It was once the undisputed market leader in the branded battery market with over 50 per cent market share. But Exide has been facing tough competition – from Amara Raja Batteries and unorganised players.
A report by Standard Chartered Securities (India) says, “In FY12, there was a dramatic shift — Exide lost almost 1,000 bps (basis points) of market share in the auto-replacement segment on account of capacity constraints, hence losing pricing power and its valuation premium”. During this time, Amara Raja gained a share of around 250-300 bps. Experts say when the auto industry grew at a scorching pace of 25-30 per cent across categories, Exide was unable to cope with a surge in after-sales market and original equipment demand.
Exide MD & CEO TV Ramanathan admits the brand’s market share had dropped because of capacity constraints. The robust demand had forced Exide to shift capacities away from the high-margin replacement segment, which accounts for almost 60 per cent of Exide's revenue.
Exide, however, says the loss of market share wasn’t much. “We did lose some market share, but we are regaining that steadily following capacity expansion,” Exide’s Director (Automotive) P K Katakay says.
Kakatay is spot on. In spite of a 6.9 per cent drop in net profit, Exide’s June quarter earnings reflect a steady recovery in performance in a challenging environment, as net revenue jumped 24.8 per cent from a year earlier —a growth rate seen after nearly seven quarters. Volume expanded by as much as 28 per cent in motorcycle batteries and 19 per cent in industrial batteries.
According to Katakay, in rural India, the challenge is mainly from unorganised players. “Our marketing initiatives such as Project Kisan and Humsafar are designed to address this by increasing points of presence,” he says.
While the Project Kisan initiative is targetted at tractor owners, under Humsafar, module batteries are retailed through motor garages, service centres, retail outlets and petrol pumps. Direct sales arrangements have been sealed with oil marketing companies, increasing the number of outlets to about 14,000.
The company is presently operating from 204 locations and has plans to increase its presence in more than 250 cities within the next 18 months.
Another significant move has been to promote its SF Sonic brand of batteries. “We are aggressively promoting the SF brand (actor Salman Khan is the brand ambassador), which is priced 20 per cent lower than that of Exide brand batteries.
The company is hardly perturbed by cannibalising. “As long as it is coming to Exide, cannibalising is not an issue,” Ramanathan notes.
Exide has also woken up to the potential of the inverter segment, in which Amara Raja is already the market leader with close to one-third share. The inverter market was dominated by unorganised players, but the hefty import duties on lead and lead products from countries such as China has made imports expensive, thus encouraging the organised players.
Though a latecomer in this segment, Exide is trying to make up for the lost time by acquiring a unit at Roorkie which manufactures 30,000 inverters a month. These inverters are being marketed under the firm's well-established brands like Exide, SF and Ceil. It is now planning to extend its footprint in the segment either through greenfield expansion or acquisition.
“While the demand for automotive batteries is slowing, the only exception is the inverter segment. There is a sudden surge of demand, mostly in the southern part of the country. We want to tap this demand”, Ramanathan says
