Earnings Call Transcript - XNSE:ARE&M 2026-11-03

Operator

Ladies and gentlemen, good day, and welcome to Amara Raja Energy and Mobility Ltd. Q2 FY27 earnings conference call, hosted by Avinvis. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mukesh Taraf from Aventus. Thank you, and over to you, sir.

Mukesh Taraf, Host

Hi. Good evening, everyone, and thank you for joining the Q2FI27 earnings conference call of Amaraja Energy and Mobility Limited. On behalf of the management, we have with us today Mr. Y. Dilibabu, chief financial officer, and Ms. Swazeta Rapati, the head for corporate finance. Now I would like to hand over the call to Mr. Dilibabu for his opening remarks. All to you, sir.

Y. Dilibabu, CFO

Yeah, hi. Good evening, everyone. Thanks for joining the call. This quarter ended September 30, 2026. We have achieved a revenue of around 4,108 crores on consolidated basis with about 94% of the revenue coming from lead acid business, which grew by around 18%. The new energy business grew by more than 30%, recording a revenue of around 232 crores. Our revenue growth has remained strong, driven by sustained volume momentum in both aftermarket and OEM segments. We continue to strengthen and deepen our market position in automotive and home energy sectors. OEM segments continue to retain the volume growth momentum of around 17% in four-wheeler and more than 30% in two-wheeler on a YOY basis. Domestic aftermarket volumes reflected a growth of around 6% in both four-wheeler and two-wheeler on a wire-away basis. Further, we also delivered growth of more than 50% in home energy business, both on tubular batteries and home UPS. The trading revenue in the current quarter moderated to 10% of the lead-acid battery revenue. On the international revenues, we have improved on a quarter-on-quarter basis, but on YOY basis, we do grew by around 20% owing to the volume drop in Middle East markets. We are expecting to recover these volumes in these markets in the subsequent quarters. Led asset telecom volumes witnessed a one-time spike during the quarter of more than 30% and lithium-ion telecom packs grew by around 15% on YOY basis. This one-off uptick in lead-acid volumes is due to delays in yearly lithium telecom pack volumes negotiations with the OEMs. During the quarter, on a combined basis, we continue to maintain a market share of over 60% and meanwhile UPS volumes sustain modest volume growth of around 8%. New energy business during the quarter continued to deliver robust performance, with revenues supported by increased demand for telecom pack volumes, which grew by around 15% during the quarter on a via-by basis. However, EV volumes faced some demand headwinds during the quarter, which is expected to recover in the coming months. Further, we are happy to share that our ePositive lab commenced operations in October 26. which will support the new energy business in its technology advancements. The board also approved our next phase of investment in prismatic cell giga factory and pack assembly capacity with a total capex outlay of around 2,320 crores, which is expected to be completed within next 30 months. The cell giga factory would be LFP-based with a capacity of around 5 gigahertz, which would initially cater to stationary applications and later on for mobility applications. The PAC capacity enhancement is done to cater to new PAC opportunities, which we are foreseeing for various storage and mobility applications. The margins during Q1 on standalone EBITDA is around 10.1%. The margins are stable on quarter-quarter basis, but we were impacted on wire-way basis. This is primarily due to elevated material cost and increased spending on our strategic initiatives, namely Emron Assist and the Factory of the Future. And also, a higher OEM mix contributed to the margin moderation to some extent. As communicated in our earlier calls, we have launched Emeron Assist during Q1FI27 in Hyderabad, a project which is focused on providing automotive services in B2C segment. Based on the pilot response and our future plans, Wood has approved setting up a wholly owned subsidiary under the brand name Emeron Assist for carrying out this business. We will be scaling up this project to new locations gradually over the near future. This business would be having some cash burn in the initial period, which also had some impact in the Q2 margins. Further, we also increased our spending on improving our manufacturing excellence by way of capacity enhancement in our existing automotive plans, which also added to the moderation of margins. Higher expenses on these strategic initiatives during the quarter led to margin moderation of around 1%. The other major aspect that led to the moderation in profitability is a significant increase in the procurement costs of alloys, sulfuric acid, and poly. We took price highs during Q1-F8-27 to offset these cost pressures. However, acid and poly have further increased during Q2. To absorb these costs, we again took a price increase of around 2% during Q2 FA27, which should help offset a portion of these cost pressures. Along with this Q2 price hike, till H1 of the current financial year, our cumulative price hike was around 5%. At a consolidated level, the margins were lowered by around 1.3% to 8.8% due to additional cost at our new energy business towards the product development and other fixed costs. pertaining to our Giga1 and Best Plans. On the capex outlay, during Fi27, we estimate to spend around 2200 crores towards various capex projects with major capex outlay in our new energy business, which is expected to be around 1600 crores. This 1600 crores includes the payment towards the earlier mentioned new cell and pack plants. Out of the planned 2,200 crores, we already spent 800 crores in the first half of FI27, and out of this 800 crores, 500 crores is spent towards new energy business. We can now move on to Q&A.

Operator

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Kapil Singh from Namura. Please go ahead.

Kapil Singh, Analyst — Nomura

Yeah, hi. Good evening, sir. Firstly, I just wanted to check on both the market growth that you mentioned in aftermarket 6%. That is in line with the industry. And, you know, it appears a little soft. So just pointing your color on that. And have you maintained market share in both two-wheeler and four-wheeler aftermarket? And also any pricing actions that you would have taken in Q3?

Y. Dilibabu, CFO

With respect to the pricing actions, as I mentioned, we already took a price hike of around 2% in Q2. Q3, we are still monitoring the current raw material prices, how it is moving, and especially the acid and poly what we have mentioned, right? So we are still monitoring as and when we feel that based on the competition pressures and we feel there is a need for further price hike, we may definitely go for an additional hike in the current quarter. And with respect to the aftermarket, yeah, I think both on two-wheeler and four-wheeler, we have grown by around 6-7%. And we feel it is more or less in like with the industry standard. We don't find there is any specific reason why it is on a lower side. Even historically also, if you see, it is a general market trend.

Speaker 6

Yeah, Kapil, one point just to add on to what Sajitha said. I think, in fact, we would have definitely gained market share as far as the two-wheeler market is concerned, and we have definitely maintained our market share position of close to 35% in the aftermarket in the four-wheeler. And two-wheeler, we have clearly established our leadership presence, and then we have definitely gained market share, because two-wheeler growth rate is marginally higher than what we have grown in four-wheeler. That way, there is no problem with respect to maintaining or even enhancing our market share.

Kapil Singh, Analyst — Nomura

Okay. Okay, great, sir. And sir, the second question was on the best business. Could you give us an idea in terms of utilization for that business? What kind of utilization to build in for FY28 or FY29? Should we expect 100 companies can achieve 100% utilization by FY29? And also on the competitive intensity, what are you expecting there? You know, what will be, you know, the competitive intensity in that business, given that some of the companies manufacturing solar cells, et cetera, and others are also looking to get into this business.

Speaker 6

Yeah, thanks. As far as best business is concerned, we are expecting to start. Right now, the acceptance tests on the mission, they have been completed. We are expected to commence the trial runs in the month of December, and most likely we may commence our operations in January or February. So, this capacity ramp up as we are seeing demand signals not only in India but also in some of the abroad markets, if we are able to comply with some of the conditions over there, I think we see there is a potential to use at least, if I were to look at my first phase capacity of 5 gigawatt hours, there is a possibility that 30% of the capacity I might be able to cater to some of the export markets as well. So, the demand per se is not a constraint because, as you know, the banking facilities that are currently operational in some of the states will slowly move into a compulsory storage that needs to be created at the grid level. And in addition, we are seeing a reasonable amount of green shoots on the demand on the commercial and industrial scale also. So, I don't foresee a challenge with respect to utilization of the plant, but it's a question of ramping up and getting the solutions in place is something that we need to accomplish in the next two to three months. So, from a demand, if I were to project a demand, obviously, our expectation at this point of time is we may be able to use the entire 5 gigawatt capacity fully by FI29. In FI28, maybe it could be 50 to 60. 60% of that capacity is our estimate at this point of time. But as we keep progressing into it, I will keep you posted if there is any change in those assumptions.

Kapil Singh, Analyst — Nomura

Also on the competitive intensity, sir?

Speaker 6

So as I mentioned, from a demand point of view, since we have various pockets where the demand... I don't see the existing capacities that are coming up in the country will force, will be a serious challenge because the demand is going to far outweigh the supply. So that way I don't think competitive intensity is going to be, there will not be any margin pressure per se. See, because, you know, still 70% is going to be the sell, which is again going to be an import. That way, I don't see demand being less and there increasing the competitive intensity side. I agree that there are players who have already announced some of these capacities, but I think there is enough demand to the capacities that are currently getting created.

Kapil Singh, Analyst — Nomura

Okay. Thank you.

Speaker 6

Furthermore, I feel as we move ahead, furthermore, since we are trying to also backward integrate into cell manufacturing also, that should actually help us, players like us, to play the long game. And I think this business will have a very sustained growth in the coming periods.

Kapil Singh, Analyst — Nomura

Okay. Great, sir. Thank you. Thanks a lot. Best wishes for this new business. I'll come back in the queue.

Operator

Thank you. A reminder for all the participants, in order to ask a question, you may press star and 1. The next question comes from the line of Krupa Shankar from Avendus. Please go ahead.

Krupa Shankar, Analyst — Avendus

Thank you for the opportunity. So, my first question is slightly on a longer-term basis. Given that, you know, you have seen a fairly robust aftermarket presence, and this business is expected to continue over the period of what would be a structural growth rate one can assume over the next five to six years on the lead asset as a whole, and given the extent of transition, what you're seeing in specific markets, like, for example, from telecom to. And some of the other segments also getting on the lithium-ion bandwagon, including UPS. So, how do you see the aftermarket growth trend across automotive and the, if at all, private extent, the UPS business? How do you think that will shape up over the medium top?

Speaker 6

See, as segment by segment, if we were to look at it, Four-wheeler and two-wheeler aftermarket, there is no reason for me to believe that the growth rates are going to be anything less than what we are currently growing, roughly about 6% to 7% on the aftermarket business. Two-wheeler, even now, is growing at a slightly higher rate. I would imagine, considering the EV penetration that we are also seeing in the scooter segment, we may see the growth in the aftermarket, even on the two-wheeler, Maybe around 8% to 9% if you were to, because you are asking me to forecast it for next five years or so, because there is also headwinds that we are seeing. It might come in the near future in the OEM side also. Taking all these things into account, I think the 6% to 8% kind of a growth number on the aftermarket business on both four-wheeler and two-wheeler is very much there on cards. And what is more important when I look at the lead acid side is the home UPS application and the lead acid battery requirement on the home as such. Even there, there will be some level of transition to the lithium as we move into. Thank you. Now, we are both keeping in view of the solar possibilities as well as the storage possibility. Now, as far as silicon is concerned, clearly the migration to lithium is almost complete. Maybe we will see some demand for lead-acid in the next couple of years, but thereafter, I think it will be a pure lithium play. As far as UPS is concerned, on the data center side, yes, there is a reasonably good penetration of lithium that's happening, but there are still certain lead-acid technologies which are still relevant even in the data center application, but considering all other applications of UPS, I feel... At least in the medium term. Now, these are all the domestic scenarios that I have talked about, but international business is something that we have built a lot of capabilities around. We are facing headwinds around it, but there is a very good chance. Even beyond 15%, once the current uncertainty is around the geopolitics and the supply chain challenges that we are facing, if once that gets stabilized, I think I see that the international business has a reasonably good scope to grow. So, putting all these things together, the lead acid battery business as a whole volume growth or revenue growth, whichever way you want to put it, anywhere around 8 to 10% cannot be ruled out. It is still going great, and I don't think... The OEMC is also another segment, obviously. So, put all these things together, there is no reason for us to believe that we will not be growing anything less than 10% in the medium term.

Krupa Shankar, Analyst — Avendus

Got it, sir. Very clear. The second question was on the recycling plant. And I just wanted to get a sense around, you know, while the inflationary environment, the benefits of that plant on the gross margins is not reflecting, would you be able to quantify what is the extent of gross margin expansion one can expect on a normalized basis over the next two years or so?

Speaker 6

See, currently, the reason, the current environment is clearly not favoring the recycling business of lead, particularly in India, because some of the import of lead scrap that used to happen has kind of stopped because of the recent geopolitical issues. That's where the local RML prices have kind of sharply increased, and then that is making the local scrap prices jump up, and then which is where... Today, the recyclers are not finding the raw material at the optimum cost. So that's the reason why it is not getting reflected in our grass margin at this point of time. But as mentioned in the earlier call, Scrap batteries, the kind of investments what we have made, even by 3% to 4% than what we get from the other smelters. I think it should reflect in my gross margin roughly around 0.3% to 0.4% kind of an improvement in my material cost.

Krupa Shankar, Analyst — Avendus

Got it, sir. Those are my questions. I'll get back in the queue. Thank you.

Operator

Thank you. The next question comes from the line of Rahul Kumar from Nuava Melks Management. Please go ahead.

Rahul Kumar, Analyst — Nuava Melks Management

Yeah, thank you for the opportunity, sir. My first question is on the EBITDA margins. I wanted to know what would be the sustainable levels over the coming quarters. Over the FY24 and FY26, it was at around 11% to 14% range, and currently we are at 10%. So how do we see the margins going ahead?

Speaker 6

Yeah, so as mentioned by Sajita in the opening remarks, there is clearly a 1% number that is attributable to some of these revenue expenditures that we are incurring towards the future. So we are already operating at an EBITDA margin of close to 11% if I adjust these two numbers. If I look at my raw material prices, which currently that I am not able to pass on, and also if I were to add the recycling piece to it, clearly there is a possibility of improving the margins by at least another one and a half percent from here, provided I am able to get my international business back online, because a 20 percent degrowth on international business, which is a very good margin business for me, is really hurting the overall bottom line. So, if I get these costs under control, and even if I were to pass on part of it to the aftermarket, I still have a large B2B business where the price negotiations will keep happening. So, if I can get these under control, I think there is clearly another 1.5% or so as a margin improvement possibility. So with that, once I have this, the capacity throughput initiatives are concluded by end of this financial year, and also if I get back my international business momentum, and also some of these highly inflated acid prices, poly prices, sulfur prices, then I think there is a very clear possibility of improving the margin by another 2% from our, from my current levels. Our optimistic scenario is by improving it by another 2.5% from the current level. Okay.

Rahul Kumar, Analyst — Nuava Melks Management

Thank you for the answer. My second question is on the lithium sales. Have we started supplies of sample NMC sales to the potential customers? And in future, when will LSD sample sales supplies start?

Speaker 6

As far as NMC cells are concerned, we have done in our CQP, close to 2000 cells have been done as B samples. They are currently going through our own internal testing. And once those test results are to our satisfaction, then I think we'll be handing over those samples to the OEMs. So, Potentially, this could happen in the next couple of months. We will be giving it to the possible OEMs who will be seeking those. And as far as the LFP is concerned, they are still under development. And once we complete the A sample level development, I think it will take some time, but I will not be able to give you a very clear timeline as to when we will give the LFP cells. But the storage-related cells are something that we are confident of completing it by the time we start the second gigafactory that we have now got the acceptance from the board. So once they are ready, I'll update you the detailed timelines, but giving a specific timeline at this point of time will not be possible.

Rahul Kumar, Analyst — Nuava Melks Management

Oh, okay. My last question is on the best part. Could you please indicate what would be the revenue and margin potential for this segment for FI28?

Speaker 6

See, if we look at per kilowatt hour pricing anywhere between $90 to $100. Then if I am able to fully use the capacity of 5 GWh, you know the map, it should be very sizable revenue. But from a margin point of view, when I look at it, it might, because it's an assembly business, as mentioned in the earlier call, it might mimic or pack business, which could be anywhere around 6-7% at the operating level. But considering the low capex intensity of these assembly businesses, It should be ROC-attractive as far as these two businesses are concerned. Okay.

Rahul Kumar, Analyst — Nuava Melks Management

Thank you. That's all from my time. Thank you for answering my questions.

Operator

Thank you. A reminder for all the participants, in order to ask a question, you may press star and 1. The next question comes from the line of Kapil Singh from Namura. Please go ahead.

Kapil Singh, Analyst — Nomura

Thanks for the opportunity again, sir. Just one follow-up. When we compare the, you know, best packs that are imported from China versus the local manufacturing, where are we in terms of, you know, cost?

Speaker 6

At the container level, because 70% is again imported cells, we will clearly have that cost disadvantage of around 10 to 15% for sure. I think that's where the initiatives like ALBM and other protection measures from the government is expected. So that should actually help this domestic supply chain. But point is, from China, it is more easier to import cells and then do the entire, the other components locally. So that way, it should not be such a big cost disadvantage when I look at only cells per se. So, but we will still have, considering their scale on all this, I think there could still be a price disadvantage of 10 to 15 percent, I think which can be mitigated with some level of government support.

Kapil Singh, Analyst — Nomura

Okay. Okay. Understood, sir. And sir, is there a plan where we can use the existing facilities, for example, for telecom or for two-wheelers, for the lead asset business? At some point in future, there is a possibility that some of these may start getting underutilized. So what is the plan over there? Any alternative options we have for this?

Speaker 6

See, I don't see the four-wheeler, two-wheeler, and the tubular, or even MVRLF facilities getting underutilized at least for next five to six years, very clearly, because... Today, I am actually running almost at 95% to 100% capacity on my two-wheeler, and you know IC engine two-wheelers, I am not going anywhere. So, that's the reason, instead of putting up a new plant, we are spending this money to see how well we can improve the throughput from the existing plants. And on the four-wheeler, with the current lower demand from my international business, I am already using it close to 80% to 85%. So, that way, there is very clear headroom available for me on the four-wheeler. So, I don't see there is any possibility of complete underutilization of any of these plants. At the minimum, I mean, if I were to take a very, very conservative scenario, six to seven years is something that we will not see any kind of reduction in the capacity utilization of lead acid. Maybe we may have to de-bottleneck some of the lines and there is possibility of adding one or two lines in four-wheeler. But that I don't see a scenario. Okay, now, after seven years, what can those facilities be used? But from a manufacturing lines point of view, Thank you.

Kapil Singh, Analyst — Nomura

And sir, just as an example, for the telecom lead acid facilities, what have we done with those facilities? Have we been able to repurpose those?

Speaker 6

Yeah, as you know, that's one of the first facilities that we have put up. Still, we are running about 30 million AH per month capacity of lead acid in those lines. So, there are certain We have the LVRLA is currently being sold. As you know, even in the current quarter, we had a spike in this one, but that facility is again getting repurposed because it's one of the smallest facilities that we had. That will be used for, let's say, for expanding any of our other smaller batteries that we produce in other plants. Like, for example, we do our Thank you very much. This is the first stage of producing lead-ass batteries. of usage of that space.

Kapil Singh, Analyst — Nomura

Thank you. Thank you so much.

Operator

Thank you. The next question comes from the line of Meet Doshi from Professional Capital. Please go ahead.

Meet Doshi, Analyst — Professional Capital

Hello, thank you for giving me the opportunity. Sir, it is good that we are investing a huge amount in the CapEx cycle. So my question is related to like, we are constantly in the downtrend in terms of ROE and ROCE due to the CapEx investment. So I want to know that where we are going to stop our new investment in future, like let's say 2027 or when, and from when we are going to again restart our journey towards upward side in terms of ROE and ROC, and how much we are expecting with full utilization of all our equipment facilities.

Speaker 6

Yeah, from an ROCE point of view, you are right. There is a downward trajectory, particularly by the fact that we have invested close to 2,100 crores so far in the subsidiary and also about 700 crores on our lithium recycling facilities. See, the improvement in the ROCE at this point of time will at least take another two to three years kind of a time frame once we see the cell capacity ramp up happening because as I mentioned in the earlier calls, the optimum profitability ratios on the new energy business can be accomplished when we actually hit a scale of about at least 8 to 10 gigawatt hour. So, with all the new investments that we are proposing, once we ramp up the production, for example, the next capacity of sell, we are looking at 5, and the NMC will be at 7. So, if we are able to ramp it up to that level in the next 2-3 years, I am sure that will be a very good platform for us to really improve not only the return ratios, but also on the overall opportunity size that we will be capable to actually attack. So, this is a long-term investment that we are making into this business because EVs are here to stay and then the lithium opportunity is something that is very big compared to the current SLI battery market what we are currently operating in. We definitely keep an eye on what's the return possibilities, what's the IRRs that we are expecting in these lines of businesses, but considering the nascent stage that they are in and the size of the opportunity that we are pursuing, we may have to give some level of patient time for these businesses to start. So, given the nature of the business, our optimistic estimate today is maybe three years down the line. From where we can improve our profitability and return ratios. These required capabilities for us to pursue such a large value opportunity.

Meet Doshi, Analyst — Professional Capital

Okay, thank you, sir. And as you have mentioned, that still be required more two to three years to get returns from the investment. But, sir, since last 10 years, being an investor, we may see that we are not getting a good response in terms of revenue growth and the profit growth, which is not reflecting in our shareholders' value. So, here I just want to know that how much confidence you have from 0 to 100%, like after 2 to 3 years, really we are going to have the sales at least double, or what kind of sales growth you are expecting and how much confidence you have in your business.

Operator

I'm sorry to interrupt you, sir. Ladies and gentlemen, management line seems to be disconnected.

Speaker 1

Hello.

Operator

Please wait, sir, while we reconnect the management's line.

Meet Doshi, Analyst — Professional Capital

Yeah.

Operator

Ladies and gentlemen, thank you for patiently holding. Management's line is reconnected. Please go ahead, sir.

Meet Doshi, Analyst — Professional Capital

Yeah, thank you. So, yes, I am starting again. As, sir, you have mentioned that we are going to heavily invest on the CapEx, and next two to three years, we are going to get the huge response. But, sir, I want to know that how much confidence will you have in the business? Since last 10 years, we are not able to grow in terms of EPS more than 100%. So I want to know that how much confidence you have in the business for the next three years and how much we are expecting in terms of EPS growth.

Speaker 6

See, firstly, I wouldn't want to say that not long before, our ROC ratios were in the range of 20%, and any business is reasonable to, because lead asset being a stabilized technology, over a period of time, with the capacity-led growth, what we have seen in this business, we have seen ROCs in the range of 23, 20, that kind of a range. And once we see out the current cost challenges, what the lead acid battery business per se is facing, I am sure we can pull back ourselves on the lead acid battery business into our original ROCE position. But when I look at my overall ROCE, then including the lithium investments that I am making, that's where I am saying it will take time for us to really stabilize that business. So, when you look at the current business, I think we need to differentiate between the lead asset business and also the new energy business, because if I look at it, after adjusting the new energy investments, what we are making, even today in FI26, if I were to adjust, our ROCE level was around 18%. So, my bets are worthy of performance. I mean, in a very earlier past, it could be much higher than that. But when you look at a stabilized capacity and the growth, we are seeing ROCE levels of 20, 21 percent. We have seen it not long before in FI24 and FI25. So I think there is every possibility that we pull back those ROCEs beyond 20 percent. When we look at new energy business, I think we need to give time to this business considering the size and complexity of this business and the opportunity that we are pursuing. We are, that's the reason we are running behind. Independence, and then I will be first rather.

Meet Doshi, Analyst — Professional Capital

Thank you so much. All the best for the future, and let's again see the reaching new highs as soon as possible. Thank you.

Operator

Thank you. The next question comes from the line of Shubham Jain from Investec. Please go ahead.

Shubham Jain, Analyst — Investec

Hi. Thanks for the opportunity. Just one clarification on the standard margin, given that Amaran Assist will be transferred to a subsidiary, and, you know, the cost will be part of that subsidiary now. Should we expect, you know, about a percentage improvement in margin from next quarter onwards?

Y. Dilibabu, CFO

I would not say, yeah, definitely at a standalone level, the margins would improve because of this divestering the business into the new subsidiary, but it may not be to the extent of 1%. It is a combination of 1%, whatever we're talking is a combination of both Emron Assist and the spending what we have made on building the manufacturing capabilities. So there will be some margin accretion, but it will not be 1%. It could be definitely lesser than that.

Shubham Jain, Analyst — Investec

Okay, okay. And on the home UPS side, you know, we have seen strong growth here for quite some time. If you could please quantify, what is the revenue contribution from home energy segment now, and where are we in terms of market share? And, you know, how should we think about the growth opportunity here? You know, how is the transition to lithium-ion going here? If you can please share some light.

Speaker 6

Currently, if I were to look at this quarter and the previous quarter, We have clearly grown the H.O.P.S. business quite substantially, and we believe we would have gained substantial market share on this business. Earlier, we used to be around 10 to 15% kind of a market share, but I think we would have at least gained another 3 to 4% kind of market share on this business at this point of time. As far as future is concerned, I'm sure with both the... The lead acid volume will shift to lithium. There is a possibility that... Households, when they increase the solar capacity, even there you need to create certain level of storage. The exact quantification of that market opportunity if and when it evolves is something that I can share in future. But at this point of time, this application today is merely a storage application can going forward become both access. A storage as well as dispensing the power to the home in the half-peak and peak hours where the solar production will be low. So that way home. Thank you.

Operator

Thank you. The next question comes from the line of Aryan Madaria from Equitas Investments. Please go ahead.

Aryan Madaria, Analyst — Equitas Investments

So, sir, I just want to understand how is the progress coming up on the lithium-ion products which we are developing. So, what kind of feedback are you getting from your customers?

Speaker 6

As I mentioned earlier in the call, as far as NMC is concerned, our samples are getting produced, and they are currently getting internally tested before it is handed over to the OEMs, and we expect to hand it over to the OEM testing in the next couple of months. And the other LFP side cells, they are at various maturity cycles, so we will be able to let you know the timelines as we move closer to the commercial deployment.

Operator

Thank you. The next question comes from the line of Amit Kumar, an individual investor. Please go ahead.

Amit Kumar, Analyst — Determined Investments

Yeah, thank you so much for the opportunity. This is Amit Kumar from Determined Investments. Just one point, I joined the call a little bit late. So, you know, just trying to understand how much time do you think, you know, it will take you on the lead acid, you know, battery business side to pass on the kind of raw material, you know, pricing that you've seen over the last six, seven months on to customers, be it OEM or on the retail side.

Speaker 6

Yeah, we were successful in getting some rate hikes, particularly on the two-wheeler customers. Some of the two-wheeler customers on the OEM side, we were able to pass on these price hikes. As far as the aftermarket is concerned, It obviously depends on not only us, even the competition, what it is doing. So we have been passing on these prices on a quarter-on-quarter basis, but unfortunately, every time we took a price increase, and immediately we are seeing a sudden jump. For example, if I were to give an example of raw acid because of the sulfur prices, we are seeing the prices going up all the way from about 10 rupees a kg today to about 43, 44 rupees a kg. And similarly, separator prices, in between the way rupee has depreciated also has impacted, and the domestic-led prices, which used to be a very good source of procurement, are also now becoming costly. So, these are some of the things we expect as and when the supply chains of import and ship availability improves, these costs can actually come down. So, to that extent, it is not easy to pass on immediately to the B2B customer, and in the aftermarket, we have been passing it on at least with a lag of two to three months kind of a time frame, because once we see a price getting, cost getting stabilized at a given level, we have been passing it on to the customers. But at this moment, it is continuously an inflation scenario, which is causing this dip in the margins.

Amit Kumar, Analyst — Determined Investments

Just a small follow-up on this. On the sulfur side, we heard that in Middle East Africa, a few producers, they had actually cut prices. This is about a few months back, actually. So, have those prices kind of stabilized, or is it that those price cuts were more to compensate for the continued freight increases, so land rate is still a problem for you on the sulfur side?

Speaker 6

Yeah, so when we look at sulfuric acid that we procure, that's where the prices are continuously on a rise. So there could be multiple factors that are hitting it. Thank you.

Amit Kumar, Analyst — Determined Investments

Okay, so on just final one on the lithium, you know, ion battery side. So, you know, just over the last couple of quarters listening to you, you know, the sort of focus, you know, has been a little bit on the, you know, best side, basically, you know, of the business. And I understand that, you know, that's obviously within that, you know, lithium ion ecosystem, that's definitely an additional opportunity, which is there. But at least our understanding, surprisingly, given the early stage of that opportunity in India, there are already so many players which are sort of producing batteries for storage for the best kind of situation. And in which case, you know, the core business of the company still sort of continues to be, you know, on the automotive side. So, you know, just to sort of, you know, thinking through in terms of focus on the automotive business, you know, versus, you know, best, I mean, you know, is it that? You know, on the automotive side, because, you know, the players might, you know, the OEMs might already have sort of done some investments, you know, in terms of their own, you know, battery manufacturing or infrastructure. Is that the reason why you're sort of incrementally shifting focus on BES and how are you looking at the competitive scenario in BES also?

Speaker 6

See, I would say we have diluted our focus in EVs and then we are replacing it with BES. I think... the overall requirement of best batteries that are going to be required in this country because that's going to be a huge potential that will come in. So naturally, we have accelerated our investments on the containerization solutions on it, and that plant, we were able to close it in a timeline of about 12 months from the date we commence the... So, there is no dilution of focus with respect to the overall self-strategy of catering to both storage as well as storage. Given the fact that today we are seeing that there is an enormous potential not only in India but even elsewhere, there is need for us to really ramp up this business because self-business, the way the capital intensity it has, we also need to equally focus on some of the solution business as well, which is why we are going ahead and then get these capacities on track. Now, as far as mobility is concerned, yes, there are a lot of OEMs who have said that they will do their own packs, but our journey in the lithium side will not stop at packs. It is definitely going to be the cells that we will have to manufacture that are required for the mobility applications. That journey is continuing, and as I said in the earlier calls also, there is a dedicated team of 200-250 people who are corely working on some of these cell development activities. So, once we are able to get our NMC lines up and running, then I think we have started our journey of cell supply with the NMC cell. And thereafter, we will definitely get into the LFP cell and get into the mobility application. So, timing-wise, there could be some delays here and there, and then we want to prioritize one over the other. But the long-term strategy is still very clear that EV as an opportunity cannot be missed. Thank you. I think we are timing those capexes according to how the market situation is evolving.

Amit Kumar, Analyst — Determined Investments

One sort of small clarification on the new energy business, arguably small, but to whatever extent the losses that we are seeing, these are largely on account of the overhead. Like you mentioned, you have the 250 people team working on sales, which are obviously not more on the R&D side. So, because the plant itself is sort of not operational, that is the cost which is hitting your P&M.

Speaker 6

You are right. I mean, there are two operational expenses. One, obviously, on the product development side and also the depreciation that will kick in on some of these developmental labs that we have set up. Those are the two major expenses why there are losses.

Amit Kumar, Analyst — Determined Investments

And the operation, you know, telecom, batteries, etc., which you are sort of, you know, that you are saying you have about 6-7% kind of margin.

Speaker 6

Yeah, yeah. Some of these expenditure is getting compensated by the fact that that's what the line that I was about to add. Yeah.

Amit Kumar, Analyst — Determined Investments

Oh, understood. Thank you so much. That's it for me. Okay, yeah.

Operator

Thank you. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir.

Speaker 6

Yeah, thank you very much, and then see you until we see next time. Happy Diwali to everyone who joined the call. Thank you so much for your patience. Thank you.

Operator

Thank you. On behalf of Amara Raja Energy and Mobility, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.