Bloomberg News

Citigroup-Backed Battery Maker in Retail Foray: Corporate India

November 13, 2013

HBL Power Systems Ltd. (HBPS), an Indian maker of batteries for phone towers, plans to offer the electric cells for two-wheelers and home backup power systems to help more than double sales in four years.

Sales at the company, in which Citigroup Inc. (C:US) holds a 6.6 percent stake, may climb to 30 billion rupees ($473 million) by March 2017, boosted by the additional products, Executive Director T. Venugopal said in an interview. It will spend 1 billion rupees over the next 12 months to set up facilities to make automobile and home power backup batteries, he said.

A slowdown in the expansion of India’s phone networks after graft allegations and regulatory hurdles is prompting the Hyderabad-based manufacturer to look at markets least hurt by a decade-low growth in Asia’s third-biggest economy. The firm will compete with Exide Industries Ltd. (EXID) and a unit of Schneider Electric SA (SU) for a share of the two-wheeler market and households dealing with frequent power outages.

“Conventional segments are not showing growth for us, so much so that our share in telecom has fallen to 50 percent from 70 percent,” said Venugopal. “We see inverter and two-wheeler autos as the new engines of growth.”

Silent, Convenient

Demand for inverters is rising in the world’s second-most populous country as inadequate availability of fuel, losses at state-owned utilities and mining curbs weigh on power generation. Peak electricity supply fell 4.2 percent short of demand in the seven months through October, according to the Central Electricity Authority.

The market for inverters in India would’ve more than tripled to $1.4 billion by March 2017 from 2010, Frost & Sullivan estimates.

Amara Raja Batteries Ltd. (AMRJ), 26 percent owned by Johnson Controls Inc. (JCI:US), said last month it will start making batteries for inverters by March 2016 to reduce reliance on the automotive industry. Inverters, an electrical power converter that changes direct current from a battery to alternating current, have gained popularity for use in homes because they are silent and convenient to use.

HBL’s revenue, excluding units, rose 10 percent to 12 billion rupees in the year ended March 31, with telecommunications and industrial applications accounting for 65 percent. Net income more than doubled in the year to 204 million rupees, according to data compiled by Bloomberg.

Shares of the company fell 0.5 percent to 10.05 rupees as of 10:05 a.m. in Mumbai trading. They have declined 41 percent this year, compared with the 5.5 percent gain in the benchmark S&P BSE Sensex. (SENSEX)

Dealer Network

HBL needs a strong dealer network to win share of a market already dominated by Amara Raja and Exide in the automotive segment and Su-Kam Power Systems Ltd. and Schneider’s unit Luminous Power Technologies Pvt., which are leaders in inverters, said Rajasekhar R., an analyst at Cholamandalam Securities Ltd. in Chennai.

The company plans to double its distributors to 1,000 in a year, according to Venugopal, compared with about 21,000 for Amara Raja and 50,000 for Exide.

“It would be difficult to match the kind of brand recall its rivals have,” Rajasekhar said. “It would need huge investment. The best way is to look at gaining at the expense of the unbranded sector, especially in the rural areas.”

A rebound in two-wheeler sales driven by rural demand after the best monsoon rains since 2007 is brightening the prospects for battery makers even as car sales headed for the second annual decline amid slowing economic growth.

Plugging Gap

Sales of scooters and motorcycles jumped 18 percent to a record 1.5 million units in October, according to data provided by the Society of Indian Automobile Manufacturers. Deliveries rose in the three months ended September after falling in the previous two quarters.

HBL plans to target the replacement market initially to build a track record before approaching vehicle manufacturers to sell its batteries, Venugopal said.

The company started in 1977 with batteries for aircraft and later for industrial, defense and railway electronics, according to its website. It also makes the power systems for submarines, torpedoes, missiles, armored vehicles and tanks.

“It is too early to say when we may garner a sizeable market share,” Venugopal said. “But we firmly believe the Indian battery market has space for a third major player, and we want to plug that gap.”

To contact the reporter on this story: Sharang Limaye in Hyderabad at slimaye@bloomberg.net

To contact the editor responsible for this story: Arijit Ghosh at aghosh@bloomberg.net


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Companies Mentioned

  • C
    (Citigroup Inc)
    • $50.09 USD
    • 0.01
    • 0.01%
  • JCI
    (Johnson Controls Inc)
    • $48.59 USD
    • -0.02
    • -0.04%
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