Exide Industries: New Partnership A Validation For Its Cell Development, Says Nomura
Nomura is also optimistic of Exide Industries' ability to win new orders from other OEMs.
Exide Industries Ltd. has been the most active auto ancillary stock, having risen 44% just in the past month. The company has been in the news after having secured a new contract for its electric batteries and brokerages see additional upside from the current levels. Morgan Stanley sees an 88% upside in a bull case, while Nomura Research is also more optimistic of Exide Industries' ability to win new orders from other original equipment manufacturers.
The company has signed a memorandum of understanding with Hyundai Motor Co. and Kia Corp. for electric vehicle battery localisation in India. This will be the first strategic cooperation in India’s EV market for Exide Industries. The partnership would equip future EVs in the Indian market with locally produced lithium-ion phosphate batteries.
This provides significant validation for Exide Industries' cell development, as Hyundai and Kia are already selling EVs in the global market and plan to launch many EVs in India, according to Nomura.
Exide Energy Solutions
Exide Energy Solutions Ltd. was incorporated in March 2022. The company is a wholly owned subsidiary of Exide Industries. This was formed for the purpose of manufacturing battery cells of advanced chemistry.
The total investment made by Exide Industries into EESL stands at Rs. 2,000 crore. Exide Energy Pvt., which was a wholly owned subsidiary carrying the business of developing and manufacturing Li-ion-based modules and packs with battery management systems for electric vehicles, was amalgamated with EESL as of March 2024 to form a one-stop shop for the electric battery division.
Partnerships With Leclanché SA, SVOLT
The company had ventured into a joint venture with Leclanché SA back in 2018. The purpose of the JV was to set up EV battery assembly operations in India. Over the next few years, Exide Industries gradually kept increasing its stake and now owns 100% of this venture.
The current capacity is 1.5 GWH and has an order book of Rs. 600–700 crore.
In December 2021, Exide Industries announced a technical collaboration with China’s SVOLT Energy Tech with a capex outlay of Rs 6,000 crore to establish a lithium-ion cell manufacturing plant in the country.
The total capacity of the plant was envisaged at 12 GWH, with the first phase being 6 GWH. As per the company, the first phase is scheduled to be operational in 2025 at a capex outlay of Rs. 4,000 crore. This is now estimated to be done by March 2025.
Till date, the company has invested close to Rs 2,000 crore, which would entail the rest of the investments earmarked in phase one to be done starting in April 2024.
Nomura And Morgan Stanley Very Positive
While Morgan Stanley sees an 88% upside in a bull case in Exide Industries, Nomura has affirmed its view and said this partnership provides significant validation to the company's cell development as Hyundai and Kia are already selling EVs in the global market and plan to launch many EVs in India.
They expect EV penetration in India for two-wheelers and four-wheelers to rise from 5%/2% in FY24 to 25%/20% by FY30. Carmakers need to meet the 50% localisation requirement for domestic value addition to meet production-linked incentive norms.
Nomura is also more optimistic about Exide Industries' ability to win new orders from other OEMs, while affirming that OEMs may also pay some premium for local sourcing. They also see a possibility of import duties being imposed on cells in a few years, which can support medium-term margins.