Amara Raja Batteries dips 8% on disappointing operational performance in Q3

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Share of Amara Raja Batteries plunged 8 per cent to Rs 915 apiece in the intra-day trade on the BSE on Monday after the company reported disappointing operating performance with earnings before interest, taxes, depreciation, and amortization (EBITDA) margin declinig 200 basis points (bps) quarter on quarter (QoQ) and 160 bps YoY to 15.6 per cent in December quarter (Q3FY21) due to higher staff cost.

The company, however, reported a 17.7 per cent YoY growth in profit after tax at Rs 193 crore on 12.1 per cent YoY jump in net sales at Rs 1,960 crore.

The company has also announced capex of Rs 500 crore towards setting up lead acid recycling plant of 1 lakh tonnes per annum capacity ( Rs 280 crore) and captive 280 MW solar power plant (Rs 220 crore).

"The company is going forward with strategic investments focused on improving operational efficiencies, cost optimisation and technology upgradation. The planned investments in solar and lead recycling plants will aid reducing costs and provide long term support to key raw material procurement," the management said in a statement.

ICICI Securities, highlighting the management's commentary that the performance was strong across channels, with telecom and commercial UPS segment doing well, said that margins were impacted by 82 bps increase in raw material costs sequentially and 116 bps increase in other expenses despite the company running at full capacity.

"The raw material cost pressures continue due to lead price inflation. However, sustenance of demand momentum will dilute impact through price pass-through and operating leverage," Motilal Oswal Financial Services said in results update.

Meanwhile, the board of the directors of the company has approved payment of an interim dividend of Rs 5 per equity share (representing 500 per cent) on face value of Re 1 each for the financial year 2020-21. The company has fixed February 26, 2021 as the record date for the purpose of payment of interim dividend.

Amara Raja Batteries is one of the largest manufacturers of lead-acid batteries for both industrial and automotive applications in the Indian storage battery industry.

At 11:59 am, the stock was trading 6 per cent lower at Rs 935 on the BSE, as compared to a per cent rise in the S&P BSE Sensex. A combined 2.9 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

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