Amara Raja Energy & Mobility Limited (500008) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '25 Earnings Conference Call of Amara Raja Energy & Mobility Limited hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aniket Mhatre from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.

Thank you, Steve. Good evening, everyone. Welcome to the post-results conference call of Amara Raja. At the outset, I would like to thank the management team of Amara Raja for giving us an opportunity to host this call. From the management team, we have with us Mr. Y. Delli Babu, Chief Financial Officer of the company. I would now like to hand over the call to Mr. Delli Babu for his opening comments on the company's Q3 performance, post which we'll begin the Q&A session. Over to you, sir.

Very good afternoon to everyone who is on the call, and thank you for your interest and time. During the current quarter ending on 31st December 2024, the consolidated revenue for the business is about INR 3,272 crores with a growth of about 7.5% over the previous year, with the lead-acid battery contributing about 96% of the revenues and the rest coming from the New Energy business, both from the battery packs and charges. See, the lead acid battery business has witnessed revenue growth of about 9% over the previous year. On the back of a strong volume growth from both automotive as well as industrial segments barring the telecom segment were due to change into the lithium chemistry, the lead acid volumes have come down compared to the previous year. The 4-wheeler volume growth for the quarter in the aftermarket side is about 11%. And the OEM growth in the 4-wheeler segment was muted during the current quarter compared to the last year numbers. The export volumes registered a growth of about 8% to 9% during the quarter. There are some order changes, which I'm sure by the year-end, we will again pick up a double-digit growth in the export volumes. In the 2-wheelers, both in the aftermarket as well as OEM segments have grown around 16% to 17% kind of a growth, continuing the aftermarket growth momentum in 2-wheeler even in this quarter. In the other applications, both tubular batteries and the home UPS systems have grown by about 15% in volumes compared to the previous year and the lubes business that we have started in the last financial year has also gained some good traction. In the current quarter, the overall revenue is about INR 100 crores from the lubes distribution business. On the industrial segment, both the UPS and the exports have grown significantly. But the overall volume growth is muted because of the dip in the telecom segment. In the New Energy business, because of some changes in the OEM offtake, there is a reduction in the overall revenue compared to the previous year by about 20%. But I'm sure with the localization plans for the charges getting completed, we are expecting that we will be able to recover this loss through the financial year. And in terms of the overall trading revenue from the business on a stand-alone basis, this quarter, the trading business accounts for about 10% of the total revenue. And when we look at the gross margins, there is a dilution on account of majorly 2 factors. One is there is a bit of an increase in some of the alloy metals like tin and antimony. And also, there is a power cost that we had to provide for in this quarter because there is a fuel purchase cost adjustment that has been done by the AP government for the financial year '23, '24, so that revision of the power cost has to be provided for in the financials in this quarter. So that kind of impacted the operating margins close to about 1% to 1.2%. And in line with this higher cost that has been levied, we may have to create some more provision for the current financial year in the -- Q4 of this financial year, which may have impact around 0.4% to 0.5% of operating margin. But going forward, with the increased renewable portion in our overall power procurement, we expect to reduce this impact in the upcoming financial years. And on the other updates, we have received on the tubular plant that we have reinstating after the fire accident, we received accumulative insurance claim of about INR 275 crores so far, which is more than the book value what has been recognized towards this plant in the books, which is why you would have seen an exceptional gain of about INR 111 crores in the financial year. And this plant is expected to commence its operations by the beginning of next year -- next financial year. Then on the recycling plant in this quarter, we have commenced the first phase of commercial operations of the refining capacity of 50,000 tonnes, we have started the commercial operations in the current quarter, and it will continue to operate at a full capacity for the next quarter as well. And then we are expecting to start the smelting operations, that is the battery breaking operations sometime towards the end of Q1 of next financial year. And you would have also noticed an other comprehensive income negative about INR 132 crores in the financials, that's more because of the fair value reassessment of some of the investments that we made into some start-ups. We've done the fair value reassessments, which is why that loss is seen over there. We are seeing the volume momentum continuing in the domestic aftermarket and also our offtakes to some of the export markets continues to be robust. So with lead acid battery business posting reasonable growth over the next quarter as well, and in the New Energy business, we have just commenced our first tranche of commercial deliveries of the 2-wheeler packs as well as we have completed the localization of portable charges for 2-wheeler and 3-wheeler applications. Then we are moving ahead with our first giga factory work. We expect that the first giga factory on the NMC side might commence its operations as mentioned earlier, either towards the end of next calendar year or beginning of 2027. So with those brief overview, I would now request if you have any specific questions, we can take them up.

[Operator Instructions] The first question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities.

Starting with other expenses. As you mentioned about the electricity costs going up about 100 bps to 120 bps, the impact for this quarter. But I still see the other expenses being higher by around 170 bps Q-on-Q. Can you just explain whatever other expenses had seen increased this quarter also?

See, the total Q-o-Q expenses increase is about INR 51 crores. Out of that, about INR 37 crores is power. The rest of the expenditure are some of the advertising expenditure that we have incurred during the current quarter, which generally, on an annualized basis will kind of -- the expenditure are incurred based on the activities that we perform in a given quarter. So -- and also some bit of increase in our overall freight expenditures, considering some of the additional trading business that we have done during the current quarter. Beyond that, there are no other significant increases.

Got it. And just for next quarter, the -- another 40 to 50 bps of impact would be seen for the more electricity provision, right, sir?

Yes, I am expecting it could be around 0.4% is what is my estimate at this time. But obviously, we need to fine tune that estimate, but that's the current estimate that I have.

And next year, onward, from the current level, it should come down, the quarterly revenues?

Yes. It should come down because this is more coming on the back of higher procurement cost that the government has taken up. It should come down both on account of grid power coming back to its normalcy as well as we increasing some more third-party power procurement, both from the renewable side as well as some of the procurement from the power exchange side. So I'm sure this number should again go down.

Got it. Sir, coming to telecom segment, can you share what was the revenue share for this quarter? And considering the shift happening to lithium battery, I mean, any near term, what kind of fall we expect for this segment?

The current quarter revenue is still about 10% to 11% of the total revenue. But if I look at -- because in the telecom side, when I look at including my lithium-ion battery packs that we are supplying, still, it accounts for about 10% to 11% of our overall revenue, but only on the lead-acid side, if you take because these are still initial days in terms of our overall lithium supply, so around 9% of the revenue from telecom -- of the overall revenue is from the telecom lead-acid battery business. I think we will see a conversion of lithium into telecom going forward as well. But this being one of the oldest plants that we have. So it is not a huge drain as far as the profitability is concerned.

And currently, how much is the fall, sir, in the telecom, sir?

On a year-on-year basis, about 25% to -- 25%.

Got it. Sir, on the lithium cell plant, just on the -- once it commences operation in CY '27 based on the ramp-up plans and the orders which we have won, what kind of revenue we expect, sir?

See, on the pack side, on the lithium, both packs and charges last year, we clocked a revenue of about INR 500-odd crores. And this year also, we expect to meet that number maybe 10% higher than what the number last year was. So that's the number that we are looking at. But going forward in the next year with the new charges that are getting localized and also some of the DC fast chargers products that are getting ready and ramping up some of our battery patch to other product segments, both in the storage side as well as mobility side, we should see some bit of growth. But at this time, it is too early for me to put a number around how much it could be. I mean, it should be sizable enough at least in my mind, it should at least be in the double digits. But I wouldn't be able to put a number right now for the next year's growth.

Got it. No, I was basically asking for the cell plant, so the NMC cell plant in the first year operation, what kind of revenue we see, sir?

See, the current price levels of NMC cell is around $70 to $75 per kilowatt hour. So our Phase 1 capacity out of the 2 gigawatt hour, maybe initially, we will start with half of that 1 gigawatt hour kind of a number. So it also depends on the offtake. So I mean, you can -- that's the kind of initial revenue what we can expect, depending on how the demand ramp-up happens. Thereafter we have to see how it goes.

Got it. If possible, any kind of order number would you have or any key customer wins, sir, in recent times, sir, in the cell side?

Apart from the earlier announcements, what we made for 21,700 cells with a couple of -- one of the OEMs that we have entered into an agreement, there are discussions with other OEMs because these cells predominantly go into 2-wheeler and 3-wheeler applications. So there, we are in touch with a lot of OEMs. There are interested about the offtake, but I don't think I'm in a position to give you specifics around it.

[Operator Instructions] The next question is from the line of Vibhav Zutshi from JPMorgan.

Congratulations on the strong volume growth. Just coming back on the lithium-ion side, can you just provide some updated time lines of the next plant that is stated to come with Gotion where you highlighted that 4 to 6 gigawatt hour could be potentially possible because it looks like even the first phase is seeing a bit of a delay because earlier we were planning to commence commercial supplies in FY '27. And now it looks like we will come up with a 1 gigawatt hour by early CY '27. So yes, just some updated time lines on the NMC as well as the LFP plant with Gotion would be helpful.

Yes. I think on NMC first phase also, I think we earlier mentioned towards the end of calendar year '26, which is what is getting -- maybe there could be a delay of a quarter here and there. As far as LFP is concerned, as I mentioned earlier as well, it will take at least another 3 to 4 quarters after the NMC plant commencement because there will be preparation exercises that are currently going on, indicate that it may take that much time considering various gestation periods for capital equipment and also some of the software development that is required.

And just as a follow-up to this, I mean, in the press release that you mentioned that there are some headwinds in the sector. So I mean what exactly are these headwinds? Is it like the lower cell pricing or overcapacity from China? So what exactly are these headwinds that we're talking about?

Yes. I think all these conditions around the oversupply and the pricing pressure, volatility in the raw materials, these are all points that -- I mean that they are definitely there. And as we mentioned in earlier calls as well, that any investment in this will go in a calibrated manner because the high capital intensity, we can't be taking the penalty. So in that way, as I mentioned earlier also, we don't mind delaying a bit but ensuring that the capital that we put in is getting used as early as possible. So in that sense, we will time the CapEx in a manner that it is not becoming financially burdensome, and it is not that the time lines, whatever we are targeting today, I'm not saying they are not subject to change. We should be changing them given the financial interest and also the way the product offtake has to happen because given the product requirements for various OEMs might undergo a change. According to that, we have to make comments to our own preparation and our own product mix, what we have agreed. So those things keep undergoing a change. I don't think -- this is not a business that is -- everybody has understood every bit of it. This I think we have discussed multiple times in these calls.

Yes. That's fair. My second question is on the lead-acid battery business So just to understand correctly, the impact of the higher electricity cost. So if your normal margin level, say, is if 14%, 14.5%, then there could be an impact of 40 to 50 basis points in the next quarter. Is that understanding correct?

Yes, yes, yes. And next quarter also -- mind you, next quarter also has this headwind in terms of the currency depreciation because this also impacts the overall lead prices. And we have to see how this goes considering both the metal, the lead staying around the INR 1,900, but the currency depleting to almost INR 87.5 to INR 88. What kind of impact it will have towards the end of next quarter is something to be seen. That's definitely another factor that is coming up. But I'm sure we will find ways and means to mitigate it through some actions here.

[Operator Instructions] The next question is from the line of Kapil Singh from Nomura.

So on the telecom segment, just wanted to understand, if one is to take into account the overall revenue opportunity, including lithium-ion as well as lead-acid. Is the market growing? Or it's not going? I mean any assessment there?

You are asking in terms of margins?

No, no. The industry revenue, is it growing if you take both the lead-acid and lithium-ion put together, is the demand growing in the industry?

The part size is not -- because see, the lithium procurement prices are marginally higher than the lead-acid by about close to 10% to 15%. So in that sense, the overall potential of the telecom segment as such is not undergoing any significant change, either upwards or downwards.

Sir, but what I was trying to understand is, is there a demand -- what kind of demand growth are you expecting? If you put together both lithium-ion and lead-acid?

From overall revenue perspective, it may be completely muted considering that the new tower expansion as such is not growing in such large numbers. Whatever comes is going to be a replacement demand and the lithium will have a longer replacement cycle as compared to lead-acid. So I don't see much of a growth rate coming up in the telecom segment as such in the immediate future.

Understood. And sir, is there any plan to sort of repurpose these capacities or to use them in the future because the way things are moving it looks like over the longer term, this -- at least the telecom segment may not need lead-acid batteries, right? So how are you thinking about using these capacities?

See, this capacity, as I said, this is the first factory that was put in by Amara Raja about 20, 25 years ago. So from that point of view, the current capacity utilization around 65% to 70% is actually not taxing on the overall profitability margins as such. But yes, we will see if there are other opportunities where we can use that machinery but generally being MVLRA batteries, beyond telecom, there are very few applications where those batteries are used. We are also looking to see if there are any export opportunities for that particular product, but we will see if there is other product segments that we should think about and then repurpose those machines. But as such, they being very old machines, maybe we are better off going for a newer and advanced machinery than repurposing them because the overall net block that I'm carrying on that factory will not be more than INR 50 crores.

And on the pricing of the batteries, can you give an update because the currency has been depreciating, as you said then, how much cost pressure are you observing at right now? And is there any pricing change we have done in the last few months?

No, we have not taken up any price change as of now, but I'm sure we will have to see which way the lead moves from here, that's an important aspect for us to consider. And moreover, there is a lag that will be there for about maybe a month, 1.5 months before the high-cost lead hits us and also some of the lead that we are procuring through the internal for the compliance of BWMR rules what the scrap that we are procuring. The domestic scrap procurement is also steadily increasing. So we have to look at this mix and then if there is a permanent increase in the raw material costs, then we have to deal with it appropriately. And as you know, anyway, we have these pass-through with the B2B business, but aftermarket is something we need to take that decision at an appropriate time.

Sure, sir. And just last question, I wanted to check for NMC facility that is coming up for the cells, what is the EBITDA breakeven level of production that we need to do to sort of breakeven?

See, as I mentioned earlier, NMC plant per se at the 2 gigawatt hour level will not be delivered when we said that the entire lithium capacity has to mature to a level of at least 7 to 8 gigawatt hour kind of number for it to really deliver targeted EBITDA margins in the lower digit -- double digits. But at the initial level for this plant, at least for -- until we stabilize on the throughput and process scrap, et cetera, it will have some bit of pressure at least for 2 to 3 years. Only then we will see that some positive margins coming up. But this is a long game. I don't think I can give a number around what EBITDA margin that I will immediately hit on the day 1 of the factory commencing its operation.

Yes, sure. Sir, I was actually not looking for EBITDA margin, but the product -- capacity utilization at which you achieve EBITDA breakeven?

See, the utilization levels generally in this segment, they deliver the optimum margins if we are able to achieve around 85% or so, but that will definitely depend on 2 variables. One is the demand. The other is obviously the plant ramp up as well.

The next question is from the line of Mukesh Saraf from Avendus Spark.

First question is on pricing, the kind of -- some of our checks suggested that competition is hiking prices by up to 3% in the aftermarket, this month itself. So would Amara Raja be kind of be following suit there on the price hikes?

Mukesh, you know I can't give a pricing decision over an investor call. But nevertheless, as I mentioned earlier, we will definitely review those prices and then see what decision to be taken in the aftermarket in the light of the dollar appreciation.

But directionally, the call will be to kind of preserve margins over any kind of market share or any such target there?

See, I don't think we are going to dilute the margins for any higher market share as such, Mukesh, I think that direction is clear for us.

Sure, sure. Got that. And I think most of my other questions are answered, but if you could just give an update on CapEx, how much we have done? And what could be the next year's CapEx?

See, this year, including the tubular restatement, which is taking close to about INR 400 crores. In addition to that, as I mentioned earlier, we may have to spend another INR 300 crores to INR 350-odd crores. So the total CapEx for the current year could be around -- if I leave the tubular numbers aside, we may have touch about INR 400 crores in the overall CapEx outflow and maybe another INR 100-odd crores, INR 100 crores to INR 200 crores on the -- sorry, INR 200 crores to INR 300 crores on the New Energy business. So that is the CapEx outflow. Next year, we should see at least about -- on the lead-acid side, I need another INR 300 crores to INR 400 crores of CapEx, and in the New Energy side, I may need about another INR 500 crores to INR 600 crores. So next year, you may see a INR 1,000 crores kind of an outflow.

[Operator Instructions] The next question is from the line of Balkrushna from Axanoun Investment Management.

My first question is related to lead-acid business. So how are you anticipating the demand in terms of volume as well as total revenue perspective in the next financial year?

See, as we have discussed earlier, both the 4-wheeler segment, we have always seen the overall market demand around 8% to 9% kind of growth and 2-wheeler demand growing around 11% to 12% or in some quarters, it has even gone to 12% to 13% as well. And we will see the UPS segment and the industrial side still growing at 6% to 7% kind of a number, but the export market is where we believe we can grow at least another 13% to 14% kind of a number next year as well. So given how this volume backdrop and also the traction what we are seeing on our lead business, I think we should continue with the revenue momentum of anything around 11% to 12% even going forward on the lead-acid battery side.

The second question is related to like overall at the industry level in the lithium-ion business. So we recently saw a report on the players who bidded in PLI scheme, it appears that they will not be able to get any incentive because they would not be able to meet the targets of localization or production level. So do you think -- will this be or, let's say, that will put us at the par level or how does it impact the industry players who did not get to participate in PLI schemes? And will it make any difference in the competitive landscape?

See, I see PLI scheme obviously had certain conditions with respect to starting commencement of the commercial operations. So when we quoted, we have been realistic to when we can actually do this. But nevertheless, that's going to be an advantage even as per the scheme for a period of about 3 to 4 years, where our estimate was if we get the best of the subsidy, then it may make about $3 to $4 per kilowatt hour of sales. So to that extent for a period of 3 to 4 years, maybe people would have enjoyed that benefit. But even without PLI or with PLI, the overall strategy of getting into this battery segment was intact. I don't think that it is materially going to alter the decision-making of any player who is really interested to come into this segment. So from that sense, in a long-term perspective, I don't think that will make a very serious difference to the competitive landscape. Yes, maybe there could be some players who may think otherwise. But I believe if you look at large players who have commenced long-term -- long-term commitment to this business, I don't think it will undergo a significant change.

The next question is from the line of Aniket Mhatre from Motilal Oswal.

Just quickly around your market share trends on a segmental basis. Could you just help us understand where we are? Are we losing share? How are you place with the competition?

No. I think we are stable with respect to our market share. In fact, on the aftermarket side, we believe we must be gaining some bit of market share considering the last 2 quarters' growth momentum, what we are seeing on the 4-wheeler as well as 2-wheeler side, but that's an estimate we generally revise on a yearly basis. But we believe, currently, we should be around 33%, 34% kind of a market share in the aftermarket side. Maybe in the 2-wheelers, we may be a little higher, maybe around 35%, 36%. And as far as the industrial is concerned, we continue to have on a combined basis, both lithium and lead put together, we should be having about 57%, 58% kind of a market share in the telecom, and the UPS business will continue to be around 42%, 43% kind of a market share. On the OEM side, in 2-wheeler, we are around 25%, maybe marginally higher this quarter. On the other applications, which is the inverter batteries, I think considering the fact that we don't have the manufacturing facility today, we still command about 10% to 11% of the overall market share in the inverter batteries.

Sorry, did you mention about telecom?

Yes, I did. Both lithium and lead combined, we are at about 57% to 58%.

Okay. So that trend -- I mean, that trend continue and we have not lost share even in telecom segment this year.

Yes. But considering the fact that we have so many players that are coming up in lithium and then currently most -- all of us are pack upon us with cell capacity to be coming in. Maybe we will see some bit of a dilution in the telecom market share with merely because there are too many number of players currently operating.

And in terms of utilization levels at the moment, the 2-wheelers, 4-wheelers and industrial. Could you just help us understand where they stand today and if you would need any capacity in any of these segments in all this?

See, we are almost losing about 85% to 90% of our 4-wheeler capacity and about close to 90% of our 2-wheeler capacity. And only in the LVRLA, our capacity utilization will be around 65% to 70%, whereas the LVRLA, that is the industry and UPS batteries, we should be around 85% or so. Thanks to some of the throughput enhancement initiatives that our teams have taken up, we are able to realize more throughput out of the existing lines, which was one of the objectives that we have set for ourselves how to get more out of the existing lines through some of the automation as well as industrial engineering initiatives. I think they are paying us well. I think in some of the units, we are able to increase the throughput considerably almost 5% to 6% of the existing capacity we were able to add without making much of a capital investment. So I think as of now, we are self-sufficient with respect to the capacities that we need for both -- all the product segments that we are participating. Once we have a tubular facility coming up with close to 1.2 to 1.3 lakh battery capacity, that should be sufficient for our inverter battery demand as well because we always top it up with some bit of trading.

And as far as the CapEx for INR 300 crores to INR 400 crores FY '26 is concerned, is that maintenance CapEx? Or that includes some capacity additions for some of these segments?

Yes, there are a couple of lines that we are taking up in our 4-wheeler side. It will have some bit of CapEx requirement on that side. And rest is basically the regular CapEx and also some of the automation-related CapEx in terms of automating some of our activities in the lead-acid factories areas, we may need to put some more investment around the digitalization of it. So that's where the rest of the amount is going to be spent.

Just one last bit from my end. Just to clarify on the lithium-ion part. Are you indicating the NMC line will start closer to CY '26 and/or early CY '27, which would mean by FY '27 will start NMC, and it is likely to take, say, at least a year or so to ramp up and then you would start the LFP, right? So at the time LFP starts, possibly we should look at FY '29 or some -- around that timing?

See, at this point of time, we believe there could be a -- if commercialization is done on X date of NMC, it may take X plus 9 to 12 months from the date of commercialization. We should have the commercialization of LFP as well is what is our current working show. But if there is any change, I will let you know in due course.

Okay. So by FY '28, we should commercialize LFP?

Yes, you can take 12 months difference between NMC and LFP commercialization.

The next question is from the line of Joseph George from IIFL.

I have 2 questions. One is in relation to the tubular batteries that you are selling now since the plant will come online only in the first quarter of FY '26. What is the revenue that you are generating now which will get converted into own manufacturing when the plant comes online?

Once we start converting, it should result in a revenue on an annualized basis, about INR 1,100 crores to INR 1,200 crores.

Okay. So right now, the run rate that you're hitting is about, say, INR 1,100 crores, INR 1, 200 crores, which is low margin because you're not manufacturing it yourself, but next year, hopefully, you'll hit that run rate with a higher margin because you will be manufacturing it yourself. Is that right?

We will -- see, because of lack of manufacturing capacity, we will not be able to give the entire revenue because trading, obviously, will limit the entire opportunity that we can do. So it will be a little lower trading revenue that we'll be looking at this year. But it will increase by at least another 20% once we start our own manufacturing. But because we are starting this production in the Q1 of next year season, next year season, we may not be able to participate fully with our manufacturing volumes. So once we commence the operations, the season thereafter, I think we should be in a position to meet all the required demand.

Understood, sir. Sir, the second question that I had was in relation to the lithium-ion business. So you mentioned that once you start the NMC operations, it will take 2 or 3 years for operations to completely stabilize and start thinking about maybe your EBITDA breakeven, et cetera. So when I think of the total investment that is going into, say, NMC, is it right to assume that you will have the initial CapEx that goes in, in setting up the plant and machinery and all of that? And in addition to that, for a period of the first 2 or 3 years till your EBITDA positive, you'll have to continue funding the cash losses. So effectively, the total investment till you reach breakeven might be much higher than the initial CapEx.

See, simultaneous to the cell venture, the New Energy business is also pursuing the pack business, right? So if we are able to meet the expenses, the revenue expenses, what we incur at least partially through the money what is earned by the pack business, we should be able to mitigate some of those cash losses at least at the entire New Energy business level. But if they are beyond, yes, they need to be funded. But at this point of time, our target is to see that, that is as minimum as possible. But you are right. If I -- because at the 1 or 2 gigawatt level, I believe we will still be able to make up that number with the other businesses, what we will be doing. And then when it ramps up to a larger scale, then I'm sure there will be a pain at least for a couple of years before the entire thing gets stabilized.

The next question is from the line of Sanket from Ashika Stock Broking Limited.

My question is on AGM batteries. So recently, there was an announcement where we will start supplying AGM batteries to Hyundai Motor, India. So are you getting any orders from other OEMs as well? And my second question is what is the price difference between the AGM batteries and the conventional CMF batteries? And what is your view on AGM batteries? Is there is a possibility that these batteries will be getting replaced by the conventional CMF batteries as well?

See, AGM batteries as far as other OEMs are concerned, I think while there are some OEMs have shown interest and then some of them are trying to look at the possibility of conversion. So -- but that will take some more time before it is fully done. From the realization point of view, yes, AGM batteries will give a higher realization, but I don't want to put a number now because we should look at that number only when it ramps up to a significant number, only then I think it is right for me to discuss those numbers in the calls. But over a period of time, whether migration will fully happen from flooded to AGM, there are possibilities but it is going to take some more time because it has happened in 2-wheelers flooded to AGM conversion that has started and then it happened in a big way, which was basically driven by Amara Raja at that time. But I'm sure it will take some more time before all OEMs accept and then we also offer the product to the aftermarket side of it.

Fair enough, sir. Sir, we may know what are the exact reasons why the OEMs are not shifting to these AGM batteries because the pros are better than the existing technologies?

I don't think there is any resistant as such to migrate, but I'm sure they will have to make their own homologation before they give the final consent to the entire process. But I'm saying it may take some more time before I can tell you that all the OEMs are -- which are the major OEMs who have agreed to go with this product because it also depends on their own vehicle requirements as well, right? So it is not that every product can be -- it is not a simple replacement of flooded to AGM. There are other things that are to be taken care before that migration happens.

Sir, so if I'm not wrong, we are the only one which is currently manufacturing AGM batteries in India? Is it?

I may have to come back to you on that because I really don't know for sure whether Exide is making it or not. I may have to check and come back to you.

Sir, my last question is, so we are expected to supply these AGM batteries in Q4 onwards. So what is the expected additional revenue from this segment, particularly?

No, it's basically in the OEMs, whatever vehicles that were going with the flooded when they do the conversion, they will get replaced with the AGM. So from an incremental revenue point of view or volume point of view, I don't think there is a significant number that is going to come in. So once the migration happens, then I can tell you how much of flooded is moving to AGM, but I don't think there is going to be a significant incremental volume that I can comment on.

Sir, lastly, what is the capacity of the plant, which is manufacturing these batteries?

We currently have -- I mean because these capacities are fungible with some bit of minor changes, we currently have about 2 million capacities to make to these AGM batteries.

The next question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities.

Sir, just coming back to the levy, sir. I just want to understand what was the levy for full -- this quarter? And I mean, last quarter was INR 15 crores, and there was an INR 37 crore increase this quarter, right, sir? So INR 52 crores would be the levy, right, for the Q3 quarter?

Yes, yes, yes.

Out of which, sir, how much would be for any previous period, sir?

Yes. I said, see, current quarter, it's about INR 35 crores to INR 37 crores is all belonging to previous year. And additional amount about another approximately it should be about INR 14-odd crores for the next quarter.

So for currently, this quarter, INR 52 crores was the levy, out of which INR 30 crores, INR 35 crores is of the previous periods. So the incremental is at INR 17 crores, INR 18 crores is for the normal run rate, which is something will continue going ahead, right, sir?

Yes, see that number cannot be said for the future periods because it's a post facto revision that every state government does. In some years, it is material. In some years, it was not material. So it all depends on the challenges of the power sector of that particular state government. I don't think I can say this is a run rate with which the levy is going to continue. That's not possible.

Okay. But by Q4, sir, all the previous levies -- previous year levies would be completed, right, sir?

Yes, yes, yes.

Got it, sir. And sir, lastly, you've announced this quarter increased investment in the ARCS and the ARPS. Can you just help us what is the increase for sir?

Yes. The ARCSPL is our recycling battery venture where we have invested about INR 500 crores so far for the Phase 1, which is what has just started the commercial production. And then we have said that we have taken the approval of the Board for infusion of additional INR 200 crores for the next phase, but the actual infusion will depend on the project progress. And as far as Amara Raja Power Systems is concerned, that is the entity which is into charger manufacturing business, where we have taken an unsecured loan approval for about INR 50 crores, which we will include depending on the fund requirement. That is not an equity investment that we are proposing at this point of time.

Ladies and gentlemen, that was the last question for today's conference call. I now hand the conference over to Mr. Aniket Mhatre for his closing comments.

Thank you, Steve. On behalf of Motilal Oswal Securities, I would like to thank Mr. Delli Babu for taking out his time for the call. Thank you very much, sir. Thank you to all the participants for attending the call. Thank you, and have a great day ahead.

Thank you. Thank you, everyone.

On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.