Amara Raja Energy & Mobility: Navigating Growth and Transition in Q2 FY26

Amara Raja Energy & Mobility Limited, a prominent player in India's battery sector, has reported a steady performance for the second quarter and first half of the financial year 2026. The company, formerly known as Amara Raja Batteries Limited, is strategically pivoting towards new energy solutions while maintaining its strong foothold in the traditional lead acid battery market. The Q2 FY26 consolidated revenue stood at INR 3,467 crore, marking a 6.5% year-on-year growth, with the New Energy business showing significant momentum.

The lead acid business, the company's core segment, contributed INR 3,297 crore, representing approximately 95.1% of the total consolidated revenue, and grew by 5% year-on-year. This growth was primarily fueled by robust OEM demand, which saw a substantial 30% increase across both 2-wheeler and 4-wheeler segments. However, aftermarket demand remained stable, impacted by procurement delays following GST rate revisions. Export volumes remained subdued due to global trade and tariff uncertainties. The industrial lead acid segment experienced an 11% decline, largely due to a 35% reduction in telecom volumes as customers transition to lithium-ion solutions. In contrast, UPS volumes within the lead acid industrial segment grew by 5%.

The New Energy Horizon

The New Energy business is emerging as a significant growth driver, reporting a healthy INR 170 crore in Q2 FY26, a remarkable 50% year-on-year increase. This growth is largely attributed to the escalating demand for telecom packs and chargers. The company has commenced commercial supplies of 3-wheeler battery packs with LFP cells and has an order book exceeding 5,000 units for AC and DC chargers. To support this ambitious growth, Amara Raja infused INR 350 crore into its lithium subsidiary, Amara Raja Advanced Cell Technologies, bringing the total investment to INR 1,200 crore.

Strategically, the company is establishing a 'Giga Corridor' in Telangana with a substantial capex plan of INR 9,500 crore. This initiative aims to build a 16 GW Giga cell plant by FY30, with initial operations for 2 GWh based on NMC Chemistry expected before H1-CY27. The company is also setting up E+ Energy Labs in Hyderabad for R&D in Li-Ion cells and battery pack assembly, underscoring its commitment to developing indigenous capabilities.

Operational Efficiency and Sustainability

Amara Raja is also focusing on enhancing operational efficiencies and sustainability across its traditional business. The new lead recycling plant at Cheyyar, Tamil Nadu, with a capacity of 1.5 Lac MTPA, saw refinery operations commence in December 2024, with battery breaking expected from Q4 FY26. This plant is anticipated to be margin accretive once stabilized. Additionally, the advanced tubular battery manufacturing plant at ARGC-Chittoor commenced commercial production in Q1 FY26 and is expected to reach full capacity by Q3 FY26, contributing to improved margins.

On the sustainability front, Amara Raja boasts a strong ESG profile, ranking #1 in S&P Global ESG rating in its sector in India. All its manufacturing plants operate with zero liquid discharge and are located in non-water-stressed areas, making the company 12X water positive. The company has also committed to Net Zero by 2050, aligning with SBTi targets.

Financial Outlook and Management Commentary

While the company's stand-alone operating margins were around 12% in Q2 FY26, they were impacted by provisions for higher warranty expenses and a one-time EPR (Extended Producer Responsibility) credit cost of INR 35 crore. Management expects these provisions to normalize in the coming quarters as collection rates improve. The total capex outlay for FY26 is projected to be between INR 1,400 crore and INR 1,500 crore, with a significant portion allocated to the New Energy business. For FY27, an additional INR 1,000 crore is planned for lithium investments.

Management guidance indicates an aspiration to achieve a 13% EBITDA margin on a run-rate basis, eventually targeting 14% in the long term. The lead acid battery revenue is expected to grow by 8-10% in FY27, while the New Energy business is projected to contribute 5% of total revenue by the end of FY26, potentially increasing to 7-8% by FY27. Amara Raja Energy & Mobility is clearly executing a dual strategy: optimizing its established lead acid business while aggressively investing in and scaling its new energy ventures to capture future market opportunities.