Amara Raja’s March Quarter Margin Is an Irritant — More Trouble Ahead?

Battery maker Amara Raja Energy & Mobility Ltd posted its Q4 FY24 results with higher revenues but a notable margin contraction, raising concerns among analysts and investors. While topline growth remains intact, rising input costs and competitive pricing in key segments have weighed on profitability.

The stock, which touched a 52-week high in early March, has seen muted momentum post-results, prompting a closer examination of the company's operational efficiency and forward visibility.

Q4 Snapshot: Revenue Growth vs Margin Pressure

Amara Raja reported Q4 FY24 consolidated revenues of ₹2,942 crore, a growth of 10.5% YoY. However, EBITDA margin declined to 12.1% from 14.2% in the year-ago period, denting the operating performance.

• Net profit stood at ₹189 crore, up 2.8% YoY, but missed Street estimates.

• EBITDA was at ₹356 crore, lower than analyst expectations of ₹375–₹390 crore.

• Operating costs surged on account of higher raw material prices and R&D spends in the energy solutions division.

“Margins were below expectations due to elevated lead costs and weak pricing power in industrial batteries. While volumes are strong, cost absorption remains a challenge,” said Ritesh Jani, auto & industrial analyst at HDFC Securities.

Segmental Performance: Mixed Signals

The automotive battery division, which contributes nearly 65% of Amara Raja’s revenues, delivered stable volumes in the replacement market. However, OEM sales were hit by price pressures and slow uptake in rural areas.

• The industrial battery segment saw strong demand from telecom and data centers, yet margin dilution continued due to pricing competition.

• The new energy solutions division (lithium-ion, ESS) saw an uptick in investment but remains in early revenue stages, impacting short-term margins.

“The company’s pivot to lithium-ion and grid storage solutions is strategic, but near-term drag on margins is unavoidable,” noted Anushka Patel, Equity Strategist at ICICI Direct.

Capex and EV Transition: Long-Term Bet or Risk?

Amara Raja is betting big on energy transition. The company’s Gigafactory project in Telangana, aimed at lithium cell manufacturing, has entered the construction phase, with ₹500 crore already spent in FY24.

The total capex planned over 3–5 years exceeds ₹5,000 crore, raising investor questions about return timelines and funding strategy.

“Amara Raja is at an inflection point. The capex-heavy cycle may compress return ratios in the near term, but could unlock scale benefits by FY27 if executed efficiently,” said Mohit Gogia, senior research analyst at Motilal Oswal.

However, execution risk remains. With global lithium prices volatile and EV adoption still nascent in India, the company's pivot from lead-acid batteries to advanced chemistries could be both visionary and risky.

What the Market Is Pricing In

Since the Q4 results announcement, Amara Raja’s stock has declined by nearly 4%, underperforming the Nifty Auto Index. While the long-term growth narrative remains intact, near-term sentiment has taken a hit.

As of June 1, the stock trades at ~17.2x FY26E EPS, at a discount to peers like Exide Industries, reflecting margin concerns and execution uncertainty.

“The market is likely to remain rangebound on this counter until there is clarity on EBITDA normalization and lithium project updates,” remarked Pratik Shah, Fund Manager at Axis Mutual Fund.

Investor Outlook: Near-Term Caution, Long-Term Potential

Investors are advised to stay cautious in the near term given:

• Margin compression and rising input costs

• Uncertainty in capex payback from lithium investments

• Competitive pricing in legacy segments

However, long-term investors may see value if:

• Margins recover with price hikes or cost rationalization

• Lithium-ion and ESS investments bear fruit by FY26–FY27

• Regulatory support accelerates battery storage and EV penetration

Analysts recommend a "Hold" rating with a 12-month target of ₹900–₹940, implying a moderate upside from current levels.

Conclusion

Amara Raja’s Q4 margin miss has injected short-term caution into an otherwise promising growth story. As the company transforms from a traditional battery player to a futuristic energy solutions provider, investors must weigh execution risks against transformational potential.

The next 2–3 quarters will be key in gauging how well Amara Raja can manage operating leverage, ramp up its lithium initiatives, and preserve shareholder value during this transition.