Among other reasons for the pressure on the stock is growth of the automotive replacement battery segment. While growth in the business is steady, the weak volume trends across various auto segments could rub off on Exide’s replacement business.
Analysts at Nomura expect industry growth to slow down from 10 per cent in FY20 to 6 per cent in FY21. They, however, believe the company will grow at 8-10 per cent over the next two years, given market share gains from the unorganised segment.
The company is also expected to face competitive pressures from rival Amara Raja, which is increasing its four-wheeler capacity by 35 per cent over the next two years.
In the industrial segment, too, there are challenges, especially the back-up segment that accounts for half of the segment’s revenues.
Given that the power situation continues to improve and the government is looking at uninterrupted supply with penalties for distributors, this segment could see a structural downtrend for Exide.
There are, however, opportunities in the solar battery and e-rickshaw segment that could offset some of the volume pressures in the power back-up business.