HBL Power Systems Vs Amara Raja Energy: In the ever-evolving world of technology, electricity plays a major role in running many industries and daily life. There is a huge demand for storing electricity and it plays a pivotal role in shaping the EV Industry. The global transition from fossil fuels to renewable energies.
These shifts can help to create a more sustainable and carbon-neutral future. In this article we will compare HBL Power Systems vs Amara Raja which operates in Battery Industry.
HBL Power Systems Vs Amara Raja Energy
HBL Power Systems – Company Overview
Jagadish Prasad Aluru founded HBL Power Systems in 1977. The company specializes in engineered products and services, focusing on aircraft batteries. With their expertise in batteries, the company expanded into new battery-based businesses and markets, including industrial electronics, defense electronics, and railway electronic signaling.
This diversification, leveraging the company’s engineering strengths, has resulted in new businesses in precision manufacturing, spun reinforced concrete, and green technology.
Segment Analysis
The company generates revenue from two main segments, batteries and electronics. In fiscal year 23, batteries accounted for the largest portion of revenue at 86.43%, while electronics accounted for 10.73%. The remaining 2.84% was unallocated.
In terms of sales, the majority of revenue 84.84% came from domestic sales, while the remaining 15.15% came from exports. Both the batteries and electronics segments showed year-on-year growth, increasing by 8.20% and 33.04% respectively. The company operates six manufacturing facilities located across Andhra Pradesh and Telangana.
Revenue contribution from Industries like Industrial Batteries accounts for 69%, Defence and Aviation accounts for 17%, 11% from Electronics and the remaining 3% from revenue from other segments.
Amara Raja Energy – Company Overview
Amara Raja Energy, also known as Amara Raja Batteries, is a battery manufacturer based in India. The company operates through two main divisions. The first division focuses on producing automotive batteries and sells them under the brand names Amaron and Powerzone.
These batteries are sold to both replacement market customers and original equipment manufacturers. The second division, known as the industrial battery division, provides batteries to a wide range of industries such as telecommunications, infrastructure, power, railways, and others.
These batteries are sold under flagship brands like Amaron, PowerStack, Quanta, and QRS Series. The majority of the company’s sales come from the Indian domestic market. They command a market share of around 30% in the industry in India.
Segment Analysis
The company recognised its revenue from the manufacture and marketing of lead acid and other storage batteries. Amara Raja earns the majority of its revenue from India which accounts for 88.12% and the remaining 11.87% from outside India in FY23.
Their segments across industries include Industrials – 30%, Auto – 68% and the remaining others (including new energy business) account for 2% of FY23 revenue.
HBL Power Systems Vs Amara Raja Energy – Industry Analysis
As technology advances, batteries are also evolving. Currently, the lithium-ion battery dominates the battery market, but we are seeing improvements in energy storage through the use of salt.
The Indian lead acid battery market is expected to grow at a Compound Annual Growth Rate (CAGR) of more than 9% between 2023 and 2028. During this forecast period, we expect to see increased business volumes driven by rising demand from the telecommunications and data centre industries, as well as increased applications in industries such as railways and defence.
The replacement battery segment currently holds a market share of more than 70%. With growing technological advancements and the strengthening of the telecommunications sector, India’s lead acid battery industry is experiencing a boost.
HBL Power Systems Vs Amara Raja Energy – Financials
Revenue and Net Profit
HBL Systems recorded a revenue of Rs. 1,368.68 crore from operations in FY23, as compared to Rs. 1,236.21 crore in FY22. On the other hand, Amara Raja’s revenue from operations for the fiscal year was Rs. 10,388.20 crore, an increase from Rs. 8,775.13 crore from the previous year.
HBL’s revenues have remained consistent, and have recently seen an improvement. In contrast, Amara Raja’s revenues have been on an upward trend over the years.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – Revenue (Cr.) | ₹1,368.68 | ₹1,236.21 | ₹912.04 | ₹1,091.78 | ₹1,261.74 |
| Amara Raja Energy & Mobility – Revenue (Cr.) | ₹10,388.20 | ₹8,775.13 | ₹7,149.68 | ₹6,839.46 | ₹6,793.11 |
HBL Power Systems’ net profits for FY23 were Rs. 98.65 crore, compared to Rs. 93.90 crore in FY22. Amara Raja’s profits increased from Rs. 512.57 crore to Rs. 694.53 crore a year ago. HBL Power Systems’ profitability increased from FY22. Amara Raja’s profits in FY23 were comparable to those in FY20. Their profitability grew as revenue increased.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – Net Profit (Cr.) | ₹98.65 | ₹93.90 | ₹13.73 | ₹26.22 | ₹27.73 |
| Amara Raja Energy & Mobility – Net Profit (Cr.) | ₹694.53 | ₹512.57 | ₹646.81 | ₹660.82 | ₹483.23 |
Profit Margins
HBL systems OPM was 12.30% in FY23, down from 13.12% in FY22. Amara Raja’s percentage increased from 12.54% to 13.34% in FY23. HBL’s OPMs were lower in FY23, but they improved exponentially during the next five years as manufacturing costs were reduced compared to revenue, improving the margin. Amara Raja’s margin improvement is attributable to lower material costs relative to revenue compared to the previous year.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – OPM (%) | 12.30% | 13.12% | 7.77% | 9.20% | 9.16% |
| Amara Raja Energy & Mobility – OPM (%) | 13.34% | 12.54% | 16.62% | 16.73% | 14.60% |
The NPM of HBL in FY23 was 7.10%, compared to 7.49% in FY22. Amara Raja’s stood at 6.63%, up from 5.83% in FY 22. HBLs NPM was impacted by an extraordinary item in FY22 totaling Rs. 10.73 crore linked to profit on asset sales. Amara Raja’s NPM improved as the OPM increased.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – NPM (%) | 7.10% | 7.49% | 1.49% | 2.37% | 2.17% |
| Amara Raja Energy & Mobility – NPM (%) | 6.63% | 5.83% | 8.94% | 9.58% | 7.07% |
Return Ratios
HBL’s RoE in FY23 was 10.84%, compared to 11.37% in FY22. Amara rajas was at 14.10% in FY23, up from 11.67% in FY222. HBL’s RoE has improved over the years, but their returns on additional capital are lower than in FY22, which has an impact in FY23. Amara Raja improved as a result of higher returns on new capital, i.e., excess returns on reserves compared to RoE, which increased the ratio.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – RoE (%) | 10.84% | 11.37% | 2.20% | 2.99% | 3.13% |
| Amara Raja Energy & Mobility – RoE (%) | 14.10% | 11.67% | 16.45% | 18.91% | 15.42% |
RoCE stood at 13.84% in FY22, down from 14.56% for HBL. Amara Raja’s FY23 earnings increased to 18.56% from 15.15% in FY22. HBL’s ratio improved rapidly in FY22, with a little decline due to a minor rise in borrowings in capital structure. Amara Raja’s ratio improved due to increased profits. Amara Raja has a better ratio than HBL.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – RoCE (%) | 13.84% | 14.56% | 4.42% | 5.93% | 6.30% |
| Amara Raja Energy & Mobility – RoCE (%) | 18.56% | 15.15% | 21.20% | 23.08% | 22.34% |
Debt Analysis
HBL’s debt-to-equity ratio was 0.08 in fiscal years 22 and 23. Amara Raja, on the other hand, maintained a constant 0.02 over five years. Both companies have a low debt-to-equity ratio, which has benefited the company by avoiding debt-based expansion. If growth continues, they will be able to take on additional debt as needed.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – Debt to Equity | 0.08 | 0.08 | 0.15 | 0.26 | 0.39 |
| Amara Raja Energy & Mobility – Debt to Equity | 0.02 | 0.02 | 0.02 | 0.02 | 0.02 |
The interest coverage ratio of HBL was 20.82 times, up from 17.36 times in FY22. Amara raja’s stood at 43.92 times in FY23, down from 46.68 times in FY22. The HBL ratio improved due to lower interest costs year after year and an increase in profits. Amara Raja’s increased profits did not help them improve because of the increase in interest costs.
However, both companies are at a comfortable level; as a general rule, any company with more than three times its earnings to interest costs is better, depending on how cyclical the industry is.
| Particulars/ Financial Year | 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 |
|---|---|---|---|---|---|
| HBL Power Systems – Interest Coverage | 20.82 | 17.36 | 2.69 | 2.59 | 2.18 |
| Amara Raja Energy & Mobility – Interest Coverage | 43.92 | 46.68 | 83.94 | 69.96 | 106.09 |
HBL Power Systems Vs Amara Raja Energy – Key Metrics
Let’s look at some of the key metrics of HBL Power vs Amara Raja
| Particulars | HBL Power | Amara Raja |
|---|---|---|
| CMP | ₹453.00 | ₹782.50 |
| Market Cap (Cr.) | ₹15,248 | ₹15,167 |
| EPS (TTM) | ₹8.56 | ₹46.89 |
| RoE (%) (TTM) | 16.89% | 13.59% |
| RoCE (%) (TTM) | 20.52% | 18.40% |
| Stock P/E (TTM) | 64.26 | 18.94 |
| Current Ratio (TTM) | 2.76 | 2.04 |
HBL Power Systems Vs Amara Raja Energy – Future Plans
HBL Power Systems
- The company has more industry experience, which can help with revenue growth, and the government is investing in railway capital expenditures. KAVACH, an anti-collision feature for trains, is also becoming increasingly popular for installation to prevent accidents.
- HBL Power expects sales of 1,750 crore in FY24, 2,300 crore in FY25, and 2,900 crore in FY26. Revenue is expected to grow in a variety of segments, including Industrial Electronics, Defence and Aviation Batteries, and Industrial Batteries.
- The company intends to invest Rs. 90 crore in capital expenditures in FY24, except for their investment in Tonbo Imaging Ltd worth Rs. 150 crore.
Amara Raja Energy
- The company is entering into a new energy business through their 100% subsidiary, Amara Raja Advanced Cell Technologies, with a planned capex of Rs. 9,500 crore for setting up Giga Corridor in Telangana.
- Setting up 16 GWh of lithium-ion cell manufacturing capacity over the next 10 years with phases and 1st phase is expected to commercialise in FY26.
- Establishing “E Positive Energy Labs” which is R&D facility in Hyderabad focusing on new energy solutions like lithium-ion.
- Expanding its EV charging solutions by acquiring Amara Raja Power Systems, a wholly-owned subsidiary.
- Planned capex of Rs. 9,500 crore for new energy business with land allotment of 262 acres.
- Strategic shift from battery manufacturer to energy & mobility solution provider.
Conclusion
As we near the end of the article, we will look at both companies in brief. Both companies operate in the battery segment. However, their business models are a bit different as their customers differ. Both companies have robust financials, with revenues and net profits spiking up in recent years.
The low debt-to-equity ratio also makes it better for companies to spend on capex. The government’s push for going electric might help the industry as well. What are your thoughts on these companies? Let us know your views in the comments section below.
Written by Santhosh
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