Q1 23/24

Aug 14, 2023

Quarterly report

Good evening, gentlemen. Welcome to the Amara Raja Q1 FY 2024 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, but there will be an opportunity for you to ask questions once the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Mukesh Saraf from Avendus Spark. Thank you, and over to you, sir. Thank you, Gavin. Good afternoon, Mukesh Saraf here from Spark Capital. Appreciate everybody logging in. I am pleased to be hosting Mr. Benny Babu, CFO of Amara Raja Batteries. We will start with brief opening remarks from Mr. Babu, and follow up with Q&A. Over to you, sir. Good evening, everyone. Welcome to this call. Thanks for your time. Before I get into the details, I wish to inform you that the new energy business comprising of lithium packs and battery chargers, which was hitherto part of ARBL, has been transferred to Amara Raja Advanced Cell Technologies, a wholly owned subsidiary of Amara Raja Batteries Limited with effect from 13th of November 2023. So the standalone financial results of Amara Raja Batteries Limited will contain 2 months revenue of this new energy business, while the consolidated revenue will include the entire quarter. In the first quarter of the financial year, at a consolidated level, the company had a revenue of INR 2,792 crores, of which about 4% of the revenue is coming from the new energy business. This reflects a growth of around 7% on a YOY basis. When we look at the further detailing into the revenue, the lead-acid battery revenue growth on YOY basis was around 4%. The four-wheeler segment grew at about 5%, and the three-wheeler segment grew at about 9%. But there was a reduction of about 20% as far as the inverters and other applications are concerned, both owing to a post-season as well as the lack of complete production facilities as the tubular factory was gutted on a fire in the month of January. Within the four-wheeler segment, the aftermarket has grown around 7%-8%, while the OEM volumes have remained stagnant. Our export volume growth was also muted during the current quarter due to certain seasonal adjustments in some of the regions and also the anti-dumping duties that was there in the Middle East market. While this is a temporary blip, we expect the export revenue growth to be recovered in the coming quarters. As far as the two-wheeler aftermarket and OEM are concerned, both have grown in the lower double digit, around 12%-13%. The industrial segment has shown a strong growth with about 15% on a YOY basis. While telecom has grown a shade more than the average, all other segments have grown at around 13%-15% during the current quarter. The reduction in the inverter volumes is mainly due to the lack of production facilities and also considering the seasonal factors. During this quarter, we have refitted this entire tubular range with traded products, which is why our total revenue, around 15%-16%, is coming from the trading piece, which has also had an impact on the margin percentages when you look at on a QOQ basis. The net average for the quarter was around INR 195 per kg. While currently the lead price is still hovering around $750, the currency depreciation is keeping the lead levels elevated. The overall lead-acid revenues will have a mix of 70% from automotive, which includes four-wheeler, two-wheeler, and the inverters, and 30% is from the industrial segment. While the inverter volumes are protected to maintain our market share, the quarter growth is getting limited considering the lack of manufacturing facilities. The overall capacity utilization from the automotive side for this quarter was around 75%-77%, and whereas the industrial segment has been pre-utilizing their capacities almost to the extent of 95%-97%. While the margins have improved during the current quarter on a YOY basis, there is a reduction in the overall EBITDA when we look at on a QOQ basis, largely due to the trading mix and also increased insurance costs. While these two are compensated by a reduction in the power cost due to higher mix of self-generated solar power, there is also some other expenses which were reduced during the current quarter. Our renewable energy efforts, both the rooftop solar as well as the ground-mounted solar, are helping us to reduce the power cost apart from reduction in the overall specific energy consumption. Higher new energy business also will reflect EBITDA margin negatively, considering this being a new business, EBITDA levels are still to mature. The overall new energy business during the current quarter was around INR 101 crore to INR 108 crore. This is a 3.5 times increase over the same period in the previous year. On a QOQ basis also, new energy business has registered a growth of 53% from the revenue point of view. The mix of new energy business, as I stated earlier, is around 6% during the current quarter as compared to about 1% in the previous year. The overall capital investment for the year as a whole will still be around INR 200 crore odd with respect to the lead-acid business, which is going to be spent on the lead recycling plant, as well as some of the ongoing capacity expansion programs. As far as other diversification, the plastics components business merger with the Amara Raja Electronics Limited is ongoing. The NCLT approval is awaited, which we are expecting sometime either in this quarter or in the first half of the next quarter. The reinstatement of tubular plant is also going as per plans. Right now, the equipment designs and the negotiations are undergoing. We expect to reinstate the tubular plant in the next 18-20 months period. With those opening remarks, I would be happy to answer any queries which you may have. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you can press star and two. Participants are requested to use handcuffs 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 with Nomura. Please go ahead. Yeah, good afternoon, sir. Thanks for the opportunity. First, I wanted to check on the demand story. If you could share your thoughts in the replacement segment for both two-wheelers, four-wheelers, as well as industrial, and how much revenue is going to be lost because of the fire incident. Also, if you have taken any pricing actions which you can comment on that in the aftermarket. Sure. See, the aftermarket demand outlook for two-wheeler, as I was explaining earlier also, Kapil, is still in the range of 6-7%, considering the volumes put on what we have seen in the last three to six months. The two-wheelers are concerned, we still believe two-wheelers are growing strong at about 11%-12%. We are growing a shade more than that as far as two-wheeler aftermarket is concerned. So these numbers are not significantly oscillating as I was speaking to you earlier as well. Then as far as industrial is concerned, yes, we have seen a strong uptick in the demand for telecom batteries because now the power augmentation requirements are increased substantially, and that is actually providing additional demand, which is why telecom is now growing more than. In this quarter, if you look at it, around 15%-17% kind of growth we are seeing in the telecom volumes. The UPS segment also has shown a very strong growth dramatically. Earlier, we used to see a growth of about 7% to 8%. Actually, in this quarter, we have seen about 11% to 12% kind of a growth we have seen. We expect that at least telecom and UPS demand at this demand levels may sustain during the current year, but we need to wait and see how this is going to shape as we move into the next year. As far as the inverter batteries is concerned, while we would not have lost much of the market share because we are using the strong vendor network that we have to replace all the requirements of our channels. But the acceleration might have got limited. While we believe that we have not lost any market share, we could have seen some upside if Amara's upside is for manufacturing facility was to be available. Yes. Sir, on pricing? Yeah. We have not taken any aftermarket price corrections during the current quarter. Because margins are under a bit of pressure, do you think excluding the new energy business and trading also, there is some margin pressure which you need to pass on with price hike? Look, if you adjust the margins compared to the previous quarter, if you adjust the margins for the higher insurance cost and the trading mix and the new energy business, there will not be a significant change in the margin profile. Maybe a 0.1%, 0.2%, that is a quarterly oscillation that happens. But I think we will be able to recover it as we move ahead into the year. As I was saying today, the lead price is still around INR 195 to INR 218 kg. So we expect, if lead demands were to remain at this level, as I was mentioning to you earlier also, that around INR 160 to and at a certain stage where we can look for a 15% kind of an EBITDA margin. Beyond that, the EBITDA margin should get slightly disconcerting the lead level. We believe over a period of time, I think we have more or less FY 2023, we closed at an EBITDA margin in the range of 13%, even though the lead level was at an elevated level, and we expect to further improve in this current financial year. But for the similar issue. Understood. Second question is just on the cost side, if you see other expenses basically reduction both on a YOY as well as QOQ basis. Are there any one-time elements here or this because this percentage of sales also looks to be on the lower side of what we have been doing for last many quarters. Are there any sustainable elements here? What should be the right level? Power cost reduction, as I was alluding to earlier, is sustainable because now all our energy capacities are adequately running. While in the summer, yes, you will get a bit of a higher generation compared to the other months. Barring for that adjustment, we believe power is something sustainable. The insurance cost we see is also something that we may see in the coming quarters. As we move into next year or the year thereafter, I think they should slowly come down. Barring these two operations, the rest of the expenses are more of a timing issue, maybe some expenditure and promotional expenditure might have got deferred depending on the activities that we do. Beyond that, there are no special one-off reductions that are happening in the current quarter. Got it. If you could still quantify these two issues, power cost, how much reduction you think you will be able to get, and how much is the impact of insurance cost that came up? Yeah. Power and insurance cost both will actually, when we look at power cost, would have given us a saving of around INR 10 crores to INR 15 crores, and insurance cost had an impact of additional expenditure of about INR 6 crores to INR 7 crores, and that is a timing issue. Okay. Thanks a lot, sir. I will get back in the queue. Sure. Thank you. Thank you. The next question is from the line of Raghu Nandan from Nuvama Institutional Equities. Please go ahead. Thank you, sir, for the opportunity. Raghu here. My first question was on the new industry side. We have seen a very good jump in terms of contribution to revenue. If you can broadly indicate which segments we are catering to and any major customers whom the company supplies to. Yeah. Today we are supplying battery packs to mostly three-wheeler applications. One of our largest customer in that segment is Piaggio. We are also supplying battery chargers to, again, three-wheeler OEMs and some of other stationary applications. Again, there the two large customers are Mahindra & Mahindra and Piaggio. We are now getting ourselves prepared for the next level of packs for two-wheeler applications and going forward certain high voltage applications also. On the industrial side, sir, do we have products, are you looking to telecom customers or any other segment? Yes, we have the regular telecom customers also now looking at some of their applications. They are looking at lithium packs. We are participating in those products as well. We have supplied some quantities in the last quarter also. Going forward, we expect that business also will substantially increase. Got it, sir. In terms of the localization of lithium cell manufacturing, company has signed an MoU with Telangana State Government. Just wanted to understand, in terms of, are you planning to tie up with any global major as a technical partner? When do you plan to start construction of the cell manufacturing facility? See, the manufacturing and the site development, the construction and the site development of the lithium ion park, the Giga Factory, Giga Corridor as we call it, is underway. We have acquired land near the 70 kilometers from Hyderabad. The construction is underway and the sourcing of required the partners required for the construction are all tied up. As far as the product technology is concerned, as you know, we have developed our own internal cell development activity is going on as far as NMC is concerned, and we are working for other chemistries with other agencies. As of now, it is not that we have a large technology partner that is on board, but we feel that in the process of creating self-sufficiency on technology, we have also started now constructing the ePositive Energy Labs, as we call it, near Hyderabad International Airport. Groundbreaking of which has happened on, day before yesterday, on 11th of this month, we had this groundbreaking ceremony also. I think we are having enough technology partners who can develop the product technology, and we are also creating a robust mechanism to ensure self-sufficiency for further development. As far as manufacturing know-how is concerned, I think we have got the right vendors and other partners who will help us in terms of building this entire gigafactory. As we move ahead in this journey, if some other partnership which is going to be synergistic with our long-term growth strategy, definitely we would be open to those ideas. At this time, the idea is to have our own self-sufficient method of achieving the product technology and also offer the right product to the Indian market. Got it, sir. Any timelines sir, when you expect to commence the pilot production? At this point of time, we believe the customer qualification plant, as we call it, will be first plant where we will be producing all the demonstration products. We believe we will start sometime towards the end of FY 2025, and the gigawatt-hour line should deliver some production in FY 2026. Understood, sir. Just one last question before I come back to the queue. Since government may reopen that PLI scheme qualification, would you consider looking at the PLI scheme, the Indian incentives? How are you thinking about the opportunity there? I think, the balance capacity, 20 gigawatt-hour is what is supposed to be the auction. Depending on the terms at which the tender is going to come, we will definitely explore the possibility of participating in it. But until the terms are clear, I do not think I am in a position to give you an yes or no answer. But, we hope to see that, if the terms are within our achievability metrics, yes, we may look at participating into the tender. And also other onerous conditions come in, we need to take a call at that time. Thank you, sir. This is very helpful. I will come back to you. Absolutely. Thank you. The next question is from the line of Dinesh Gandhi from Motilal Oswal. Please go ahead. Hi. Just want to check the tubular plant you are saying will get re-inspected in 18 to 20 months, is it? Hello? Yes, Dinesh. I can hear you. Please. Yeah. The tubular plant will take 18-20 months to start that? Yes. In that case, broadly our margins will be in this kind of range. We are talking to 15% range depending on the seasonality of inverter. Is that the right way to look at our margin profiles from where we are today? Again, we need to link it to the lead levels as well. The core business will again follow the same margin trajectory, what I have explained earlier. The FY 2025 season is what we hope to use our own factory. Until that time, when we meet the tubular demand as a trading volume, yes, it will have some negative impact on the margin. Okay. So effectively, FY 2025 season is what we should be looking at. Got it. Second question, coming to the lithium-ion CapEx, given that probably you expect plant to be ready by FY 2025 end, what kind of CapEx should we budget for lithium-ion cell plant for FY 2024 and FY 2025? As I mentioned earlier also, Dinesh, the battery CapEx includes these three projects. One is our ePositive Energy Labs. Second is the customer qualification plant, and the 2 gigawatt-hour cell line. All three put together will cost us about INR 1,500 crores. This year we may need about INR 200 crores-INR 300 crores towards the initial construction. We believe next year we'll have the higher cash flow as most of the machinery and other things may come in. While I will not be able to put a number at this point of time, I think 50% of the CapEx may be falling between next year and the year after. So I'll leave it at that. Okay. So for the phase one plus customer qualification plant, I'm assuming it's INR 3,000 crores. Okay. I said INR 1,500 crores. 1,500. Okay. Sorry, my bad. Okay. Coming to the replacement market demand scope, the 7% growth which we are seeing, that is for the market, right? Not for us. We would have grown slightly more. Yes. For the market. Yes. In the market around 6%-7%, we have grown even in this quarter between 7%-8%. So there is a shade higher growth is coming. The industry growth rate is somewhere around 6%-7%. Okay. Aftermarket should continue to grow in similar range, low single digit growth from high single digit kind of a range, given the weakness which was there in demand. Yeah. On two-wheeler, yes. What is driving the strong demand growth because underlying market has been quite weak for some time in the sense underlying two-wheeler market has been weak for quite some time. So what is driving the strong growth in the two-wheeler aftermarket? I think there has been considerable improvement in our share as far as the aftermarket of two-wheeler is concerned. We have been growing at this pace, I think, for the last four to five quarters from an immediate memory. But robustness for the overall vehicle park vis-à-vis the total battery demand, I think, is continuing. I will attribute most of this cause lesser amalgams as well as our improved market share. Okay. But then underlying market would be still growing at high single digits through new businesses? That's our view. At least we will be growing more than the market, but in 2-wheel segments, at least a share more than 1%-1.5%. Okay. The 4-wheeler maybe around 0.5%-1%. Got it. Great. Thanks. I'll come back to you. Thank you. The next question is from the line of Vibhav Zutshi from J.P. Morgan. Please go ahead. Yes. Hello. Good afternoon, sir. Thanks for taking my questions. Just touching on the lithium ion side, I just wanted to understand what is our supply chain regimen in terms of sourcing the raw materials, at least for the first stage of the plan which is 2-wheel or what are. Just related to that, we do have strategic investments in Log9 as well as InoBat Auto. Are you also collaborating with them? Would you call them as your strategic partners or something like that? As far as the investment is concerned, I wouldn't call perhaps partners. I would definitely call them as our associates. We do exchange and collaborate with them. There are activities that are going between some of these industries and us in terms of some of the technology development works. That's the relationship currently. As far as the overall supply chain is concerned, yes, we are currently in discussion and working with certain partners. For our equipment, we are working with at least 3, 4 vendors. For our material also, there is a team working with at least 4 or 5 pieces right now. It will depend on also the material mixes that once we finally decide on, then we will have to choose the right source for those material mixes and then select accordingly, and then see how do we tie up about it. Work in terms of tying up the right mix, right partners and other things are going on at this point of time. I don't think I have specific details to share about it. Okay. Just to follow up on this, you mentioned that currently it is three wheelers and then you are also looking at two wheelers. The strategy as three wheelers, two wheelers and telecom and this industrial side is what you will be focusing on initially? Yeah. The demand trajectory also is going to look like that depending on the penetration level of what we have seen. Obviously, three wheelers is just one and two wheelers is next. Actually, some of the storage applications like telecom are actually seeing traction. Coming data centers and UPS may have a slowly considering the time that is going to be spent on those applications. But depending on the charge characteristics and the power requirements and energy requirements, each segment will have a different penetration cycle. So we just, right now, these three set of applications is what is going to start the initial demand. As we move ahead, yes, we will get into other segments as well as we have the development. Okay. Thanks. My second question is on the export side, maybe your export revenue has been at a very strong CAGR of 20%+ if I look at the last several years. In terms of percentage contribution, it has now risen to double digits. Is there any target that you have in mind how much it contributes in terms of top line? You have been talking about making certain transportation inorganic intervention as well. What is the target for maybe export exposure going forward? Right now, as we have articulated in our annual report also that we have got interested, which could be we currently started to about six or seven countries which were more related in and around the Indo-Pacific rim. The idea is to look at what are the other markets in the western part of the world that we can actually penetrate into, and some work is happening over there. We expect that the volumes will ramp up into the export segment again, and then we continue to maintain the healthy growth rate of 15%-20% year on year as we move ahead. But we are also seeing in some of these global markets, the EV product demand is steadily increasing and now we are ready with the product and then we are going to supply those products to some of these markets. Considering the product readiness and also our distribution reach has been significantly improved, we expect to continue this growth momentum in exports. While we are really strong in the APAC markets, the Middle Eastern markets, and also the African markets, we expect to increase that presence in these markets further and also spread our presence in the other countries so that the volume trajectory for export segments is as well. Got it. Thank you so much. Thank you. We have the next question from the line of Abhishek from Dolat Securities. Go ahead. Thanks for the opportunity. How is the RM going for the non-lead RM, like, say, battery and the plastic item? Yes, what we have seen as an inflation in the last year has now tapered off. We have now seen a reasonable level of materials like plastic separator, acid, the C trades, all those impacts have now more or less come back. While they are still a shade above the lowest levels, what we have seen, I think they are at manageable levels. When can we expect the integration of this 15% business? What would be the addition in the top line and the margin front because of this integration? Yes. As I was mentioning in my initial remarks, we expect the NCLT to give its approval in the next couple of months, then the integration will start from that. We expect GTM if you have checked recent, that is what we have said as directional and also our discussion in Zoom. While those numbers we have set up, I would wait to provide you the details once the complete integration is done. We are very clear that it will be an EPS accretion as well as margin expansion. Exact numbers, I have some numbers in my memory. I would like to certainly inform you once the integration is complete. Okay. Sir, I assume this is 2-wheeler segment current capacity utilization is around 90%. How do you see this affects in this particular segment? As far as two-wheeler is concerned, currently we are around 80% levels. If you look at on an annualized basis, we will be around 85% to 80% levels. We still have some headroom to utilize those capacities and we are also trying to do some enhancement work, which should take care of further requirements for the coming period. But any further greenfield capacities on two-wheelers, we need to be extremely careful about how the penetration of two-wheelers is going to happen and how it may impact overall demand. While two-wheeler factories to some extent are compatible with our SR or battery requirements, we will be looking at the demand for both these and interpret well. At this point of time, we believe we have sufficient capacities for two-wheeler at least for the next one to one and a half year. Also we are looking at any export volume growth if at all were to come even in the two-wheeler segment. We will see if there is any alternative arrangement that we can work with instead of completely going on a greenfield project, where the capital requirements and any risk associated with that has to be gauged before we actually take the decision. We are thinking about it, but at this point of time, I do not have specific plans to share with you on any capacity addition as far as two-wheelers is concerned. In the lithium-ion batteries, you are adding the capacity of 4.5 gigawatts. What would be the peak revenue from this business if increased capacity from 5 gigawatts capacity from Amara Raja? That would be the peak revenue and the margin. See, these are definitely changing scenarios. We were tied to earlier that the asset turns could be only one to 1.2. Based on the latest CapEx numbers, we have seen we scale it up, given the asset turns can improve as high as 1.4 to 1.5 as well. Now, the question is, depending on the cell side, today if I look at different things we have different retailers. So on a weighted average basis, at cell level we may think about $100 to $110 level realization in the initial period and there is also a target price to reach because we have seen on a global basis the kilowatt-hour cost is still shown as a possible reduction from about $100, $110 to about maybe $70 or $80 per kilowatt-hour. If we take average $100 as a per kilowatt-hour revenue and you can at a 2 gigawatt-hour level and our current currency at INR 83, you know the numbers. That's how we are looking at today. On the pack side also we currently have our pack capacity close to about 500 megawatt-hour. We expect that can be increased to about 1 gigawatt-hour. We also think that capacity can be further increased to about 3 gigawatt-hour in the coming future. If we do that even the packs over a period of time should deliver roughly about INR 3,000 gross revenue if we use our entire 3 gigawatt-hour pack. The numbers on the specifics can only be detailed out maybe into some more quarters into the future. At this point of time we do our teaching. Thanks for the detail. I'm sorry? Thanks for the detailed insight. Thank you. Thank you. The next question is from the line of Manav Choksey from KRChoksey Shares and Securities. Please go ahead. Hi. Thank you for giving me this opportunity. I had a question on Amara Raja Electronics Limited. Could you suggest the synergy or the benefits that the Amara Raja Battery would have with that subsidiary? Is there any plan of going forward with a merger or getting it listed going forward? See, right now Amara Raja Electronics supplies us the home UPS, the inverter VRLA cell, not while we make the battery. Beyond that, it can be Quanta and Optima Battery's cell response has been. I wouldn't want to comment on any other strategic possibilities going forward at this point of time. Okay, thank you. My second question is like add on to what you mentioned about Log9. Your investment in Log9, can you suggest how it would complement the Amara Raja investment, like, because it is in the same sector. So what are the synergies you see with the Log9 investment towards the Amara Raja Battery Limited? The initial investment into these startups was more to look at, because Log9 was focusing on certain solutions, LTO cell and pack development. Apart from that, they are also working on certain other technologies like fuel cells, and they are also working on things like other lithium chemistry development as well. So we are working with them on certain product development areas, and then over a period of time, we will have to see what other strategic possibilities can come in. The idea is it is not possible in this segment for everyone to do everything. So we have initially thought about ability to draw the technological inputs towards initiatives that these startups are doing, and we are working with them on certain projects. On that process, obviously, we had to make this investment. As we move ahead, we will see how those relationships can be nurtured and then see how we can take this journey forward. Okay. Thank you so much. The next question is on the line of Satya Saswati from Ampersand Capital. Please go ahead. Hello, sir. Yeah, hi. Hi. Sir, two things. First of all, while you have given a lot of details on this lithium ion cell program, just wanted to clarify, whether your focus is a lot more towards non-passenger vehicle chain? No, I think at the cell level, the chemistries what we are focusing on currently NMC and LFP, because cells can go into any application, starting from stationary application to a low voltage two-wheeler application to a high voltage four-wheeler application. As far as the packs are concerned, obviously currently our focus is still on two-wheeler and three-wheeler. Naturally, four-wheeler is only a matter of time, that we will be prepared for all requirements for all vehicle categories. But we also need to understand that amongst the OEMs, it is not necessary that they would want to outsource the pack development as well. While yes, cells certainly, I think the battery players will make and then the OEMs will be buying it, but it is not the same case for packs. Some OEMs think they can outsource the pack, some OEMs think the pack has to remain with them itself. Our capability development is for developing packs for all categories of applications. So there are cells maybe, I would say, which are not fixed to which application they are going yet. There will be some requirements, I am not saying. Technically, there may be some variations, but cells may get into any of these application categories. And sir, on the timeline, I will be confused. You said that you will take about 18 to 24 months, but at the same time, you were also saying that the revenue will start to flow in only from early 2026. So can you just clarify the timeline, sir? See, FY 2025 is when we expect to start our customer qualification plans, which is more to test run the products for the applications and get approvals, et cetera. So initially, we think we will start with the two-wheeler or our MMC line, which is going to take that much time, and then that's why I said revenue may come only in FY 2026. Okay. Thank you. The next question is from the line of Harsh Beria, an individual investor. Please go ahead. Hello, am I audible? Yes. Hi. I think you mentioned about that solar cost which we have got, which was in the vicinity of INR 15 crores to INR 16 crores a year. What was the capital investment that went behind these solar power plants? Overall investment, INR crores. Right now, our overall energy requirement, about 20% of it is coming from these renewable sources. The overall investment we made into this roof-mounted and the rooftop solar will be around INR 300 crores. Do we see further investments, like at optimum utilization, what is the percentage of power which we can utilize from our captive power units? We are using 100% of it because we have created the capacity by keeping in view the peak requirement. We are currently using these captive solar plants fully. Any further expansion or investment into these plants will be guided by our requirements and also the government policies with respect to the power banking and the magnetic material related story. As and when we see the policy environment and also the requirement of energy for the company as a whole, then we will take a call whether to make total investment, outward investment or yes. Perfect. My second question is, as AJ, our chairman, had mentioned that we will be putting up 80 plants for lead-acid batteries of capacity of 7 million plus, which is almost equivalent to our current capacity. Can you talk more about these plants because that would be very large capacity commitment from our company? No. It is 7 million. Today our total capacity is about 2 million capacity and our planned capacity is about 30 million. Depending on, we had to take, obviously the coming future capacity expansion that is required for the future demand. Also look at, we have been discussing about the concentration as a . Between both these plants which have been running for . When we see a need for a large refurbishment of those, or maybe technology improvements that we have done over a period of time, we may consider, look at having a facility. When we put that facility, naturally, we do not want to put up in the same location considering the risk that we have discussed for a long time. Next, when we decide our next plan, which will obviously be in a different location, the sizing of a new plant, when we look at it, the optimum size of any plant will be in the range of 7 to 7.5 million batteries. It used to be 6 considering the equipment efficiency. Now that has increased. Whenever we look at a new plant, we look at that size, and it does not mean we directly go and put a capacity for the entire 7 million at one go. We do that in phases. Line addition will happen only when there is a clear demand. Perfect. Thanks for answering my question. That is all from my side. Thank you. We have the next question from the line of Rajesh Annar with ITI Limited. Please go ahead. Hello. Am I audible? Yes, please. Thanks for the opportunity, sir. In some parts of the discussion, how much is the CapEx for the 2.5 gigawatt that we are setting up? In terms of total, how much is the CapEx? Second part is, what kind of profitability do you expect from this unit? Some margin percentage or Yes. I'll repeat your question and confirm if that is right. You are asking about the margin percentage of the lithium business? Yes, and the CapEx. Yes. CapEx, as I mentioned earlier, for the first phase, we are looking at about INR 1,500 crores as an investment. As far as profitability is concerned, at the operating level, we believe 10%-12% kind of a margin is possible at this point of time. But once we finalize the entire product mix and also the sourcing of raw material, I think I will be able to come back to you with clear numbers. But at this point of time, that is our view. But I would wait for some more time before we actually put a clear number on it as far as profitability is concerned. When you say phase one 2.5 gigawatt and INR 1,500 crore is, I think, on the lower side of it volume-wise for that capacity. No, I said two gigawatt-hour of energy and customer qualification plant and our energy research labs. So those are the three projects which would call for INR 1,500-INR 1,600 crore CapEx. That is what I said. Okay, understood. Thanks, sir. Thank you. The next question is from the line of Uday Prakash from Value Research-India Private Limited. Please go ahead. Hi, sir. Good afternoon. Hi, good afternoon. I just have three questions from my side. The first is, it's more of a new energy related question. The thing is, whenever we have a new technology, the normal thing what happens over the years is that production grows and demand grows. But cost of production falls relatively over the years. But we have quite a difficult situation here where the lithium prices have climbed up and with difficulties to find new reserves and make it operate. Find new mines and make it operational. Do you think we won't have this effect in lithium energy business going forward in, let's say, another 5 to 10 years? I'm not asking when we start operating the plant. In 5 to 10 years, is it possible for us to witness a cost of falling cost of production level, similar to the way we have for other technologies? Are you asking? I'm not very clear about what your question is. If you can repeat it again, please. Yes, sir. Similarly, what happens whenever we adopt a new technology is that as demand grows and volumes grow, relatively cost of production falls to the unit, ton of, to the unit basis. But here we have a situation where the lithium prices are growing every year and the demand is also growing. Do you think we may not witness the same thing in new energy business, not just for Amara Raja but for in the entire industry? See, the lithium prices have gone through its own cycles. I think any metal price, that's what happens. Even with lead, if you go back to the history, you would have seen even $800 per ton also as a price. But today we are at $2,150 or $2,200. We have seen even $2,500 happening at some point of time. I think the metal supply situation cannot be the sole factor for us to decide whether the cell prices, what is the impact of the cell prices that will come in. As more and more resources come up and then the identification of the minerals happens, I think the demand-supply situation of the metal will go through certain, I would say, certain trajectory. But as far as the conversion cost efficiency, how to improve the density so that you are consuming lesser material per kilowatt or power delivered, these things are a continuous effort which will definitely have impact on the overall conversion cost. Over a period of time, scale will definitely give you the efficiency. I think, in my view, I think these two things have to be de-linked and then looked at. The mineral availability versus the conversion cost efficiency and technology innovation. These two may have to be de-linked and then looked at. Okay, sir. Thank you. My next question is on our investment in renewable gas and our solar plants. With new plants coming up, be it with group or VRLA and lithium ion, are we planning to invest further in these power sources or are we trying to just maintain what we already have? As I mentioned earlier, I think the decision to go further on the renewable will depend not only on our demand but also on the policies and the interstate power movement charges and various other things. It is not necessary that we should only install the facilities. There are other structures that are getting available in the market. We will explore those possibilities with an idea to further reduce our power cost as we move ahead. Okay. Thank you, sir. My final question is regarding the contribution of the revenue mix between automotive and industrial. As I said, many sectors in industrial segments have very good growth prospects as industry becomes normal. Do you still believe revenue contribution will continue to be 70/30 let us say in 2024 and 2025? Or is there a chance for this segment to contribute more going forward? I think this ratio of 70/30 will continue, because we are also seeing equal growth opportunities in our automotive side as well. I don't see that significantly altering on an annual basis going forward. And sir, is 70/30 same on operating level too? As in revenue level it is 70/30. Is it the same on operating level too? We wouldn't comment on the sub-segment level profitabilities in this call. Okay, sir. Thank you very much. Thank you. The next question is from the line of Praveen Singh from Nomura. Please go ahead. Yeah. Hi. Just one follow-up. On the pricing for lithium ion cell, do you expect that to be at import parity, or do you see that there is an opportunity to get some premium in this because of proximity of source, et cetera? I think the first objective is to be import parity. So anything beyond that, I wouldn't want to venture a guess at this point of time. The idea is now to first get how do we compete with one cell. The scale at which other players are competing and for Indian players to reach that scale and also deliver the cost efficiency in parity with the import, this is, as you said, is a big ask. I think which people are gearing up towards that. I don't want to go beyond that. Okay. You think the first target is to get to import parity pricing with volumes, and then later on you think about it. Yeah, I would think so. Obviously, I have not consulted my colleague before I give you this answer, but that's my view, yes. Okay. Would you also look at segments like buckets, for example, which have potential to grow more. Is that a segment where you think we can be a significant supplier as well? See, as I said, as we move, we need to develop the packs for all the possible applications depending on what is the demand that we have for each of the various segments. At this point of time, we are not saying that we will rule out one for the other. The idea is wherever our product development initiative and the demand initiative both have as much demand, we obviously offer products for all the applications. It is not that we are shying away from any given application. As and when these are ready, and then we are able to get the customers' approval for those products. Yes, we are not shying away from any one of those products. But at this point of time, the focus is to build products for these segments which are currently requiring those and there is a good demand signal that's available. The focus currently is on those segments that I have explained earlier. Understood. Sir, lastly, just on the technology tie-up, how should we understand this, that you are not really looking for a major partner? Are we comfortable with whatever inputs we have got through our investments or otherwise internal development, or we are still looking out for a major technology partner? See, it is like this. We have to continue our effort of developing the required product for this market, whether a large partner like our FY lead-acid business partner is available or not. I think we have got the wherewithal to develop those products and then run on our own. Naturally, if there is a large partner, you can comfortably find cycles and maybe get market ready a little ahead of time. But we are not saying we are absolutely closed to that part of it. We will see. As long as there is a synergistic relationship we can build with any large partner, we are definitely clearly open for such an idea. But until then that happens, it is not that we can sit quiet and then do nothing. We have to follow our effort and then have our strategy in place, whether with partner or without partner, it is going in that direction. If any partner were to come on board, I mean, any other relationship were to be coming on board, then naturally there will be some advantage. We are definitely open for such areas. Okay, sir. Thank you and wish you all the best. Thank you, Satish. Thank you. The next question is from the line of Jinesh Rathi from Motilal Oswal. Please go ahead. Hi, sir. Just wanted to clarify on the data business. The feasibility of that business is, for us, one key is heavy from inverter point is concerned, and one key and key are the heavy quarters, right? Yes. Got it. Great. Thanks and all the best. Thank you. Thank you. The next question is from the line of Madhur Rathi from Quant Securities Investments. Please go ahead. Good afternoon, sir. Sir, I have just one question. When you were telling that asset turnover is a lithium-ion battery in the range of 1 to 1.2, and our gross profit margin will be 10%-12% range. What kind of RoCs are we expecting? Because this will be a decline in our current RoCs and looking from this source as well. Yeah. As I was mentioning earlier also, based on our current capital position, sometime back it looked one to 1.2. Now there is a possibility of it going up to one to 1.4 as well. So even the bill of material, the cost of procurement, all these numbers are also a working progress. While we have certain views at a given point of time, it is not that there are no improvements possible on top of it. I do understand that these numbers, yes, the RoCs may be little diluted, but the opportunity size and the future growth potential from this business is too big for us to ignore. Also think that the RoC levels will continue to be under pressure by looking at the current numbers. The idea is to get into this and then see how do we improve from there. As we increase the scale, I believe both the return and the profitability numbers will improve. I will only be able to put those numbers with lot of conviction as we move into the time and then see how we are able to improve it, yeah. And sir, what was the IRR or the RoC that we expected before embarking on this platform? Could you just highlight on the future two to three year guideline when we shift from lead-acid batteries to lithium-ion batteries? What are our proposition going forward? See, I do not think I will be able to put number around at this point of time, and I do not think lead-acid future is only limited for the next two years. There is a large future available for lead acid as well. We have embarked on this journey by seeing the size of the opportunity and also the attractiveness and the requirements of the Indian market. So we are sure the return and profitability ratios can be improved as and when we scale up this activity. Okay. The final question, what will be our outlook for top line and bottom line for FY 2024 and maybe next one or two years? That will be very helpful. As we have discussed the possible market growth rates, we generally have been mentioning those numbers. We have not been giving very clear numbers around the possible revenue per se. Okay. Thank you, sir. Thank you. Thank you. We will be taking the last question on the line of Hemant, an individual investor. Please go ahead. Sir, thank you for the opportunity. Most of my questions are answered. Just briefly, sir, for the insurance claim that we had, can you give us some update? Is that claim processed, the money, any timeline on when the money is expected to be received? Yeah. We received about INR 100 crores on account payment, which we have mentioned in our results as well. Right now, we are working on the balance claim for the inventory loss. As and when we reinstate our tubular plants going forward, as I mentioned earlier about the current status, we are confident of realizing the claims for the full reinstatement. Generally, that claim takes that additional 3-6 months, or would it take longer or? The inventory claim should take next two to three months, but the reimbursement will come only as and when we reinstate. It will go along with the project implementation. Okay. Thank you, sir. All the best. Thank you. Thanks, everyone. Thank you. I would now like to hand the conference over to Mr. Mukesh Saraf for closing comments. Over to you, sir. Thank you, sir, for your time. If you have any closing remarks, maybe it will kind of conclude our discussion. Yeah. Nothing more to add, Mukesh. Thanks, everyone, for your time and insightful questions. Thank you. Thanks. Thank you. On behalf of Motilal Oswal, that concludes this conference. Thank you for joining us. You may now disconnect your lines.