‘Exide will consolidate businesses this year’

Exide Industries, the leading manufacturer of lead-acid storage batteries, has maintained its top position in India with a market share of 70% in the automotive business.
Over the past one year, price volatility of lead has forced Exide to adopt new strategies of acquiring smelters and working on the cost benefits from captive raw material. T V Ramanathan, the managing director and CEO of Exide Industries, spoke to Nandini Goswami of DNA Money about the company’s strategies and plans for the next few months.

In the last few months, you have made two acquisitions in smelting companies - Tandon Metals in Pune and Leadage Alloys India in Bangalore. What kind of price benefits do you expect? To what extent are these acquisitions expected to meet your lead requirements?
With our own smelting operations, we are trying to bring in some stability to our operations and reduce dependence on imported lead and lead alloys. Lead prices have shot up over the last one year. At present, it is very volatile, varying from $2,859 in March to a decline to $1,580 in June and a jump to $2,200 in July. Over the next three years, we expect a 10% price benefit, given good quality production of lead from smelters. Currently, about 30-35% of our total consumption of lead is captive, which should increase to 50% by 2010.

Will you go in for further increase in retail prices of car batteries this year, given that lead prices are on the upswing?
Last year, we had to go in for four rounds of price hike as lead prices on the London Metal Exchange (LME) had gone through the roof. This year, we will not touch prices at all. But if LME prices go over the $2,500 mark, we may think of an increase.

So far, the prices in your industrial category have been determined on negotiated rates. As these too are linked to the LME, are you feeling any heat?
Yes, from August 1, we will be going in for an LME benchmark for our industrial batteries vastly used in the telecom industry and uninterruptible power supply (UPS) systems. In 2006-07, about 10% of our industrial customers agreed to a price variation clause in lead. From now on, 70% of our industrial customers will have to agree to the LME benchmark.

Any acquisition on the cards in smelting and other business? Also, do you plan to merge the subsidiaries for smelting with Exide? 
There are no such plans. We do receive informal requests from smelters, but at the moment we are not interested. This year we will be consolidating our businesses. Going forward, we may look at merging some of our businesses that are similar in nature. For example, two smelting companies can become one, if needed.

What is your growth target for the current fiscal? And your plans for capital expansion?
We are expecting a 15% growth and the capex will be a total of Rs 180 crore, with Rs 90 crore for the automotive sector and Rs 60 crore for industrial. The balance will be for research and other activities. We would be increasing capacities by around 20% across our plants.

On your insurance venture, will you lower your shareholding in ING Vysya from 50% at present if the FDI in insurance goes up from 26% to 49%?
Not at all. Insurance is a promising business and will have great valuations going ahead. Capital infusion will not be a problem in the life insurance venture. I don’t mind if other Indian partners in the venture sell their stake, but Exide’s stake will remain at 50% definitely.

g_nandini@dnaindia.net