Stock Of The Day: Amara Raja Hits Upper Circuit On EV Battery Deal — Key Levels, Analysts View

Shares of Amara Raja Energy & Mobility Ltd., formerly known as Amara Raja Batteries, surged to the upper circuit of 20% on Tuesday after it entered into a technical licensing agreement with GIB EnergyX Slovakia s.r.o., a subsidiary of Chinese Gotion High-Tech Co.

The agreement ensures that GIB EnergyX will license Gotion’s lithium iron phosphate technology for lithium-ion cells to Amara Raja Advanced Cell Technologies Pvt., a subsidiary of the listed entity, according to an exchange filing.

The scope of this agreement will enable Amara Raja access to cell technology intellectual property rights and help it to manufacture LFP cells in both cylindrical and prismatic form factors. This in turn will also support in establishing gigafactory facilities.

• Resistance Level: Rs 1,610.2 (Today's High)

• Support Level: Rs 1,333 (June 14 Low)

Both Amara Raja and its closest peer, Exide Industries Ltd., have been making inroads in the lithium battery space. While Exide was the first to announce investments and is on track to commercialise the first phase by the end of this fiscal year, this technological collaboration will give Amara Raja access to cell technology intellectual property.

Amara Raja has also announced a huge capex of roughly Rs 9,500 crore, which will support establishing gigafactory facilities for the latest generation of process technologies. This also helps in integration with Gotion’s global supply chain network for critical battery materials, which the company has mentioned is key due to the global rise in demand for raw materials for making these batteries. This partnership will also offer customer technical support for solution deployment and fully complement Amara Raja’s efforts to operationalize its Gigafactory manufacturing capacities.

On June 20, the company announced an equity investment in Inobat, a European battery technology company. The company had invested 20 million euros in InoBat for a 4.5% equity stake, over and above the previous investments of 10 million euros. This increases their total stake to 9.32% in the European company.

Inobat Auto is a lithium-ion battery manufacturer based in Slovakia. Interestingly enough, Gotion High-Tech also acquired a 25% stake in InoBat. Gotion Hi-tech and InoBat have formed a joint venture, GIB (Gotion InoBat Batteries), and GIB has signed an investment agreement with the Government of Slovakia for the development of the country's first LFP battery Gigafactory.

Gotion not only provides electrolyte solutions for cell development, but also a large pack for backup power generation. According to Kotak Institutional Equities, Gotion has eight global R&D centres, with 8,000 patented technologies covering the battery industry value chain. They currently have 20 major manufacturing locations around the world, and their capacity layout is expected to reach 300 GWh by the calendar year 2025.

Based on the NMC form factor, it has also developed the ultra-fast charging battery Stellary, which can charge to 80% in less than 10 minutes.

On its quarterly conference calls, the management has mentioned ongoing talks with battery manufacturers over the last two quarters. Technology transfer, as well as access to the global supply chain for key raw materials, have been important considerations. One of the key things highlighted by the company is that while India can absorb new technology, it doesn’t enjoy the type of raw material ecosystem, which is a key consideration for a global supply chain player.

They have also said that the company is looking for partnerships with someone with enough R&D and a pipeline of products, which could lead Amara Raja for at least the next five to eight years in terms of tech changes.

The partnership will also strengthen the company’s ongoing investment outlay of Rs 9,500 crore for a gigafactory in Telangana. They expect to have a total cell capacity of 16 GWH over the next 10 years, which is higher than Exide Industries' current 12 GW. Amara Raja expects to commercialize phase one of the plant by fiscal 2026.

Although Exide Industries was ahead of the curve in terms of investment and is expected to commercialise their first phase by the end of this fiscal year, this key partnership will likely help Amara Raja gain some ground back.

Brokerages have been positive on both listed battery players since the start of the year but post the sharp run-up seen at the start of the year have realigned their calls.

Among the 17 analysts that cover Amara Raja, eight suggest a 'buy', four maintain a 'hold', and five recommend a 'sell' on the stock, according to Bloomberg data.

Kotak Institutional Equities, which has a 'sell' call on the stock with a target price of Rs 1,100 apiece, said that this partnership will enable the company to develop lithium ion batteries in India, while order wins from passenger vehicle makers will remain the key given their existing partnership.

During the day, the shares of Amara Raja hit their upper circuit of 20% at 1,656.05 before cooling off to Rs 1,606 apiece, compared with 0.21% gain in the Nifty 50 as of 10:22 a.m.