Exide Industries Limited (EIL) has announced an investment of ₹75 crore in its wholly-owned subsidiary, Exide Energy Solutions Limited (EESL), through a rights issue. This move brings EIL's total investment in EESL to ₹4,022.23 crore, underlining the company's commitment to expanding its presence in the lithium-ion battery manufacturing sector.

Investment Details

Purpose of Investment

The fresh capital injection is earmarked for funding EESL's greenfield project in Bengaluru. This facility will focus on manufacturing and selling lithium-ion battery cells, modules, and packs, catering to India's electric vehicle market and stationary applications.

About Exide Energy Solutions Limited (EESL)

Financial Performance of EESL

This investment by Exide Industries Limited in EESL aligns with the demand for advanced battery technologies in India's electric vehicle and energy storage markets. By bolstering its subsidiary's capabilities, EIL aims to position itself in the lithium-ion battery manufacturing space, potentially capitalizing on the shift towards cleaner energy solutions and electric mobility.

The investment maintains EIL's 100% shareholding in EESL, indicating the parent company's continued confidence in its subsidiary's potential and the broader market opportunities in the advanced battery sector.

Exide Industries , a leading battery manufacturer, reported a 2.1% decline in revenue for the second quarter, primarily due to the impact of GST rate cuts on batteries. The company faced challenges as distributors engaged in destocking following the reduction of GST rates from 28% to 18% on batteries.

Key Highlights

• Revenue declined by 2.1% in Q2
• GST rate cut on batteries from 28% to 18% led to distributor destocking
• Production cuts implemented to manage inventory
• Margin pressure experienced due to input cost inflation
• Lithium-ion cell manufacturing project nears completion

Impact of GST Rate Cut

The reduction in GST rates, while potentially beneficial for consumers in the long run, caused short-term disruptions in Exide's supply chain. Distributors and retailers postponed their purchases in anticipation of receiving new stocks with updated prices, leading to a sudden shift in market momentum.

Production and Inventory Management

In response to the market changes, Exide implemented production cuts in August and September. The company focused on cash management and kept costs under control at the manufacturing side. Raw material procurement was also kept in check. These measures, while impacting profitability, helped reduce inventory levels significantly.

Financial Performance

While specific financial figures were not disclosed, the company indicated that operating profitability was affected due to continuous pressure on input material costs. Exide has not fully passed on the input material price impact to the market, partly due to the timing of the GST rate cut announcement.

Lithium-Ion Project Progress

Exide's lithium-ion cell manufacturing project is approaching completion, with INR 3,947.00 crores invested to date. The company expects to start production by the end of the fiscal year. Key developments include:

• Equipment installation and commissioning works nearing completion
• Engagement with 2-wheeler and stationary energy OEMs for supply agreements
• Process validation and sample preparation for customers underway

Market Outlook

Despite the challenges in Q2, Exide Industries remains optimistic about the future. The company expects an uptick in auto OEM demand in the coming quarters, particularly due to the GST reduction impact. The aftermarket demand for batteries has shown resilience, with double-digit growth in both 4-wheeler and 2-wheeler segments.

Management Commentary

Avik Roy, Managing Director and CEO of Exide Industries, commented on the results: "We started the year on a strong note with Q1 registering about 5% growth, but showed a 2.1% degrowth in Q2, overall resulting in a modest 1.3% growth during H1. The sudden shift in momentum once the GST rate cuts were announced impacted our performance, but we believe this is a short-term effect."

Exide Industries continues to focus on operational improvements, cost excellence, and manufacturing technology upgrades to enhance competitiveness and improve margins in the coming quarters.