- Management indicated strong demand for batteries from the growing automobile industry and pickup in industrial activities. - The company plans capacity expansions to meet increasing demand and expects to clock 15% CAGR in industrial batteries over the next few years. - While demand from telecom batteries has contracted, the company expects 6-7% annual growth and is optimistic about long-term replacement demand.

1. Management Meet Note | Auto Ancillary
July 7, 2010
Amara Raja Batteries NOT RATED
NOT RATED
CMP Rs189
Inching up Target Price -
Key Takeaways Investment Period -
Management has indicated strong demand for batteries aided by healthy Stock Info
growth of the automobile industry and pick up in industrial activities. Sector Auto Ancillary
High growth in the automobile sector will support around 14% CAGR in the Market Cap (Rs cr) 1,611
OEM segment over FY2010-12E, while large base of auto volume would help Beta 1.02
the battery industry sustain annual growth of around 8-9% in replacement 52 Week High / Low 189/73
segment. The company is operating at more than 95% utilisation levels in Avg. Daily Volume 90,616
auto battery segment.
Face Value (Rs) 2
The company is increasing supply to the high-margin replacement segment BSE Sensex 17,471
marginally shifting volumes from the OEM segment in its bid to improve Nifty 5,241
margins.
Reuters Code AMAR.BO
To meet the increasing demand in the automobile battery segment, the company Bloomberg Code AMRJ@IN
has announced capex of around Rs150cr in FY2011, of which around Rs90cr
would be incurred towards capacity expansion and the balance Rs60cr would Shareholding Pattern (%)
be utilised for maintenance capex. Promoters 52.1
The company plans to increase its two-wheeler battery capacity from 1.8mn MF / Banks / Indian FIIs 13.9
to 3.6mn by December 2010, with around 0.6mn capacity getting operational FII / NRIs / OCBs 15.9
from June 2010; it also plans to increase capacity of its battery unit that caters Indian Public / Others 18.1
to the four-wheeler segment from 4.2mn to 5.1mn by December 2010.
Abs. (%) 3m 1yr 3yr
The company proposes to increase its market share in the OEM segment from
Sensex (2.8) 23.3 16.8
27% to around 30% in FY2011 and to over 50% over the next five years.
Amara Raja 10.0 122.7 169.9
Management expects to clock a CAGR of 15% in industrial batteries (excluding
telecom), over the next couple of years.
Key Financials
Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
Net Sales 1,318 1,465 1,790 2,097
% chg 21.6 11.2 22.2 17.1
Profit
Net Profit 80.5 159.1 168.3 205.5
% chg (14.7) 97.7 5.8 22.1
OPM (%) 13.5 20.8 14.8 15.2
EPS (Rs) 9.4 18.6 19.7 24.1
P/E (x) 20.0 10.1 9.6 7.8
Vaishali Jajoo
RoE (%) 19.8 29.4 24.3 23.4
+91 22 4040 3800 Ext: 344
RoCE (%) 13.0 21.1 31.8 30.8 Email: vaishali.jajoo@angeltrade.com
P/BV 4.0 3.0 2.3 1.8
Yaresh Kothari
Kothari
EV/Sales (x) 1.4 1.2 1.0 0.9
+91 22 4040 3800 Ext: 313
EV/EBITDA (x) 10.3 6.0 6.9 5.7 Email:yareshb.kothari@angeltrade.com
Source: Company, Angel Research
Please refer to important disclosures at the end of this report

2. Amara Raja Batteries | Management Meet Note
Key Takeaways
The company has seen contraction in demand from the telecom batteries segment
and estimates it to register annual growth of around 6-7% (has posted more than
40% CAGR in the last three years) over the next couple of years. Nonetheless,
the company is sanguine about the telecom batteries replacement demand in the
long run. Further, the new 3G spectrum licenses would also help the industry
register modest CAGR of around 7% over the next few years.
The company does not expect substantial volatility in the lead prices going forward
on account of high inventory levels at the LME. It aims to maintain its EBITDA
margins at around 14-15% over the next couple of years.
The company plans to enter the tubular batteries segment in the next couple of
years. Tubular batteries are mainly used in material handling equipment.
Outlook and Valuation
On the valuation front, the stock is trading at 9.6x and 7.8x FY2011E and FY2012E
EPS, which is at a significant 47% discount to industry leader, Exide Industries. The gap
is due to Exide's leadership position and its less dependence on the telecom battery
segment. However, Amara Raja products have exhibited strong performance and
continuously increased market share through innovative marketing strategies. Further,
on the back of improved fundamentals, the company’s return ratios are expected to
increase as compared to its historical levels. Thus, going ahead, Amara Raja's valuation
multiple is expected to expand on improved growth and earnings visibility, and the
valuation gap with Exide would reduce to reasonable levels of around 30-35%.
Currently,
Currently, we do not have a Rating on the stock.
Exhibit 1: AMRL - One-year forward P/E chart
16
14
12
10
8
6
4
2
0
Apr-04
Jun-04
Aug-04
Feb-05
Apr-05
Jun-05
Aug-05
Feb-06
Apr-06
Jun-06
Aug-06
Feb-07
Apr-07
Jun-07
Aug-07
Feb-08
Apr-08
Jun-08
Aug-08
Feb-09
Apr-09
Jun-09
Aug-09
Feb-10
Apr-10
Jun-10
Oct-04
Dec-04
Oct-05
Dec-05
Oct-06
Dec-06
Oct-07
Dec-07
Oct-08
Dec-08
Oct-09
Dec-09
1 yr forward P/E 3 year average
Source: Company, Angel Research
July 7, 2010 2

3. July 7, 2010
(%)
0
0.0
5.0
10.0
15.0
20.0
25.0
(90)
(80)
(70)
(60)
(50)
(40)
(30)
(20)
(10)
Apr-04 Apr-04
Jun-04 Jun-04
Aug-04 Aug-04
Oct-04 Oct-04
Dec-04 Dec-04
Feb-05 Feb-05
Apr-05 Apr-05
Jun-05 Jun-05
Aug-05 Aug-05
Oct-05 Oct-05
Dec-05 Dec-05
Source: Company, Angel Research
Feb-06 Feb-06
Apr-06 Apr-06
Jun-06 Jun-06
Aug-06 Aug-06
AMRL
Oct-06 Oct-06
Dec-06 Dec-06
prem./ disc. to Exide
Feb-07 Feb-07
Apr-07 Apr-07
Jun-07 Jun-07
Aug-07 Aug-07
Oct-07 Oct-07
Exhibit 3: AMRL - Premium/discount to Exide
Dec-07 Dec-07
Feb-08 Feb-08
Apr-08 Apr-08
Jun-08 Jun-08
Aug-08 Aug-08
Exhibit 2: AMRL, Exide - One-year forward P/E chart
Exide Adj. for Insurance
Oct-08 Oct-08
3 year average prem. / disc. Dec-08 Dec-08
Feb-09 Feb-09
Apr-09 Apr-09
Source: Company, Angel Research; Note: Exide P/E adjusted for Insurance business
Jun-09 Jun-09
Aug-09 Aug-09
Oct-09 Oct-09
Dec-09 Dec-09
Feb-10 Feb-10
Apr-10 Apr-10
Jun-10 Jun-10
3
Amara Raja Batteries | Management Meet Note

4. Amara Raja Batteries | Management Meet Note
Company Background
Amara Raja Batteries is India's second largest manufacturer of valve regulated lead
acid (VRLA) batteries for both industrial and automotive applications. It is a joint venture
between the Galla family and Johnson Controls (NYSE: JCI), with each holding 26%
stake in the venture. Based in Andhra Pradesh, with a fully integrated manufacturing
unit for its batteries at Tirupati, Amara Raja has been steadily gaining market share
across both industrial and automobile segments. ARBL operates in the automotive
and industrial segments with both the businesses contributing equally to the company's
financials.
Industrial battery business
ARBL's industrial battery product portfolio comprises batteries with capacities ranging
from 4.5 ampere per hour (Ah) to 5,000Ah and it caters to the Department of
Telecommunication, Indian Railways, power generation stations and UPS back-up
systems. The company has developed a niche for itself in the telecom batteries space
and is the preferred battery supplier to major cellular service providers in the country.
In the telecom sector, the batteries support switches and networks, Indian Railways
uses these batteries to power air-conditioning in AC coaches, and the batteries support
the transmission and distribution networks of power stations. The UPS batteries support
IT and ITeS operations and form a part of UPS systems to regulate power supply to
critical equipment during voltage fluctuations. Small VRLA batteries find application in
small UPS and emergency lamps.
Exhibit 4: Industrial battery brands
Brand Application
POWER STACK Telecom exchanges, power stations, oil and gas, Indian
Railways and other industrial applications
QUANTA (UPS Segment) Indian Railways, IT and ITeS companies, government
agencies and companies in the BFSI segment
Source: Company, Angel Research
The telecom batteries contribute 60% of the industrial segment sales, while the rest is
derived from Indian Railways, UPS, power utilities and others. As on March 2010,
ARBL had 27% market share in the industrial battery segment.
Automotive battery business
In the automotive battery space, ARBL operates in both the OEM and replacement
segments. ARBL has original equipment contracts with most of the four-wheeler makers
including prestigious clients like Maruti, Hyundai, Ashok Leyland, Tata Motors, M&M,
TAFE and others. The company has a market share of 27% in the auto OEM space.
The company is very active in the replacement segment and has consistently increased
its market share from 20% in FY2007 to 28% in FY2010.
July 7, 2010 4

5. Amara Raja Batteries | Management Meet Note
Exhibit 5: Automobile battery brands
Brand Application
PRO, FLO, GO, BLACK Passenger cars
HI-WAY Commercial vehicles
HARVEST Tractors
SHIELD Inverters
FRESH Passenger/MUV
PRO BIKE RIDER Two wheelers
Source: Company, Angel Research
Exhibit 6: Market share trend across segments
30 28 28 28 28
26 27 27 27 27
26
25
25
20
20
(%)
15
10
5
0
FY2007 FY2008 FY2009 FY2010
Automotive OEM Organised Auto aftermarket Industrial
Source: Company, Angel Research
The company has a tie up with Maruti Suzuki and has launched a co-branded
replacement battery under the Amaron MGB brand, which will be available across
Maruti network of 3,000 plus authorised outlets.
ARBL has steadily expanded its retail network, which now comprises more than 200
franchisees and around 19,000 retailers and has also strengthened the presence
through 700 PowerZone outlets in semi-urban and rural locations. A wider retail network
along with strategic alliance with Maruti Suzuki would assist in better penetration of
the replacement market.
July 7, 2010 5

6. Amara Raja Batteries
Disclaimer
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Angel Securities Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment
decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are
those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading
volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources
believed to be true, and is for general guidance only. Angel Securities Limited has not independently verified all the information contained
within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents
or data contained within this document. While Angel Securities Limited endeavours to update on a reasonable basis the information
discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed
or passed on, directly or indirectly.
Angel Securities Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other
advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.
Neither Angel Securities Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section).
Disclosure of Interest Statement Amara Raja Batteries
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock Yes
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to -15%) Sell (< -15%)

7. Amara Raja Batteries
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel : (022) 3952 4568 / 4040 3800
Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG , Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angeltrade.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angeltrade.com
Paresh Jain Metals & Mining pareshn.jain@angeltrade.com
Amit Rane Banking amitn.rane@angeltrade.com
Jai Sharda Mid-cap jai.sharda@angeltrade.com
Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angeltrade.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
Aniruddha Mate Research Associate (Infra, Real Estate) aniruddha.mate@angeltrade.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angeltrade.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angeltrade.com
Vibha Salvi Research Associate (IT, Telecom) vibhas.salvi@angeltrade.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angeltrade.com
Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angeltrade.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angeltrade.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angeltrade.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angeltrade.com
Institutional Sales Team:
Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angeltrade.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angeltrade.com
Nitesh Jalan Sr. Manager niteshk.jalan@angeltrade.com
Pranav Modi Sr. Manager pranavs.modi@angeltrade.com
Sandeep Jangir Sr. Manager sandeepp.jangir@angeltrade.com
Ganesh Iyer Sr. Manager ganeshb.Iyer@angeltrade.com
Jay Harsora Sr. Dealer jayr.harsora@angeltrade.com
Meenakshi Chavan Dealer meenakshis.chavan@angeltrade.com
Gaurang Tisani Dealer gaurangp.tisani@angeltrade.com
Production Team:
Bharathi Shetty Research Editor bharathi.shetty@angeltrade.com
Simran Kaur Research Editor simran.kaur@angeltrade.com
Bharat Patil Production bharat.patil@angeltrade.com
Dilip Patel Production dilipm.patel@angeltrade.com
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302