Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil AA+/Stable/Crisil A1+' ratings on the bank facilities of Amara Raja Energy & Mobility Ltd (ARE&ML; formerly known as Amara Raja Batteries Ltd)

 

The ratings continue to reflect the strong business risk profile of ARE&ML, supported by its established market position as the second largest lead acid battery manufacturer with its Amaron brand, diverse product profile across automotive and industrial battery segments, and robust distribution network in India and abroad. The ratings also factor in ARE&ML’s strong financial risk profile with negligible debt on its balance sheet. These strengths are partially offset by exposure to intense competition in the domestic battery segment and to logistical challenges arising from geographically concentrated operations. The company also faces project-related risk associated with its proposed entry into lithium ion (Li-ion) cells and battery packs through its subsidiary, Amara Raja Advanced Cell Technology Pvt Ltd (ARACT; 'Crisil A+/Stable')

 

During April-December 2025, ARE&ML reported a 5% year-on-year revenue growth, driven by an 8% revenue growth in its Automotive Battery Division and more than 40% revenue  growth in its New Energy Business division. While growth in automotive division was supported by GST revision in automobile which had stimulated the OEM demand thereby having a cascading effect on automotive batteries along with GST reduction in lead acid batteries, Industrial Battery Division experienced negative growth due to declining telecom battery sales as the industry shifts towards lithium-ion batteries. Sale of batteries for home UPS/inverters witnessed a moderate growth during April-December 2025. ARACT’s revenues too witnessed good growth, driven by Energy Storage Systems (ESS) batteries for telecom applications which offset decline in electric vehicle (EV) battery pack and charger sales, following lower offtake from key clients.

 

Over the near to medium term, ARE&ML is estimated to achieve a revenue growth of around 5-6%, driven by steady growth in its automotive division, fueled by stable demand for lead-acid batteries for existing Internal Combustion Engine (ICE) vehicles and growing demand for auxiliary power solutions for EVs, as well as continued momentum in its New Energy Business (NEB) division, which will benefit from shift towards lithium-ion batteries in the telecom sector along with rising EV penetration.

 

ARE&ML's operating profitability declined by 120 basis points to 10.8% in the first nine months of fiscal 2026 from ~13% during corresponding period of previous year, primarily due to higher raw material costs especially, lead, antimony, sulphuric acid etc., a greater share of lower-margin tubular battery trading, one-time Extended Producer Responsibility (EPR) provisions , increased warranty expenses and operating losses at subsidiaries, ARACT and Amara Raja Power Systems Limited (ARPSL; Crisil A+/Stable/A1), which are investing in new ventures such as EV chargers and battery packs and cell division. These businesses are yet to scale up and have yet to contribute to profitability. Going forward, ARE&ML’s operating profitability will improve gradually to 11-12%, driven by a higher manufacturing mix with the commencement of tubular battery production from the third quarter of fiscal 2026, and an expected increase in in-house lead sourcing from its captive subsidiary, Amara Raja Circular Solutions Pvt Ltd (ARCSPL), and controlled losses at ARACT.

 

Crisil Ratings notes the impact of ongoing geopolitical tensions in middle east which accounts for 3-4% of the company's overall revenue. While demand impact is neutral, ongoing tensions in the region have led to supply chain disruptions, resulting in steady price increases for key raw materials such as plastics and acids and sustained increase in maritime insurance and freight. To mitigate this volatility, ARE&ML is expanding into Europe and the Americas, with plans to establish a wholly-owned US subsidiary, ARE&M US Inc, with an initial investment of $5 million. This strategic diversification aims to boost local presence, manage battery distribution, and explore future lithium-ion cell and pack manufacturing capabilities in the US.

 

The company’s financial risk profile continues to remain robust, marked by an estimated net worth of over Rs.7,000 crore as of March 31, 2026. Although the company plans to invest Rs.1,300-1,400 crore  over the next two years in Phase-I of its Lithium Ion Giga factory, partly through debt funding, its debt metrics are expected to remain comfortable, supported by healthy annual cash generation of Rs.1,200-1,300 crore.

Analytical Approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of ARE&ML and its wholly owned subsidiaries, ARPSL, ARACT, ARCSPL and Amara Raja Batteries Middle East (FZE) UAE, on account of their financial and operational linkages

 

Crisil Ratings has amortised the goodwill of Rs.428 crore on the acquisition of the plastic components business from MIL over a period of five years from fiscal 2023 till fiscal 2027. Crisil Ratings has also amortised goodwill of Rs 7.8 crore on the acquisition of ARPSL over a period of five years from fiscal 2024 till fiscal 2028.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Healthy market presence in the domestic storage batteries segment: The business risk profile of ARE&ML is supported by its healthy presence in the domestic storage battery market. The company is the largest player in this segment after Exide Industries Ltd (Exide), and has a large distribution network comprising 100,000+ points of sales, 1,000+ Power zone retail stores, 2,000+ extensive service hubs and 23 branches across India. This, along with the strong equity of its Amaron brand, has strengthened its market position over the years. Steady capacity addition has supported revenue growth (compound annual growth of 12% over the 10 years through fiscal 2025) and market share in both the industrial and automotive segments.
 

Diverse revenue streams, supported by established relationship with clients: ARE&ML’s increasing market presence in the domestic battery segment is a result of its diversified presence across the automotive and industrial segments. The company has a diversified presence in four-wheelers and two-wheelers in the automotive segment, apart from home uninterruptible power supply (UPS) and other battery segments as well as in exports, with limited dependence on any single customer for revenue. The diversified presence renders its business risk profile less vulnerable to downturns in the domestic automotive and industrial sectors, and sub-segments within this sectors.
 

Strong financial risk profile: The financial risk profile is supported by modest debt, sizeable networth of Rs.6819 crore as on March 31, 2025, and healthy cash generating ability, translating into healthy return on capital employed (RoCE; 16.1% in fiscal 2025) and robust debt protection metrics. Despite high capex intensity in the past, ARE&ML has not relied much on debt, leading to limited debt and comfortable gearing of 0.02 time as on March 31, 2025.

 

The expansion at ARACT is estimated at Rs 9,500 crore, to be undertaken in phases over 8-10 years. ARE&ML proposes to invest Rs 60-70 crore in Phase II of the lead recycling facility at ARCSPL, and ~Rs 2,000 crore through ARACT over the next 2.0-2.5 years (also includes the recently approved Battery Energy Storage system(BESS) capex of Rs.270-280 crore), while its routine annual capex is expected at Rs 350-400 crore. ARE&ML will continue to support ARACT financially for Phase-I of the project, with board approved  investment of upto Rs.2000 crore towards the capex of the ongoing Li-ion Giga factory post which ARE&ML plans to enable debt financing at ARACT, with details on the debt quantum to be finalized. The current investment status as of December 31, 2025, stands at Rs.1400 crore, with additional investments of Rs.600 crore planned in Q4FY26 and FY27. Moderate debt addition is expected from fiscal 2027 on ARACT’s books. However, despite availment of debt, ARE&ML’s financial risk profile is expected to remain strong due to healthy cash generating ability and sizeable estimated net worth of over Rs.7000 crore as on 31st March 2026. Debt metrics too will remain at comfortable levels.

Key Rating Drivers - Weaknesses

Logistical disadvantages arising from geographical concentration in operations: ARE&ML operates from two locations in Andhra Pradesh (Tirupati and Chittoor), while demand is spread across the country, thereby restricting distribution logistics. The concentration of operations in a single state exposes the company to risks relating to natural calamities in the region. However, ARE&ML’s closely linked facilities offer benefits in the form of economies of scale. The plants are completely integrated with all critical components, including plastic battery cases which are sourced in-house. The company operates two assembly facilities in Andhra Pradesh: Tirupathi (telecom packs) and Divitapalli (mobility and EV packs).

 

The Andhra Pradesh Pollution Control Board (APPCB) issued closure orders in April 2021 for ARE&ML’s lead acid battery plants at Tirupati and Chittoor, citing allegations relating to non-compliance with environmental regulations. However, the High Court of Andhra Pradesh has continued to grant interim suspensions of the APPCB closure orders. While there have been no significant production disruptions in the past three fiscals, any adverse ruling could impact ARE&ML’s production and will be monitorable. The location of both plants in the same state thus exposes ARE&ML to possible legal risks.

 

Exposure to intense competition: The telecom sector has been undergoing a transformation, driven by telecom providers' shift towards lithium-ion (Li-ion) batteries for new tower installations, owing to their higher energy density and longer lifespan. This transition has led to a decline in demand for lead-acid batteries in telecom applications, with operators continuing to push vendors for price reductions. In response, ARE&ML has proactively adapted by commencing production of Energy Storage Batteries (ESS) under its New Energy Business (NEB) division and has successfully started supplying these batteries to major telecom tower players, with volumes steadily increasing. This strategic move has enabled ARE&ML to maintain its strong market share in the industrial battery segment. Competition is also intensifying in the automotive aftermarket battery segment with small and mid-sized players (hitherto operating only in the industrial segment and now increasing focus on the automotive segment) offering products at competitive prices. During periods of subdued end-market demand, the increase in lead prices cannot be fully transferred to end customers, especially in the aftermarket segment. Still, ARE&ML due to their diversified revenue streams and product quality has performed better than its peers.

 

Project risk related to entry into Li-ion cell and battery pack business: The new capacity coming up in ARACT is not likely to face material demand risk, with steady offtake expected from larger original equipment manufacturers (OEMs) as part of their green energy strategy despite operational challenges such as inadequate charging infrastructure, reliance on imported components and parts, and high prices of EVs. During August 2024, ARE&ML signed a Memorandum of Understanding (MoU) with Piaggio Vehicles Pvt Ltd (PVPL; ‘Crisil A/Positive/Crisil A1’) and Ather Energy Pvt Ltd for development and supply of lithium ferro phosphate (LFP) and battery packs for their upcoming vehicle offerings. ARE&ML is also in discussion with a few other EV technology players and will collaborate with them over the medium term in line with their EV strategy.

 

Although investments in ARACT will be sizeable over Rs 9,500 crore towards setting up a Li-ion battery plant and battery storage facility, the same will be well phased out over 8-10 years. ARACT has also commenced sale of energy storage system (ESS) solutions and EV battery packs, which will help absorb initial gestational losses from the Li-ion battery plant. Besides, ARE&ML has implemented various large capex programmes in the past.

 

ARACT has completed Phase 1 of its assembly pack plant at Divitipally, with a 1.5 GWH capacity and the Cell Qualification Plant and E-positive labs, which will support customer testing and validation are in final stages of completion and are expected to start operations from the first quarter of fiscal 2027 onwards.

 

There has also been an increase in demand for EVs, especially in the two-wheeler and passenger car segments, which will gradually impact demand for ICE vehicles, and hence, demand for traditional automotive batteries. ARE&ML has invested in InoBat AS, a European group, which is focused on battery technology for EVs. The technical tie-ups will aid ARE&ML in getting access to cell technology IP, support in establishing gigafactory facilities conforming to the latest generation process technologies, integration with global supply chain network for critical battery materials, and customer technical support for solution deployment. ARE&ML’s ability to bring in successful products and technology, and garner customers for these batteries, where technology is still evolving, will remain monitorable.

 

Further ARE&ML has obtained board approval for a capex plans of  Rs.270-280 crore in a Battery Energy Storage System (BESS) project, scheduled for completion in fiscal 2027. The project aims to achieve a 5 GWH capacity and is expected to generate revenue starting from fiscal 2028. With growing demand for BESS anticipated from the renewable energy and commercial & industrial sectors, ARE&ML is well-positioned to capitalize on this trend. Supported by ARE&ML’s established relationships with key industry players, including EPC companies, solar park developers, and project developers, as well as its potential for exports.

Liquidity Strong

ARE&ML will maintain strong liquidity, driven by expected annual cash accrual of Rs 1,300-1,400 crore over the medium term and liquid surplus of over Rs 331 crore as of September 30, 2025. Besides, the company’s working capital lines of Rs 370 crore are sparingly utilized at 13% over 12 month ended January 2026 which is also expected to further cushion the liquidity. ARE&ML has signed a MoU with the government of Telangana for setting up the state’s first Li-ion battery making giga factory and proposes to invest Rs 9,500 crore over the next 8-10 years in a phased manner for the same. The current plan is to  have have ultimate capacity up to 16 GWh and investment of up to Rs 2,000 crore is proposed to be made over the next 2.0-2.5 years through optimal mix of debt and equity.

ESG Profile of ARE&ML

Crisil Ratings believes ARE&ML’s Environment, Social and Governance (ESG) profile supports the company’s already strong credit risk profile.

 

The battery sector has a significant impact on the environment because of the high greenhouse gas (GHG) emissions of its core operations as well as products. The sector also has a significant social impact because of its large workforce across its own operations and value chain partners and focus on innovation and product development.

 

ESG highlights:

• ARE&ML’s plans to achieve Net Zero emissions by 2030, targeting a 30% absolute reduction in Scope 1 & 2 emissions by FY 2026-27 (baseline: FY 2021-22), against this it has achieved a 19% reduction in absolute emissions and a 43% reduction in emission intensity.
• Further, ARE&ML has also achieved 12x water positivity during the year through a combination of Zero Liquid Discharge (ZLD) systems, rainwater harvesting reservoirs, and community water restoration efforts such as checking dams and ponds resulted in achieving a 28% reduction in absolute water consumption and a 60% reduction in water intensity, compared to the FY 2021-22 baseline.
• ARE&ML’s share of female workforce stood at (~9% female employees and ~15% female workers) in fiscal 2025. Further, it reported zero fatalities in fiscal 2025.
• ARE&ML governance structure is characterized by ~50% of its board comprising of independent directors, 17%-woman board directors, adequate attendance of independence directors in the board and committee meetings, and extensive financial disclosures. 
   

There is growing importance of ESG among investors and lenders. ARE&ML’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of shareholding by foreign investors/companies

Outlook Stable

Crisil believes that ARE&ML will continue to benefit from its established market position in the automotive and industrial battery segment, its improving revenue and customer diversity, and adequate operating profitability. Strong annual cash generation, and prudent funding of its sizeable capital expenditure (capex), which is well phased out, will ensure sustenance of strong debt metrics over the medium term.

Rating sensitivity factors

Upward factors

• Strong revenue growth and sustenance of operating profitability at above 15% resulting in better-than-anticipated cash generation
• Completion of Phase 1 of sizeable capex (Li-ion battery plant) without material time and cost overruns, and timely stabilisation of operations thereafter
• Sustenance of strong financial risk profile and comfortable debt metrics

 

Downward factors

• Lower-than-expected revenue growth due to delays in ramping-up capacity utilisation at new production facilities, and operating profitability sustaining below 10%
• Larger-than-expected, debt-funded capex or acquisition or material time and cost overruns in ongoing projects adversely affecting key debt metrics on sustained basis
• Adverse legal ruling impacting operations materially

About the Company

ARE&ML, promoted by Mr Ramachandra Galla in 1985, initially manufactured standby valve-regulated lead acid (VRLA) batteries at its unit at Karakambadi in Tirupati, AP. As per the latest shareholding data as of Dec 2025, holding company Amara Raja Enterprises Private Limited(AREPL; Crisil A+/Stable/A1) formerly known as RNgalla Family Pvt Ltd is the single largest owner and promoter of ARE&ML with 32.86% stake, followed by foreign portfolio investors (17.4%), Life Insurance Corporation of India (9.82%), mutual funds (7.05%) with the balance held by public and others as on December 2025.

 

ARE&ML reported net profit of Rs 581 crore on operating income of Rs 10278 crore in the first nine months of fiscal 2026, compared with net profit of Rs 783 crore on operating income of Rs 9,786 crore in the corresponding period of fiscal 2025.

Key Financial Indicators

Particulars	Unit	2025	2024
Operating income	Rs crore	12858	11,717
Profit after tax (PAT)*	Rs crore	858	847
PAT margin	%	6.7	7.2
Adjusted debt/adjusted net worth	Times	0.02	0.01
Interest coverage	Times	39	51

*Adjusted for Goodwill amortization

Any other information: Not applicable