seconds Got it sir. Uh so if I understand correctly uh in standalone ported margin is 12%. Adjusting for APR it would have been 13%. 9:06 9 minutes, 6 seconds And also that uh uh lithium business cost if I adjust for that it will further increase by another 40 basis 9:14 9 minutes, 14 seconds point 13.4 four would that be the right understanding and just continuing if I take out the lithium trading 9:22 9 minutes, 22 seconds revenue out of the standalone goods uh then naturally you will see that the but for the EPR and the trading revenue uh 9:31 9 minutes, 31 seconds you what you said is got it sir and sir earlier you had explained that uh you have triggers like 9:40 9 minutes, 40 seconds uh the tubular uh plant will go to full capacity in Q3 and uh the power cost issues uh will get resolved and also the 9:49 9 minutes, 49 seconds recycling plant uh will be uh uh you know up and running in Q4. How do you see the benefits to the margin given 9:58 9 minutes, 58 seconds these uh three initiatives going forward? 10:02 10 minutes, 2 seconds As I mentioned earlier Rahu I think manufacturing impact will only be felt in the next season. uh obviously now I'm 10:11 10 minutes, 11 seconds taking some depreciation expenses uh because commercial production we have just commenced and obviously the volumes will be subdued in this quarter uh per 10:19 10 minutes, 19 seconds se in Q4 I'm sure there will be volumes that will coming out from this so manufacturing revenue should definitely 10:27 10 minutes, 27 seconds help us improve a bit of margin while I have given earlier the indicative margins but I wouldn't want to uh give 10:34 10 minutes, 34 seconds uh an absolute numbers in this call uh the power issues also So to a major extent it gots resolved except for the 10:42 10 minutes, 42 seconds LFCG duty issue which is currently subsidized. Uh we hope some resolution will be formed sometime uh towards the 10:50 10 minutes, 50 seconds beginning of next year. Uh the scrap recycling battery breaking operations right now we are expecting that we will commence sometime in the month of 10:57 10 minutes, 57 seconds January. So we may see some bit of once the plant stabilizes and if we are able to improve the recovery beyond what we 11:05 11 minutes, 5 seconds are getting today it will it should definitely be uh margin effective at the operating side but I would like to discuss the specific numbers once these uh uh actual operations begin. 11:19 11 minutes, 19 seconds Got it sir. Uh one more question before I fall back to the queue. Uh so KEX in first half is around 400 cr in 11:27 11 minutes, 27 seconds standalone. How much would be the full year capex and lithium investment so far is 1200 cr how much more will be 11:35 11 minutes, 35 seconds invested in FI26 and FI27. 11:46 11 minutes, 46 seconds Ladies and gentlemen please stay on hold. The management has disconnected. 11:52 11 minutes, 52 seconds We will reconnect the management and continue the call where we left off. Please stay on hold. 12:28 12 minutes, 28 seconds Ladies and gentlemen, the management is back in line with us. Thank you for your patience and we can continue where we left off. 12:38 12 minutes, 38 seconds Um, hi. Should I repeat the question? Yes. 12:44 12 minutes, 44 seconds Yeah. Uh uh sir just quickly on the capeex side 400 crores was the investment in H1 uh in standalone 12:52 12 minutes, 52 seconds business what would be the fullear capex on lead acid battery and lithium investment so far is 1200 cr how much 12:59 12 minutes, 59 seconds more will be invested in FI26 and FI27 13:06 13 minutes, 6 seconds uh on the red side this 400 includes even the tubular battery capex that we have invested Uh so on a full year basis 13:15 13 minutes, 15 seconds lead asset will net off the cubular investment uh we should be around 500 to 600 crores because we are investing some 13:24 13 minutes, 24 seconds money on couple of line expansions and also some of the factory of the future digital initiatives. uh and as far as 13:31 13 minutes, 31 seconds new energy is concerned, we may have to spend another 600 to 700 crores during the year because all three projects which is the E positive labs and CP as 13:40 13 minutes, 40 seconds well as the first gigaf factor of the factory are now running in full speed and in fact the equipment installation 13:47 13 minutes, 47 seconds is going on uh with respect to the EO labs and CQ uh for next year uh I think 13:55 13 minutes, 55 seconds we'll again since next year there not be much of a additional capex So from lead acid point of view we may fall back to a 14:03 14 minutes, 3 seconds level of about 350 to 400 course of maintenance and other small rebott 14:10 14 minutes, 10 seconds linking capex in lead acid and probably we need to spend about another thousand odds in the next year but these efforts 14:19 14 minutes, 19 seconds will vary based on what is the pace at which these projects get uh implemented. 14:27 14 minutes, 27 seconds Got it sir. Thank you so much and fall back to the queue. 14:34 14 minutes, 34 seconds Thank you. Our next question comes from the line of Adept Jaw from Invest. Please go ahead. 14:41 14 minutes, 41 seconds Yeah. Uh thanks for the opportunity. Uh few questions on the lithiumion business. So the recent announcement uh 14:48 14 minutes, 48 seconds you know from China on restriction on equipment uh used for lithiumion cell. 14:53 14 minutes, 53 seconds Uh are we seeing any impact or deferment because of that? 15:00 15 minutes Uh see there is a chamber of commerce guideline as to which missionary uh they should not export and which missionary 15:09 15 minutes, 9 seconds they can but again um couple of days back there was an announcement again to postpone the deadline um from uh I think 15:18 15 minutes, 18 seconds if uh if I remember correctly the act the original deadline was 8th November there is also a talk about postponing that deadline as well uh But to the 15:27 15 minutes, 27 seconds extent of the missionary that we have ordered so far both for all the three projects we don't see a challenge and if 15:36 15 minutes, 36 seconds at all there are going to be any challenges we are also exploring alternatives from other geographies as well. So at this point of time while 15:44 15 minutes, 44 seconds there could be some minor delays because it is not a blanket ban on exporting those machineries but it is more of uh 15:53 15 minutes, 53 seconds getting certain clearances from certain agencies in the in the that country so that they can still export. Uh so that 16:00 16 minutes way while there could be some delays we I don't see major challenge in terms of uh not being able to procure a 16:08 16 minutes, 8 seconds missionary for any of the uh uh orders that we have made. so far but there can also be alternatives in uh other jobs. 16:19 16 minutes, 19 seconds Sure. Sure sir. Uh my s second question is you know in our presentation we speak about that NMC capacity of 2 gawatt uh 16:27 16 minutes, 27 seconds will come in first half of 27 and then it talks about directly the second you know capacity expansion directly in 16:33 16 minutes, 33 seconds 2030. Uh in between when can we expect a LFP? Um and if you can just explain the 16:40 16 minutes, 40 seconds timeline from now till 2030 in different phases of expansion. 16:46 16 minutes, 46 seconds Uh see there are internal timelines that have been discussed but I am unable to put a specific timeline now considering 16:54 16 minutes, 54 seconds uh the various uh product demand discussions that are happening. Uh while yes we expect that uh there could be an 17:03 17 minutes, 3 seconds year delay between uh NMC launch as well as LFP launch. uh but I can I will come back to you with the specific dates uh 17:12 17 minutes, 12 seconds in the coming quarters but at this point of time uh I am unable to give you uh very phased wise LSP capacity addition 17:20 17 minutes, 20 seconds uh we we just need some more time and then uh uh there are certain demand uh discussions that need to satify so that 17:28 17 minutes, 28 seconds I can give you the proper timelines but I'll be needing some more time before I confirm that to you. 17:34 17 minutes, 34 seconds Sure sir. Now sir you know just one clarification you on the capeex front you mentioned that in F26 for capeex 17:42 17 minutes, 42 seconds excluding tubular expansion would be 500 to 600 cr and including tubular what would be that number sir 17:50 17 minutes, 50 seconds uh it is I think I I thought I said 600 crores as including 17:57 17 minutes, 57 seconds including fair enough fair enough fair enough so final question so so far you know about 1200 cr we have invested 18:05 18 minutes, 5 seconds Ed in lithium and you gave a number of,000 cr to be invested in next year in FI26. What would be the incremental 18:12 18 minutes, 12 seconds investment? I mean for FI26 in lithium eer uh in the subsidiary we have invested so 18:20 18 minutes, 20 seconds far 1200 crores. Uh they still carry uh a cash of around 250 odd crores with 18:27 18 minutes, 27 seconds them. So I may have to invest another 500 crores during the current fiscal for them to spend that 600 700 crores kind 18:35 18 minutes, 35 seconds of a cap this year and thereafter in the next year uh I need to do the balance. 18:42 18 minutes, 42 seconds Okay perfect that's it for my section all the best. Thank you. 18:48 18 minutes, 48 seconds Thank you very much ladies and gentlemen. A reminder to all the participants that if you wish to ask a question, you may press star and one join the question queue. 18:59 18 minutes, 59 seconds In order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per 19:06 19 minutes, 6 seconds participant. Should you have follow-up questions, please rejoin the question queue. The next question comes from the line of Kabil Singh from Namura Holdings. Please go ahead. 19:18 19 minutes, 18 seconds Good evening, sir. Uh my first question uh is on the demand side. Uh you mentioned that uh there is 30% growth in 19:26 19 minutes, 26 seconds the OEM side. Can you just give some color here as to uh what could be the reasons for that because obviously the 19:33 19 minutes, 33 seconds underlying market hasn't grown at that pace and how to think about it uh going forward and also uh what percentage of 19:42 19 minutes, 42 seconds revenues for you come from telecom and UPS segments see between telecom and UPS today we get 19:51 19 minutes, 51 seconds about uh 20% of the total uh revenue we of course there are other segments like railways and power control. I'm talking 19:58 19 minutes, 58 seconds about those who have metastic industrial volumes. As far as OEMs are concerned, we had some good traction in some of the 20:07 20 minutes, 7 seconds OEMs and also there was a production ramp up that was there during the month of uh September because for the festival 20:14 20 minutes, 14 seconds season etc. So that's where we have seen a good uptake happening in the OEMs. uh 20:20 20 minutes, 20 seconds while uh I I the specifics uh around each OEM is something that we are not 20:27 20 minutes, 27 seconds discussing in det I'm not looking for specifics on the OEMs but uh just to understand because 20:35 20 minutes, 35 seconds the growth is much more than the underlying industry growth is it something that you expect will continue going ahead or should we expect you know 20:45 20 minutes, 45 seconds little bit higher growth than industry how to think about this? No no no no no I think these are more of you know there 20:52 20 minutes, 52 seconds were certain ramp up that was done by the OEMs considering their five season and also the GST rate reductions uh that 20:59 20 minutes, 59 seconds was one of the reason that has uh um increased the number substantially but I don't see that this momentum will 21:07 21 minutes, 7 seconds continue for uh in the coming quarters as well we'll again fall back to the normal growth rates of all 21:18 21 minutes, 18 seconds Okay. And sir, we have seen lead prices going up. Is there any pricing action by the company as well or anything expected there? 21:29 21 minutes, 29 seconds As of now, no. But we because again while we have seen 20,000 again we expect that it will again come 21:38 21 minutes, 38 seconds back. Uh but rupee has been behaving little volatile man. But as of now we are yet 21:46 21 minutes, 46 seconds to take any uh pricing action in that month. 21:50 21 minutes, 50 seconds Sure. And sir on the lithium business just one question um how have been the imported uh cost for LSP NMC is there 21:59 21 minutes, 59 seconds any change from last time or they have stabilized and uh for our cell facility 22:07 22 minutes, 7 seconds um is there a risk for sourcing raw materials also in future? Uh how do you think about that risk? uh because raw 22:15 22 minutes, 15 seconds material may be getting sourced from China in future right yes yes yes see as of now the cost 22:23 22 minutes, 23 seconds effective solution supply chain for raw material is clearly from China I don't think there are enough and many 22:29 22 minutes, 29 seconds alternatives for it uh geopolitical issues with respect to ban on some of the material uh is something that we 22:38 22 minutes, 38 seconds keep hearing but as such on the raw material side we should not have a significant challenge because uh they 22:45 22 minutes, 45 seconds are the kind of excess capacity that got created. I think over a period of time things should normalize. Uh as far as 22:52 22 minutes, 52 seconds sell prices are concerned, we have seen a marginal increase of maybe $1, $2 here and there, but by and large they remain 23:00 23 minutes more or less the same as what we have seen in the earlier quarters. 23:06 23 minutes, 6 seconds Sure. So thank you. I'll come back in the queue and best wishes. 23:13 23 minutes, 13 seconds Thank you. A reminder to the participants of the conference that if you wish to ask a question, you may press star and one on your touchstone 23:21 23 minutes, 21 seconds phone. The next question comes from the line of Vnavi Gurong from Craven Alpha Wealth Fund. Please go ahead. 23:31 23 minutes, 31 seconds Uh thank you for this opportunity sir. 23:33 23 minutes, 33 seconds My first question is on the UPS business side. So on the data center side uh how 23:40 23 minutes, 40 seconds do we expect the UPS business to grow going ahead on an annualized basis? 23:47 23 minutes, 47 seconds See our industrial UPS applications they vary not only from data centers but 23:54 23 minutes, 54 seconds also various other power control um installations uh and other uh financial services 24:01 24 minutes, 1 second companies for their APN etc. uh so that way uh data center business today in India if you see there is a clear 24:10 24 minutes, 10 seconds migration towards the lithium uh solution than of a lead acid solution while in some abroad markets we still 24:18 24 minutes, 18 seconds see that uh UBS batteries and lead acid chemistry are still being used. uh so that way uh data centers will definitely 24:26 24 minutes, 26 seconds be helpful in getting the volumes on the lithium side but redid requirements on the UPS side might be uh growing in a very slow pace. 24:38 24 minutes, 38 seconds So sir on the lithium side if you can uh help us with the analyzed growth numbers for GPS. 24:46 24 minutes, 46 seconds Right now we we don't supply any UPS batteries on lithium chemistry. 24:52 24 minutes, 52 seconds Currently our supplies of lithium is more for teleform storage segment and 24:58 24 minutes, 58 seconds the uh other segments like BSS and UPS or even the home uh lithium solution. 25:07 25 minutes, 7 seconds These are all under development now. So hopefully at some point of time in future we'll be able to present those products to the market. 25:16 25 minutes, 16 seconds My second question is on the new age business uh with respect to the telecom side. Do we see any competition on that business? 25:26 25 minutes, 26 seconds Yeah, telecom lithium business has uh more competition than the lead acid telecom business because in lead acid telecom we have only three players 25:35 25 minutes, 35 seconds whereas in the lithium pack side there are more than six to seven players but I'm sure not all of them are having 25:44 25 minutes, 44 seconds plans for putting up their own self capacity. Uh so that way at the pack level the competition pressure is 25:51 25 minutes, 51 seconds definitely higher than what it is on the radical level. 25:56 25 minutes, 56 seconds Okay. Uh one followup question uh on the telecom side do we expect to maintain our market share of 50% going ahead in the uh new age business in telecom side? 26:08 26 minutes, 8 seconds Okay. 26:08 26 minutes, 8 seconds Yes. On compiled basis even today we have a substantial uh market but I'm sure with the number of players that are 26:17 26 minutes, 17 seconds there in the lithium side it may marginally come down but we will still be a very significant player in the uh telecom business because we are having a 26:26 26 minutes, 26 seconds very good market share even on the lithium side as we have mentioned earlier the current quarter it has crossed the supplies more than 150 26:34 26 minutes, 34 seconds megawatt hour. So I think we should in the long term maintain our same level of market shares what we used to maintain 26:41 26 minutes, 41 seconds in the letter but in the internet going to higher competition we may have to uh 26:48 26 minutes, 48 seconds we may see some level of uh reduction in the market share but I'm sure we'll pull it back. 26:55 26 minutes, 55 seconds So my last question is on the revenue side uh consolidated for FI26 if you can give any guidance on that. 27:04 27 minutes, 4 seconds Uh no we have not been giving any specific guidance on the revenue u um we 27:11 27 minutes, 11 seconds basically the uh growth rates across industries what we have discussed in the earlier calls we believe will be uh 27:18 27 minutes, 18 seconds sustained in the next year as well we expect the lead acid package revenue to grow anywhere between 8 to 10% in the 27:25 27 minutes, 25 seconds next year as well but I don't have a specific guidance number for you okay thank you I'll join the queue 27:36 27 minutes, 36 seconds Thank you. Our next question comes from the line of Sorup Tachawa from Indent General Insurance. Please go ahead. 27:45 27 minutes, 45 seconds Thank you for taking my question sir. I wanted to understand your uh aspiration or guidance for the margins for your each of the business verticles. 27:57 27 minutes, 57 seconds So at the entity level is what we definitely aspire on a run basis from 28:03 28 minutes, 3 seconds here to move to a 13% AITA margin and uh considering the higher lead base that we are currently operating close to 2AK 28:11 28 minutes, 11 seconds 10,000 rupees uh we will have to uh first reach the first milestone of 13% and thereafter in the long term I think 28:19 28 minutes, 19 seconds we should again move back to our uh original margin of 14% uh over a period of time but that may take some more time 28:28 28 minutes, 28 seconds before uh the uh internal efficiency projects which are currently running and also the other initiatives on recycling 28:35 28 minutes, 35 seconds and manu tubular manufacturing to come into full force. uh so it will take some more time but idea is again we move back 28:43 28 minutes, 43 seconds to our original margin of 14% even at the elevated lead level of uh 10 29:03 29 minutes, 3 seconds sir are you trying to say something no I'm done thank you thank you so much our next Question comes from the line of Mihir Vora from Equirus. Please go ahead. 29:14 29 minutes, 14 seconds Uh yeah thank you for taking my question. So sir basically in the opening remarks it was mentioned that you have took some warranty provision. 29:22 29 minutes, 22 seconds So one is can you quantify the same and whether what are this warranty provisions regarding and why would they be elevated in the quarter currency? 29:33 29 minutes, 33 seconds Yeah, there see uh we have increased the overall warranty option on the products uh some time ago and then uh we are 29:42 29 minutes, 42 seconds seeing that there is a bit of an increase in the overall actual replacements that we are currently making. uh when we see that there is an 29:50 29 minutes, 50 seconds upward movement in the axel placements we tend to generally provide for it uh on a estimation basis for future also because these estimates have to be 29:59 29 minutes, 59 seconds altered as per the accounting norms on a quarterly basis uh that is where uh some level of expenditure was taken uh while 30:07 30 minutes, 7 seconds I don't have immediately the exact number that was also one of the reason why there is a quarter increase in the 30:15 30 minutes, 15 seconds overall expenditure Uh so just a follow up on that like so for next few quarters we may see this 30:22 30 minutes, 22 seconds provision to be a higher number as such or how are we looking at like till how many quarters we may see the pain. 30:30 30 minutes, 30 seconds We may have this challenge for at least next couple of quarters at this point of time I think because we have also uh 30:37 30 minutes, 37 seconds completed beating up of the product as well to meet this kind of a uh higher timeline as well. So that way I think we 30:45 30 minutes, 45 seconds may have a challenge for next couple of quarters and thereafter we should again come back to the All right. Okay. Okay. And the second 30:54 30 minutes, 54 seconds like we mentioned in the presentation that we are going ahead with an NMC capacity but now many OEMs both in the two wheelers and TVs like PVs is already 31:02 31 minutes, 2 seconds LFP but NM two wheelers are talking about getting into an LFP pack also. So how easy how is how easy it is to 31:12 31 minutes, 12 seconds convert a facility from NMC to LSP or how are we looking at things going ahead just some light on what we are seeing on 31:19 31 minutes, 19 seconds the customer transition side there is a constant effort as we have mentioned in the opening remarks that 31:27 31 minutes, 27 seconds even three applications there are OEMs who are asking to move to the LSP but we still believe there will be some portion 31:35 31 minutes, 35 seconds of both two vas and three wheelers will still require an MNC chemistry. That is the reason from the beginning we have been saying our MNC capacity will not 31:43 31 minutes, 43 seconds cross beyond 2 Gh hour and even in case if there is a challenge because this being a cylindrical form factor with 31:52 31 minutes, 52 seconds some bit of an incremental capex while I'll not be able to quantify that capex number we can still move to an LFP cylindrical form factor. So that way it is not going to be taxing on the capex. 32:04 32 minutes, 4 seconds Uh but we still believe that the overall demand potential for NMC will remain good enough for us to uh sell this capacity of $2. 32:18 32 minutes, 18 seconds Um okay that's all from my side. Thank you. 32:24 32 minutes, 24 seconds Thank you very much. A reminder to all the participants of the conference that if you wish to ask a question, you may press star and one on your touchstone 32:32 32 minutes, 32 seconds phone to join the question queue. The next question comes from the line of Rishi from Kotek securities. Please go ahead. 32:40 32 minutes, 40 seconds Yeah. Uh hi. Uh thank you for the opportunity. Firstly, just on the quarter um on a sequential issues, we have seen a a sharp increase in gross 32:48 32 minutes, 48 seconds margins. So uh what uh you know what has led to such an expansion and uh because you know you highlighted that OEMs have 32:56 32 minutes, 56 seconds done well. So assuming that that would be marginal value uh at gross level. Uh so you know what has happened over there and can you also comment on the 33:05 33 minutes, 5 seconds anti-money uh where it is and how how do you expect it to trend in the coming quarters? 33:12 33 minutes, 12 seconds Yeah, antimoney prices we have seen uh at least about 10% reduction from where they were earlier. uh that definitely 33:20 33 minutes, 20 seconds has uh helped us and in this quarter uh we also had some level of uh uh cheaper 33:27 33 minutes, 27 seconds lead in entry with us that also kind of helped us and in the aftermarket the product mix was little favorable to us 33:34 33 minutes, 34 seconds that's where uh there is that gross margin improvement that you would have seen uh that that you come back to the previous quarter you would have observed 33:43 33 minutes, 43 seconds a two two and a half% improvement of the material cost side of it uh that is also to do with the uh amount of trading 33:51 33 minutes, 51 seconds batteries uh reduction compared to the previous periods because we have extinguished the tubular inventory of 33:58 33 minutes, 58 seconds trading batteries. Uh that is also a reason why there is an improvement in the last month. 34:04 34 minutes, 4 seconds In next quarter we should see some inflation uh on account of higher lead procurement cost. 34:11 34 minutes, 11 seconds Yes. Yes. Yes. That's what earlier also somebody asked in the call. We have taken a pricing correction but uh right now we are seeing that a bit of a 34:20 34 minutes, 20 seconds variation in the leg but we will see those uh cost trends for some more time and then see uh there is any reason to enter in the market. 34:30 34 minutes, 30 seconds Understood. And sir just a clarification on EPR uh this 30 K impact which you talk uh talked about is this pertaining 34:37 34 minutes, 37 seconds to a previous quarter and and can you just give us how does it work like the EPR uh implication as in do we need to 34:45 34 minutes, 45 seconds like how much we are procuring it from outside and how much we are internally doing it any any color on that so as I mentioned out of 90% of 34:54 34 minutes, 54 seconds collections that we need to do we actually do about 75 to 80%. 34:59 34 minutes, 59 seconds uh the overall short call would be anywhere around 10% which I think we should be able to we are anyway be able to ramp up the collection but uh 35:07 35 minutes, 7 seconds considering the uh where the shortfall we need to buy the EPR the provisioning demands that uh if we continue with our 35:15 35 minutes, 15 seconds earlier trend uh then we need to see what is the shortfall and then create a provision for uh that shortfall. uh 35:23 35 minutes, 23 seconds again uh from a cost of EPR point of view also in future it may increase. So we have to estimate what could be the 35:30 35 minutes, 30 seconds possible uh cost of EPS for the future and then accordingly whatever the expected shortfall in the collection uh 35:39 35 minutes, 39 seconds that we need to provide for but if we are able to improve the collection in the coming quarters again this provision can be uh written back to the woods 35:48 35 minutes, 48 seconds and and by collection you mean uh sourcing it internally is it correct sourcing the scrap from the channel directly and getting it 35:57 35 minutes, 57 seconds reprocessed uh so if we can improve because generally we need to collect close to because last 3 years whatever 36:06 36 minutes, 6 seconds batteries that we have sold that is the one that I need to collect during the current year. 36:11 36 minutes, 11 seconds Understood. Understood sir and just lastly uh uh I don't know whether it was shared or not but any uh uh timeline on 36:18 36 minutes, 18 seconds when we are when we'll be commencing our Giza factory at least the commercial production any indicative timeline which you have shared? 36:26 36 minutes, 26 seconds Yeah, we have shared saying that we will be doing it sometime in H1 of calendar year 27. 36:32 36 minutes, 32 seconds So that's Yeah. Thank you sir. All the best. 36:40 36 minutes, 40 seconds Thank you. Our next question comes from the line of Joseph George from Capital. Please go ahead. 36:48 36 minutes, 48 seconds Uh thank you. I have a couple of questions. One is you mentioned that um the aftermarket segment was disrupted because of the whole GST transition. 36:56 36 minutes, 56 seconds What I want to understand was before the GST cut announcement were the sales trending at the same level in terms of growth as we were seeing in the 37:04 37 minutes, 4 seconds preceding quarters you know mid to high singledigit kind of a growth and uh only after the GST uh uh cut announcement the sales was disrupted. 37:15 37 minutes, 15 seconds No, it is more to do with the stocking patterns of the retailers because nobody want to have particularly those 37:22 37 minutes, 22 seconds retailers who are on composition scheme or out of the GST net. They would like to keep the minimum stock because the 37:29 37 minutes, 29 seconds MRP will be will be 28% GST and uh that's the reason there is a tendency at 37:37 37 minutes, 37 seconds the retailer level to minimize their stock so that they'll not be burdened. 37:42 37 minutes, 42 seconds So if I leave that separation that has happened towards the uh second part of September otherwise we have seen uh in 37:50 37 minutes, 50 seconds the afterm market side there is a uh reasonable growth like you said from the mid single digits to high single digits. 38:00 38 minutes Understood sir. So the second question that I had was in relation to the tubular plant. You mentioned that commercial production has started. I just want to understand in this quarter 38:09 38 minutes, 9 seconds uh were there any revenues from the tubular grant and uh I mean irrespective of whether the answer is yes or no should we uh expect a full ramp ramp up starting with the third quarter. 38:20 38 minutes, 20 seconds Yeah as I mentioned the overall tubular revenues from next part onwards will be only from our manifest. 38:31 38 minutes, 31 seconds Yeah, I think yeah the capacity from this quarter it'll be ramped up uh in the earlier quarter there there was some manufacturing revenue but the full 38:39 38 minutes, 39 seconds capacity revenue will come up from the third quarter. Understood. Thank you. That's all I had. 38:48 38 minutes, 48 seconds Thank you. Our next follow-up question comes from the line of Vary Gurong from Craving Alpha Wealth Fund. Please go ahead. 38:58 38 minutes, 58 seconds Uh thank you for taking my question again. My question is on the demand side. Um like how are you seeing the 39:04 39 minutes, 4 seconds demand from our own ports to GST and how sustainable do you think this is? 39:13 39 minutes, 13 seconds Uh see uh the during the period of uh the rate cut announcement there was definitely a higher demand that has come 39:21 39 minutes, 21 seconds up but again I think uh right now uh we have come back to the original levels what we have seen in the Q1 of this 39:28 39 minutes, 28 seconds financial year. I don't have immediately a number to tell you what is the growth rate but uh we believe it has come down 39:35 39 minutes, 35 seconds to the earlier quarter one levels uh but not a uh that growth momentum what we have seen in Q2 uh may not sustain in Q3 39:45 39 minutes, 45 seconds but we will still see some close numbers in Q3 but it may not be to the order of what we have done in Q2. 39:53 39 minutes, 53 seconds Okay. I saw one last session from my side is on the new energy business which was currently uh contributing 39:59 39 minutes, 59 seconds approximately 4%. So and given our current expansion and capacity expansion that we are taking on the new energy 40:08 40 minutes, 8 seconds business. How do you see the contribution going ahead? 40:13 40 minutes, 13 seconds See the revenue from energy has to be seen in two separate baskets. One is the backs and charges revenue. The other is 40:20 40 minutes, 20 seconds the sell revenue. revenue obviously will take some time before we start the uh comment of the commercial production. Uh 40:27 40 minutes, 27 seconds we expect that uh this we should actually move to a 5% kind of 40:34 40 minutes, 34 seconds overall revenue share for the new energy by end of this financial year maybe next year to go as what we are thinking right now. 40:45 40 minutes, 45 seconds uh they should actually move to a 7 to 8% kind of uh sorry sir I missed your uh 7 to 8% 40:54 40 minutes, 54 seconds for for the year for the next for 27 okay sir okay thank you 41:05 41 minutes, 5 seconds thank you our next question comes from the line of neat who is an individual investor please go ahead 41:12 41 minutes, 12 seconds hello uh good afternoon first of all and thank you for giving me the opportunity. Uh am I audible and uh loud and clear? 41:21 41 minutes, 21 seconds Yes, I'm clear. 41:24 41 minutes, 24 seconds Yes. Yes. Uh sir, I want to know that uh since 2015 uh we were not be able to create the 41:32 41 minutes, 32 seconds substantial wealth for the investor. So because of the low sales growth percentage either you can say the top 41:41 41 minutes, 41 seconds line and the bottom line. So I want to know that are you willing to just focus on singledigit sales growth only 41:48 41 minutes, 48 seconds throughout the years or what is the management reason to improve these at least for 15% or 20% let's say higher 41:56 41 minutes, 56 seconds doubledigit growth so that your uh investor can be beneficial and this is one thing and uh as we came to know that 42:05 42 minutes, 5 seconds now the government focus is also mainly on the electrical two wheelers four-wheers and all uh uh electrical 42:13 42 minutes, 13 seconds related equipments either it is a battery storage system or transform uh transportation of electricity from one place to another. So everywhere the battery segment is going to be utilized. 42:24 42 minutes, 24 seconds So why don't we mainly focus on to expand uh it is better not to focus to 42:32 42 minutes, 32 seconds uh extend our facility but it will be good if we market ourselves in such a way that our revenue can be increased. 42:39 42 minutes, 39 seconds So how we are planning to improvise this thing? 42:44 42 minutes, 44 seconds Yeah. On your second part of the question uh is basically we uh getting into the new energy business and also doing uh the two-wheeler and 42:53 42 minutes, 53 seconds three-wheeler pack revenue already. Uh if you remember last year we clocked a revenue of 500 crores on the new energy 43:00 43 minutes business and even in this quarter the new energy revenues have grown substantially over the previous year and we are already having uh the lithium 43:10 43 minutes, 10 seconds battery packs uh sales both for four two three-wheeler and two wheeler applications along with storage 43:17 43 minutes, 17 seconds applications like telecom. Now as far as emerging segments that you have alluded to in terms of energy storage systems, 43:25 43 minutes, 25 seconds battery energy, BSS systems, we are currently working on those products and we will be coming to the market with 43:33 43 minutes, 33 seconds those solutions both at the grid level as well as at the PNI level and also at the home level. So there is an effort 43:41 43 minutes, 41 seconds going on even to develop a home lithium solution as well. So considering the lead acid industry the way it is growing 43:49 43 minutes, 49 seconds and in the last 10 years our revenues have grown on a CAGR of close to 12 to 13%. Of late considering the large base 43:58 43 minutes, 58 seconds and also uh India being a two or three player market there is a growth that we are actually doing beyond the industry 44:06 44 minutes, 6 seconds uh growth rate as well. Our market shares across all products have been continuously improving and we will 44:13 44 minutes, 13 seconds continue to deploy more amount of resources to enhance our international business. If you look at current quarter, our international revenues are 44:22 44 minutes, 22 seconds almost 14% of our total revenues. So there is a very clear effort to do the lead acid battery business with a higher 44:30 44 minutes, 30 seconds efficiency and also achieve growth rates in lead acid business by focusing on markets where we can deepen our presence 44:37 44 minutes, 37 seconds or broaden our presence. Uh at the same time we are investing decent amount of money behind the new energy business 44:44 44 minutes, 44 seconds where we are trying to increase our pack revenue at the same time invest into sell capability because we are not 44:52 44 minutes, 52 seconds simply trying to uh remain as a packmaker. We want to develop the capabilities to develop any cells that require that are required by the Indian 45:00 45 minutes market which is why we are investing behind the capability development. So in the long term the company is fairly um 45:10 45 minutes, 10 seconds looking at a uh good growth both in the uh lead acid as well as the lithium batteries. 45:19 45 minutes, 19 seconds Me sir I hope that answers your question. Ladies and gentlemen, we will be taking that as our last question for the day. I now hand the conference over 45:26 45 minutes, 26 seconds to the management for the closing comments. 45:31 45 minutes, 31 seconds Thanks for uh thanks for your time everyone and see you next time. 45:37 45 minutes, 37 seconds On behalf of IFL Capital that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.