Thread by @myfinology

Why we liked Amara Raja Batteries but never recommended it?

✅ India's 2nd largest mfg. of lead-acid batteries, mostly used in vehicles; but...

❌ No usage in electric 2w & 3w and rising env. concerns regarding lead batteries

More reasons in this thread ⤵️

✅ With $1Bn capex, expanding to Li-ion batteries that are preferred for EVs

❌ Li-ion batteries require much more techno-chemical expertise and new ways of mfg., unclear if Amara can imbibe

#ElectricVehicles #vehicles

❌ Li-ion batteries amount to > 50% of the cost of EVs, so auto cos. may produce it in-house (Tata, M&M, Ola already exploring)

#business

❌ Amara needs to take on new debt to invest heavily on Li-ion R&D fast, might take a hit on its share price

#stocks #Investment

❌ Much more renewable and cheaper option Na-ion is being explored. RIL, Maruti, etc entering this space is a big threat

#reliance

Amara Raja's report card by Recipe:

❓ Quality business model
❌ Robust financials
✅ Ethical management
❓ Strong growth prospects
✅ Reasonable valuations
❌ Adequate safety net

It remains to be seen how fast the industry transitions towards renewable alternatives and whether Amara is able to adapt to this change faster than deep pockets like RIL

Amara Raja scored 33% in Recipe's scorecard. But we require a minimum of 90-100% to recommend a stock.

View our recommendations now at Recipe.finology.in/stock-and-mutu…