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India batteries market overview

10th June, 2017

Context and Summary
• This document is an extract from our research on the Indian storage batteries market.

• In this document, we have structured the overall storage battery market, estimate the total market
size and assess key market players.

• A deep and comprehensive market growth model of the Indian storage battery market was developed
during the course of this study which aids key industry players in their strategic decision making.

• A further deep-dive into two market incumbents was done to understand the key success factors and
latest on-ground market trends.

• As a part of this study, we did extensive market visits, mystery shops, trade interviews and consumer
interviews but the insights have been hidden due to client confidentiality.

© Praxis Global Alliance | 2

Agenda

Storage Battery Market Overview

Exide vs Amaron Battle

About Praxis

© Praxis Global Alliance | 3

Storage Battery industry (INR 27K Cr in FY16) is expected to grow at 14% CAGR
from FY16 to FY21 in India
Organized Storage Battery Market Size CAGR Electricity Production grew at 8.6% CAGR for the period FY12-16 and is
expected to grow with increasing urbanization and demand.
(INR Crores) (FY16–21F) • Power consumption is expected to increase at 7% from 1174 TWh in
14% FY16
60
Thousands

Demand for UPS and Inverter is expected to increase with increasing power
consumption, at a CAGR of 13%
52
50 2 15%
5 13%
Industrial Production experienced a growth of 6.4% CAGR for FY12-16
• Mining CAGR – 3.8%, Manufacturing CAGR – 6.7%, Electricity production
40 CAGR – 8.6%
• Telecommunication subscribers to grow at 5% CAGR going forward
18
11%
30 27
1
3 The total automobile production exhibited a growth of 7% CAGR for the
period FY11-16
20 • 2 Wheeler increased from 13.3 Mn units to 19.9 Mn units (8% CAGR)
10
• Passenger Vehicles from 2.99 Mn units to 3.79 Mn units (5% CAGR)
27 16%
10 As per AMP-2026, NEMMP-2020, the automobile industry is expected to
grow at 12% CAGR overall, driven by an increase in production of
13 passenger vehicles (11% CAGR) and two wheelers (12% CAGR)

0 Further, unorganized players are losing share (as cheaper organized

FY16E FY21F alternatives like Dynex, SF, PowerZone are emerging) and battery market
will continue seeing a price inflation of 3-5%
Automotive Industrial UPS and Inverters Exports
Note: CAGR- Compound annual growth rate, AMP – Annual mobility plan, TWh – Terra Watt-hours

Source: SIAM, NEMMP-2020, IBEF, AMP2026, Ministry of Power, CSO, Praxis analysis © Praxis Global Alliance | 4
Automotive and Industrial sectors account for ~90% of the Storage Battery
consumption in India
Total Market for Storage Battery in India, FY16E (~INR 27,000 Crores)

Automotive Industrial UPS and Inverters Exports

(45-50%) (30-45%) (10-15%) (3-4%)
(INR 12,000 - 13,000 Cr.) (INR 10,000 - 11,000 Cr.) (INR 2,000 – 3,000 Cr.) (INR 1,087 Cr.)

• Railways
• Telecom • Home UPS
OEM Replacement • Power • Online/Offline UPS
• Projects • Inverters
(60%) (40%) • Traction
(~INR7,500 Cr.) (~INR 5,200 Cr.)
• Solar
• Mining

OEM Replacement OEM Replacement

(40%) (60%) (20%) (80%)
(~INR 4,000 Cr.) (~INR 6,000 Cr.) (~INR 400-600 Cr.) (~INR 2,000 Cr.)

According to estimates, the unorganized sector caters to approximately 11% of the total demand. Their presence is restricted to the
automobile-replacement and UPS/Inverter-replacement markets only capturing 37% of replacement demand.
Note: OEM-Original Equipment Manufacturers

Source: Secondary research, Annual reports. Praxis batteries market model, Praxis analysis © Praxis Global Alliance | 5
Snapshot of the Storage Battery market in India (FY16)
~INR 27,000 Cr. ~INR 24,000 Cr. ~INR 27,000 Cr. ~INR 24,000 Cr. ~INR 3,000 Cr.
100% 100% UPS-Repl.
Unorganized UPS and Inverter Unorganized
2,879 1,748 1,234
Replacement UPS/Inverter
90% 90% 2,879 Replacement
823
Industrial
80% 80% Replacement

Industrial
Organized 6,170
Replacement
70% 10,283 70%
10,489
Automobile
60% 60% Replacement
3,085
UPS OEM 514
50% Organized 50%
23,916 Industrial Automobile
40% 40% OEM Replacement
4,113
2,057
Organized
30% Automobile 30% OEM
12,340 Automobile
10,797
OEM
20% 20%
7,712
10% 10%

0% 0%
Total Market Organized Market Total Market Organized Unorganized
Note: Figures stated exclude exports worth INR 1,087 Cr.

Source: Praxis batteries market model, Praxis analysis © Praxis Global Alliance | 6
Exide and Amaron are market leaders accounting for 43% of the total battery market
but Amaron is growing much faster
Players Market Share
(%) Established in 1947 1985
of Total Market
(INR 27,000 Cr.) Gross Revenue - FY16
7,727 4% 5,242 17%
(INR Crores)
3-4
Net Revenue - FY16
Large Scale Units (INR Crores)
6,809
4%
4,690 17%
(Exide and Amaron Gross Sales – Exports
account for 43%) 386 28% 278 19%
FY16 (INR Crores)
~85-90% EBITDA – FY16
1,067 842
(INR Crores)
30-40 Medium Scale EBITDA (% CAGR)
9.2% 23.9%
(FY12-16)
Units
EBIT– FY16
906 722
(INR Crores)
4000+
EBIT (% CAGR)
• Small Scale Units (FY12-16)
8.9% 22.7%

• Small Battery Market Capitalization

Manufacturers ~10-15% (INR Crores, 1st June 18,955
24%
14,704
30%
2017)
• Road Side
P/E Multiple (as of 1st
Assemblies 27 31
Jun, 2017)

Source: Industry expert interviews, Annual reports, Praxis analysis © Praxis Global Alliance | 7
Amaron is closing the gap with Exide rapidly
Indexed Market Shares of Amaron versus Exide
Exide Operating
Revenue = 100
100
80 69
58 61
60 46 49
40
20 5,107 2,366 6,071 2,959 5,964 3,437 6,874 4,211 6,809 4,691
0
FY12 FY13 FY14 FY15 FY16
Exide Amaron
FY 12 FY 14 FY 16E
(~INR 14,500 Cr.) (~INR 19,000 Cr.) (~INR 27,000 Cr.)

36% 31% 25%

18% 18%
16%

Exide Amaron Others Exide Amaron Others Exide Amaron Others

Source: Annual reports, Praxis analysis © Praxis Global Alliance | 8

TSR Decomposition FY14-17

Total Share Holder Return (FY14-17)

Change in
Revenue P/E Ratio Dividend
Margin Growth Share
Growth Change Yield
Structure

Top Down – 24%

Bottom Up – 20% 9% 1% 8% - 2%

Top Down – 30%

Bottom Up – 31% 11% 1% 18% - 1%

© Praxis Global Alliance | 9

TSR Decomposition FY13-16

Total Share Holder Return (FY13-16)

Change in
Revenue P/E Ratio Dividend
Margin Growth Share
Growth Change Yield
Structure

Top Down – 4.0%

Bottom Up – 2.4% 4% 3% -6% - 1.5%

Top Down – 48%

Bottom Up – 45% 16% 4% 23% - 1%

© Praxis Global Alliance | 10

Summary: Competitive assessment scorecard – Exide has strength but Amaron has
the momentum to close the gap with Exide
Factors
• Innovation has enabled Amaron to capture a
Product competitive market share with a smaller basket of
• Exide has the widest range of products catering to the
products as compared to Exide. Technology and
automotive segment and enjoys a better market position.
Portfolio optimization has enabled Amaron to be more cost
competitive

Value • Exide’s brand and leading position in the automobile • Amaron is priced at a discount at most markets.
battery (OEM and replacement) segment allows it to • The product reviews are also good with slightly longer
Proposition command a premium. battery life

Brand • Exide has a higher brand recall in tier-2, tier-3 and rural
• Amaron has been evolving as a strong competitor and
locations, due to its investment in on-ground and POS
invested more than Exide behind its brand this year
Building advertisements

• With project HighWay, Project Kisan, Bat-Mobile and the
Distribution HumSafar network promise, Exide has managed to
increase reach
Reach • Exide has a network of 35,000 retailers and is not
onboarding additional dealers/retailers in 2017.
• Amaron has been expanding the network but has
some gaps even in cities like Mumbai
• Amaron has more room for growth in terms of
distributor and retailer network in tier 2 and rural
locations

Channel • Attractive incentives, creative volume discounts and

• Exide dealer network is fairly loyal but Multi-brand outlets
dealer/retailer relationships have enabled Amaron
are increasingly becoming neutral to Amaron vs Exide.
Loyalty gain market share

• Amaron has higher market share in the lucrative

• Exide has more than 100 OEM tie ups in the competitive industrial battery segment
OEM tie-ups automotive segment • Bridging the gap in the automotive segment with key
OEM tie-ups

Note: Harvey balls indicate current strength Source: Praxis analysis © Praxis Global Alliance | 11
Amaron is more cost competitive: managing operations efficiently both at COGS
level and Employee level (190bps higher PBT margin in FY16)
100%

850 12.5% 14.4% 677 Drivers of Cost Advantage for Amaron

90%

Percentage of Net Operating Revenue

• Overall, Amaron operates more efficiently than Exide with a
80% 1,123 16.5% 17.9% margin of 14.4% on the net income
839
54
0.8% 1.2% • This is despite Amaron investing more than Exide in promoting
70% 197 58
2.9% 2.8% its brand (first time in last 5 years)
475 131
7.0% 5.2% 243
60% • Exide and Amaron spend approx. 2.85% of the net income on
freight. (Exide has 7 manufacturing plants spread across India

(FY16)
50% vs 2 plants located in the South for Amaron)

• Amaron has 8,700+ employees accounting for approx. 5% of

40%
the net Operating Revenue. Exide has 5,000+ employees
accounting for nearly 7% of the total Net Operating Revenue →
30% 4,111 60.4% 58.5% 2,742 Amaron’s per employee cost is nearly half of Exide

20% • Approx. 80% of the total Raw Material Costs are spent on Lead
and Lead Alloys purchase. Exide has incurred comparatively
more expenses on other raw material (21% of total compared
10% to 17% in the case of Amaron).

0% • Amaron has invested in reducing lead scrap generation by

~20% in FY13 and further 5% in FY15
Exide Amaron

Raw Material Employee Benefits Freight Exp A&SP Others Margin/PBT

Source: Annual reports, Praxis analysis © Praxis Global Alliance | 12

Owing to its cost advantage, Amaron is able to price its products (same quality) at a
4%-9% discount to Exide in most markets
Indexed Retail Price of competing products
100 100 100 100 100 100 100 100 100 100 100 100 100 100
100
98 96 96
96
96 95
94 94 94
94 93 93
92 92
92 91

90
88
86
Mumbai Gurgaon Chennai Ahmedabad Mumbai Gurgaon Chennai Bengaluru 35 Ah Mumbai 80 Ah Mumbai 35 Ah Chennai 70 Ah Chennai Two Wheeler
Products

Exide Amaron

Across Markets 12V 35 Ah Across Markets 12V 70-80Ah Across High Selling Products

“Replacement battery customers do not “ The margins for me are the same in “ Amaron batteries are cheaper by INR “Amaron is a
hesitate to pay higher price for a branded both products. Customers in Chennai 500-600. Customers are happy with clear winner in
reliable product. Hence, Amaron and ask for Amaron. Amaron sells more.” this as both products have equal two wheeler
Exide are the only two options.” “ Three years back, Exide used to quality” segment in
“ Exide has lost its position as the ‘only’ account for 70% of sales in Bangalore, South India”
Dealer, Mumbai
branded battery. Amaron is a clear now it is 50-50, unless Amaron is more.”
Dealer, Chennai
winner among small petrol cars”
Dealer, Bangalore
Dealer, Chennai
Dealer, Mumbai

Source: Expert interviews (N=9), Dealer visits and discussion across sites, Praxis analysis © Praxis Global Alliance | 13
Exide has invested more in the past to establish its image as market leader and the
default standard in battery and service

1,500+ exclusive brand outlets which Exide BAT-Mobile is a highly popular on-road ‘anytime-anywhere’ Battery
promote the entire Exide product service for any type of battery from any manufacturer.
portfolio to customers. • Toll Free Number
• Wide Range of Hum-Safars/Partners

Project Kisan - Aimed at the tractor segment in rural

areas
Project Highway – Providing assistance to Heavy
Commercial Vehicles with any battery type
EXIDE E-Ride – Aimed at the developing e-rickshaw
segment.

MS Dhoni endorses Exide Life

Insurance which adds to the
brand recall of Exide in the
Digital Promotion through SEO
Mobile App to facilitate service market.
(Exide results appear on relevant
battery-related searches) requests, warranty claims,

Source: In depth interviews, Annual reports, Praxis analysis © Praxis Global Alliance | 14
Amaron is ramping up its brand investments with time; spent more than Exide for
the first time in FY16

Annual Advertising and Promotion Expenditure (INR Crores)

194.9
200 1.4%
1.50%
180 1.40%
160 1.30%
1.2%
140 1.2% 1.20%
120 111.6 1.10%
1.1%
100 82.6 1.00%
80 0.9% 72.9 0.9% 0.90%
54.4 58.7 53.5 58.4
60 0.8% 0.80%
40 21.5 27.9 25.3 0.8% 0.70%
15.4
20 0.6% 0.60%
0.5%
0 0.50%
FY12 FY13 FY14 FY15 FY16 FY14-16 Total
Exide Amaron ASP as %age of revenue Exide ASP as %age of revenue Amaron

“ ARBL has spent the last few

“ Exide developed in to the
“The advertising and branding years building a competitive brand
“ The UPS consumer is not standard in battery and service.
is targeted mainly towards the capable of competing with Exide.
particular about brands yet, Exide Bat-Mobile is a highly
automobile replacement Hence the strategic name change
they may be in the future” popular ‘anytime-anywhere’
market and the fragmented to Amaron specifically for the
solution. Exide Care App enables
UPS/Inverter market” automotive market. They have
–Battery manufacturer and online purchase and delivery of
more room for growth.”
dealer, NCR new battery”
–Dealer, Chennai –Dealer, Mumbai
–Dealer, Mumbai

Source: In depth interviews, Annual reports, Praxis analysis © Praxis Global Alliance | 15
Amaron has been building awareness and tried to create more viral advertisements
for the past 15 years

Tie Up with batterywale.com to provide online services

to customers

Amaron is known for its engaging and viral

Television Advertisements since 2002.
“Lasts Long Really Long”
“Life Saver Amaron”

Source: Secondary research, Praxis analysis © Praxis Global Alliance | 16

Exide has done well in growing its reach but Amaron is not lagging significantly
Exclusive Outlets/Distributors Retailers

1500 Founder of a large distributor which also sells online

1500 40,000
35,000
1000 35,000
30,000
500 294 30,000
0 25,000
FY16
20,000 18,000
Exide Amaron 16,000
Industrial Distributors 15,000
100
100 10,000

50 30 5,000

0 -
FY16 FY12 FY16
“The total retailers in both networks comprise a high share of multi-brand
“The industrial battery segment is more lucrative because it is
retailers as dealers look ways to increase their profits.”
completely organized with better margins. ARBL has a competitive
“Amaron are more selective with their dealer and distributor partnerships
edge in industrial segment compared to Exide and this is a major
where as Exide used to onboard all motor garages, service centres and petrol
advantage going in to the future.”
pumps in their Hum Safar network. Recently this has caused a few problems
“Amaron has increased their reach and presence in the past 5
for the registered partners on the network who competed against themselves
years building on their industrial advantage”
for battery sales
– Founder of a large distributor which also sells online
– Founder of a large distributor which also sells online
Source: In depth interviews, Annual reports, Praxis analysis © Praxis Global Alliance | 17
While Exide is playing on the brand, Amaron is doing more ‘at-the-counter’
promotions at multi-brand outlets

“Mechanics get a commission of up to INR 250 per battery retailers irrespective of the manufacturing”
“They are not really loyal to any one brand. They do not see battery commissions as a significant
Mechanic source of their income”

“Amaron offers better performance based

“Exide used to offer incentives. At present they
incentives than Exide.”
do not offer credit.”
“Amaron offers 30-day line of credit. Exide does
“We do not prefer to entertain warranty claims
not offer any credit”
and replacements, we send the customer to the
Sub Dealer/ company or Exide Care store directly because
“Amaron offers ‘zero-fuss’ replacement and
there are a lot of problems interacting with the
Retailer warranty and has better customer service”
company and it costs us money. Amaron offers
battery replacement with zero questions and is
“Amaron is a leader in 2-Wheeler segment and
safer”
has lesser complaints than Exide. Hence we
suggest Amaron in our shop in Chennai”

“Both brands try to enforce some sort of exclusivity contract on battery sales”

Distributor
Source: Secondary research, Praxis analysis
“Exide offers cash-n-carry model, no credit “Amaron has a minimal number of distributors in
terms. Credit terms offered for select old each city. They service the dealers with attractive
partners who have been with Exide for years” cash back options based on the volume of
transaction”
Rank #2 Rank #1
© Praxis Global Alliance | 18
Sources used in the report

Primary research Secondary research

50+ dealers
Delhi, Mumbai, Kolkata,
Bengaluru, Ahmedabad
• MOSPI
• Ministry of Commerce, Export-Import database
•
•
Ministry of Road Transport and Highways
India Brand Equity Foundation
• Society of Indian Automotive Manufacturers (SIAM)
•
•
Automotive Components Manufacturers Association of India (ACMA)
National Electric Mobility Mission Plan (NEMMP) 2020
• National Automotive Board
•
•
Automotive Mission Plan (AMP) 2016
National Portal of India
• Annual reports and Investor presentations
• Press search – newspapers, journals
• CSO-Industrial production indices

100+ 5
Mechanics/ Auto OEMs
Proprietary Praxis models
garage
• Praxis Batteries Market Model
owners • Praxis Auto park model

© Praxis Global Alliance | 19

 Contact us on contact@praxisga.com
to schedule a tailored discussion
Key questions for battery players
1. How are your customers (or end-consumers) latching on to new product and technologies? How are
they expected to evolve?

2. What is the ‘ideal customer experience’ for the consumer? How can you alter your product
proposition to a more ‘unified’ product-and-service offering to deliver the ‘next gen’ customer
experience?

3. How can you be leading edge on driving the ‘consumer experience’ and ‘technology’ shifts in your
market?

4. How can you drive greater channel productivity across channels?

5. What drives brand leadership for you in a category like batteries? How can you take your consumer
engagement and loyalty to the next level to enable repeat buying?

© Praxis Global Alliance | 20

About Praxis™
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Contact us - We will be happy to share perspectives
Madhur Singhal Aryaman Tandon
Managing Director, Mumbai Director, New Delhi
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© Praxis Global Alliance | 22