Q2 23/24

Nov 1, 2023

Ladies and gentlemen, good day and welcome to the Q2 FY 2024 conference call of Amara Raja Energy & Mobility Limited, hosted by Valorem Advisors. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * then zero on your touchtone phone. I now hand the conference over to Mr. Anuj Sonpal, CEO at Valorem Advisors. Thank you, and over to you, Mr. Sonpal. Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the investor relations of Amara Raja Energy & Mobility Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and first half of financial year 2024. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Vaidyanathan Babu, Chief Financial Officer. Without any further delay, I request Mr. Babu to start with his opening remarks. Thank you, and over to you, sir. Thank you, Anuj. A very good afternoon to everyone who is on the call. Thanks for your time. The current quarter has seen a consolidated revenue growth of about 9.5% on Y-o-Y basis, backed up by the new energy volumes that have grown apart from the growth in the four-wheeler and two-wheeler segment. When we look at the lead acid business on a standalone basis, the revenue growth is about 6.4%, on Y-o-Y basis. This is coming on the back of a volume growth that we have seen in the four-wheeler segment, about 7%, and the two-wheeler segment, about 9%. And the other applications on the inverter batteries, we have seen a big growth, about 11%, considering the lack of manufacturing volumes, while substantial portion is supplied through our trading of the two-wheeler batteries. Within the four-wheeler segments, we have seen robust growth in the aftermarket, which has grown around 8% or so. We have seen the volumes and exports had a subdued growth during the current quarter at about 3%-4%. In the export segment, there were some shipment delays considering the name change that we have done, and there were certain custom that got a bit delayed, but it is not a sales loss. It is only a postponement to the next quarter. We are seeing good traction on the exports volumes as well. In the two-wheeler side, while the aftermarket has grown about 4% to 13%, the volume growth has been subdued at about 2%-3%. That is culminated into the overall revenue growth of about 6.5% on the regular lead acid battery business. The new energy business during the current quarter has actually more than doubled its revenue compared to the previous year. We have seen good volume growth both in the chargers as well as the battery packs that we are supplying for three-wheelers and other storage requirements. There has been a significant volume growth, so that is where the overall revenue for the new energy business for the first half year has almost crossed the full year revenue of last year. On the margin side, yes, there has been an improvement in the overall margin considering the better realizations and also a bit of savings on the raw material side. The other expenses you would have observed, there is a growth in the other expenses because of three major factors. One is because of the fire incident, the insurance premiums have shot up, which I have explained even in our earlier earnings call. That continues to be an issue in all the four quarters. There were certain throughput enhancement projects and cost reduction projects that we have taken up. We are incurring certain consultancy charges, which is also coming and then hit the P&L during the current quarter. Those and there were certain provisioning that we had to make towards the warranty expenses. These are some of the issues that have caused the increase in the other expenses. Otherwise, all other expenses are in line with the volume growth that we have seen. As far as the other updates are concerned, we have completed the acquisition of Amara Raja Power Systems Limited, which is a charger manufacturing unit. This company has also entered into a technology development agreement for other range of chargers for both the two-wheeler as well as three-wheeler applications and also the storage applications. This technology agreement will also help us increase the local value addition, and thereby it will improve the overall charging solution capability within this organization. The plastics business integration, which we have started about 10 months ago, is almost at its fag end. Expected sometime in the month of November, and thereafter we will be completing the integration of the plastic component business with Amara Raja Batteries. Apart from this, there were a couple of queries that we have received on mail. Let me respond to that. The recycling plant that is in the subsidiary of Amara Raja Circular Solutions Private Limited is expected to commence its production in the first phase. The overall capacity of the plant planned in two phases is about 150,000 metric tons. The first phase of 100,000 metric ton is expected to commence the production in the first quarter of next financial year. That should help us increase the overall recycling material quantum, what we use for recycling quantum of lead material within the total requirement, what is required for Amara Raja Energy & Mobility. As far as the fire incident is concerned, we have now completed the lodging of the inventory claim. We are expecting the claim process to complete in the next one or two months, and we are hopeful to recover all the loss that has come in because of the fire incident. With those initial remarks, I will now open for the questions from the participants. Malcolm, over to you. 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 touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kapil Singh from Nomura. Go ahead. Good afternoon, sir. Good afternoon, Kapil. Yeah. Congratulations on a good set of results. Sir, before coming to results, I just wanted to ask you that we have changed the name of the company, right? We are saying mobility is also a focus area. So, if you could just talk a bit about it, what all will be the target segments that we can incrementally look at? What is the rationale behind this change? See, from a simple battery manufacturing, I think the idea is to look at solutions around energy, both for the storage as well as the mobility applications across the segments. I think when we are looking at our new energy business from the point of manufacturing the cells, chargers, as well as packs, we are trying to look at all the energy solutions related to the mobility as well as storage. So in order to employ the right strategy, as you know, we have articulated about a couple of years ago in terms of how do we effectively get into the new energy business, at the same time maximizing the value of the existing business. So in line with that strategy, the idea is on both these major application segments, one is the storage, the other is the mobility. How do we become an energy storage solutions provider across both these segments to reflect the new journey that we have coined? I think the name got changed. As of now, if you are indicating to me that whether we are getting into any vehicle manufacturing, I don't think that is the idea. It is to convey that we are looking at foraying into expanding our foothold into the solutions related to energy, which is both for the storage as well as the mobility applications. Okay, sir. Thanks. That's understood. Just coming to company's performance, usually we have seen that Amara Raja, especially the OEM segment growth, has been ahead of the industry. We have always talked of market share gains. So this quarter I see that's not really the case. So if you could just talk us through in terms of market share on the OEM side, where are we or how are we looking at growth as we go ahead? Do you think we will be gaining market share as we move ahead? As far as the OEM segment is concerned, our strategy is not undergoing any change. As we have said, the market share assessments we do at the end of every year. Last year, our assessment is that we should be around 35%, 36% of the market share. Even this year, I think by the time we close the year, we should be around the same number, if not better. As such, there is no change. The current quarter, depending on what vehicle platforms that we have been participating in some of the volumes, there could be a minor dip compared to the overall OEM production. Our sales might have taken a bit of a dip, but that is only a current quarter challenge. I don't think that is any reflection of any change in our overall market share aspirations as far as volumes are concerned. Sure, sir. If you could talk of the growth outlook for each of the segments going ahead, what kind of growth are you expecting moving ahead? Also if you could cover other business revenue segment in that, I notice you've mentioned around INR 150 crores. Does this include the new energy business as well? Yeah. The other business segment predominantly is new energy business. For the H1, we would have reached a revenue size of about INR 240 crores. With the quarter end as a question, we have done about INR 150 odd crores of revenue. That is where I was mentioning this revenue is almost equal to what we have done in the full year of last year, because we have carved this out into a subsidiary sometime in the month of July. That's where, this is the first quarter where you see that the new energy revenues are appearing in a separate segment as compared to the legacy lead acid business in a separate segment. As far as growth momentum is concerned, both in the aftermarket side of four-wheeler as well as two-wheeler, we are seeing market growth rates around 6% to 7% in the aftermarket and four-wheeler, as I mentioned in the earlier calls as well. In the same manner with the two-wheeler, the lowest double digits we are seeing the growth. Our growth has been pretty robust in both the aftermarket segments. I don't think there is any significant change in that growth numbers. As far as the industrial business is concerned, we are seeing a reasonable growth in the UPS side of the business, at about 7% to 8% kind of a growth, that is stable. Yes, telecom, like I mentioned in our last call as well, we are seeing certain uptick in the demand because of the 5G network expansion, et cetera. That has continued even into this quarter, which is where the overall industrial business also has grown about 8%, 9% levels. In terms of the lead acid battery growth momentum, I do not see any significant challenges at this point of time. In the new energy business, I know we are currently dealing with chargers and three-wheeler battery packs and some of the telecom storage battery packs. We are hopeful that we will expand the new energy business into other vehicle segments and other storage segments in the coming future. That is what is the summary of how we are looking at the business now, sir. Sir, lastly, if you could talk about the profitability in the new energy business. Will it be close to double digits already? See, it is too early to comment because our new energy business is currently only the pack manufacturing and also the charger manufacturing. Both are highly price competitive. So at this point of time, we are able to see some margins in the range of 7%-8% as the overall margin number. But, going forward, when we increase the overall revenue, I think we will still be able to sustain those kind of numbers as far as the pack business is concerned. But when we indigenize more and more charger manufacturing, there is a possibility of improving the overall margins in the new energy business. So I think before creating a benchmark on margins for this business, I would wait for some more time. But as of now, we are finding because the cell prices are also in a reasonable range, and then there is a reasonable comfort in terms of the raw material pricing. But I think I am sure, considering the B2B business it is, I would wait for some more time before we put a kind of a benchmark on margins for the new energy business. Thank you, sir. I will come back in the queue and wish you all the best. Thanks. Thank you. Before we take the next question, a request to all participants in the conference. Please limit your questions to two per participant because we have other participants in the queue. The next question is from the line of Aditya Jhawar from Investec. Please go ahead, sir. Yeah. Hi. Thanks for the opportunity. Sir, if you can talk us about the lithium-ion battery and how are we thinking in terms of technology, in-house versus log line, and partnership with global companies. If you can add to that, when you are engaging in a conversation with OEM, what is the response of these OEMs with our different approach, specifically with regard to technology on lithium-ion, sir? See, as I have mentioned earlier as well, there is a plan that is clearly laid out as far as the two major chemistries of NMC and LFP are concerned. I have told you that there is an in-house development on NMC, and then we are working with certain other people as far as the LFP product development is concerned. That does not mean to say that we are not open for any larger partnerships. Yes, there is some work that is happening on that front as well. As and when something comes up, we will definitely update you. But right now, we are not waiting for that to happen. I think there is a good amount of investment that is happening within the company to develop capabilities around these two chemistries. And also see to it that our plan of going for commercial production sometime in FY26 with the first 2 gigawatt hour line are achieved. To that extent, the efforts are on. If and when we are able to structure a relationship with any of the global battery makers, that will definitely be looked at. As far as OEMs is concerned, we are at least discussing with multiple OEMs at this point of time. For different vehicle categories, there are different battery requirements are being stated. There are few who are talking about making packs on their own. I think it is still, I won't be able to say so and so OEM is asking for so and so kind of battery. I think it's a progressive working that's going on with multiple people at this point of time. I'm sure that when some specific arrangements are agreed upon, we'll be able to share those details. That's helpful, sir. Then, sir, next question is, if you can sort of remind us on timelines of CapEx spend for the gigafactory. You mentioned that FY26, we will have 2 gigawatt, and overall we have a plan of about 16. So how is the CapEx spend planned over the next few years, and how are we thinking about funding? See, as far as new energy business is concerned, as I've articulated earlier, there are three major projects. One is setting up our research hub, which is happening near the Hyderabad International Airport. And then there is the second one, which is the customer qualification plant, which is to make all the form factors and chemistries at a mega scale so that that can be extrapolated to a giga scale in the gigafactory. And third is the first 2 gigawatt hour NMC line that we want to put up, where we are looking at starting the commercial production sometime in FY26. That's the current target that is there in place. Towards these three projects, the initial outlay to be spent over next 2-3 years time frame is about INR 1,500 crores, which we think in FY 2024, we have completed the land acquisition and the construction have just started, so we may have to spend in FY 2024 of another INR 100-INR 150 crores. Next year, the equipment purchase and all other things, the orders are getting placed now. So we will have another INR 500-INR 600 crores CapEx being spent next year and a similar amount thereafter. That's the plan as far as the new energy is concerned. As far as lead-acid battery is concerned, I think we will continue to have a regular CapEx of about INR 150 crores. Then there is another INR 200-INR 300 crores of line expansions that we will do in our existing factories. Any new greenfield, if at all there are greenfield capacity requirements somewhere, at that time, I'll update you if there is further CapEx requirement is going to be there or not. Okay. So that's it from my side, sir. I'll call back in queue. All the best. Thank you. The next question is from the line of Raghu Nandan from Nuvama Institutional Equities. Please go ahead. Good afternoon, sir. Congratulations on good set of numbers. Sir, firstly, on the result side, just wanted to get a couple of numbers from you. Can you share the telecom growth for the quarter? You indicated that consultancy fee was also incurred in this quarter in other expenses. That is not likely to repeat in coming quarters. What would be that one-off amount, sir? Yeah. From a telecom growth point of view, on a volume basis, it has grown around 9%-10% during the current quarter, Raghu. As far as the expenses are concerned, these charges what we are incurring around INR 10 crores or so, may not recur going forward of the two amounts that I have indicated. But rest will be there as an expenditure. Understood, sir. In terms of building the new energy business, have you started the efforts of showing the product capabilities to the OEMs? If FY 2026 the plant is coming up, by when would the tie-ups with OEMs get finalized? See, as you know, there are no specific tie-ups that are generally done in our ecosystem. It is generally we work on a particular product development and then as and when that becomes commercially acceptable to both the parties, the supplies will start. While I can't disclose some of these discussions at this point of time, because right now, you know we are dealing with couple of OEMs on the three-wheeler side and two-wheeler side, and also on the storage side, we are dealing with some of the telecom players. As and when there are certain specific agreements that are getting entered in the form of a supplier agreement, because generally supplier agreements are entered only when the firmed up supply is agreed between both the parties. I think I would wait for some more time, before I can actually come and discuss those specifics in these calls. It will take some more time for me to come back. Got it, sir. Any progress on that PLI scheme? Because that 20 gigawatt hour was supposed to be again, offered to the players. Would you be participating in that or do you find the conditions of the PLI scheme restrictive? I don't think as of now the specific conditions are out, but if the conditions that are going to be laid out in the second round that they are going to come in, if they are reasonable for us to think that it will help the overall business growth, definitely we will not hesitate to participate in. But for me to answer an yes or no for this, I would wait for the scheme. Once it is out, then definitely we can discuss on that. Any timeline there, sir? I'm sorry to interrupt you, Mr. Raghu Nandan. There are other participants waiting in the queue. I would request you- Yeah. I will come back in the queue. Thank you so much. Thank you so much. Participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Abhishek from Dolat Capital. Please go ahead. Sir, how is the pricing trend for lead and non-lead RM, like separator and plastic parts? Have you taken any price hike in aftermarket in last quarter? There were no price hikes taken in the last quarter in the aftermarket, Abhishek. The raw material prices are fairly stable between first quarter and the second quarter. While we are seeing some uptick in the lead number of late and also currency depreciation that has happened, I think we will see whether that will have an impact on our overall team working. Accordingly, the pricing decisions will be taken. But as of now, the raw material prices, at least for the last two quarters, have been fairly stable and we are not seeing a serious challenge out of it. Despite the higher revenue from this new energy business and fall in export volumes, this quarter we have seen a gross margin expansion. Is it because of the product mix change, especially for the aftermarket growth in this quarter? See, I wouldn't call export volume a fall and all. Definitely they have grown compared to what we have done last year. I think the timing issue in terms of some of the shipments will get evened out as we move into the next quarter. As far as margin expansion is concerned, if you see on one side we have a higher trading volume. For example, in the current quarter, our trading revenue is about 11%, and our manufacturing revenue is about 8% to 9% when you look at it on a standalone basis. Even on consolidated, maybe a 1% change will be there. In that sense, just because there is a minor reduction in the OEM mix, I don't think it is going to have a very significant impact on the margin profile. I think the initiatives that are taken on the material cost reduction and some of the expense controls is definitely giving us some dividends. Also, some of the realizations that are also are helping the overall profitability. Thank you, sir. That's all from my side. Thank you very much. The next question is from the line of Jinesh Gandhi from MOFSL. Please go ahead. Hi, Mr. Babu. A couple of questions from my side. You indicated that exports have started to see growth on last year's base. Are we seeing total normalization of our export volumes? Are we growing on high base, which we had seen till, say, one Q last year, or it is growth on a lower base? See, I think last year's base was also reasonably higher. It is not that last year's base was lower. We are seeing growth, but in this quarter we had a blip considering some of the clearances. Otherwise, they are on a clear growth trajectory of 10% to 11% or 10% to 15% that we have been talking about. I think even this year on a full year basis, we will see a double digit growth in the export volumes as well. Okay. Secondly, you indicated about the lead prices have started to inch up in 3Q. That's fairly reasonable. I think it's almost 8% to 10% higher than the 2Q average. In that context, given that we haven't seen a material price increase in replacement market for, I think, over 12 to 15 months now, you think this can be passed through to the customers now, or demand is not as strong as what we would have liked to before we take price increases? Price increase decision is definitely in the aftermarket. It's not a dynamic of only cost, it's also about how the competition is behaving. Once we see a trend getting established, generally we have seen industry has taken the price increases. I don't think it will be any different even now. I think whether a price increase will happen in Q3 or not is something that I will not be able to comment at this point of time. But at a sustained elevated lead levels, we have always been taking those price increases, but there will always be that lead and lag- Right in these decisions, yes. Got it. Great. I'll come back in queue. Thanks. Thank you. The next question is from the line of Mr. Mukesh Saraf from Avendus Spark. Please go ahead. Yes, good evening, and thank you for the opportunity. Just some bookkeeping questions. Last quarter you had mentioned that the power cost was higher by about INR 10 crores-INR 15 crores, and there are some efforts being taken to reduce these costs. Have we already started seeing some benefit of these efforts, or is it going to take some more time? Yes, Mukesh, I think last quarter we had seen certain levies by the government in terms of electricity duty and all. That is partially compensated because now our solar plant has also started generating the energy and we are now getting settlements in a particular periodicity. That has definitely given us the cushion. That's where in this quarter compared to the previous year, we have not seen a very significant jump beyond, after adjusting for the increase in the volumes, we have not seen a substantial jump in the power cost. All right. Okay. In the raw material cost, we do see inventory build up. If I look at it's about INR 150 crores, INR 145 crores in the standalone numbers. Is this just a kind of a seasonality here or could you explain this inventory build up? Yeah. See, I think this, you know, generally Q3 will definitely be a place where we will see extra demand coming up considering the winter season. Obviously, there are certain inventories that got built up, and also some of the export clearances also has made some of these inventories higher. I think that will come back to normalcy by the end of Q3 as usual. Right. Just the last thing on the insurance claim, I think you had said INR 100 crores is what we have received so far, and the balance we will receive in this second or third quarter. So any more amount we will receive on the insurance claims? No, that INR 100 crores is what we have received. We have also now whatever the lead that could be recycled, what was there in that factory has also been recycled. So that, I think we were able to recover roughly about INR 85 crores to INR 90 crores from that. Also there were some amounts that were realized under this clearance. So roughly we can say another INR 90 crores is recovered through the material recycling. The rest, we are confident that we will collect those claims from the insurance. All right. Okay, great. Sir, thanks a lot. Thank you. Thank you. The next question is from the line of Parv Jain from Nivesh Investment Advisory. Please go ahead. Hi, sir. Just a few questions on ETR front. Sir, you mentioned about recycled materials during your presentation. Can you please repeat the figure? See, we are setting up a recycling plant for lead-acid batteries with an eventual capacity of 150,000 tons. In the first phase, we will be having a capacity of 100,000 tons, which will be used captively by the battery manufacturer. We will be collecting these batteries from the channel, and then these recycled batteries will be processed within the Amara Raja Circular Solutions subsidiary. These batteries is generally available batteries in the market or particularly our battery? Yeah. See, the way scrap is procured is not necessarily our own battery. Generally, the retailers pull up other brands as well. It is not that it is only be our battery. It can be other brands as well. Okay. What is the primary usage of recycled material? Our own consumption or resale? Yeah, it will be 100% own consumption. Even today, we use lot of recycled lead because lead-acid batteries are almost recyclable up to 95%, if not more. Because you can recycle the plastic, you can recycle the entire lead. This is one of the most recyclable product. In that way, currently we are using almost like 60% to 70% of lead and alloy requirement through the recycled material. Once we go through our own smelting unit, that percentage will only increase. So, once we put up our 1 lakh tons capacity, that plant itself should give us roughly about 25% to 30% of our overall requirement. The rest we will continue to procure from other smelters as well as the virgin lead producers like HZL. And sir, what is the cost advantage that we are seeing here versus this procuring your primary lead versus recycled lead? See, from a procurement side, from external smelters, all the lead is generally linked to the LME, so you will not see a significant cost difference. But when we do our own recycling, based on our project estimates, we see that there could be at least a further saving of about 1% to 2% on the overall material cost. That is what is our estimate, because we are setting up one of the best technology around recycling. So that should help us give some raw material edge. But we have to understand one more thing that in India, the scrap prices generally move in line with what the LME moves. Also in the seasons of tubular batteries, you see that the scrap prices sometimes even shoot up more than what the LME benchmark is. In that sense, that price volatility of scrap batteries also has to be factored in. If you observe all other listed smelters, the profitability numbers you must be already aware. I think there will be some level of cost reduction because we will also be reprocessing the plastic granules and then we will be using them in our, you know that we are acquiring the plastic component business. That should also give us some cost advantage. At this point of time, my estimate is on the lead material cost, we may see about 1%-2% of cost advantage, but I would wait once we run the factory at least for a couple of quarters. I think we can say with confidence as to how much is the possible material cost saving. Just one last thing. What is the expected timeline for this setup? We are expecting to start the commercial production of this recycling unit sometime in the first quarter of next financial year. Okay, sir. Thank you, and congrats. Thanks. Thank you. Thank you. The next question is from the line of Vibhav Zutshi from JP Morgan. Please go ahead. Yes. Good afternoon, sir, and thanks for taking my questions. My first question is on the new energy business. During your Q4 call, you had mentioned that this year we could see around INR 750 crores of revenue growing three times that of FY 2023. Would we be still on that target? Any thoughts towards you looking to see further ramp up? That was a possibility that I have quoted, Vibhav. We may or may not go closer to that number, but I am sure because now that the first half has almost hit the last year's full number, I am confident that we will be at least doubling the last year number, if not more. Okay. Got it. In your presentation, I am seeing Omega Seiki as a partner. Is this a new partnership that you have won over the recent past? No. You know that we are supplying to two, three-wheeler OEMs our battery packs. We have started supplying to them as well. Okay. Got it. My second question is basically, your announcement on entering into the lubricants business. I think early in September you had launched a new product. Just wanted to get some thoughts around this business. Do you have plans to scale it up? How should we think about the CapEx going forward? How does this tie into the synergy that you are guiding? Yeah. You would recollect that as part of our value maximization strategy, we have said that all the assets that we have on the legacy lead acid business have to be used more effectively. Naturally, channel is one of our big assets. We felt there is a possibility of selling other allied products through this channel so that both the value for the channel as well as value for the company is maximized. That is where the lubes came in as one of the product that we thought we can participate in. The initially idea is we are doing trading on these lubes for two-wheeler, four-wheeler, as well as the trucks and tractors. As part of optimizing the channel capability, in one sense, this will also help expanding our channel as well because now we will be touch-basing even those sole lubes points as well, which may become one of the potential battery sellers as well. That way, I think it should actually augment our channel as well. Right now the thought process is to see what are those allied products which will actually help us grow, and also help the channel to grow their overall business. That is where we have started this. Going forward, we will come back. Right now, the CapEx investment into this is very meager, except for a few molds that we invest in. There is no great capital that we are putting behind this business. If at all there are any plans around it, we will come back and share it with you. Okay. Thanks a lot. I will come back in the queue. Thank you. The next question is from Ayush Mittal, from Mittal Analytics. Please go ahead. Good afternoon, sir. Am I audible? Yes, you are audible. Good afternoon. Sir, first question from my side is more about the growth in our core legacy battery business. One, what is the aftermarket number that you would be having as of now? Given that we see that the number of vehicles keep piling, what kind of growth rate are we seeing in this segment for us? Because growth rate of 6%-7% overall looks a bit low. I am trying to understand more about the consistent growth for us. When we look at the vehicle segment, we know the volumes were sluggish in the last two and a half years. Naturally, the fleet size growth is definitely limited on account of lower volume growth that we have seen in the volumes. That will definitely play how the aftermarket grows with about two and a half to three years kind of a lag. At this point of time, we see that on a full year basis, the aftermarket for four-wheelers may be in the higher single digits. That is around 7%-8% on the optimistic side, and maybe about 6%-7% on the pessimistic side. Two-wheelers, we are seeing a lower double digit growth, around 12%-13% kind of an aftermarket growth is being seen as far as two-wheelers are concerned. Okay. This is what is the sustainable thing you feel? Sorry? This is the sustainable number you feel? Yes. Yeah. Okay. Sir, second question I keep wondering is, that recently a partner sold out a big chunk of equity, but there was no participation from the promoters. Any thoughts on that and why we are not thinking of buyback or something at some point of time? I think the exit of Brookfield, because after Johnson Controls exited their power solutions business, Brookfield was a financial investor. It is a decision that they have taken as part of their global strategy. So at that point of time, there was no direct purchase that had happened by the promoters. So these decisions around other buyback or any other capital allocation decision are a matter of a continuous debate. It is not that we are ruling out anything at this point of time. Because as a business, we are also investing heavily into the new energy business. So once we see the cash flow sustenance, the management is on a constant review of all these matters with respect to the capital allocation. We will come back to you as and when a specific decision is taken from that. Okay. Thank you. Thank you. The next question is from the line of Gaurav Nigam from Tunga Investments. Please go ahead. Yeah. Thank you, sir, for taking my question. Sir, my first question was on, I just wanted to understand how the auto OEM volumes and Amara's OEM segment volumes are correlated. Because one thing is very clearly visible in the market, is that higher priced products are growing more, and there's a muted volume growth in the lower price segments in both two-wheeler and four-wheeler segments. Does it have any implication on Amara's auto OEM volume growth? See, the OEM platforms, whenever we participate, it does not say that we will only participate in certain segments and we don't participate in others. It is like there are certain vehicle platforms. Sometimes, the shares will differ, how much is given to one player vis-à-vis the other. Beyond those operational details, I don't think there is any change in our overall strategy of participating in the OEMs. We are participating in almost all the OEMs as of now. In some of the OEMs which are now working on an AGM battery, we are also now ready with the product, and we are now trying to work with those OEMs to provide the AGM battery as well. In that sense, be it on the product development, be it on participating in as many vehicle platforms that we can, there is no change in our stance. I think the idea to grow the market share within the range what we have set for ourselves will continue. Got it. Just a clarification. You are saying that overall volume growth of the industry should broadly mirror the auto OEM volume growth for Amara as well. Is that correct understanding based on this statement? Yes. On a clear basis, yes. But there could be minor deviations always. That is fair. Understood. And sir, second question was on the- Sorry to interrupt you. We have other participants in the queue. Can I request- I'll just ask one question. Sorry, go ahead. Yeah. Sir, just one question on the lithium-ion batteries. Sir, I understand you are planning for FY26. From a design perspective, who are we targeting as a customer segment? Is it two-wheeler, three-wheeler or four-wheeler? Are these capacities fungible in nature that we can do any kind of end user segment? Do we need to have an MOU in place before we do the FY26 capital commitment? Just wanted to understand perspective on that. Initially, the NMC cells are going to be used in a two-wheeler product. There is also a possibility that some of the three-wheelers may also use the NMC product. Secondly, as far as fungibility is concerned, from a chemistry point of view, they are reasonably fungible. There may be a requirement of a minor capital addition. Only when it comes to the form factor, there could be an additional CapEx that we may have to spend. Otherwise, when we want to change from NMC to LFP, there may not be a significant CapEx penalty. As such, in our long-term view, at least at this point of time, we believe LFP chemistry will have almost a 60% kind of a share, whereas NMC chemistry may have about 30%-35%, and rest could be with the other chemistry that can come in. In that sense, we don't see a great capital risk around the initial investment what we are making, both from a chemistry point of view as well as from an application segment point of view. Got it. Sir, your answer on the MOUs, is that required for FY26, like capital commitment or that you will do it as and when it comes? I think, in a B2B scenario, at this point of time, I don't have any specific MOUs that I can share with you. These are ongoing discussions. As and when things come to a shape, we'll let you know. Understood. Thank you. Thank you, sir, for answering the question. Thank you. Thank you so much. Thank you very much. The next question is from the line of Sandeep Dixit from Arjav Partners. Please go ahead. Thank you very much. I just had two questions. Number one, you have mentioned that there is some kind of a one-off in the cost or expenses in this quarter. Is it possible to quantify it again? Yes. I think I mentioned that about 10 crores could be the one-off item in the expenditure because they are from specific projects that are running. Once those projects are done, we may not incur it in the subsequent quarters. Thank you. The second question was, we haven't seen your margins go back to the 15%-16% levels that we used to enjoy. Is this some structural change that we have to live with this kind of a 12%-13% range? Or can we expect to go back to 15%-16% in the next one, two years or so? Yeah. Like we discussed in some of our previous calls as well, if you align the margin percentages with the lead cost. For example, we have seen 16%, 17% EBITDA margins also when the lead was around INR 150,000 or even less. I think we have seen INR 135,000 also in some quarters. When you have such low level lead levels, naturally, the denominator impact itself will play, and then you see that though you make the same amount of money on per battery produced, suddenly your margin percentages will appear bigger. We have seen from there the lead moving up to about INR 250,000 levels. We have been mentioning that from an internal process efficiency improvement or maybe realization improvement point of view, we can look at that kind of a 15%-16% kind of an EBITDA margin around when the lead is around INR 175,000, INR 180,000 level. But now, though we are at about INR 2 lakh level, we have now in the current quarter, we reached about 13.8% or so. The idea is how do we increase our margin quality though the underlying lead rate is constantly increasing. That effort is on. It is not that we can completely de-link the lead price level vis-a-vis the margin profile where we are at. I think if we adjust for it, I think I'm sure we are having the same amount of money for every ton of lead processed, subject to some product mix changing. Okay. Then should I be actually looking at such an absolute EBITDA per battery rather than looking at it in terms of percentages? Is that what you imply? Yeah. From an efficiency measurement point of view, yes, I would feel that is the right metric, but the effort is to see how do we increase the percentage as well. What would that number be? Sorry? What would that number be in terms of EBITDA per battery? These are measured at each application segment separately. I don't think we'll be able I understand. to lock those numbers here. Yeah. Okay. Thank you very much. No more questions. Thank you. The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead. Namaskar, sir. Sir, taking into account our first half growth numbers, what should we anticipate going into H2? These are sustainable numbers in terms of the revenue and the profitability. What should we extrapolate? I don't want to give a guidance here, but I think on an overall basis, on a full year basis, we can think about considering the industry growth rates, what we are seeing, a 10% revenue growth is possible. Sir, when you were answering regarding our insurance claim part and the other income component, have we accrued any amount for this first half? Sir, I missed your comment. I think the INR 80-90 crore or some figure you mentioned. Can you repeat the same once again? See, the claim amount received is INR 100 crores. The inventory recycled is about INR 80-90 crores. They are not part of the other income. They go as part of the claim receivable that is already recognized in the last year. They do not form the part of the P&L. That is, these are all operational numbers. Yes. P&L, you will not see the impact of the insurance claim because the fire incident occurred in January 2023. Last year itself, those claims and recognition of the claim receivable has been completed. Right. And last, second point was regarding the telecom investment pipeline, sir. If you could give us some color, what's the ask from the telecom companies, especially in terms of the replacement demand and also in terms of new tower being erected for 5G deployment or if you could give us some more color, what's the ask from them? See, right now, because some of the 5G deployment, the base transceiver stations are also getting strengthened. That's why there is a requirement of additional batteries over there. Going forward, yes, this sector is also susceptible for chemistry change. The storage side, if the lithium prices were to be coming in a particular range, then we could see that penetration happening even in the telecom level. But at this point of time, there is a reasonable demand for the lead acid telecom batteries. We have been using our capacities almost to the level of 85%, 90% kind of utilization, which was earlier around 75% kind of utilization. We see this demand might sustain for at least, I think, next couple of years. And we have to wait and see how the new chemistry will come in terms of its price per kilowatt hour. Based on that, the migration to the new technologies may happen. Great. If I may squeeze in just a small point. Sir, when you look at the investment cycle or the investment phase where the company is currently and the amount of cash being generated since we are a net cash surplus company, what should investors, investing community should look as our company as a whole for, say, three, four years down the line? The incremental cash generation even post the CapEx that has been announced, how should we look, say, four, five years down the line as the name says, Amara Raja Energy & Mobility? What should we pay attention to? Saket, I am so sorry to interrupt you, but due to time constraint, can you join the next conference? I just put forward my point. It is up to the management. No issue. I put forward my point. If sir has heard me, okay. Otherwise, I join the next one. Yeah, see, Sitaram, the overall capital allocation point of view, years, how we should think, is definitely a question that we grapple with on a daily basis because the investments into the new energy business are quite sizable. It is also not necessary that the entire additional cash accrual of the legacy business will be totally used for this CapEx, either to put up CapEx for the legacy business or for the new energy business. At certain point of time, how do we fund the new energy business? What is the right debt and equity mix that should be there for the new energy business is a decision that we constantly evaluate. At this point of time, our idea is we should invest the initial risk capital and then make significant progress on some of the milestones that we have set for ourselves. Once we do that, then definitely the capital allocation decision is a matter of time. I think each quarter we need to review these decisions, and accordingly, the decisions have to be taken. I do not think I can say any particular formula for it at this point of time. Yeah. Thanks. Thank you, sir. We will continue the discussion later. Thank you. I now hand over the conference over to the management from Amara Raja Energy & Mobility Limited for closing comments. Go ahead, sir. Yeah. I am sure a lot of you might have many other questions and clarifications. We will definitely try and clarify them as much as possible. It is always a pleasure to interact with all of you. Some of your questions always add value to our thinking process. We welcome your questions. Thank you so much for your time. It is a pleasure talking to all of you. Thank you very much, sir. On behalf of Amara Raja Energy & Mobility Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.