Exide Industries Limited ($500086)

Ladies and gentlemen, good day, and welcome to the Exide Industries Q4 FY '26 Earnings Conference Call, hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Jhawar from Investec Capital Services. Over to you, sir.

Yes. Thank you. Good afternoon to you all. From Exide industries we have with us our MD and CEO, Mr. Avik Roy, Director of Finance and CFO, Manoj Kumar Agarwal, Mr Pravin Saraf, MD and CEO of Exide Energy Solutions; President, Legal and Corporate Affairs and Company Secretary, Mr. Jitendra Kumar; and Mr. Prashant Serasa, Head of Investor Relations. Before we proceed, there is a disclaimer for the call, a few statements made by the company's management in the call may be forward-looking in nature, and we request you to refer to the disclaimer in the earnings presentation for further details. We will start the call with a brief opening remarks from the management and followed by Q&A session. I would now like to hand over the call to Mr. Avik Roy for opening remarks. Thank you, and over to you, sir.

Thank you, Aditya. Good afternoon. Good afternoon, ladies and gentlemen, and a warm welcome to you all to the Exide earnings call. Before taking you through the key highlights of our performance, I would like to talk about some of the macro and industry drivers that shaped our operating environment in the last quarter. Globally, the West Asia conflict continues to be an ongoing threat. With regard to availability and pricing of commodities such as LPG, sulfuric acid and plastics, the situation is quite alarming. Rapidly increasing commodity rates, coupled with rupee depreciation continue to pressurize our input costs. But in contrast, the Indian demand situation remained favorable. low inflation rates, low interest rates and the consequence of GST 2.0 reforms increased end consumers' affordability, especially in the second half of FY '26. Rural India experienced strong broad-based revival as well, driven by rising income, upbeid sentiment and infrastructure development. Coming to the company's performance during quarter 4, nearly 92% of the business has grown by about 16%. And that basically includes our entire domestic business minus telecom. All key verticals grew double digits, headlined by 2-wheeler and 4-wheeler OEM then home UPS, solar, 2-wheeler and 4-wheeler replacement market as well as industrial infrastructure business, excluding telecom. Remaining 8% of the business witnessed a strong decline in revenues, exports being one of them, which was subdued by the given geopolitical situation and telecom and the E-Rickshaw continues to shift towards lithium-ion technology. This translated to about 9.4% year-on-year overall revenue growth. And in quarter 4, we generated our highest ever quarterly revenue. Domestic business sales grew by 12.5% year-on-year. For the full year FY '26, the company has delivered 4.1% year-on-year revenue growth. Again, nearly 92% of the business grew by double digits. The domestic business sales business grew by about 7.5% year-on-year for the full year. In quarter 4, the company continued to ramp up production, leading to higher capacity utilization, better absorption of fixed costs and positive impact on the bottom line. The company was also able to maintain on a sequential quarter basis, the EBITDA margin of 11.7%, buoyed by strong volume growth, improved product mix and better realization, which was also helped a lot by lowering our warranty costs and benefiting and benefits accruing out of our manufacturing excellence projects. All the above efforts resulted in expanding the EBITDA margin year-on-year by nearly 50 basis points. The GST 2.0 led demand surge continued in Q4 as auto OEM business recorded its second consecutive quarter of 25% plus year-on-year growth, also hitting its highest ever quarterly revenue breaking the mark set in quarter 3. Home UPS business recorded its highest ever quarter 4 sales, uplifted by the little early onset of summer. Solar vertical returned to double-digit growth. And I'm happy to inform you that we incubated and nurtured this solar vertical for the last few years. And this year, they have crossed the INR 1,000 crore mark for the full year. Two-wheeler and 4-wheeler replacement demand remained robust as it continued in its mid-teens growth rates as in the past quarters. Industrial Infrastructure, excluding telecom, continued its strong performance, maintaining double-digit year-on-year growth. Order inflow and execution remained healthy across sectors like railways, motive power and industrial UPS. Geopolitical tensions continue to impact exports business. We expect these uncertainties to remain for at least in the first half of next year -- of this current year. We have been briefing you for the last couple of years on our new One Exide operating model. So a few comments on that. The company transformed from a strategic business unit-led model to a One Exide operating model in FY '25. This was intended to recalibrate our go-to-market approach across vertical business verticals. During the last year, FY '26, this operating model has enabled the company to be more agile and customer-focused while bringing synergies across the organization, reflecting in the overall company performance. As we enter the next fiscal year, the outlook for the lead acids business remains positive across most business verticals. However, we remain cautiously optimistic and we'll constantly watch and monitor the domestic demand situation in view of the expected inflationary economy, if at all. The company remains focused on tight cost control despite the global headwinds. I believe that Exide with its advanced product portfolio, pan-India distribution network and a strong brand recall will continue to benefit from growth opportunities. I will move on to our lithium-ion cell manufacturing project, where we have invested INR 600 crores in quarter 4. And about INR 1,500 crores in FY '26 in the full year. With this, the total equity investment made in Exide Energy, our subsidiary, till date stands at INR 4,802 crores. Our cylindrical lines are expected to start customer sample delivery by around this month onwards, while the prismatic line will be initiating product trials shortly thereafter. Meanwhile, the company continues to engage with various OEMs of 2-wheeler, 3-wheeler and 4-wheeler and stationary energy providers to build the offtake across key end consumer markets. With this, I close my opening remarks. We will now be happy to take your questions going forward.

[Operator Instructions] We take the first question from the line of Binay Singh from Morgan Stanley.

In the opening remarks, we talked about 8% of the business declining, which is telecom and exports. Fair to say that exports will be around 5% of top line in telecom around 3%. Will that be the breakup?

Yes, Binay. You are right in the ballpark.

And which region.

3% would also include a bit of E-Rickshaw business.

Okay. Because that brings me to my next question, when you look at next year on this core business, exports will have volatility for the first half, but will recover. So then we should be actually quite set for a much better top line growth than this year next year, right?

Because I would like to believe the positive side is, Binay, the baseline is now low for these businesses because we have declined. And next year, we see -- we have a strategy in place given if the global geopolitical tensions ease out a little bit. I see a substantial upside for the exports because our main export markets are also in Western Europe and U.S., where we were targeting as a strategy. So exports was already doing -- was already 8% of our revenue a couple of years back. So we came down to 5%. So I think there is a good chance to increase our share of exports and therefore, the incremental revenue.

And the overall top line growth also next year should improve from this year, right? Because all the other businesses commentary that you gave was quite strong.

Yes, yes. The exits have been quite strong. Q3, Q4 has been quite strong. And I personally believe that -- and we -- as you will recall, we were a little pulled down because of the Q2 washout when this GST announcement was made in the month of mid-August, and it was effective from 22nd September, if you recall. So that 1.5, 2 months, we almost had a washout because there was no offtake from our distribution network. So other than Q2, I think all 3 quarters, we have been doing well and also riding on the demand wave. I would still believe that the core business at this situation has a potential to do at least a high single-digit to double-digit growth. Today, we are domestic, we are -- even despite the telecom decline, domestic, we had 12.5% in the quarter. So I would like to believe that high single to double-digit growth for the overall core business is possible.

And sir, secondly, on the new energy business, I think in the press release, we had added that for cylindrical, the trial runs have started. Prismatic will be a few quarters down the line. So to that extent, is Prismatic also for this year only.

Yes, yes. Prismatic is the LFP line, and this is also scheduled for this year. The difference between cylindrical line and prismatic would be that the start of revenue will be quicker in LFP because that product will not go through so much of validation and customer homologation like the 2-wheeler batteries in cylindrical. So though the production of cylindrical will start first, but possibly the revenue stream will come first from the prismatic lines. Yes.

And sir, could you talk a little bit about the industrial side of the opportunity? Because globally, what we've seen that, that opportunity pie has surprised on the positive side and margins are also actually better. So when you talk about -- when you think about data center, [ VSS ], in your view, the 6 gigawatt capacity allocation, what could be industrial share in that? How is the reception of clients on the industrial side?

See, Binay, you know we have 2 lines of LFP about LFP Prismatic, which is meant for industrial stationary storage applications. I mean the design every cell, what we are going to manufacture will have multiple use cases. It could be both automotive as well as stationary. It depends on the -- form factor is prismatic in any case. So we are -- the cell formats, which we are -- will be producing in Line 3 and Line 4, the prismatic lines will also cater to the stationary storage use cases. You have heard I have made in the opening commentary that the telecom is shifting towards lithium-ion. E-Rickshaw is shifting towards lithium-ion, and there are some other use cases shifting towards lithium-ion. Now in many cases, we are already present with our pack business. Only thing that we are doing it through imported cells. We will just switch over to our own made in India cells. That's the plan.

We will take the next question from the line of Krupashankar NJ from Avendus Spark.

My first question will be on the commodity cost. Just wanted to get a sense around the extent of impact what we have seen in fourth quarter? And what sort of escalation is anticipated in the first quarter of FY '27, considering the initial comments? And continuation to the question is that what would be the extent of price hikes taken in the aftermarket and the expectation on further price hikes going ahead?

Thank you. Thank you for the question. So first question on the commodity situation. Our impact on material cost for quarter 4 was roughly -- net-net impact was INR 150 crores, I would say, a negative impact. So it has come down by about -- the gross margin, if you see, has come down by about 90 basis points. Though we have been able to maintain our -- able to improve our EBITDA. But even if you see quarter-on-quarter movement, the gross margin has come down from, let's say, it was -- in Q3, it was 31.6% and in Q4, in the last quarter, it was 30.1% -- but despite that, we have been able to maintain our EBITDA sequentially at 11.7% because of our tight controls on the other cost elements. We have been very successful in controlling our factory costs as a percentage of sales, employee cost, you will see that. And best part is we could be able to reduce the warranty cost as a percentage of sales. So these 3 -- mostly these 3 elements have offset the increase in the commodity cost. So therefore, we could offset the drop in gross margin through our internal controls. But as far as price hike is concerned, we have started -- I think I have mentioned this in the past that in Q3, we did not take a price rise consciously because GST -- the revised GST rates were announced, and we thought we will pass on the entire benefit to the end consumer. But from January onwards, we could not sustain the cost inflation of material. Therefore, we started taking price increases stage by stage. So January, 1st January, 1st March, 20th March, I think in 3 tranches, we have taken increases, which maybe amounts to about, let's say, about 5% -- 5% to 6% varies on the segment. But across all segments in the trade in the aftermarket, we have taken corrections. And even on 1st of April, we announced the last round. In April also, we took another round of correction. So we have been trying to pass on as much as possible of our commodity inflation. And that has also resulted in our resilience in quarter 4 margins.

Got it sir. What was the...

Have I left anything?

Nothing, sir. I think one follow-up is that what was the quantum of price hike taken on April 1 as well? If you can share that?

It was around 3%.

All right. And do you anticipate further hikes coming in given that the commodity inflation has been quite sharp. So just wondering, given the competitive dynamics, do you see further price hikes coming in to pass through this inflation?

I mean, right now, it's difficult to comment, but the leading indicators, if you see the April exit prices of commodity, it is far more than March exit, whether it's steel, whether it's sulfur, sulfuric acid, we are very, very badly hit. The March exit was INR 58 per kg, and April exit is already INR 74. And just imagine 1 year back, it used to be only INR 15 per kg. So INR 15 to INR 75 INR 74, INR 75 is 5x. So obviously, we will be watching it. And going forward, we will have to take the price hikes. We have no other option.

Got it, sir. And with respect to OEM contracts, the escalation comes in with a lag. So what would be the time period of that lag? And what will be covered? Is it only the lead acid piece, which will be covered, right? So the other aspects, are you negotiating with them to pass this on?

Yes, yes, you're right. We have -- and the good news is that last year also when we were going through this huge inflation, non-led inflation, I would say, non-led inflation on commodities, we have been able to make our customers' OEMs agree to a certain amount of price increases. We have been successful. we have given them evidences that how we are suffering and some of them has been extremely logical and they gave us a price correction last year. So that helped us in the full year performance as well as the quarter 4 performance of auto OEM also. Having said that, we have again approached them and everybody knows this. It's not surprise that the way the commodities are growing, particularly the commodities which are essential for batteries, acid, plastics, LPGs and of course, currency hitting the lead prices. I think we are constantly in touch with the major OEMs. Some of them agreed and some of them, the negotiations are on.

So the lead time is typically 2 months to 3 months. Is that the right metric?

I'll rather say it's a quarter.

We will take the next question from the line of Siddhartha Bera from Nomura.

Sir, first question is on the lithium-ion business. We have invested close to INR 4,800 crores till now. How much investment do you see in the next 1 or 2 years going ahead in this business? And second is, I mean, we -- when we have started the trials, when we sort of look at the commercial supplies, do you think the pricing will be at par with the imported or there can be some premium we can derive? And how should we think about the learning curve? Where are the yields? Do you expect that we may be in the normal sort of yield by quarter 3 when we start or that may take some time to settle down?

So let me take the first part of the question, and then I will hand over to Pravin Saraf, who is on the call to answer about pricing and yields. The first part is, Siddharth, we have already got a Board approval, and this has been announced in the past of investing INR 1,400 crores in the fiscal year '27, which is a mix of both CapEx as well as the OpEx, working capital requirement, which we have to fund. So that's the number for FY '27. I think that should be sufficient for Phase 1. We'll see how it works. Regarding our pricing strategy and yields, I'll request Pravin to take over. Pravin?

Yes. Thank you. So I'll start with the reply to yield. So you're absolutely right. The yield is the most critical factor governing the price -- the cost of the cell manufacturing. And we -- what is -- how we control and improve the yield is we must have good machines, people who is operating the machines as well as having the process knowledge and good technology support. So you know that we have a very good technology support from [indiscernible]. Then we have good machines already installed, which are very capable. So -- but what yield will govern is only by experiencing and we all learn that once we start 3 shifts running and having continuous running, then the yield will improve. So it takes time. But definitely, we will work towards it and how much it will be better to -- once we start the manufacturing, then we'll be able to exactly predict that how much time it takes. I can only assure that whatever required things and parameters control yield are at present. So once we start, we'll be able to quickly reach to -- we'll try to reach to the yield levels. The best yield level should be 90%, what we should target. Coming to the pricing, yes, today, the raw material are getting all from import from China. So the pricing today is definitely will be a little higher. But what we are targeting is that with utilization of the plant with a maximum utilization, more than 85% yield is 90%. And with some amount of localization, which you already know that a lot of local supplies are coming, we will also able to meet the targeted price, what is the landed price today. So what will help us in achieving this is also, if you may be knowing, recently, there is a change in the [ VAT ] structure in China. So for the imported cells today, there is a 3% increase in the [ VAT ] due to the [ VAT ] structure already implemented. And by January next year, it will be additional 6%. So it will be overall 9% increase will happen. So this will also help us. Parallelly, we are also working with government to have subsidiaries and incentives for the localization of raw material as well as for manufacturing of cells. So put together, our target will be meeting the landed cost of the imported cell.

I think the key will be to also the government has to also develop this industry locally. There has to be a value for Make in India cell, like I have been repeating quarter after quarter that we are the first one and Make in India cell has to have its learning curve because otherwise, nobody else will come up for investment like this if they are not encouraged. So that's also our take. Thank you.

We will take the next question from the line of Arvind Sharma from Citi.

The lithium-ion business, have you seen any -- I mean, any revenue commitment over the past few months, given the trial supplies have started or are supposed to start. So when should the companies actually start seeing revenue accrue from the lithium-ion business? And versus the plans when you launched in 2022, I remember you had said around 27 to 30 months is the time it takes for operationalization. Where are you in that plan right now? -- first cement business.

I think let's little to bring clarity to the question. First one is what is your status of revenue flow? That's simple. So far, we have been doing pack business, which is around, let's say, INR 100 crores, INR 200 crores of module and pack businesses, which we were doing through imported cells. Now we will be making cells. Now regarding start of cell revenue debt, I think I already mentioned in the previous question that in the first question itself that when is likely the revenue to start. And so it will probably start with the LFP prismatic line because that product does not need so much of approvals and things like that, that use case. But as a start of production, the NMC cylindrical line will be first, which is -- and we have not started the supplies of cells, just to correct you. We have completed our process validation. The sample supplies will start possibly this month, end of this month or next month. Pravin, would you like to add on this?

Yes. So we -- our internal validations for the cylindrical cells have been completed, and we will be able to give the cell to our customers in this month. Of course, as you all know that the custom validation will take time because the mobiligation as well as the internal ties at the cell as well as at the pack level. And for the prismatic cell, we are -- right now, we are running the trials for the making the customer samples. We are targeting by June and July, we can say we want to give the samples for customization.

Got it, sir. So it will still be some time before there's any significant revenue recognition from the cell plant?

See, this is -- this will be a material disclosure for us. So be assured that we will let you know much in advance our start date officially.

Sure, sir. Sir, second question on the core business, the legacy business. Would it be possible to share the proportion of autos and non-autos and the OEM replacement share in the mix? Would it be possible?

I think this we have shared many times in the past. Auto and non-auto is almost half roughly or maybe 53%, 47% kind of auto is -- OEM and aftermarket put together is about 50%. And the ratio between auto replacement and non-auto, as you know, it's standard is 70-30. Plus/minus 1%.

[Operator Instructions] We will take the next question from the line of [ Sujit Pandey ] from Axis Capital.

A couple of questions. I wanted to check in terms of the raw commodity inflation, how much impact are you seeing currently so.

Absolutely. You have to repeat your question, I'm afraid you were not very clear. Can you say that again?

Is it okay now? -- so sir, I wanted to check in terms of commodity inflation, what...

[ Sujit ], could you please use the handset mode and speak?

Yes, there are some background noise coming in.

Is it okay now? Yes. I wanted to check the commodity inflation in the fourth quarter and the first quarter till date. So what has been -- what is the level of price increase you have?

This question we just answered a little back, I think, to Binay Singh -- if you read the transcripts, I think we have mentioned it already.

No, no. Sir, about the price hike, the inflation, raw material.

Yes, yes. Yes, yes. We had mentioned that as well. You have mentioned that as well. Exactly what was the impact on the material rate impact you have mentioned.

Okay. Okay. And secondly, sir, the prismatic so that validation will take customer validation will take -- should we expect around 3 months? Or is it longer than...

See, prismatic sales, what we are making is primarily for 3-wheelers and some stationary applications. For these applications, basically, these are either through trade channels or to institutional customers, where we are -- we do not have that kind of a homologation process like an auto OEM runs. So therefore, the time to market will be and the time for revenue will be quicker than auto OEM.

And for cylindrical film, it will be around 3 months or...

It depends on the customer because it depends on how much mileage the vehicle will run or they want to run. So -- but yes, around that ballpark, I think, Pravin?

Yes, yes, 2 to 3 months, yes. But of course, it depends on customer again. So we are always also discussing with them, but it depends on that.

We will take the next question from the line of Aditya Jhawar, from Investec Capital Services.

Sir, I think this commodity question is quite important in the current context. If you can refresh that if you look at our bill of material, what are the ballpark big commodity in terms of percentage exposure that we have, the top 3, 4 commodities, whether it is lead, polymer, how much percentage of COGS it represents? And for specific commodity, if you can talk about that what is the near-term outlook that you are looking at?

Okay. So if you -- let's see how much we can give you. I'll give you both quarter-on-quarter and year-on-year rises.

First, I would recommend that for FY '26 on a full year basis, what is the breakup of our bill of material in terms of exposure to key big commodities?

I think, Aditya, perhaps this is a little not in public domain. All I can say is that our key components is lead acid and plastic, okay, mainly our bill of material items. This covers about 95%, 96%. Lead as an index has been softer year-on-year. But in India, lead is sold, even recycled lead and pure leads are sold on import parity prices. So because the currency has softened by about 10%, the reduction in [ LME ] has been over offsetted by the dollar rupee depreciation. okay? So we did not get a net-net benefit on lead also. So regarding plastics, because we use polypropylene containers, this is -- this was directly hit in the Q4. Q1 to Q3 was pretty stable. But Q4, we got a hit because of shortage of crude, which is coming to India. Sulfuric acid, I mean, this for the first time, we used to buy sulfuric acid for INR 15, as I said, 1 year back. Sulfur is a byproduct of the petrochemical refinery plants, right? And since the petrochemical plants, refiners are operating at a lower capacity utilization because of crude shortage, even the generation of sulfur has also come down. And therefore, just to run the business, sulfuric acid costs have gone to INR 75 April exit compared to INR 15 in the beginning of the year.

So I mean, what I'm trying to understand, sir, clearly, I think lead prices not going up is also a better situation for us in INR terms. And lead might represent more than 50%, 60% of cost and even the polymer prices would be the remaining 20%, 30%. So what I'm trying to understand that, yes, sulfur has seen a big spike, but that -- is it that it is less than 10% of BOM?

See, I mean, we have to go into details. There are other alloys, which also come in play based on seasonal demand. Are you looking for Q1 outlook or kind of a picture of Q1 or last quarter 4?

No. So I mean the outlook, I mean, if you look at on a blended basis, depending upon how much exposure we have, because now the Street is worried about the commodity inflation. looking -- and our exposure is significantly different to commodities as compared to OEMs. So just trying to understand from FY '27 perspective, what should we think about commodity inflation and how much price increase would be required to offset that? So...

So the short answer is this, that this year, at least quarter-on-quarter, we will pass through the non-lead price increases to the customers. The lead will be governed by the formulas that we have with at least the OEMs and industrial customers. But otherwise, everything we will try to take price correction because at this moment, we believe that our sourcing efficiency is at its best just for business continuity itself. So we have been successful in passing on in both, as I said, January, February, March, April, 4 months consecutively, we could be -- we could be able to take price corrections from the market. If I do not know the situation of rupee, this is rupee to dollar is a kind of an uncertainty. But if it stays at this level, then probably even if LME goes down, we'll not get a benefit in rupee terms. Just for your information, Aditya, that till March, though LME was softer, but in April, LME has again shot up to INR 1,950. So it's really volatile. We are navigating through calibrated price increase from the market. Yes.

We will take the next question from the line of [ Sreeram ] from [ MLP ].

Yes. Sir, if you can just help us understand that within the acid consumption, is it only sulfuric acid or are there other type of acid also that we use? No, it's sulfuric acid.

No, it's sulphuric acid.

We will take the next question from the line of Viren Sameer Deshpande from Alphapeak Investments.

The results have been quite decent in the current scenario and our dominance in the market share is really helping us. We are getting a good result. And another important thing, the first -- to become the first company in India to make these lithium-ion batteries will be a good figure in the cap. But as you rightly said, is the government likely to be significantly supportive to the company with these benefits or incentives like [ PLI ] or any other incentives? Because otherwise, the imports are going to hurt with the rupee depreciation. So what is the status on that?

So imports are going to be expensive. That's what you meant.

Yes.

Precisely, there are 2 parts of it. One is, of course, government has to develop this industry and give a value for or give attention to Make in India cell. And when I say cell manufacturing, it's electrode manufacturing. It's not importing complete electrodes and just assembling it as a cell and then supplying. So if government wants us to really integrate backward in manufacturing, manufacturing our own electrodes, sourcing our own anode and cathode material from the country, they have to support the industry, and that will happen eventually. Otherwise, the investments will not come, not only in the cell manufacturing, but also in the supply chain. There is a second angle to it. The second angle is the comfort of the OEMs. Now how long do you think a large OEM like, let's say, the top 2 names, Maruti, Tata, Mahindra of this world will depend on completely imported batteries from China for their vehicle. The OEM runs on 1-day inventory. That is how their supply chain. And here, they are investing in 3 months inventory of imported material. So their operational sequence, their total supply chain management also improves for Make in India sourcing. So I'm sure once there are scales, once there are players like us, -- even the OEMs would also like to have localized supplies. We have seen those trends already in some cases because they -- of course, they want to have at least 2 sources, even if not -- even if they don't want to disrupt their import, they will like to have an alternative source because otherwise, it is too expensive and too volatile -- too big an exposure to depend on imported complete batteries from China on a long term. So yes, we are looking forward that both the government as well as the auto OEMs will be driving this market, which will encourage more players to come in.

I think definitely with the Atmanirbhar policies of the government and the current situation in the Gulf, which is always exposing the country to these huge risks because if there are no imports possible, then the things really can come to a standstill and hit the India in a big way. So definitely, the government support will come. And I hope with the big investments we have made around INR 5,000 crores to date. And I think in this year also, we are likely to invest about INR 1,000 crores, you mentioned?

INR 1,400 crores.

Okay. So it about INR 6,500-odd crores. About INR 6,500-odd crores will be investment. And when we sold our life insurance business, we got approximately the similar amount, I think, in terms of the shares of HDFC Life.

Yes, roughly that amount.

So we are currently in the investments in the balance sheet, now noncurrent investments have fallen by about INR 850 crores. So have you sold some part of the shares of HDFC Life during the year?

No, no. I will hand over to Manoj Agarwal, our CFO, to answer this question.

Mainly because of the mark-to-market of valuation of the shares, we have not sold any shares as on date.

Okay. So the mark-to-market valuation has come down by about INR 850-odd crores.

As of 31st March, yes.

And that the second effect has been given to the reserves or what?

It went through [ OCI ]. We route to OCI. So this is coming as a net worth, not [indiscernible].

We will take the next question from the line of Suraj Chheda from Bandhan AMC.

A couple of questions. First on the lead.

Sorry to interrupt in between, Suraj, you're not audible. Please use the handset mode.

So a couple of questions from my side. First, on the core lead acid battery business. In the earlier comments during the call, you mentioned that you are expecting mid -- high single-digit growth to early double-digit growth. This you mentioned with respect to FY '27? Or do you think over next 3 to 4 years, that should be the medium-term CAGR for your business?

I think even in the medium-term CAGR, it should be. Last 5 years also, if you see the 5-year CAGR was 11%. And I don't see any reason for the next 5-year CAGR to be different from that, plus/minus a few percentage or 1% maybe. Because clearly, if you look at the OEM business today, which is for at least consecutive 2 quarters as well as Q1 outlook of this year, the automotive OEM business is growing by 20% plus, 25% -- these are all going to get reflected in aftermarket after 2 years.

Understood. Okay. And what is the UPS revenue mix for you right now in FY '26?

The UPS revenue would be -- just a minute. It will be more than INR 2,000 crores, around INR 2,300 crores.

Okay. Okay. And telecom, you mentioned is maybe around 2%, 3% of your revenues right now?

Yes, yes.

And second question was with respect to your first Phase 1 of 6 gigawatts capacity for lithium cell manufacturing. How do you see this capacity being allocated between, say, automotive and maybe stationary application or telecom or BES segment? Any plan you are having over the next 1, 2 years?

I'll request Pravin to take this.

Sure. Thank you. So the 6 gigawatt, we have 2 chemistries. I think it's a good thing that because of 2 chemistries, we can be able to cater the various applications. So we have cylindrical and prismatic. So our capacity is divided cylindrical in 3 and prismatic in 3 gigawatts. So as you know, cylindrical today's applications is 2-wheeler. And in prismatic, we have applications like 4-wheeler buses and stationary like telecom sector as well as ESS. So this is how -- today, the capacity is allocated.

Okay. Okay. Any breakup of this 6 gigawatts between the 2 chemist ballpark numbers?

3 gigawatt, 3 gigawatt for cylindrical and 3 gigawatt for Prismatic.

Okay. Okay. And for this 3 gigawatt prismatic one, this will also cover your tie-up with the [ Hyundai ], which you announced, right?

No, no, no. That's a little different. This is -- this will not have an impact on the Hyundai.

We will take the next question from the line of Karan [indiscernible] from Tata AIA Life Insurance.

So I just had a clarificatory question. So if I heard right, you said that sulfuric acid prices have gone up from INR 15 per kg to INR 75 per kg.

That's the sulfur price, not sulfur price.

Okay. Sorry. So sulfur prices have gone up from INR 15 per kg to INR 75 per kg. You said this has happened since the start of the year. So this is since Jan or this is since April?

No, no, this is for 1 year, gradual increase. Gradual increase quarter-on-quarter started -- the baseline is Q1 of '25, 4 quarters.

For the last 1 year?

Selling 4 quarters, yes.

Okay. And on a sequential basis, what would be the jump?

Sequential basis, in Q4, sulfur was plus 40% and sulfuric acid is -- year-on-year -- sorry, quarter-on-quarter sequential basis will be about 20%. April exit is higher than March exit by a lot.

Yes. Okay. And this increase in price, does it get reflected in the same quarter? Or will it get reflected in the upcoming quarter?

More or less same quarter. That's why if you recall, I just said that from 1st of April itself, we took the price hike. And because we did not wet normally, acid and others impact immediately. So that's why first we announced on 1st of April. Actually, we took on 20th of March round. If you check your channels, you will know. The 20th of March, we announced and then 1st of April, back to back after 10 days, we announced. And now we -- again ongoing in May and June, you will also hear some announcements.

We will take the next question from the line of [ Deepak Ajmera ] from [indiscernible] India.

We would like to understand your thought process that you have invested INR 5,000 crores, we will be investing another INR 1,000 crores. And what sort of return metrics now looking at the raw material price and the demand and the availability, what's your internal projection on the return metrics and the margin?

So sir, at the moment, we are completely focused on ramping up the production, as Pravin has mentioned, -- we do not know what will be the level of commodity prices when we actually serialize our production. Today, lithium has again gone up by double digit in the last couple of months due to various supply-demand constraints. So it's not proper for me to do a math based on assumptions on commodity prices because all those things will depend on that. What is good is that the customer has realized that lithium is also volatile. Today, last 1 year, lithium was dropping because there was high overcapacity in China. Today, if you look at last 2, 3 months, the situation is reversed because of this West Asia crisis, because of crude shortages, the production of electric vehicle and electric vehicle batteries in China has shot up. Everybody has loaded their factories because primary fossil fuel is in crisis at this moment. So this has led into a demand side boom locally, and therefore, the prices are going up. So people also understand that lithium prices is not exactly predictable because this type of volatility will happen going forward. And then China, suddenly, the government has come up with a policy that you can't bleed anymore. The EV manufacturers cannot make losses anymore. They have to be profitable. So they are forced to raise prices. That's why Pravin told you that they have withdrawn a lot of VAT benefits and export benefits. So this is the environment of lithium. So I have a feeling that -- we will have a much better case than last year when we start production because prices will stabilize, number one. Number two is the prices are also indexed to a great extent so that the risk is also a pass-through like lead. And third is, as I said, the OEMs will definitely take a deeper look of developing local supply chain for cells and packs. So I think with this, we'll have a much stronger case, but the time to announce that has not come. Let us ramp up our plant, let us operate at 85% utilization with 90% yield, and that will be the time when I'll come back and reply to this question. Please have in mind, we are the first one in the country to manufacture cells with this kind of scale.

Yes, yes, yes. That's really great. The second question is, while you are like Ministry of discussing on the policy framework on the cell manufacturing localization, what is their feedback? What they are exactly waiting for the any policy measures?

It's like kind of a chicken and egg. I mean you also have to have sufficient capacity locally to announce a policy for Make in India. So unless there is -- I would like to believe, unless there is about 20, 25 gigawatt of capacity in India or let's say, 20 gigawatt, that is a minimum that where we will get a lot of support from the government. In fact, today, the whole EV market in automotive, the EV market in India is also 20 gigawatt hour. So to have that -- just to have that in mind at scale. So once we have 2, 3 players coming up with 15, 20 gigawatt hour, I think we'll have substantial scale for the government to intervene and take some policy changes.

We will take the next question from the line of [ Sagar Parekh ] from [indiscernible] Investment.

Sir, just I was confused, actually, you said 6 gigawatts or 3 years in NMC [indiscernible] in LP cylindrical [indiscernible] 3 in LFP this thing. But and then you said Hyundai is separate. So what exactly...

With Hyundai, we have a separate contract, which -- where there is a co-investment. So we are delinking it with our own internal investment. So that will be an incremental capacity over 6 gigawatts when we commission that.

So that is not a part of that. So when will that be? And that part of INR 400 crores also, INR 4,800 crores that we...

No, no. So that we'll make a disclosure when the time comes, maybe soon. Yes.

But it's not a part of FY '27.

Commenting on that. This is still not in public would be, but I'm not commenting on this because this is a material disclosure.

Ladies and gentlemen, we will take that as the last question for today. And that concludes the question-and-answer session. I now hand the conference back to the management for closing comments.

So thank you, everybody, for the extremely engaging questions. We have been pretty confident of the quarter coming by because last consecutive 2 quarters was pretty satisfying, particularly after a weak quarter 2. I think we have been able to deliver a growth, which normally is in line with the expectation, both in top line and bottom line. And our April having gone, I think we also have a similar view on quarter 1 of this year as well. I hope we have been able to answer all your questions satisfactorily. If you have any further questions, I mean, we would be very happy to be of assistance, kindly reach out to us. Thank you. Over to the moderator.

Thank you, members of the management. On behalf of Investec Capital Services, that concludes this conference call. Thank you all for joining with us today, and you may now disconnect your lines.