As the falling rupee impacts its price patterns, Amara Raja Batteries Ltd will consider hiking the supply cost of automotive batteries. Though the company has long-term contracts with some of its customers such as automobile manufacturers, it will have to consider renegotiation.
“Lead accounts for a major chunk of the company’s input. The import of lead has had a big impact on the company. This will force us to hike prices by about five to six per cent. We expect to take a decision soon,” said Suresh Kalyan, Chief Financial Officer, speaking to Business Line .
“The rupee fall also impacts the overall pricing pattern as we import nearly 50 per cent of the lead requirement. This is a major component for the battery industry. Significantly, even local suppliers such as Hindustan Zinc and Nile benchmark prices taking into account rates on the London Metal Exchange and factoring other aspects, he said.
“The contracts are entered into with automotive original equipment manufacturers based on the rollout of a new model or vehicle. This also has facility for escalation. But sometimes, the price fluctuation of some inputs is so high that we will have to renegotiate with the manufacturers,’’ he said. However, for industrial batteries, the approach is different. The prices are decided for, say, two months and then renegotiated. Channel partners also cover this aspect.
“The first quarter of this financial year will not be impacted by the rupee fluctuation. However, by increasing prices, we will be able to cover this up for the second quarter. There is generally some lag when it comes to impact of input costs on the overall pricing pattern,” said Kalyan.
Our Kolkata bureau adds: Another battery maker Exide hiked prices by 5 per cent recently to reduce the impact of a falling rupee. It suffered nearly Rs 4 crore exchange loss in the first quarter. Trade or aftermarket margins and value engineering helped the company offset the impact. It reported 4 per cent growth in profit-after-tax in the first quarter. For the second quarter, the outlook depends on the aftermarket growth.