Exide Industries Q1 Earnings Call: Price Hikes, Cost Controls Help Margins Improve

Exide Industries reported an improvement in its EBITDA margin to 12.4% in the first quarter of fiscal year 2027. This marks a 20 basis point increase compared to the previous year and a 70 basis point rise from the prior quarter.

The enhancement in margins was driven by increased revenues, effective cost control strategies, and efficiencies in supply chain operations, despite challenges such as higher input costs and unfavorable currency fluctuations.

Lithium-Ion Battery Segment Insights

The company’s Chief Financial Officer noted that it is premature to provide detailed insights on profit margins for the lithium-ion battery segment. Currently, the lithium pack division is operating at a loss due to the low value addition associated with imported cells.

Management highlighted potential pricing impacts for lithium-ion cells following China’s removal of its export value-added tax rebate starting January 1, 2027. Additionally, increased domestic demand within China may lead to reduced export availability at lower prices.

Presently, lithium-ion cells incur an import duty of 5%, which may be subject to adjustment as domestic cell manufacturing capacity expands. Early margin estimates remain uncertain due to the nascent stage of production and ongoing improvements in yield rates.

Pricing Strategy and Cost Management

To address higher input costs and currency headwinds, Exide Industries implemented year-on-year price increases ranging from 4% to 6% across various product categories in Q1 FY27.

Looking ahead, the company plans to adopt a gradual and dynamic approach for pricing adjustments in Q2 rather than a single significant increase.

Raw Material Sourcing and Localization Efforts

Exide is currently sourcing raw material samples from China. The development of an Indian supply chain for raw materials is projected to take three to five years.

Although existing Chinese export controls do not currently apply to raw materials, from November onwards additional approvals will be required. This requirement may necessitate maintaining higher inventory levels.

In terms of critical components, electrolyte will initially be fully imported through the company’s technology partner’s established supply network. Pilot projects are underway with a major Indian manufacturer to explore opportunities for localization.

Exide aims to localize between 50% and 60% of its bill of materials within the next two to three years by engaging multiple suppliers for diverse components.

Building a robust domestic raw material ecosystem will involve investments in lithium refineries, cathode active materials, and graphite, supported by government initiatives.

Key Takeaways

• Exide Industries improved its Q1 EBITDA margin to 12.4%, aided by price hikes and cost controls.
• Lithium-ion battery segment currently operates at a loss; margin insights remain preliminary.
• China’s export policy changes may impact lithium-ion cell pricing and availability.
• Pricing increases of 4-6% were implemented in Q1 FY27; future adjustments will be gradual.
• Localization efforts aim for 50-60% bill of materials domestically within 2-3 years.
• Developing an Indian supply chain for raw materials will require several years and substantial investment.