Amara Raja Batteries tumbles 6% after almost 18% equity change hands

According to media reports, Clarios ARBL Holding was to sell its entire 14 per cent stake in the company though bulk-block deal mechanisms on stock exchanges at a floor price of Rs 651 per share.

Shares of Amara Raja Batteries slipped 6 per cent to Rs 643.40 on the National Stock Exchange (NSE) in Tuesday’s intra-day trade after nearly 18 per cent of the total equity of India’s leading industrial and automotive battery major changed hands.

Till 09:47 AM; around 30.46 million equity shares representing 17.83 per cent of total equity of Amara Raja Batteries changed hands on the NSE, the exchange data shows. On the BSE, around 2.4 million shares or 1.2 per cent of total equity of the company changed hands, data shows. The names of the buyers and sellers were not ascertained immediately.

According to media reports, Clarios ARBL Holding was to sell its entire 14 per cent stake in the company though bulk-block deal mechanisms on stock exchanges today at a floor price of Rs 651 per share. The deal value was pegged around Rs 1,550 crore.

This follows Johnson Control ending its partnership with Amra Raja way back in April 2019 pursuant to selling of its global power solutions business. Clarios is classified as foreign institutional investor (FII) with promoter holding to remain unchanged at 28.1 per cent post this transaction.

Given the floor price at around 5 per cent discount to Monday’s closing price, ICICI Securities expected the stock to open negative in opening trade today. Over the long term however it bodes well for the company as stake sale overhang will be behind it, the brokerage firm said in a note.

CRISIL Ratings believes Amara Raja Batteries will continue to benefit from its established position in the domestic industrial and automotive battery sectors, its healthy operating efficiencies, and strong cash generating ability. This, along with prudent working capital requirement, will keep the debt metrics strong over the medium term, not withstanding sizeable capex needs, which will involve part debt funding, the rating agency said in rationale.

Amara Raja Batteries has strong liquidity, driven by expected annual cash accrual of Rs 1,100-1,200 crore over the medium term and liquid surplus of over Rs 270 crore as of March 31, 2023. Besides, the company’s working capital lines of Rs 115 crore are also sparingly utilized.

Amara Raja Batteries has signed a Memorandum of Understanding with the government of Telangana for setting up the state’s first lithium-ion battery making giga factory and proposes to invest Rs 9,500 crore over the next 10 years towards the same. The plant will have ultimate capacity up to 16 GWh and a battery pack assembly unit up to 5 GWh. Initial investment of upto Rs 1300 crore (over next 2-2.5 years) is proposed to be largely funded from the company’s accruals. Debt obligations relating to debt raised for the recycling facility and the company’s own capex, are expected to be well spaced out, CRISIL Ratings said.