Mkt share in replacement biz to rise from 22%: Amara Raja

Amara Raja reported a rise in revenue by 24 percent at Rs 759 crore against Rs 614 crore yoy for the quarter ending December 31, 2012. Jayadev Galla, MD of the company told CNBC-TV18 that the company had raised the price of the car batteries in December and will need to revise it further due to increase in lead prices.

Further Galla is more bullish on the automotive segment of the company as there is more room for growth. "Currently, we are about 22 percent in the automotive aftermarket and close to 30 percent in the automotive original equipment (OE) market and those should be going up in the coming quarters as well," added Galla.

Below is an edited transcript of Jayadev Galla's interview on CNBC-TV18

Q: Can you confirm that you have raised car battery prices and what impact could this have on your margin?

A: We had a small price increase in December of about 3.5 percent in the automotive aftermarket. Since then we have not raised prices but we have been looking at the cost carefully, especially the lead prices are going up in the market and that is increasing our input costs. The pricing increase that we had in December would not offset that lead increase completely. So, we are watching what happens in the market closely and there could be a need to further revise the prices in the aftermarket.

Also Read: Mkt consolidation on; no Budget surprises, says Baer Cap

Q: Could you quantify how much lead prices have gone up by and how much you would need to, by extension increase your own price to balance things out?

A: The lead prices are now gone to Rs 2,300 from USD 2,000 as what we budgeted in the beginning of the year. There is an increase of USD 300 per metric tonne in the US market and that is concerning us most. Our long-term contracts are protected because we have lead conversion clauses so pricing with original equipment manufacturers (OEMs) and pricing with the railways and various other customers where we have long-term pricing is protected. It is only in the automotive aftermarket and few other industrial segments that we would see how we recover that cost for the customers.

Q: The market has been quite enthused with what you have done on volume growth and in terms of increasing market share in segments like OEM. Right now, what kind of market share are you working on and are you confident of holding volume growth given the point you were making about prices?

A: I think pricing has been fairly rational in our market over the last many years and will continue to be the case. When major input costs go up, customers do understand that. We have been working very diligently on our costs; our conversion costs are coming down on per unit basis across the board, our capacity utilisation is nearly full in all of our product segments.

We are going for a major capacity expansion as a result of that and what is driving all of that is our market share growth across segments. That in-turn being driven by superior products and superior performance and customer is getting value for their money with Amara Raja.

Q: You reported double digit volume growth in both the auto and the industrial segments, which one are you more bullish on when you look out for the entire 2013?

A: We have been longer in the industrial market and do enjoy larger market share in the industrial segment namely in the telecom and the uninterruptible power supply (UPS). We have a dominant share in telecom, more than 40 percent and nearly 35 percent market share in UPS and those have also been growing over the last several quarters and a couple of years.

In the automotive segment, we have more room for growth and though we have been growing substantially in volume terms compared to our industrial business, the automotive market represents a higher potential for us because we are starting out at lower market share. Currently, we are about 22 percent in the automotive aftermarket and close to 30 percent in the automotive OE market and those should be going up in the coming quarters as well.

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