Amar Raja Annual Report 2013-14

7/24/2019 Amar Raja Annual Report 2013-14

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AMARA RAJABATTERIES

LIMITED

ANNUAL REPORT

2013/ 14

it just makes


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hese are momentous times. Rather than be

inuenced by the slowdown of the past, thetime has come to be excited by the prospectsof the future.

The probability of real GDP growth at 8-9% perannum over the medium-term can potentiallydouble Indias economy in just ve years from now.

Stored energy will represent one of the vitalbuilding blocks of this robust national rebound. AtAmara Raja Batteries Limited, we are adequatelyprepared to play a critical role in this signicantnational resurgence through proactive capacitybuilding.

It took us decades to reach where we are now interms of capacity; we are signicantly enhancingour installed capacity in just 18-24 months byinvesting H7.50 billion, the largest outlay over thelast decade.

With the objective to not only capitalise on thecountrys growth but also accelerate it.

t


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more incomes.more vehicles. more batteries.

3,277Indias GDP per capita (PPP)in US$, 2013-14

37Number of passenger cars per1,000 people in China, 2012

1.81Indias four-wheeler sales(million units), 2013-14

8Indias projected four-wheelersales (million units), 2020

5,359Estimated Indias GDP percapita (PPP) in US$, 2015

15Number of passengercars per 1,000 people inIndia, 2012

more middle-class.more youth. more batteries.

1.2Indias population(billion), 2011

991Indias consumerspending(US$,billion), 2010

3.6Indias projectedconsumer spending(US$, trillion), 2020

464Indias population(million) in the age-groupof 15-34, 2021

430Indias population(million) in the age-groupof 15-34, 2011

1.3 +Indias projectedpopulation (billion),2020

29Indias projectedmedian age, 2020

26.7Indias median age,2013

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more people.more speech. more batteries.

795Indias wireless subscriberbase (million), 2013

5.71Number of estimatedtelecom towers (lakh) inIndia, 2016

50The % of rural towers thatare projected to be run onhybrid power by 2015

520Indias estimatedsmartphone penetration(million), 2020

1,145Indias estimated mobilesubscriber base (million),2020

90Indias smartphonepenetration (million),2013

~40The % of Indias telecomtowers that encounterload shedding of morethan 12 hours per day

4.06Number of telecomtowers (lakh) in India,2013

more IT literacy.more computer users. more batteries.

210Number of internetusers in India (millions),September, 2013

5.6The estimated %contribution of internet-to-GDP in India, 2016

2.5Global average IT spendas a % of GDP, 2013

76Indias e-commerceindustry (US$, billion),2020 (estimated)

330Estimated number ofinternet users in India(millions), 2016

1Indias e-commerceindustry (US$, billion),2014 (estimated)


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more prosperity.more banking. more batteries.

74Number of ATMs inIndia per million people

50

80

The % of credit-to-GDPratio (projected) of everydistrict, 2020

The estimated % of totalterm-life-insurance-sum-assured-to-GDP ratio ofeach, 2020

100The % of Indian citizens(recommended by RBI)above 18 years with full-service bank accounts,2016

2

30

Number of ATMs (lakh)estimated in India, 2016

The % of total term-life-insurance-sum-assured-to-GDP ratio of each, 2013

200

65

Number of ATMs inChina per million people

The estimated % ofnew ATMs in Tier II andIII cities, 2016

The data in Page 2-4 is taken from various sources

0.9Number of ATMs (lakh)in India, June, 2012

40The % of Indian citizenswith functional bankaccounts, 2013

10The % of credit-to-GDPratio of every district,2013

Karakambadi,Tirupati

Men at workat the pastingsection

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Through the Amara Raja way and

through enduring progressivepartnerships we will be a GlobalLeader in Batteries and BatteryTechnologies and a dominant

player in Indian Ocean Rim.

To transform our spheres of influence and to improve the qualityof life by building institutions that provide better access to betteropportunities, goods and services to more people... all the time.

Innovation forus is proactivelyrebelling for betterways of doingthings leading tonewer possibilities.

Responsibility tous is the totalownership ofour thoughtsand actions inevery situation toachieve maximumcommon good inthe best interestof Environment,Society, Customer,Supplier, Employeeand Shareholders.

Experiences tous are what wecreate for ourstakeholders whichmake them feelpart of somethingspecial, leadingto endearingrelationships.

Entrepreneurshipto us is leadingwith courageand conviction toconvert gaps intoopportunities,create wealthand contribute togrowth.

Excellence to usis continuallyenhancing ourperformanceto consistentlyproduceoutstandingresults with lastingimpact.


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our past. a goodfoundation for the future.

Business growth

Net revenue (J million)

Revenuegrowth

16.15 %Over 2012-13

21.22 %CAGR over 5 years

09-10

10-11

11-12

12-13

13-14

14,645

17,611

23,645

29,589

34,367

EBIDTA (J million)

EBIDTAgrowth

23.61 %Over 2012-13


09-10

10-11

11-12

12-13

13-14

2,965

2,588

3,570

4,658

5,758

Net profit (J million)

Net profitgrowth

28.16 %Over 2012-13


09-1010-11

11-12

12-13

13-14

1,6701,481

2,151

2,867

3,674

Shareholder value accretion

Earnings per share (J )*

Earnings pershare growth

* For face value ofH 1 each

28.16 %Over 2012-13


09-10

10-11

11-12

12-13

13-14

9.78

8.67

12.59

16.78

21.51

* For face value ofH 1 each

Book value per share (J )*

Book value pershare growth

28.58 %Over 2012-13


09-10

10-11

11-12

12-13

13-14

31.83

37.82

48.21

62.05

79.78

Market capitalisation (J million)

Marketcapitalisationgrowth

44.13 %Over 2012-13


09-1010-11

11-12

12-13

13-14

14,02416,206

25,007

46,743

67,368

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Business returns

Return on assets (%)

ROAgrowth

481 bpsOver 2012-13

2,005 bpsOver 2009-10

09-10

10-11

11-12

12-13

13-14

44.51

34.61

45.76

59.75

64.56

ROCE (%)

ROCEgrowth

78bpsOver 2012-13

133 bpsOver 2009-10

09-10

10-11

11-12

12-13

13-14

37.12

30.52

36.48

37.67

38.45

National Award forExcellence in CostManagement

Jayadev Galla, Vice Chairmanand Managing Directorreceiving the National

Award for Excellence in CostManagement for the year2012 of Institute of CostAccountants of India fromMr. Sachin Pilot, FormerHonble Union Minister ofState for Corporate Affairs,Government of India

Amara Raja has not tapped the equity marketeven once during its high-growth phase that commenced in FY01.Market capitalisation grew at 84.75% CAGR over five years enhancingshareholders wealth.

007006Amara Raja Batteries LimitedAnnual Report 2013-14


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our journey continues.

THE MANAGEMENT STATEMENT

The Companys product sales areclimbing; brands have been aresounding success; factories arebuzzing with activity; people are happyand you, the shareholders, are satisfied.

Logic says we should be content.Rationality guides us to makeincremental investments. Prudenceadvises cautious aggression.

At this crucial juncture, we can eitherbe satisfied with the bountiful returns;or undertake the challenge of doingthe extraordinary that transformsthe perception of the brand andthe corporate in the minds of thestakeholders and the sector as a

whole. Here at Amara Raja, we haveopted for the latter option. Case inpoint: we initiated our largest capacityaugmentation exercise at a time whenmost corporates chose to put theircapex investments on the backburner.

Because Amara Raja has relentlesslyattempted to outperform the prevailinggrowth averages. And has inevitablymade it happen through a combinationof superior product quality, distinctivepositioning, attractive price-valueproposition, enduring OEM customerrelationships, deeper distributionnetwork, prudent fiscal managementand a proactive ability to invest aheadof the curve.

The efficacy of this approach is reflectedin the superior numbers that AmaraRaja posted in 2013-14 16.15%increase in revenues, 28.16% in profitafter tax, growth in return on capitalemployed by 78 bps - even as the Indianeconomy reported its second slowestgrowth of the last 10 years in 2013-14.

RechargedRecharged this single word aptly

sums up the energy within AmaraRajas team, which provides assurancethat our largest capacity augmentationinvestment will turn out to be anunprecedented success. For it is not

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only about more batteries, but aboutbatteries with new applications. Itsabout novel processes, sophisticatedtechnologies, and state-of-the-artequipment. Its about entrenchingdeeper inside existing markets. Itsabout establishing a foothold innew sectors. Its about doing thingsconsidered inconceivable untilyesterday. Its about living our ethos Gotta be a better way!

And this was the only way forward forAmara Raja. For it was the need of thehour!

Economic demand: The newly electedCentral Government with its emphasison development is acting as a harbingerof economic resurgence. This will

trigger increased power consumption,widening Indias power deficit, whichshould significantly increase thedemand for batteries.

Brand demand: Over the lastdecade, our battery brands Amaron ,PowerZoneTM, Amaron Volt TM Quanta ,Power Stack and Power Sleek TM haveestablished a reliable recall aroundavailability and performance. Withour plants already operating at stretchutilisation, product availability wouldhave been hampered as demand isexpected to accelerate over the nextfour or five years, making it imperativeto invest in sizeable additional capacity.

Customer demand: Having gained thepreferred partner status with large andrespected corporates (i.e. Indus Towers,Honda, Maruti, and Hyundai, amongothers) a marginal capacity increasewas never an option.

Consumer demand: Indias aftermarketis growing across every vehiclecategory. Two-wheelers increased theirpenetration from 11.7% to 21.0%over 2001-2011; rural penetrationmore than doubled to 14.3% whileurban penetration grew from 24.7%to 35.2%. Four-wheeler penetrationincreased from 2.5% to 4.7% over2001-2011. Indias preference

What has worked for Amara Raja in the recent past willcontinue to work over the foreseeable future with onedifference the scale and urgency will increase, translatinginto larger value in the hands of all those who own shares inour Company.Dr. Ramachandra N Galla

Chairman



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for Amaron (for its superior fieldperformance and value-proposition)increased proportionately, resulting inAmara Raja emerging among leaders inthe niche aftermarket space. Hence, alarge new capacity commissioning wasinevitable.

Shareholder demand: Deliveringconsistent returns and ensuringimproved profitability for theshareholders is an unwritten rule atAmara Raja. We have lived up to ourcommitment in the past, deliveringconsistently healthy returns, in goodtimes and bad. We have strivedtirelessly to sustain this reputation.Our greenfield and brownfield capitalinvestment is an important initiative instaying true to this commitment.

ExcitementAt Amara Raja, our excitement knowsno bounds. We view our H7.50 billionexpansion as business-transforming as great things are happening acrossthe organisation. For example, at ournew facility, we will be launching newproducts for diverse user applications(Home UPS and solar applications), weare installing best-in-class environmentalmanagement system and ventilation

solutions, we will use robotics forroutine assembly-line activities; weexpect to leverage best-practices at ourexisting and new facilities.

We are working on new products forexisting and new applications. We areworking in creating markets. It is very

encouraging to see the passionateinvolvement of every member of theAmara Raja team with a single-mindedfocus in taking the Company to newheights.

Cautious OptimismConcerned well-wishers may feelwe are going overboard, havingpeaked too early. We wish to assureour stakeholders that this significant

expansion will not compromise theirinterests for we have ring-fenced ourinvestments with de-risking strategies.

The investment has been financedentirely from accruals and no debtthrough which we hope to retainbusiness profitability.

THE MANAGEMENT STATEMENT

We continue to build our capability matrix for we trulybelieve that there is always a Gotta be a better way in

delivering stakeholder delight.Jayadev Galla

Vice Chairman and Managing Director

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Our investment has been phased; onesection was commissioned in January2014 and the other is scheduled to goon stream by end-2014.

Our planned fungibility will makeit possible to shift from one productto another in line with marketrequirements.

Our new capacities will enable usto address the requirement of new

applications and allow us to strengthenour global presence.

In doing so, we are optimistic of havingcreated the foundation for a largerand stronger company empoweredto address the projected economicresurgence expected to manifest itself

across the foreseeable future. In doingso, we hope to enhance shareholdervalue.

AcknowledgmentsOn behalf of the Company, we takethis opportunity to convey our sincereappreciation to all our shareholdersand express our gratitude to thegovernment and its agencies, our

joint-venture partner Johnson Controls

Inc., customers, employees, channelpartners, bankers and our suppliers.

With warm regards,



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In the backdrop of a subduedeconomic and businessenvironment, it has becomeimportant for a corporate toprovide a narrative, whichshowcases its ability to sustain itsgrowth in good times and bad,which provides complete, fair andbalanced information of businessoperations, which empowersshareholders to make an informeddecision to remain invested - areview titled ManagementDiscussion and Analysis.

013ECONOMICOVERVIEW

017INDUSTRIALBATTERIES

023AUTOMOTIVEBATTERIES

028BUSINESSDRIVERS

035ANALYSIS OFFINANCIAL STATEMENTS

038RISKMANAGEMENT

040CORPORATESOCIAL RESPONSIBILITY

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Global economyThe global economy remain subduedas global GDP growth deceleratedfor the third year 3.9% in 2011 to3.1% in 2012 and 3% in 2013. Most

developed economies addressed thereality through appropriate remedialfiscal policy action. Besides, a number ofemerging economies, which had alreadyexperienced a debilitating slowdown inthe past two years, encountered newdomestic and international headwindsduring this period.

Prospects: Looking ahead, globalgrowth is projected to strengthento 3.6% in 2014 and 3.9% in 2015(Source: IMF April 2014). Global activityis expected to improve during 2014-15,

with much of the impetus coming fromadvanced economies. Many emergingmarket economies account for morethan two-thirds of global growth andtheir output growth is likely to be liftedby exports to advanced economies.

Challenge: Global recovery is stillfragile despite improved prospects withsignificant downside risks. Among oldrisks, those related to emerging marketeconomies increased. According to

the Global Financial Stability Report,rapid normalisation of the Americanmonetary policy or renewed boutsof high risk aversion on the part ofinvestors could result in further pain(Source: IMF, April 2014).

of our performance and plans

a real


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Indian economyIndias economic growth of 4.7% in2013-14 was marginally higher than

the previous year due to an improvedperformance in the agriculture andallied sectors.

The slowdown was primarily due toan unsupportive external environment,regulatory policy logjam, structuralconstraints and inflation. Despite thesechallenges, there were positives whichprovided a foundation for resurgence:

The current account deficit contracted;the fiscal deficit target was met

India implemented substantivemeasures to narrow external and fiscalimbalances, tighten monetary policy,move forward on structural reformsand address market volatility to reducevulnerability

India built upon its foreign exchangereserves

The Indian economy is placed betterthan what it was in 2013. A dynamicgovernment at the Centre strengthens

optimism of robust economic growth,which is projected at 5.6% in 2014,rising to 6.0% in 2015 (Source: RBI).

User sectorsTelecom: Indias telecom industryposted a 10.1% revenue growth in

2013-14 from 8.6% in the previousfiscal despite intense competition andcall rates declining to an all-time low.The improvement was largely a resultof growth in the wireless subscriberbase, reduced churn levels and animprovement in revenue realisation.

More importantly, 2013-14 will beregarded as a transformational yearfor the industry. The uncertainty ofthe previous years ended with fresh

spectrum auctions taking place. TheDepartment of Telecom, Government ofIndia, announced significant initiatives- revision of the tower rollout policyand the mergers and acquisitions

India became the worlds third biggest economy in terms ofpurchasing power parity (PPP), according to a World Bank report, rising fromthe tenth position in 2005 (Source: The Economic Times, April 30, 2014).

3rd

biggest

Chilling plantcooling towers

New plant atNunegundlapalle

village

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policy, which permitted 100% FDI inthe sector. Spectrum auction in thelast quarter of FY 2013-14 enhanced a

clarity for sectoral expansion.

HUPS: An estimated 17 states witnessedsignificant power supply shortagesin 2013-14. As per CEA estimates,South India experienced a powerdeficit of 19.1% in 2013-14 comparedto a 15.5% deficit in 2012-13. Thisunreliable power supply made UPSbackup a critical aspect of technology-led operations, strengthening demandfor UPS batteries.

Automotive OEMs: The domesticpassenger vehicle industry, pegged at2.5 million units in 2013-14, declinedby 6.1% over the previous year as allthree sub-segments (passenger cars,

utility vehicles and vans) experienceda demand contraction despite anexcise duty cut and the introduction

of 101 models (35 completely new).Demand had declined over two years(FY2012-14) due to a sharp increase inthe cost of ownership while growth inreal per capita income declined to anaverage of 4%. However, the domestictwo-wheeler industry recorded a salesvolume of 14.8 million units in 2013-14, a growth of 7.3% over the previousyear.

Automotive replacement: The

demand for batteries from this segmentcontinued to register healthy growthdue to the addition of vehicles. Besides,

battery usage increased (due to roadcongestion and the need to optimisefuel consumption) resulting in faster

battery replacement.

With the automotive battery beingrecognised as a critical component,users show an increasing preference forbranded products.

(Source: IMF)

Indias per capita income at current prices during 2013-14 was estimated at H74,920 compared with H67,839 during 2012-13,a rise of 10.4%.

10.4%

rise



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BUSINESSDIVISION 01

industrialbatterydivision

900 Mn AHCapacity of large VRLA batteries(Standard Equivalent units per annum)

3.0 MnCapacity of medium VRLA batteries(Standard Equivalent units per annum)



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Overview Products Distribution

network

Customers Niche

features

Manufacture batteries for thetelecom, UPS,railways, solar andpower utility sectors

Manufacturingfacility is ISO9001 and ISO14001-accredited

Product ranging from 7.2Ah to 5,000 Ahunder multiplebrands

Amaron Volt TM (Telecom, datacentres, power, oil& gas)

Power Stack

(Telecom, datacentres, power,oil & gas, IndianRailways, solar)

Quanta (UPS applications)

Power Sleek TM (Wireless telecom,UPS applications)

Largely a B2Bmodel

100 AQuA channelpartners facilitatethe reach for UPSbatteries across thecountry

Key customersincludeIndus Towers,Viom Networks,ATC, Bharti Infratel,Bharti Airtel,Vodafone, Aircel,BSNL, IndianRailways, Schneider,Emerson, Numeric,

Delta, DB Poweramong others

Partnered BhartiAirtel for itsAfrican, Sri Lankanand Bangladeshnetwork expansionsas the vendor-of-choice

Entered into astrategic supplypartnership withleading telecomtower companiesand operators.

Devised innovativeproduct solutionsfor ever-changingcustomer needs

Business in 2013-14Received the Platinum Award forPartner of the Year from Indus TowersLimited

Commissioned the new MVRLAplant at Nunegundlapalle village,Bangarupalyam Mandal, Chittoordistrict and expanded LVRLA plantcapacity at Karakambadi, Tirupati

Improved quality of business throughbetter product mix

Strengthening the business

01Making the operations morecompetitiveImproved LVRLA plant productivity

through de-bottlenecking in the pastingarea; this reduced the first charge failurerate and scrap generation in assemblylines

Implemented important smallgroup activities for optimising energyconsumption and costs

Implemented safety measures(including to-and-fro transportation) tominimise absenteeism during agitationfor the bifurcation of Andhra Pradesh

Implemented the gravity lead potconcept, which optimised energy andlead consumption

Commissioned the capacityaugmentation of LVRLA batteries atKarakambadi, Tirupati

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Inauguration ofnew plant

Mr. Brian Kesseler,President PowerSolutions, JohnsonControls Inc. lightingof the lamp, whileChairman looks on,

at the inauguralfunction of new plantat Nunegundlapallevillage.

Transferred three MVRLA lines fromthe existing to new unit; commissionedtwo new lines at that site; the line at

Tirupati will be transferred in the secondquarter of 2014-15, which will enhanceMVRLA capacity further

Appointed a global expert to designthe new plant as per internationalenvironmental standards

02 Making our brand morecompellingDeveloped and soft-launched batteriesfor DG start application

Broad-based the product range ofUPS batteries; added 120 Ah and

150 Ah batteries to the portfolio tocater to wider applications

Medium-term optimismTelecom: This sector offers a growthopportunity for the following reasons:

The countrys telecom tower base isexpected to increase from 4.06 lakhunits in 2013 to 5.71 lakh units by2015 (Source: Telecom and NetworkCommunication Today, November 14,2013).

Increase in tower sharing by telecomservice providers (cost optimisation

strategy) has increased the energy

requirement per tower (hence batterybank capacity).

Mobile data traffic increased by 87%in 2013 due to an increase in 3G usage(Source: News & Analysis of /digitalMedia in India, March 31, 2014) , atrend that is only expected to increaseas smart phone penetration grows from10% or 90 million devices in 2013 to45% or 520 million devices by 2020(Source: Ericsson report).

The regulatory norm to reduce CO 2 emission could elevate batteries tothe status of being the primary powersource for cell sites.

Installing the gravity lead pot concept in the grid formation unit for all plantsUtilising a robot for labour-intensive operations

Automating battery movement between assembly-formation finishing

Whats new at our

new unit?



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BFSI: The RBI issued banking licencesto two out of 25 NBFC applicants,with more approvals expected in the

short-term. As part of the new licensingnorms, new banks must open at least25% of their branches in un-bankedrural centres, which is expected to drivebackup power demand.

ATMs: The countrys ATM rolloutis expected to increase followingfavourable regulatory policies; this isexpected to catalyse the demand forbatteries.

The government directive (UnionBudget, 2013-14) that each Indianpublic sector bank branch must have an

ATM by March 2014.

The recent RBI permission to non-banking financial institutions to set uptheir own White Label ATMs (WLAs) insemi-urban and rural areas.

According to the report titled IndianATM Industry: Gearing Up for the NextPhase of Growth, the number of ATMsstood at 99,218 in June 2012 and isexpected to reach 200,000 ATMs by2016. About 50-65% of new ATMs will

be deployed in Tier-II and III cities; ATMrollout in Tier-I cities will grow at a rateof around 20%.

IT/ITeS: India emerged as a keydestination for the global sourcing of ITand ITeS, accounting for around 52%of the global sourcing market during2012-13 (Source: Dun & Bradstreet:IT & ITeS sector Outlook 2014 ) . Withcost optimisation being the key focus ofdeveloped and other large economies,IT and ITeS is only expected to increase.NASSCOM has envisaged the IndianIT/ITeS industry to achieve a revenue

target of US$ 225 billion by 2020. The

LT, Compressor andRO and DM Plant

External view ofthe LT, Compressor

and RO and DMPlant - new plant

at Nunegundlapallevillage

According to the report titled Indian ATM Industry:Gearing Up for the Next Phase of Growth, the number of ATMs stood at99,218 in June 2012 and is expected to reach 200,000 ATMs by 2016.

200,000

ATMs

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Overview Products Distribution

network

Customers Niche

features

Commenced operations in 2000with technologyfrom JohnsonControls Inc. USA

Manufacturing facility is QS-9000,ISO-14001 andTS- 16949 certified

Passenger cars:Amaron Pro,Amaron Flo,Amaron Go,Amaron Black andAmaron Fresh

Commercialvehicles: Amaron Hiway

Tractors: Amaron

Harvest

Two-wheelers: Amaron Pro BikeRiderTM

Amaron network comprises294 franchiseddistributors,including 25,000-plus retailers

PowerZonenetwork comprises1,100 retailoutlets ensuringwidespread semi-urban and ruralpresence

Major OEMcustomers: Ford,Maruti Suzuki,Hyundai, Honda,M&M, Tata, Volvo,Eicher, DaimlerBenz, Tafe Tractors,Isuzu Motorsamong others

Major privatelabel customers: Bosch, Lucas,Cummins and ACDelco

Leading player in the aftermarketsegment amongfour-wheelers

Battery supplier tothe entire ComfortDelgro taxi fleet inSingapore

100% share ofbusiness with FordIndia and DaimlerBenz

100% share ofbusiness in Maruti

A-Star exports andHyundai EON

First supplierof batteries toMahindra andMahindra forScorpio microhybrid vehicles

First to introducezero maintenancefour-wheelerbatteries and

VRLA two-wheelerbatteries

First to provideextendedwarranties toconsumers

Business in 2013-14Increased sales volumes of automotiveaftermarket four-wheeler batteries by12% over 2012-13

Maintained OE volumes throughstrong business relations with high-growth OE brands, despite a decline inOE production

Facilitated healthy growth inaftermarket volumes with deeperpenetration

Grew exports by 35% due to theimplementation of region-specificmarketing strategies

Increased sales volumes of two-wheeler batteries by 63% over 2012-13;the after-market segment grew by morethan 30% over the previous year

Commenced despatches of batteries toTwo Wheeler-OEM Honda Motorcycle &Scooter India Pvt. Ltd. during the year

Strengthening the business

01Making the operations morecompetitiveImproved four-wheeler batteryproductivity through various initiativeswhich include de-bottlenecking theoxide unit, removing all non-valueadding shopfloor activity through Leanand Six Sigma projects

Improved productivity of the two-wheeler plant by identifying and

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Chargingstation

Charging of two-wheeler batteriesat Karakambadi,Tirupati

plugging procedural gaps andeliminating non-value-adding shopflooractivity

Instituted a task force forimplementing projects to improve safetyand environmental standards

Added three production lines for two-wheeler batteries, which commencedoperations in March 2014

02 Making our brand morecompellingFilled the product range gaps, whichincreased business volumes

Sustained investment in brand-building and below-the-line marketingactivities

Strengthened the distribution networkto 25,000+ retailers to establish apresence across all Tier-II and Tier-IIItowns

Implemented strategic movesto counter competitive forces andstrengthen the value-proposition forcustomer

Strengthened presence in key globalmarkets and forayed into new markets

Medium-term optimismEstimates suggest a sectoral resurgenceover FY2014-17 as the two biggestfactors that influence automobiledemand - per capita income andownership cost are likely to turnfavourable. Passenger vehicles areexpected to report sharper volume

growth than two-wheelers due to pent-up demand and lower penetration.

Passenger cars: The new IndianGovernment is clearing economicroadblocks, which is expected toenhance consumer confidence and

catalyse car purchase. Moreover,important steps have been taken tooptimise the cost of ownership ofpassenger cars.

In February 2014 , excise duty on smallcars was reduced from 12% to 8%; onmid and large-sized cars, it was broughtdown from 24% to 20% and 27% to24%, respectively.

Diesel price subsidies declined to ahistoric low. The government is mullinga slow but steady increase in prices ofother subsidised petroleum products ofmass consumption, which is expectedto stabilise the price of automotive fuel(petrol and diesel) shoring the demandfor passenger cars.

The sectoral optimism was reflected inthe Auto Expo 2014, which witnessednearly 70 launches/concept unveilings,

Expanding the range of products with the expanded metal technologyfor manufacturing negative plates for optimising lead consumption andimproving product qualityDesigned the plant to meet international environmental norms.

Whats new at ournew four-wheeler

unit?



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compared to the earlier edition whereabout 47 vehicles were showcased andlaunched.

Commercial vehicles: The IndianGovernment targeted a US$1 trillioninvestment in infrastructure as part ofthe Twelfth Five Year Plan (2012-17),which can catalyse the demand forcommercial vehicles. Besides, Societyof Indian Automobile Manufacturersis pushing for a fleet modernisationprogramme. Under the scheme, about3.9 million trucks (more than 10 yearsold) would be replaced with new fuel-

efficient variants.

Tractors: Long-term industry drivers

continue to remain favourable. TheIndian Government remains committedto rural development and agri-

mechanisation; besides scarcity offarm labour, healthy credit availability,moderate penetration and a shortenedreplacement cycle have catalysed tractordemand.

Growing at a 9% CAGR, Indias tractorpopulation could reach 13 million units(excluding tractors required for purelycommercial purposes which wouldbe an additional 2-4 million units) by2024-25. At 13 million units, tractor

penetration (HP/ha) would increase to3.4 times, comparable to the current

tractor penetration levels in developedcountries.

Two-wheelers: Despite being thesecond largest manufacturer oftwo-wheelers, India remains under-penetrated compared to otheremerging markets, which couldcorrect over the next few years for thefollowing reasons:

Rising young population: India hasabout 50% of its population below theage of 25 and more than 65% belowthe age of 35. The current medianage of 26.7 is expected to reach 29 by2020.

Aftermarket potential(Four-wheelers)

15.00

U n i

t i n

M n .

5.00

10.00

0.00FY10

9.80

FY11

10.03

FY12

11.13

FY13

12.47

FY14

14.21

Two-wheeler penetration(per thousand person) in CY13

300

250

200

150

100

50

0

M a l a y s i a

181

T a i w a n

84

I n d o n e s i a

261

I n d i a

76

D e n m a r

k

86

C h i n a

100

B r a z

i l

82

Minimum support prices of variousagricultural commodities ( D per quintal)

C o t t o n m e d

i u m s t a p

l e

C o t t o n

l o n g s t a p

l e

Y e l l o w

S o y a

b e a n

B l a c

k S o y a

b e a n

M a i z e

P a d d y

W h e a t

1 , 3 1 0 1 , 2 5 0 5 8 0

1 , 4 0 0

3 , 7 0 0

4 , 0 0 0

2 , 5 6 0

2 , 5 0 0

1 , 3 1 0

1 , 3 5 0

3 , 6 0 0

3 , 9 0 0

2 , 2

4 0

2 , 2

0 0

1 , 1 7 5

7 5 0

1 , 7 7 0 1 ,

9 9 0

1 , 0 2 0

9 0 0

9 0 0

2013-14 2012-13 2006-07

Source: Ministry of Agriculture Source: World Bank

lower penetrationproviding hugeopportunity to India

Proportion of Indias populationbelow the age of 25; more than 65% ofits people are below 35 years.

50 %

population

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Rising rural income: The governmentshifted its focus towards rural sectordevelopment. The governments crop

price support policy over the last fiveyears has led to higher rural incomes.

AftermarketEvery vehicle added on Indian roadscreates an aftermarket opportunity asbatteries need to be changed every fewyears. So while OE demand extends onlyto assembly, the aftermarket demandstays upbeat across useful asset life,making the aftermarket a significantlylarger opportunity. And while theOE market may experience volatilityconsequent to economic and business

cycles, the aftermarket growth rateremains relatively stable.

Since the battery is a critical componentin every automobile (including a two-wheeler), long life and reliability arethe most important factors influencingpurchase. With the organised sectorproviding a superior value-proposition,there is an increasing shift towardsbranded batteries in the aftermarketsegment.

Amara Rajas strategyAftermarket: The Companys significant

presence in the aftermarket segment de-risks it from sectoral cyclicality. Goingforward, the Company will continue to

strengthen its distribution network byentering areas where its penetration islow, filling gaps in its product range

and ensuring supply chain efficiency.Moreover, the Company will continue toinvest in brand promotion and ground-level initiatives to develop a strongerbond with customers, retailers anddistributors.

OE market: While the aftermarket is thekey revenue earner, the Company is alsoworking to forge stronger relationshipswith leading and reputed OE playersin the automotive market, which will

increase its brand preference at the timeof replacement.

Indias automotive sector performance

CAGR for last five years (2007-08 to 2012-13)Total: 11.6%, Cars: 11.3%, UVs: 18.4%, 3Ws: 10.9%, LCVs: 16.8%, M&HCVs: -1.1%, Tractors: 10.7%

(Source: SIAM)

P r o

d u c t i o n

N o .

i n M n s

6

5

4

3

2

1

0

Car UV 3-W LCV M&HCV Tractor

2006-07

0.36

0.290.23

0.56

0.31

1.24

2.98

2007-08

0.35

0.290.25

0.50

0.35

1.42

3.16

2008-09

0.340.190.22

0.50

0.32

1.52

3.09

2009-10

0.44

0.250.32

0.62

0.42

1.93

3.98

2010-11

0.54

0.34

0.41

0.80

0.53

2.45

5.08

2011-12

0.65

0.38

0.53

0.88

0.61

2.51

5.56

2012-13

0.57

0.28

0.55

0.84

0.80

2.43

5.48

Chargingarea

Automotivebattery

division atKarakambadi,Tirupati



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supply chainBUSINESSDRIVER01

A standby battery is critical acrossapplications. This criticality makes itimperative to replace non-functioning

batteries immediately.

Addressing this now is what makessupply chain efficiency crucial to thesuccess of a battery manufacturer. Thesupply chain challenge has becomeeven more complex especially for AmaraRaja for the following reasons:

The Company services more than1,200-plus channel partners pan-Indiaas well as the distributors spread acrossthe Indian Ocean Rim

The Company services the diverseneeds of leading OEMs in theautomotive, UPS and telecom sectors

The success of Amara Raja in this field isreflected in the Companys positioning a supplier preferred among leading

OEMs and a brand preferred by amongdiscerning individuals.

Moreover, the supply chain team isresponsible for aggregating variousinputs from multiple sources withinIndia and globally to its manufacturingfacilities.

Raw material sourcing: Lead and leadalloys are the most critical componentsfor battery manufacture by value. TheCompany maintains a prudent balancebetween importing lead and sourcingit from domestic lead producers.The Company actively maintains

procurement synergies with its jointventure partner Johnson ControlsInc. USA -- to improve procurement

efficiency.

The Company strengthened its materialsourcing capability. It secured supplyagreements for the entire volume of keyinputs in line with its business plan. TheCompany also strengthened its vendorteam for ensuring seamless materialsourcing for its expanding capacities.

Logistics: The team focuses on reachingproducts to its destination with speedto adhere to delivery schedules andin a cost-effective manner to counterinflation. The challenge lies in handlingclose to 100 vehicles daily for inbound

Operationalexcellence

Amara Raja received theOperational Excellence

in Warehousingaward at the 3rd Asia

Manufacturing SupplyChain Summit

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and outbound traffic to more than300 destinations with efficient systemsand processes in place through our

distribution networks.

Road transport: The Companytransported finished products throughcommercial vehicles. The continueddiesel price rise in 2013-14 consequentto diesel price de-regulation furthercomplicated the challenge of optimisinglogistics costs.

Over the last 24 months, the teamundertook a number of initiatives tostrengthen its logistics backbone.

Extended business relations frombrokers to vehicle-owners; expandedthe broker and vehicle-owner network ensuring increasing vehicle availability

Forged business relations with reputedtransporters serving a particular regionto ensure timely consignment delivery

Provided a detailed shift-wise, weeklyschedule of vehicle requirements toevery transporter providing them with

the adequate opportunity to arrange forvehicles

Consistently maintained a high loadfactor in excess of 90% - optimisinglogistics cost per battery

Strengthened adherence to thepayables against proof-of-deliveryapproach

Institutionalised an appraisal systemfor all transporters and rewarded thesuperior performers

Automated the documentmanagement system which reduced thevehicle waiting time to a quarter of theearlier levels

Successfully created a network oftransporters to address demand round-the clock

Implemented a solution whichautomated the shipment note; itprovided an SMS alert from thedistribution centre to the franchisee(s)detailing the material despatch date,vehicle number and the tentative arrivaldate

To optimise logistics costs, theCompany increased the transportationof consignments via rail which involved

strategic planning and accuratescheduling. Substantial in-bounddespatches were transferred via rail in2013-14.

Shipping: The Company shifted itsfocus to deal directly with shippingliners instead through freightforwarders. This entailed analysingthe key routes used for its exports,identifying the best liner for eachroute and entering into medium-

term contracts with them, optimisingshipping costs. Having been awardedwith the Star certification, the Companyleveraged its export/import benefitsfrom the government to guaranteeunhindered movement of materialthrough ports.



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quality management

Amara Raja carved a niche through anemphasis on qualitative consistency,a fact reflected in its longest warranty

batteries.

Building quality culture across all levelsand at all functions is the key for oursuccess. The Company institutionalisedContinuous Improvement (CI) andLean Implementation programmes inaddition to the use of TPM, QCC, VisualManagement, 5S, Industrial Engineering(IE) studies and Lean Six Sigma. Itbenchmarked operational practices withthe plants of Johnson Controls Inc.

2013-14 in retrospectThe Company continued to improveresource utilisation and minimisein-process rejections by leveragingquality techniques (QC, Six Sigma andKaizen) across all facilities. Moreover,

low-cost automation projects andsmall group activities helped minimisefailures. About 235 projects have been

implemented, which are expected toenhance efficiencies and quality. AmaraRaja implemented automated datalogging management system for bettertraceability and supervision.

The Company always focused onimproving the quality systems andtheir effectiveness. During the yearthe Company achieved B ranking inAlliance Supplier Evaluation Standardfrom Renault and Nissan, enabling us to

start regular supplies.

RecognitionBest Organisation SupportingQC Movement award (fourth time)along with seven gold awards andtwo silver awards at regional level

QC competitions by the Quality CircleForum of India (QCFI)

Best Organisation Supporting QCMovement award in the private sector(first time at the national- level) alongwith four par excellence and fourexcellence awards from QCFI at thenational-level

Two EXCELLENCE awards atinternational QC competitions (ICQC)organised by the Association of PioneerQuality Control Research (PQCRA) inTaiwan

Most Preferred Battery Brand Telecom from Frost & Sullivan

South OME-Energy Award 2013from Indus Towers Limited

Platinum award for Partner of the Year 2013-14 from Indus TowersLimited for customer-focused approach,service delivery and product innovation

Silver award in the infra equipmentcategory from Indus Towers Limited

Consistent High Quality Performance

award from Maruti Suzuki Limited

National award for Six Sigma Projectfrom the Confederation of IndianIndustry

Special Award for Best Six SigmaProject from the Indian StatisticalInstitute

Packing Two-wheelerbatteries

BUSINESSDRIVER02

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human resource

Amara Raja believes that intellectualcapital represents its most valuable asset- from the top floor to the shopfloor. In

line with this, the Company positionedemployee engagement as a key priority.

Even as the Company increased itspresence across various businesssegments, it formulated HR goals to

create an organisation which can berecognised as a centre of excellence.The Companys endeavour was not

just to increase its work force insimple numbers, but to ensure thatpeople competencies are enhancedin line with the changing businessneeds. Consequently, different teamscollaborated with each other to createan optimal working culture, industry

best practices were inculcated and anethically motivated work culture wasfostered.

The Amara Raja team comprised aninvigorating combination of know-howand liveliness; the average age of the3,834-strong workforce was 31 as onMarch 31, 2014

Team segregation

DESCRIPTION Numbers % of total

Permanent employees with disabilities 2 0.03

Employees from weaker sections (BC,SC,ST and OST) 1,977 29.72

Permanent women employees 187 2.81

Other employees not included in any of the above 1,668 25.08

Personnel hired as graduate engineer trainees and management trainees under the Amara Raja NavaPrathibha Scheme

43 0.65

Personnel hired as graduate trainees and diploma trainees under the Amara Raja Nava Prathibha Scheme 36 0.54

Personnel hired as shop floor trainees in manufacturing under the Amara Raja Nava Prathibha Scheme 2,622 39.42

Personnel hired on temporary/retainer basis 116 1.74

Total 6,651 100.00

BUSINESSDRIVER03



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Workforce strategyA comprehensive study of the socio-economic environment, increasingcompetition and other integral aspectsof the day-to-day working of thefrontline workforce were anchoredduring the year. Based on the study, theCompany has initiated several focusedactions in aid of its frontline workforceto ensure the achievement of Amara

Rajas People Strategy. The Companyalso undertook comprehensivecompensation benchmarking studiesand other people-related measures toensure that they adopted appropriatepeople related decisions in the areasof engagement, development andperformance.

Talent acquisitionThe in-house exclusive talent acquisitioncell inducted talented personnel to drivegrowth. The Companys Nava Prathibhaprogramme inducted talent througha structured programme comprisingcustomised induction sessions.

AR e-inductionThe Companys intranet-basede-induction programme enabled theon-boarding of recruits within 72hours of joining. The modules providedinformation on the culture, products,processes and milestones, interspersedwith quizzes and interactive content.

Learning and development

Amara Rajas learning and developmentcalendar captured the developmentneeds of employees throughperformance appraisals, TQM andTPM initiatives. In 2013-14, specificin-house programmes were organisedto build technical expertise and softskills. Employees were nominated forparticipating in specialised learningand development workshops/seminarsorganised by external institutions.

In 2013-14, the Company added 33trainers in the club of internal trainerscalled Guru Club. Through the GuruClub members and external experts,the Company provided 5,918 mandays

(41,398 man-hours) of training toemployees.

The Amara Raja WayAmara Raja continued its journey ofinstitutionalising the Amara Raja Wayacross the organisation. An interactivee-learning programme called ENDEAR(ENgage, Discover and ExperienceAmara Raja) was launched. Thisinteractive e-learning program helpedin educating employees about theCompany, people and policies, CSRactivities and The Amara Raja Way. Allemployees reiterated their commitmentto the Amara Rajas Code of Ethics andConduct by signing a declaration inelectronic form.

A book titled The Amara Raja Way ;elucidating the journey of AmaraRaja, its core purpose and values, waspublished for internal circulation. Thisbook was issued to all employees andmade a part of the joining kit for allrecruits.

The Amara Rajateam

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A two-day flagship training programmewas initiated to educate and trainpeople in The Amara Raja Way. Theentire senior leadership team (31members; DGM, GM, VP, President)was trained in this programme to actas trainers for other members of theAmara Raja family. About 75 internaltrainers from other levels of theorganisation were also identified are

trained in this programme.

Revamped performancemanagement systemIn 2013-14, Amara Raja revampedthe performance planning andevaluation system. Role assessment wasintroduced to enable the comprehensiveassessment of individual performanceon the role that she/he held. Theassessment of attitudes and leaderbehaviours was introduced across the

organisation.

Employee opinionThe Company conducted acompanywide survey AR Speak, to

gauge the perception and engagementof people. There was a rising trendin dimensions like communication,rewards and recognition and role-clarity.

Group communication meetDuring the year, the Companyconducted a communication meetwhere results and prospects werecommunicated. During this meet, theorganisations core purpose, vision andvalues were discussed. Dr. RamachandraN Galla, Chairman, Mr. Jayadev Galla,Vice Chairman and Managing Director,and the senior leadership addressedemployees. The event was webcastacross locations. An open housesession provided employees with anopportunity to interact with the apexleadership team.

Employee advisory forumIn order to elicit employee insights/ ideas/ thoughts, a new initiative calledthe Employee Advisory Forum wasintroduced. Participants were randomly

selected, ensuring a prudent mix ofgrades, locations and genders.

Internal opportunity andgrowth planTo motivate existing talent to worktowards career growth and towardsbetter retention, the Companyintroduced a policy on internalopportunity and growth, which willenable employees with potential tograduate to higher positions and alsoplug vacancies.

Internship policyTo create a platform for providing astructured industry learning experiencefor students from ITIs, engineering andmanagement graduates, an internshippolicy was introduced during 2013-14. This will help achieve a largerobjective of building industry-institution

relationships, engage students for shortprojects and identify potential talentwithin the Company.



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information technology

The IT function at Amara Rajaendeavours to implement emergingIT tools that facilitate seamless

data integration, superior businessmanagement and real-time decision-making.

The department addresses all theneeds of user departments and clients(conception to installation). The centralinfrastructure and in-house team atKarakambadi addresses the growinginformation and communicationtechnology requirements despitechallenges posed by the remote nature

of locations.

2013-14 in retrospectIncreased bandwidth capacity acrossall locations

Reconsidered architect informationcommunication technologyrequirements for greenfield projects

Evaluated existing software platformsto automate export-import functions

Completed software development toformat Amaron franchisee operations

Developed internal software packagesto address specific business processesfor various functions

Conducted studies on industry-best ITpractices

Roadmap for 2014-15Roll out software for Amaron franchisees

Implement SAP-Success Factorsto automate what has been mostly apeople-driven process

Operationalise export -importsoftware

Initiate business process automationsupport for finance-shared servicecentre

Apply business continuity planning andsafeguards

Enhance end-point protection toimprove client security

Review and implement appropriatemobile device management

BUSINESSDRIVER04

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financial statementsanalysis of

Fiscal 2013-14 was a year when theCompany continued to strengthen itsfinancials and live up to its commitmentto grow shareholder value.

Statement of Profit and LossNet revenue from operations: Increased by 16.15% from H29,589.15

million in 2012-13 to H34,366.59million in 2013-14. This increase wasdue to rise in sales volumes across bothbusiness divisions.

Net revenue from the automotivedivision posted a double-digit growthover the previous year. This was due tothe following reasons:

Increased sale of Honda four-wheelers

Commencement of despatches to

Honda (two-wheeler batteries)

Entrenched presence in theaftermarket

In the industrial battery division, netrevenue from operations registered ahealthy growth over the previous year.This was primarily due to increasedofftake from the telecom and UPScustomers. The growth could have beenhigher had it not been for the shiftingof assembly lines from the Tirupati plantto the new facility at Nunegundlapalle.

Operating expenses: Operatingcosts (total expenses less interest anddepreciation) as a percentage of totalrevenue declined from 85.07% in 2012-13 to 83.81% in 2013-14, underscoring

the Companys ability to control costsdespite a high-inflation environment.Material costs comprised over 70% of

the total operating costs.

Cost of material consumed: Increasedby 19.36% from H17,603.12 million in2012-13 to H21,011.95 million in2013-14. This was primarily due tosignificant increase in lead and alloyprices globally; growth in businessvolumes also contributed to the costincrease.

Employee expenses: Expenses underthis head increased by 25.42% fromH1,262.30 million in 2012-13 toH1,583.16 million in 2013-14, largelydue to increase in the team size formanaging the expanded operations.

Other expenses: Stores andconsumables, power and selling anddistribution expenses accounted fora majority of the expenses under thishead. Selling and distribution expensesincreased over the previous year inkeeping with the Companys focuson creating new avenues for sellingadditional volumes and establishing apresence in new markets. Power andfuel expenses declined largely due tothe Companys efforts in optimising fuelconsumption through several projects atboth the operating units.

28.16%

Growth in Profit for the Yearover 2012-13

23.61 %Growth in EBIDTA over 2012-13

16.15 %Growth in Net revenue fromoperations over 2012-13



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Margins: The Companys superiorbusiness management strategiesresulted in improved margins despitethe subdued economic scenarioand a slowdown in key user sectors(automotive and telecom). EBIDTAmargin improved from 15.74% in2012-13 to 16.75% in 2013-14,

while net margin stood at 10.55%,representing an increase of 101 bpsover the previous year.

Balance SheetShareholders funds: The corpusunder this head increased by 28.58%from H10,598.14 million as on March31, 2013 to H13,627.01 million ason March 31, 2014, primarily due toploughing the operational surplus backinto the business. As a result, the bookvalue per share stood at H79.78 as onMarch 31, 2014, against H62.05 as onMarch 31, 2013.

Non-current liabilities: It comprisesall long-term liabilities, includingdebt, provisions and deferred taxliability. Long-term debt representsinterest-free sales tax deferment loan;balance stood at H759.47 million ason March 31, 2014, against H773.13million. Long-term provisions are on

account of employee benefits such asgratuity, leave encashment and productwarranties.

Current liabilities: Representsshort-term liabilities which are tobe liquidated in the next 12 monthssuch as short-term provision for taxes,dividend etc and other liabilities.

Trade payables declined from H1,362.84million as on March 31, 2013 toH1,277.79 million as on March 31,2014, despite an increase in thebusiness volumes. This was due tothe Companys ability to payoff tradepayables faster to avail cash discounts

Between end-FY04 and end-FY14...... the Companys gross block went up 6.20x to H9,880 million and net working capital rose8.40x at H6,946 million these two factors being the key drivers of Balance Sheet expansion(8.9x) between FY04 and FY14.While the combined gross block and net working capital rose by H14,413 million over FY04-FY14, the total loan funds rose by only H708 million during the same period, which reflects thatits growth was funded entirely through internal accruals.

building the

balance sheet

16.75 %EBIDTA margin in 2013-14 against15.74% in 2012-13; net margin stoodat 10.55% in 2013-14, representing anincrease of 101 bps over the previous year.

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and also to strengthen the vendorrelationship.

Short-term provisions primarily comprisethe provision for income tax andproposed dividend for 2013-14, whichare expected to be paid in the currentyear.

Non-current assets: Fixed assets are thekey sub-heads under this segment andrepresent the Companys critical edgein manufacturing. Fixed assets jumped74.37% from H3,554.97 million as onMarch 31, 2013 to H6,198.94 millionas on March 31, 2014, consequent tothe part-commissioning of the newgreenfield unit. The capital work-in-progress largely represents unitsat the new facility expected to becommissioned by the end-2014.

Current assets: It represents assetscreated during the course of day-to-day business, namely inventory, tradereceivables as well as cash and bankbalances. Current assets increasedby 3.32% from H12,568.52 millionas on March 2013 to H12,986.10million as on March 31, 2014. While

inventory and trade receivablesincreased in line with the increase innet revenue from operations, cash andbank balances as on March 31, 2014declined significantly cash being usedfor funding the Companys capitalexpenditure.

Internal controlsThe Company believes that businessefficiency, management effectivenessand asset safeguarding can be sustainedthrough adequate internal controland process standardisation. At theCompany, internal control is exercisedthrough the following initiatives:

Accurate and timely recording oftransactions with multi-layered checks

Consistent accounting policies andpractices; compliance with prescribedaccounting standards

Control reviews of long-term plans,annual budgets with mid-course

correction

Critical operational and securitycontrols in the ERP platform

Documented policies and guidelines

Initiatives in line with statutoryrequirements

Constant monitoring by internalcontrol personnel

Audits and reviews by independentprofessionals

Interactions between independentauditors, management and auditcommittee on scope, observations andoutcomes of audits and reviews

Besides, the Company has not tapped theequity market even once during its high-growth phase that started in FY 2001. The50% jump in issued equity capital (in FY2007) was entirely on account of a 1:2bonus share.

More importantly, the promoters reluctancein diluting their stake represents a watermarkof their confidence in the Companys robustbusiness model.



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managingbusiness uncertainties

Amara Raja, a large and respectedbattery organisation, accords thetopmost priority to de-risk the

organisation. The Company leveragesresident knowledge to strengthenprospects in an otherwise fragmentedindustry space.

The economy takes longer torevive which could impactbusiness performance

Amara Rajas position in the batteryindustry has enabled it to sustain itsgrowth despite economic downturns.In the automotive segment, theCompany is among the leading playersin the aftermarket segment wheredemand is economy agnostic and themarket size is 3x the OE market. Inthe industrial battery segment, theCompany forged strong relationshipswith tower companies, which secured

the replacement demand from towers.Despite fewer tower rollouts in the pastthree years, the Companys telecombattery business grew at a healthy pace.Now with the new government at theCentre, it is expected that dynamic andinvestment-friendly policies will driveindustrial growth and the demand forbatteries.

Sustaining growth despite aslowdown could be a challengeAmara Rajas business is spread acrossdiverse user segments and applications;no segment comprises more than25% of the consolidated topline. Moreimportantly, it has ring-fenced growthby strengthening its position in securedmarkets.

The automotive aftermarket segmentgrew at a healthy clip in the lastdecade despite industrial and economicvolatility and this is expected to sustain

Having earned the preferred supplierstatus with key telecom towercompanies, Amara Raja continues tosecure increasing replacement demanddespite tower rollouts shrinking, pan-India

The Company is developing batteriesfor new applications (solar applications,home UPS market and new telecomapplications) expected to reduce itsdependence on any one sector.

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M arketing additional volumescould be an uphill taskCapacities are created not to beconsumed in one year. Moreimportantly, a large part of the newcapacities are expected to come onstream by the close of 2014-15 asIndias economic resurgence kicksin. The Company expects to growits market penetration through thefollowing initiatives:

Strengthening its distribution networkpan-India

Nurturing relationships with corporatecustomers

Expanding its international presence

New applications (solar application andhome UPS) are expected to generategrowing volumes over the next 18-24months

Competition from theunorganised sector coulddampen the Companys prospects

In the battery space, unorganisedcompetition is largely visible in the retailaftermarket. In the automotive space,the battery has emerged as a criticalassembly hence the individual looks forquality and reliability. Moreover, as thedisposable income of the average Indianincreases, there is a perceptible shiftfrom the unorganised to the organiseddue to the superior value propositionprovided by organised players. Amara

Raja, through superior technology andcontinuous innovation, has altered thebattery space (in terms of extendedwarranties) leading to an unmatchedrecall.

Sourcing additional workingcapital needs could posedifficulties

The Company funded the entireH7.5 billion investment in capacityenhancement through accruals. Thephased commissioning of the newcapacities will generate adequatecash for meeting working capitalrequirements for the growing business.Besides, the zero-debt status willmake it possible for the Company tofund working capital needs throughborrowing (if needed).



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Amara Rajas corporatesocial responsibility (CSR)activities reflect its philosophyof implementing sound businesspractices; innovating to createproducts that motivate and

enthuse; assisting communitiesin which we operate; helpingshape a better, more sustainablesociety. Amara Raja believes thatthese activities benefit society andenhance corporate value.

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Economic responsibility Amara Raja pioneered the VRLAtechnology in India; today majority ofthe batteries used in India utilise theVRLA technology.

Amara Rajas path-breaking quickrecharge battery for the telecom sectorhas reduced the reliance on diesel forenergising telecom towers therebyreducing CO2 emissions.

Amara Rajas business growth hashad an incremental impact on thegovernmental coffers its contribution

to the State and National exchequerincreased from H4,125 million in2008-09 to H10,704 million in2013-14 increasing at a rate of21.01% CAGR.

Amara Raja selected a rural locationfor its global-sized plant and equippedit with world-class technology, thusmaking a meaningful contributiontowards uplifting rural India.

The Companys batteries for solarapplication are expected to strengthenthe nations thrust on increasing its

reliance on renewable sources forpower generation.

People responsibility Around 70% of the Companysemployees in the manufacturing plants

are first-timers coming from poverty-stricken backgrounds.

The Company recruited unskilled anduneducated personnel from the nearbyareas; institutionalised a training systemfor inculcating technical and soft skillsand enhance their learning curves.

of responsibility

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The Company introduced itsemployees to global best-practices likeIE Studies, Six Sigma, Kaizen and QualityCircle, which developed their personalityand increased their employability.

The Companys greenfield facility hasincreased employment opportunities forpeople at the bottom of the pyramid.

The use of robots for mundane andback-breaking jobs at the new facility(to be later replicated in the existingfacility) is a reflection of the Companyscommitment to embrace the latesttechnologies while easing the workload

of its team members.

Health, Safety &Environmental StewardshipThe Companys commitment to

the environment was reflected inaligning systems and processes toglobally stringent standards resultingin Amara Raja being recertified for withEnvironment Management System ISO14001:2004 and Occupational Healthand Safety (OH&S) Management System OHSAS 18001-2007 accreditations.

The Companys usage of uniqueprocesses (gravity lead pot system inthe casting unit) and cutting-edge

technology (expanded metal technologyfor plate making) showcased itscommitment to optimising naturalresources.

The Company implemented small, yetmeaningful initiatives for optimisingenergy consumption - electricity,consumed in KWH per lakh of Ampere-hour reduced from 4,452 in 2010-11 to4,195 in 2013-14.

The Company is revamping the totalwater distribution system to bringefficiency and effectiveness in the realmof water management with a capex ofH37 million

The Company created a green coverextending across more than 70% in theCompanys existing unit transforming

a barren area into one of the greenestfacilities in India.

Studentsof Mangal

Vidyalayamat Pettamitta,

Chittor

Amara Raja is developing 233 hectares of hillock area in Pemmagutta, Chittor district under Social Forestry and Afforestation Program for the cultivation of medicinalherbs thereby providing a means of earning a livelihood for 40 tribal families. To expand this project,

the Rajanna Trust and Nandan Cleantech Limited, Hyderabad, conducted a baseline survey at thePemmugutta hill under the Green Cover project to identify suitable land for a Jatropha plantation (idealfor biodiesel production). Under the Blue Sky CSR initiative, the Rajanna Trust continues to extend thegreen cover at the Petamitta village involving local communities, school children and employees.

hillock area of

233-hectares

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The Company initiated a pilot solarpower project of 18KW for street lights.

The new plant at Nunegundlapalle

village is designed to internationalstandards and provide an industry-bestwork environment.

The Company institutionalised thesafety as a way of life with a specialfocus on safety training for all newworkforce members to integrate theminto the culture from day one.

Social responsibilityAmara Raja undertakes its corporate

social activities predominantly throughthe Rajanna Trust, the Mangamma &Gangulu Naidu Memorial Trust (Mangal

Trust) and the Krishnadeva RayaEducational and Cultural Association(KECA). The Company has adopted apolicy of contributing 0.2% of its netturnover or 2% of its profits beforetax, whichever is higher, each year, tocharitable causes.

The Company continues to supportthe two schools at Karakambadi andPetamitta and a junior college in thePetamitta village. Today, there are atotal of 2,250 students being educatedat these educational institutions.

The Company, through these Trusts,

ensured safe drinking water to theDiguvamagham and Petamitta villagesby constructing overhead tanks with

reverse osmosis water treatment plants.Moreover, the Rajanna Trust madeefforts to maintain 23 check dams andsix lakes, ponds and other water sourcesto enhance the ground water levelacross 50 villages of Chittoor district.

The Company implemented asustainable solution for providingsafe drinking water to the Rajiv Nagarpanchayat (Tirupati) in 2013-14.



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it just makes sense

10 - Years

financialsH million

Parameters/Year 2013-14 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05

OPERATING RESULTSNet sales 34,367 29,589 23,645 17,611 14,645 13,132 10,833 5,958 3,637 2,199Profit before depreciation, interest & tax (PBITDA)* 5,758 4,658 3,570 2,588 2,965 2,056 1,795 905 521 262

Profit before interest & tax (PBIT)* 5,087 3,952 3,096 2,171 2,536 1,711 1,551 735 374 125Profit before tax (PBT) 5,367 4,218 3,186 2,204 2,546 1,227 1,459 712 373 136Profit after tax (PAT) 3,674 2,867 2,151 1,481 1,670 805 944 470 238 87

Dividends 552 430 323 393 248 68 40 40 28 23Dividend Tax 93.77 73 52 65 42 12 7 7 4 3

Retained profits 3,029 2,363 1,776 1,023 1,380 725 897 423 206 61SOURCES AND APPLICATION OF FUNDS

SOURCES OF FUNDS

Share capital 171 171 171 171 171 171 114 114 114 114Reserves and surplus 13,456 10,427 8,064 6,288 5,266 3,885 3,217 2,323 1,899 1,693Net worth 13,627 10,598 8,235 6,459 5,437 4,056 3,331 2,437 2,013 1,807Debt 857 881 855 1,000 912 2,859 3,163 1,407 405 233Deferred tax liability 301 195 220 205 216 182 169 136 120 131Funds employed 14,785 11,674 9,310 7,664 6,565 7,097 6,663 3,980 2,538 2,171APPLICATION OF FUNDS

Gross fixed assets 9,880 6727^ 6,213 5,388 4,911 4,271 3,106 2,577 1,907 1,672Accumulated depreciation 3,648 3,138 2,667 2,237 1,854 1,458 1,217 1,009 863 724Net fixed assets 6,232 3,589 3,546 3,151 3,057 2,813 1,889 1,568 1,044 948Capital work-in-progress 1,446 1,030 315 375 227 396 657 62 48 13Investments 161 161 161 161 161 471 162 162 320 236

Gross current assets 13,555 12,924 9,494 7,472 6,311 5,260 5,749 3,500 2,280 1,613Current liabilities and provisions 6,609 6,030 4,206 3,495 3,191 1,843 1,794 1,312 1,154 639Net current assets 6,946 6,894 5,288 3,977 3,120 3,417 3,955 2,188 1,126 974Net assets 14,785 11,674 9,310 7,664 6,565 7,097 6,663 3,980 2,538 2,171RATIOS

PBT to sales (%) 15.62 14.26 13.48 12.51 17.38 9.34 13.47 11.95 10.26 6.18PAT to sales (%) 10.69 9.69 9.10 8.41 11.40 6.13 8.71 7.89 6.54 3.96Return on Assets (ROA) - (%)+ 64.56 59.75 45.76 34.61 44.51 30.62 33.91 25.44 18.55 6.81Return on net worth (%) @ 30.33 30.45 29.28 24.90 35.18 21.80 32.73 21.12 12.46 4.90Debt : Equity (times) 0.06 0.08 0.10 0.15 0.17 0.70 0.95 0.58 0.20 0.13Fixed assets turnover (times) & 5.06 7.52 6.42 5.57 4.79 4.67 5.73 3.80 3.48 2.32Earnings per share ( H)# 21.51 16.78 25.18 17.34 19.56 9.42 16.57 41.31 20.94 7.63Dividend (%) 323 252 189 230 145 40 35 35 25 20Dividend per share ( H)# 3.23 2.52 3.78 4.60 2.90 0.80 0.70 3.50 2.50 2.00Book value per share ( H)# 79.78 62.05 96.42 75.63 63.65 47.49 58.50 213.98 176.76 158.66Share Price (as of 31st March) - ( H)# 394.40 273.65 292.80 189.75 164.20 36.65 195.65 340.40 234.25 91.65

* PBDIT and PBIT are net of non operating income and expenditure

^ Gross fixed assets are net of impairment in value

+ ROA is PBIT divided by Average Net Operating Assets. Net operating assets exclude CWIP, Cash and Non-Trade Investments

@ Return on networth is computed based on average networth

& Year end net fixed assets and manufacturing revenue are considered for computing fixed assets turnover

# Earnings, Dividend, book value and share price are on face value of H10 each and H2 each upto 2007 and 2012 respectively and thereafter on face value ofH1 each


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Corporate

informationBoard of Directors Dr. Ramachandra N Galla ChairmanJayadev Galla Vice Chairman and Managing DirectorRavi Bhamidipati Executive Director

(upto August 31, 2013)Shu Qing Yang Non-Executive DirectorEric Stuart Mitchell Non-Executive Director

(w.e.f April 18, 2013)

Raymond J Brown Non-Executive Independent Director P Lakshmana Rao Non-Executive Independent DirectorNagarjun Valluripalli Non-Executive Independent DirectorN Sri Vishnu Raju Non-Executive Independent DirectorT R Narayanaswamy Non-Executive Independent Director

Management Team

D Naren Reddy President - Quality & HSE B Jaikrishna President - HR and AdministrationK Suresh President - Finance

(w.e.f April 8, 2014)S V Raghavendra Chief Financial Officer

(w.e.f April 8, 2014)G Jagan Mohan Head - OperationsL Venkat Madhav Head - Supply Chain ManagementSrinivasa Rao Ganga Chief Marketing Officer,

Industrial Battery DivisionRajesh Jindal Chief Marketing Officer,

Automotive Battery DivisionM Jagadish Head - Technology M M Venkata Krishna Head - Home Incubation

Task Force

Company Secretary M R Rajaram

AuditorsM/s. E Phalguna Kumar & Co.Chartered Accountants , Tirupati

M/s. Chevuturi AssociatesChartered Accountants , Vijayawada

Cost AuditorsM/s. Sagar & AssociatesCost Accountants , Hyderabad

BankersState Bank of India, Settipalli, TirupatiAndhra Bank, Main Branch, TirupatiState Bank of Hyderabad, Main Branch, TirupatiThe Bank of Nova Scotia, Coimbatore

Registered OfficeRenigunta Cuddapah RoadKarakambadi, Tirupati, Andhra Pradesh - 517 520Tel: 91 877 226 5000Fax: 91 877 228 5600

CIN: L31402AP1985PLC005305

Corporate Operations OfficeTerminal A1-18/1/AMR/NR, NanakramgudaGachibowli, Hyderabad - 500 032Tel: 91 40 2313 9000Fax: 91 40 2313 9001Website: www.amararaja.co.inE-mail : [email protected]

Registrar and Share Transfer AgentsM/s. Cameo Corporate Services LimitedSubramanian BuildingNo.1, Club House Road, Chennai - 600 002Tel: + 91 44 2846 0390Fax: + 91 44 2846 0129E-mail : [email protected]



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Dear Members, Your Directors have pleasure in presenting their report togetherwith the audited financial statements for the financial yearended March 31, 2014.

H millionParameters 2013-14 2012-13

Net revenue 34,367 29,589Other income 455 465Total income 34,822 30,054

Operating profit (EBIDTA) 5,758 4,658Profit before tax (PBT) 5,367 4,218Profit after tax (PAT) 3,674 2,867Surplus brought forward 8,298 6,221Amount available for appropriation 11,973 9,088Appropriations:

Transfer to General Reserve 367 287Dividend on equity capital

Proposed dividend 552 430 Corporate dividend tax 94 73Surplus carried forward to balance sheet 10,960 8,298

Financial Highlights

Directorsreport

Performance overviewThe financial year 2013-14 was yet another significant year inwhich your company continued its record of clocking highest

ever turnover and profit. The Company has recorded totalrevenue (net of excise duty) of H34.37 billion as against H29.59billion in the previous year registering a growth of 16%. Theoperating profit (Earnings Before Depreciation, Interest, Taxand Amortisation-EBIDTA) for the year stood at H5,758 million(previous year H4,658 million) representing 16.75% of netrevenue. The Profit Before Tax (PBT) and Profit After Tax (PAT)for the financial year ended March 31, 2014 was at H5,367

million and H3,674 million as against H4,218 million and H2,867million of the previous financial year respectively. The profitafter tax has registered an impressive 28% growth.

Industrial battery businessThe Companys Industrial Battery business registered doubledigit revenue growth over the previous financial year despitecapacity constraints by better product mix. The demand fromthe telecom sector grew during the year primarily driven bygrowth in data and for energy optimisation by tower companies.The adverse macro economic conditions had moderated the

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demand for UPS during the first three quarters and improved in

the fourth quarter mainly due to finalisation of projects in thebanking sector.

Amidst these challenges, our efficient after sales service,customer relationship management, consistent productperformance of both PowerStack and Quanta batteriescoupled with continued preferred supplier status accorded byall major customers resulted in the improved performance ofthe industrial battery business.

During the year the Company had successfully introduced newrange of Quanta series UPS batteries (120 AH and 150 AH),which were well received by the market resulting in improvedmarket share in IT&ITES and Banking sector. The Quick RechargeSeries large VRLA battery introduced for telecom applicationconsolidated its position in the market.

The medium VRLA battery for Home UPS application whichwas introduced in the African markets helped to broad basethe export business. The capacities of medium and largeVRLA product lines were enhanced to 3.00 million standardequivalent units per annum and 900 million Ah in standardequivalent units per annum respectively during the Q4 of FY2014.

Automotive battery businessThe Companys Automotive battery business reported doubledigit revenue growth supported by volume increase of 9%in four-wheeler and 63% in two-wheeler batteries, over theprevious financial year, despite capacity constraints in theautomotive four-wheeler batteries .

During the year, the Company commenced bulk supplies to

two-wheeler OEM business, consolidating its position in thisspace and witnessed a flat volume growth in four-wheelerOEM business due to slowdown in automobile production onaccount of various macro-economic conditions. The volumegrowth in both four-wheeler and two-wheeler aftermarketbusiness continued during the year due to strong preferencefor Companys products, supported by complete productoffering, strengthening of brands Amaron and PowerZone TM,and leveraging customer relationship.

The volume of inverter batteries witnessed a drop mainly onaccount of early onset of monsoon during the year. A separate

task force was created to focus and develop this business verticalas the Company sees a promising future for this business.

The revenue from export business grew significantly during theyear aided by the quality of the product, moderation in importtariff and depreciation rupee. The Company will continue itsefforts to increase the exports in the Indian Ocean RIM bystrengthening and expanding the distributors network andentering into new markets.

During the year, the capacity of two-wheeler battery and four-wheeler battery was enhanced to 8.40 million and 6.00 millionunits per annum respectively. The green field expansion of four-wheeler battery capacity to 8.25 million units is progressingas per schedule and is expected to commence supplies in thesecond half of FY 2015.

Financial positionThe Companys financial position has shown immenseimprovement over the years. The networth as at March 31,



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2014 improved to H13,627 million with the addition of H3,029million to the reserves and surplus during the year. There is nointerest bearing debt as of March 31, 2014. The surplus cash asat the year end stood at H2,446 million. CRISIL had re-affirmedthe ratings on the Companys loan-term bank loan facilities atCRISIL AA+/Stable and on the short-term bank facilities atCRISIL A1+.

During the year under review, the gross fixed assets includingcapital work in progress increased by H3,570 million (net ofdeletions of H161 million) and are at H11,402 million (previousyear - H7,832 million). The entire additions were fundedthrough internal accruals. The earnings per share of H1 each forthe financial year 2013-14 grew by 28% at H21.51 as againstH16.78 for the previous financial year, while the book value pershare as at March 31, 2014 was at H80 as against H62 as atMarch 31, 2013.

DividendThe Board of Directors of the Company at their meeting held onMay 19, 2010 had approved a policy on payment of dividend toshareholders i.e., to pay dividend (excluding corporate dividend

tax) up to 15% of the profit after tax of the Company. In linewith the said dividend policy your directors have pleasure inrecommending a dividend of H3.23 per equity share of H1 each(323%) for the financial year ended March 31, 2014, subject tothe approval of the shareholders.

Transfer to reservesAs stipulated under the provisions of the Companies Act, 1956read with Companies (Transfer to Reserves) Rules, 1975, yourdirectors have proposed to transfer a sum of H367.44 million tothe general reserve out of the profits earned by the Company.A sum of H10,959.62 million is proposed to be retained as

surplus.

DirectorsIn accordance with the provisions of the Companies Act,2013, Mr. Shu Qing Yang, Dr. Ramachandra N Galla andMr. N Sri Vishnu Raju, directors are liable to retire by rotationat the ensuing annual general meeting and being eligible offerthemselves for re-appointment.

In accordance with the provisions of Section 149 of theCompanies Act, 2013, the present independent directorsi.e Mr. P Lakshamana Rao, Mr.Nagarjun Valluripalli,Mr. N Sri Vishunu Raju, Mr. T R Narayanaswamy andMr. Raymond J Brown are being proposed for appointment asan independent directors of the Company to hold office for aterm of five consecutive years effective from August 6, 2014.

Necessary resolutions for appointment/re-appointment of theabove directors are being placed before the members for theirapproval.

During the year, Mr. Ravi Bhamidipati resigned from the officeof Executive Director and as director with effect from August 31,2013. The Board wishes to place on record their appreciationfor the valuable services rendered by Mr. Ravi Bhamidipatiduring his tenure as director of the Company.

AuditorsM/s. E Phalguna Kumar & Co., Chartered Accountants, Tirupatiand M/s. Chevuturi Associates, Chartered Accountants,Vijayawada, the joint statutory auditors of the Company whohold office until the conclusion of the ensuing annual general

meeting and being eligible, have offered themselves forre-appointment.

The Central Government had approved the appointment ofM/s. Sagar & Associates, Cost Accountants, Hyderabad as costauditors for the financial year 2013-14. The cost audit reportwill be filed with Central Government within 180 days from theclose of the financial year. The cost audit report for the previousfinancial year 2012-13 signed by M/s. Nageswara Rao & Co.,Cost Accountants, Hyderabad was filed in eXtensible BusinessReporting Language (XBRL) mode on September 24, 2013,within due date.

Corporate GovernanceThe report on corporate governance along with the certificatefrom practising company secretary regarding compliance ofconditions of corporate governance for the year ended March31, 2014 pursuant to clause 49 of the listing agreementis annexed hereto and forms part of the annual report. TheManaging Director and the Chief Financial Officer of the

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Company have submitted a certificate endorsing to the Boardthe correctness of the financial statements and other matters asrequired under Clause 49 (V) of the listing agreement enteredinto with the stock exchanges.

Management discussion and analysisManagement discussion and analysis report, highlighting theperformance and prospects of the Companys business, formspart of this annual report.

Transfer to the Investor Education andProtection FundIn terms of Section 205A read with Section 205C of theCompanies Act, 1956, an amount of H305,957 beingunclaimed dividend pertaining to the financial year 2005-06was transferred to the Investor Education and Protection Fund(IEPF) on September 30, 2013.

Fixed depositsThe Company has not accepted any deposits from the publicin terms of Section 58A of the Companies Act, 1956, duringthe year under review and hence there were no outstanding

deposits as on March 31, 2014.

Health, safet

Documents

Amar Raja Annual Report 2013-14