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Tuesday, May 25, 2010

Exide to Boost Battery Capacity on Motorcycle Demand

Bloomberg / Business Week

Exide Industries Ltd., India’s largest maker of automotive batteries, plans to spend as much as 4 billion rupees ($88 million) to add capacity as demand for motorcycles outstrips the company’s expectations.

Exide, based in Kolkata, plans to boost motorcycle battery capacity by as much as 60 percent by April to cater to customers such as Hero Honda Motors Ltd., Managing Director T.V. Ramanathan said.

Motorcycle sales in India, the world’s largest two-wheeler market after China, surged to a record in the year ended March as economic growth and rising salaries encouraged Indians to increase spending. Demand for automobiles has helped Exide lift earnings by an average 92 percent in the past four quarters.

“Everyone underestimated the income transfer to rural areas,” Ramanathan said in an interview yesterday. The increase in the number of outsourcing centers in smaller cities is also helping create demand for motorcycle and motor scooter batteries from younger Indians, he said.

The company’s shares, which have risen 2.3 percent this year, fell 0.3 percent to 118 rupees in Mumbai at 1:47 p.m. in Mumbai. Exide in March raised about $119 million selling shares to institutional investors.

Exide’s fourth-quarter profit almost doubled to 1.35 billion rupees, sales increased 29 percent to 10.3 billion rupees.     “Right now they are operating at more than 90 percent utilization level, and looking at auto demand the expansion is needed,” said Vaishali Jajoo, an analyst at Angel Broking Ltd. in Mumbai. “They have a huge opportunity to grow as auto demand will continue to grow for the next five to ten years.”


India’s $1.2 trillion economy may expand 8.5 percent in the current fiscal year, Finance Minister Pranab Mukherjee said on May 13, spurring demand for motorcycles, scooters, refrigerators and homes.

The company, which sells the SF Sonic and Exide brands, expects to increase battery sales to original equipment manufacturers to 90 percent from 70 percent to improve its relationship with the companies, Ramanathan said. Direct sales to manufacturers are low in profitability, he said.