Amara Raja's Major Transformation & Vision: Tech Pact With Gotion-InoBat | Vikramadithya Gourineni

Vikram Aditya Gornani, who is the Ed at Amara Raja Mobility is here and we want to get in an insight as well into all of the latest news as well as what we've been seeing with respect to the brokerage notes coming in. Do remember there was that pact that they signed with Goshen Inobat. So let's hear it out then as the management spoke with ET Now as to what the contours of the deal are, discussion with the Vikram Aditya Gurineni, the MD of Amaraja Batteries and Amaraj. There is a lot of stuff happening at Amaraja. In fact, the entire battery ecosystem of India is undergoing a transformation. Amaraja for the last few years had been working in this direction and now we are looking at much more concrete steps being taken by the top management. Vikram, thank you very much for joining us on ET Now. I remember interacting with you and your brother when you had taken over this role. And now over the years I'm seeing that much more concrete steps, much more, you know, evidence of the vision you had laid for us then are being seen in steps. And this new tie up perhaps is also in the same direction. But I'll come to that in a moment. But I just want to understand with you. I remember you telling us then that the idea is now the top management wants to transform the company into a mobility solutions company from just being a battery company in the past. How is the movement towards that overall the progress since then till now? I think the the progress has been, it's been measured. There have been small steps taken, but largely in line with what we expected to start with. We, you know, we identified synergies within our own group. You know, we had a pretty strong background in power electronics, we had a strong background in large system integration. So we in another one of our group companies, Amaraja Power Systems, we got rid of the businesses that didn't really gel with what we talked about energy and mobility and we restructured that business and actually we acquired it into the listed entity. So now today we're not just going with the, you know, simple batteries to our customers, we're going with batteries and chargers and we're adding an entire power solutions stack on top of that. So I think it still takes a bit of time because we are building new capabilities, but the teams are in place right now. The customers, you know, we have projects with them and some of the first wins we had are on the charging side. And we're entering into mass production very soon with a completely localized portable charger that can cater to all electric 2 Wheelers and three Wheelers. And slowly we're expanding our portfolio. And I think on the battery side, it takes some time, but it's a little bit different than a lead acid battery. It's not just a plug and play solution with what we make straight off the factory line. There's a lot of customization that goes into it. There's a lot of coordination with the OEM. So the packed business is a bit more complex and we're expanding our capabilities in that weekly as well. Vikram, let's talk about the Goshen high Tech, the tie up which you have done also. Tell us about a little bit about the background of this company and what does this type actually bring to the table for company and shareholders? Sure. So Goshen high Tech is actually, if you look in China, they're one of the top four or five players and in the globe they make they crack the top ten. But specifically what we're, you know, tying up with them for is their LFP chemistry, which they have a very strong track record, excellent customer portfolio, well accepted in India also with with some major OEMs already using their product. And Goshen is one of those companies that very early on took a bet to not only globalize, but more quickly than their peers in China, but also to, you know, really make backwards investments across the entire battery value chains, everything from mining to the cell making pack solutions downstream. They own every part of their supply chain. So that's what we're really excited about. And secondly, because they're globalizing, Goshen is replicating the supply chain all over the world as well. So it was a, it was a good fit for us. Of course, we invested in a company called Innovat a couple of years back and doubled down on our investment over very recently in the last one week. So we're tying up with a subsidiary of Goshen that's AJV with Innovat in Europe and hopefully plugging into, you know, a much broader ecosystem beyond the cell making that we're currently talking to them about. So would it be right to assume that even Amara Raja actually is looking at a model which is a full scale solution right from, you know, raw material to putting it together to distribution and even application in the charging ecosystem site? Is that the direction we would like to take? Earlier model was just battery manufacturing. I think you've hit it on the head. That's kind of the direction we're going. Probably it takes a little bit more planning and time for us to really get, you know, deeply invested into the raw material. But to start with, this partnership enables us to, you know, plug into a well established global ecosystem. I think it gives us a lot of supply security, but also it definitely helps us on supply costing. So we're talking about deeper partnering with, you know, our partner in the global supply chain. But to begin with, it'd be for a cell assembly. Some know how unpacks energy storage solutions. But definitely we're all all parties involved are open to deepening this relationship. Excellent. Let's talk about the financial part of the of the business. Of course the current company is throwing a lot of cash from the legacy business. What are the requirement for this plan which you're talking about the fully, fully integrated plan, the what are the capital requirement? How are you going to fulfill it, if you could share and what is the overall CapEx over this, the plan project life of the next say three to five year period? So what we announced when we, you know, announced our investment in Telangana was that the overall outlay of 16 GW hour would be, you know, around the ballpark of 9500 crores. I think we have to recast this slightly because you know with a partner on board, we see that there's a immense advantages on the CapEx side on the, you know, the purchasing cost, the equipment, everything. I think there's a lot of advantages they bring to the table. And in addition to that, we also need to see depending on the the portfolio of products we want to release into the market, our partner can suggest that you know, there's far more efficient ways to double, double the the CapEx utilization. There may be cells that have a lot of synergy that can use many of common equipment. So I think we're recasting those numbers to see exactly where we end up. There is a possibility of an upside that we add more capacity sooner if we get more orders, especially with you know a very proven product in our Kitty now. But what we said earlier was that phase one which includes the R&D facility here in Hyderabad with the pilot plant and the first Giga line of A2 GW hour, that's stillwell in line and there's pack facility part of that also. In fact all that phase one investment, we're still you know we're, we are still maintaining that it's going to be funded largely in house and for future requirements as we sit with our partner and recast you know our funding, our requirements, I think we're going to look at many options. Of course we're a completely unleveraged company, but some mix of debt and equity with the appropriate funding model we'll be able to share with you more in the next couple of months. Can you share a ballpark of how much this, you know, what is the gross block which will be invested into say over the next five year period and what are the kind of revenue it is capable of generating over that period when fully invested and full utilization is achieved? So if I'm not mistaken, I think we said that the full once fully invested that we're going to be around 2 to 2 1/2 billion dollars. But I think there's a couple of assumptions that we just need to double check and see mostly still within this five year period 9500 crores. But like I said earlier, I think we're going to just take a quick re look at this, a fresh look along with the partner to see what makes sense and where we can actually optimize on this FX. OK, great. Also I want to understand how exactly is the plan progressing on your the recycling of you know the new batteries which will be manufactured the lithium Amons, Would you be going for your own recycling plant or would you be partnering or outsourcing it to some experts of recyclers? What's the progress and plan like there? So at the moment, you know, maybe I can share our lead on the lead asset side, actually we're building state-of-the-art recycling facility in the state of Tamil Nadu that's progressing and that should be up and operational this at the end of this financial year. And on the lithium side, I think we want to do that much more quickly LED, we didn't really need to touch that for the, you know, a large part of our history. But today, because we hardly do, you know, pilot volumes in the very early stages, we may actually continue to work with some recycling partners that are there in India Today. But what we have observed a lot of large players is that especially working with LFP chemistry where the material recovery is not, you know, so valuable, it's better to just have a closed loop system where you're able to recycle your own process, scrap your own, recycle like your own spent batteries and also possibly even import scrap from others as well within the country or outside. So that's something I'm not, I don't have immediate plans on, but it's something that definitely along with the partner, we want to sit and have an A captive recycling over a period of time. OK, great. Vikram, I want to understand what are the margin levers which exists within the company? I'm assuming that since you're going for a completely integrated kind of a model of business going forward in new mobility solution and of course you would have a recycling unit be it the legacy batteries or the new batteries, both you would have a margin edge versus peers. What is the ideal kind of margin range we are talking about when all these plans come into place? I think that's a it's a slightly early, we still have to pass those figures. And I think what we have observed definitely is that around the world, it's not that the cell business are are wildly profitable. It takes some time to mature and get to a certain scale. We need to see how well our scale efficiency is able to lend to you know making better margins more quickly. But what I can say is being able to plug into a global supply chain of our partner is going to help us a lot because otherwise we don't, you know, we are setting up something around 16 to 20 GW hour in a world where the capacity is, you know, announced capacity at least is in excess of two terawatt hour. So we're very small, but being able to be part of a larger, you know, raw material ecosystem where we get preferential pricing on par with our partner is going to be very helpful for us, right. Can you tell us how's your Giga factory shaping up right now in Telangana? So the pack facility, I'm happy to share, you know, in a less than a year, we've been able to get the facility pretty much underway. Today. We have a local employees that got trained up between our existing facility in Tirupati and now they're running the lines. The first line is installed and we're doing some debugging and quick you know production runs, trial runs, but that should be you know up and running in full in the next month or so. On the pilot line, the R&D facility construction is under way and I believe that at least the first phase of each will be ready to go maybe this time next year. On the 1st factory which we talked about which is to cater specifically to light electric mobility, the two Wheeler segment, we have commenced the plans and the construction should start shortly. Let's talk about, you know, your domestic auto business is growing at about 16% international volumes, 30% when first of all, just share some outlook. Where, where do you see these numbers sustained going forward? And as in when EV batteries also become large, would you also be looking at an export opportunity or for the initial few years, largely the domestic opportunity because it then they sell big demand out there will be looked at. I would, you know, refrain from commenting too deeply about our existing numbers because of course I, there's another team that runs that, you know, the, the automotive industrial business as it is today. But they are, we are growing our exports at a very healthy rate and we are exploring if there's any good targets out there are any opportunities for Greenfield investment into international markets as well. Because I think while I work on this new energy space, contrary to a lot of people are saying the traditional power trains are not going to phase out very quickly. There's still especially in part of the world, we are the developing world, there's a lot of growth left. There's a lot of penetration that it's an under penetrated market. And we believe that there's plenty of opportunity, especially where we've already hit critical mass of exports from India to possibly even put local, local facilities with, you know, varying levels of value addition on the on the new energy side. On the lithium side, we do have some broad export rights. It's something that, you know, we were able to secure for ourselves with reasonable restrictions. I think when your partner is investing all over the world, they'll also want, you know, some reasonable restrictions, but it's not going to affect our strategy in any manner. Also kind of, you know, going back to the earlier point, the capacity we're setting up is relatively small compared to what people are setting up around the world. So we do believe that opportunistically we can sell our lithium solutions in the existing markets, especially our stationary customers who are looking for, you know, multiple options in addition to lead acid telecom UPS, but also in light electric mobility, which is more prevalent in India, Southeast Asia, these, these, you know, near markets. I think we'll have a good opportunity to sell some products there as well. Sure, I understand and I appreciate it. Let's focus back on new energy. I want to understand the landscape much more larger point, how much capacity addition is happening right now in our country in new, new, new energy space, lithium ion players such as you and few others versus how much the demand, incremental demand is likely to come up. What I want to understand that will be will there be a demand supply mismatch in for initial year that should be made-up for by import. So what are the scenario you envision in the next three to five things will take shape as capacities come on stream? I think we can talk about announced capacities because at least you know that's a relatively a known figure. I believe the latest I saw the announced capacities are around 80 to 100 GW hour capacity coming up in India and that definitely will fall short of the required market demand. This is by 20-30 I'm talking about. So I do believe that imports will have to supplement lack of capacity in India for a period of time because by 20-30 we're talking about anywhere from a hundred 150 GW hour in a very optimistic scenario required in India. So I definitely believe that imports will continue for a period for you know some period of time, but it's I think players like Amarajah are very well placed during in that time because we have a tie up with large global manufacturers. So the cells that we see are required on higher priority. We can localize in our first phase and we can continue taking the partner support to cater to all other applications where we're not, you know, finding as quick in our our own road map. OK, so that's the latest from the management of Amara Raja very high interest stock right now because it's seen a massive rally. It's more than double this year already. And if you hear the commentary from the management, they're not done yet. Perhaps a lot more is on the cards. The stock is taking a bit of a breather today, but that's after the massive run up that we have seen this year already. We're talking about the other important. If you like this video then like, share and subscribe to ET Now.