The automobile industry may not see a revival in the July-September quarter, said P.K. Kataky, Managing Director and CEO of Exide Industries. He was addressing the media on the sidelines of the company’s annual general meeting in Kolkata on Tuesday. “In July, OE (original equipment) demand has not improved,” he said. Kataky, however, added that a good monsoon may see demand improve.
Exide Industries, which caters to about two-third of the OE demand, does not expect to see any immediate increase in demand from the auto sector.
The company saw OE demand decline 10 per cent on an average in the April-May period. In June, OE demand was down seven per cent in passenger vehicles, 15 per cent in medium and heavy vehicles, eight per cent in light commercial vehicles and 2-3 per cent in the two-wheeler segment.
Demand for scooter batteries increased by two per cent in June. However, that is a very small segment compared to the company’s capacity to supply approximately one million batteries a month.
Price rise
In an effort to cope with rising input costs due to currency fluctuation, Exide increased battery prices by five per cent from July 5. The increase is across the board and will be enough to accommodate exchange rate increases up to Rs 61 a dollar.
This is the second price hike effected by the company this financial year. Exide had hiked product prices by 5 per cent in April.
“We had no other option than passing on the cost of the increase in raw materials to the customer,” said Kataky.
The price escalation, coupled with growing after-market sales of automotive batteries, is expected to see Exide sail through the current quarter without a further dent in margins, said Kataky.
The company ended the first quarter with a four per cent increase in net profit to approximately Rs 159 crore.
“If the trade market (after-market) is good, then we might see maintenance of margins,” said Kataky.
With 72 per cent capacity utilisation, the company has no reason to consider any expansion plan at this juncture except for continuing with the ongoing project at Chinchwad near Pune to expand its 4-wheeler battery manufacturing capacity by 0.8 million pieces a year.
Exide has allocated Rs 70 crore towards capacity expansion in this financial year. The expanded capacity will go on stream in June 2014.
Another Rs 210 crore worth of capital expenditure is earmarked towards maintenance of existing facilities and upgrading of pollution control devices in all the company’s facilities.