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`Exide to focus on plant upgradation' — Mr Barun Das, Company Secretary

Jayanta Mallick

KOLKATA, May 25

EXIDE Industries Ltd, the country's largest storage battery manufacturer, is quietly recharging itself for a long haul. After steering into a value-addition and cost reduction course, the company is currently undertaking an exercise of production and process upgradation.

On the export front, it is also targeting US in the near future. Mr Barun Das, Company Secretary, in an exclusive interview to Business Line, traced Exide's footprints in the recent past and shared a glimpse of its broad roadmap ahead. Excerpts:

What kind of sales growth are you looking at for 2003-04?

We are looking at an overall growth target of around 10 per cent for the current fiscal.

This means Exide will have to double its combined sales and export growth, recorded in 2002-03 ...

The last fiscal was exceptionally bad for the domestic market for industrial batteries as the infrastructure industry reeled under recessionary pressure.

However, the automobile sector, particularly two-wheelers, provided a significant growth impetus for batteries.

So we turned more towards value-addition as also reaching out to the clients in the domestic market.

As a result, out market share went up to 82 per cent in the replacement segment at the end of March this year from 80 per cent.

Incidentally, in the original equipment segment we have established a market share of 90 per cent.

Added thrust was given to exports, particularly industrial batteries. We have made further inroads into Asia, Australia and Europe. Next destination is North America.

How do you plan to approach the US market?

We would require to adopt a new standard for the our products for the US market. So far we have been following European (DIN) and Japanese (JIS) standards. We are preparing to adopt BCI standards also for our future foray into the US, the largest among the global market.

Will you use your Singapore outfit — Chloride Batteries South East Asia Ltd (CBSEAL) — as the stepping-stone to the US market?

CBSEAL will be instrumental in spearheading our export foray into US. But we may also look for a strategic marketing partner there.

Are you planning any capacity expansion?

The Bawal plant for motorcycle batteries would add one more production line in June. We plan to add lines at the plant as the demand improves.

At the Pune plant, we are undertaking a major production upgradation exercise for plate processing. This is likely to go on stream in the next quarter.

Currently, we have a total manufacturing capacity of 4.2 million batteries a year based on a two-shift production.

We have the flexibility to augment this by 25 to 30 per cent through adoption of three-shift production strategy with a little investment on additional balancing equipment.

Since we produce the complete range of storage batteries, change in production strategy depends on how the demand for the particular product moves up.

Is your proposal for a joint venture with a Malaysian partner for setting up a smelter for lead recovery from scraps off?

Yes, it is off. But we have not jettisoned the project. We are looking for a local partner, who can make such a project economically viable and at the same time environmentally safe.

Talks are on with certain entities. We are looking at reusing 15 to 20 per cent of lead used in batteries manufactured by us annually through this recovery process.

Are you contemplating a strategy for backward integration or long-term sourcing of virgin lead, one of your primary raw materials?

We do not have a plan for backward integration.

But we can envisage sourcing arrangement from overseas manufactures of lead ingots.

What is the result of your R&D efforts on the consumption of lead or an alternative raw material?

Exide's R&D efforts have reduced consumption of lead. But as of now we are not focussing on alternative raw materials.

In the last two Union Budgets, the custom duty on the lead ingots has been reduced.

Moreover, the anti-dumping authorities have taken measures against dumping of storage batteries.

Do these have an impact on topline or bottomline?

The downward price pressure of the finished products has been stemmed. It has reduced the cost to an extent also. A normal time lag of around six months — between the import and availing of duty drawback on exports — means an interest cost. The custom duty cut by 10 per cent over the last two years on ingots has reduced deployment of funds.

You have been swapping debts and resorting to repayment to reduce interest cost. What is your target for debt-equity ratio?

Our current debt-equity ratio is 0.98:1 and the target three years down the line is 0.60:1. We have decided not to take fresh public deposits, but if required would opt for debenture issue, albeit at a lower rates than earlier.

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