Finding a sharp pick-up in demand from new car factories, Exide Industries Ltd, India’s largest battery-maker, has shelved plans to seek global acquisitions and is instead planning to invest Rs350 crore in doubling domestic capacity of automotive and industrial batteries.
The proposed expansion of capacity in Exide’s eight factories nationwide will be funded mostly internally. “With the pick up in industrial activity and every car manufacturer planning new models, the demand for our batteries is rising by 34% year on year in a Rs5,000 crore market in the organized sector. We are now treating our domestic business as priority and not focusing on global acquisitions,” said S.B. Ganguly, executive chairman and CEO, Exide Industries Ltd, in an interview with Mint.
“The 34% growth entails setting up a new plant every three years. We are expecting at least 25 new car models to be launched in the next two to three years. So the pressure to expand domestic capacity is immense,” said Ganguly.
He also pointed out that domestic retail profit margins are above 15% compared to global margins, which are currently below 10%.
The Rs350 crore investment will be over three years. The capacity expansion is expected to increase production of four-wheeler batteries from 5.5 million to 11 million, for two-wheelers from 4.5 million to nine million and for industrial applications from 800 million ampere hours to 1600 million ampere hours.
Exide has 80% share in the automotive original equipment manufacturer market and 65% in the replacement market.
Exide had firmed up a capital expenditure plan of Rs100-120 crore during the current fiscal and was keen on acquistions, especially in Germany, to supply European markets.
Exide already has subsidiaries in the UK (Espex Batteries), Singapore (Chloride Batteries S.E. Asia) and Sri Lanka (Associated Battery Manufacturers).
Exide is already carrying out a Rs120 crore capacity expansion at all its facilities in India this fiscal and is setting up a second factory at Haldia in West Bengal at a cost of Rs60 crore for making industrial traction batteries.