New Delhi: Revenue for domestic lead-acid battery manufacturers is expected to grow by 10-11% in fiscal year 2025, similar to the 12% growth recorded in the previous fiscal, according to CRISIL reports. This uptick will be driven by steady demand in the automotive sector and additional support from the rising penetration of 5G technology, the expansion of 4G networks, the growth of data centers, and demand from the railways. Battery makers are increasing capital expenditure to enhance capacities, integrate backward into lead recycling, and diversify into lithium-ion batteries.The capex, projected at INR 11,000-12,000 crore between fiscals 2024 and 2026, will result in an increase in debt to partially fund these investments. However, robust debt protection metrics and stable credit profiles are expected, backed by healthy cash accruals due to a steady operating margin of 12-13%.
A CRISIL Ratings analysis of five lead-acid battery makers, which contribute over 80% of the sector’s revenue, aligns with these projections. Currently, 55% of the sector’s revenue comes from the automotive segment, while the remaining revenue is derived from industries such as telecommunications, home inverters, healthcare, and railways.
Anuj Sethi, Senior Director, CRISIL Ratings, stated, “Demand from the automotive segment is projected to increase 9-10% in fiscal 2025, driven by two-wheeler and passenger vehicle sales as well as replacement demand. This, along with a demand growth of 11-12% from the industrial segment due to expansion in the telecom, data centres and railway sectors, will ensure healthy revenue growth for lead-acid battery makers this fiscal as well.”
To mitigate dependence on the cyclical automotive segment, leading battery manufacturers are investing in lithium-ion battery capacities, which have diverse applications. Lithium-ion batteries are in demand for electric vehicles (EVs), renewable energy storage, data centers, consumer electronics, and industrial segments due to their high energy density, longer life cycle, and superior efficiency.
India currently relies heavily on imports to meet its lithium-ion battery needs. These imports have increased by approximately 45% over the past three fiscals to around INR 26,000 crore in fiscal 2024. China, South Korea, and Japan are the main suppliers, with China alone covering over 75% of the demand. Despite the high demand, domestic battery manufacturers will see only 15-20 gigawatt hours of lithium-ion battery capacity becoming operational in phases between fiscals 2025 and 2028, accounting for 25-30% of the total requirement at that time. These manufacturers will aim to secure tie-ups or offtake arrangements for a significant portion of this capacity.
Naren Kartic.K, Associate Director, CRISIL Ratings, remarked, “We expect annual capex of battery makers to double to INR 3,800-4,000 crore between fiscals 2024 and 2026 (from ~INR 2,000 crore previously) towards enhancing lead-acid battery capacity (current utilisation of 75-80%) given the stable demand, as well as to set up lead acid battery recycling capacities and lithium-ion battery capacities. Amid this sizeable capex, strong balance sheets will help absorb initial losses from lithium-ion battery plants and the impact of debt for part-funding capex, keeping debt protection metrics healthy and credit profiles stable.”
The ongoing expansion and diversification efforts by domestic lead-acid battery manufacturers underline their strategic response to evolving market demands. As they enhance their production capacities and explore new segments, the industry is poised for stable growth backed by solid financial management and adaptive strategies.
