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Tuesday, July 10, 2001

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Amara Raja's de-risking model on telecom sector

C.R. Sukumar

HYDERABAD, July 9

AMARA Raja Batteries Ltd (ARBL), the Rs 162-crore battery major, has evolved a de-risking model to mitigate the problems that may arise from overdependence on the Government policies pertaining to industrial batteries for telecom applications.

ARBL, with its manufacturing facilities located near Tirupati, Andhra Pradesh, is currently specialising in maintenance-free valve-regulated lead acid (MF-VRLA) batteries and lead acid batteries used for starting piston engines.

According to a senior ARBL official, a majority of the company's revenues were currently from sales of industrial batteries for telecom applications.

Stating that this sector was being highly influenced by the Government policies and investments, a company official told Business Line that though it did not expect any reversal in the trend towards increased investments in the sector in the near future, ``we are of the view that prices and demand were definitely subject to changes in policies on tendering and indenting.''

In view of this, the company developed products for other markets in sectors such as power control and UPS, while aggressively expanding the automotive business. Aimed at achieving significantly higher economies of scale, Amara Raja plans to focus on dev eloping exports and expanding to new markets.

With the assistance of its foreign collaborator, the US-based Johnson Controls Inc, which currently holds 26 per cent equity, the company has started exploring the markets in South-East Asia, Europe, West Asia and Africa for telecom, UPS and automotive a fter-market applications.

The ARBL official said the company anticipates substantial growth rates in sectors such as telecom, railways, power control and UPS owing to increasing privatisation. ``Further, improvements in our manufacturing facility and processes make us believe tha t we will emerge as the lowest cost producer of VRLA batteries allowing us to remain ahead of competitors.''

On the automotive business, which was traditionally seen as a low-margin, high-volume game and often viewed as fraught with uncertainty, the official said: ``Our view has always been that presence in this industry is both essential and desirable from a l ong-term point of view.''

According to him, ``the automotive business has added to our competencies in distribution and given us an additional scale to reinforce our position in the battery industry.''

Further, ARBL expects that the Government legislation on recycling of junk, which is currently in draft form, would shortly be enacted, making it mandatory to demonstrate a higher level of environmental responsibility for all manufacturers and others in the unorganised sector.

``We believe this will result in curbing the activities of the unorganised sector and throw further opportunities for manufacturers in the organised sector. This, coupled with the increasing vehicle population on the roads, will allow us to grow our afte r-market business vigorously,'' the ARBL official said.

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