Exide Industries, one of India’s oldest automotive battery companies, reported a strong increase in revenue for the September quarter, but an equally significant jump in the cost of key raw materials prevented any benefit of the higher sales from flowing to the company’s bottom line.
The company’s operating revenue jumped Rs 4,758 cr from Rs 4,032 cr in the same quarter of 2021, and Rs 3,779 cr in the same quarter of 2019, before the COVID pandemic hit.
This increase in revenue owed to both business units of the company — battery manufacturing and life insurance.
The battery business recorded revenue of Rs 3,383 cr during the latest period, up from Rs 2,834 cr in the year-ago period and Rs 2,686 cr in 2019.
Meanwhile, the life insurance business had revenue of Rs 1,369 cr this time, compared to Rs 1,168 cr last year and Rs 1,075 cr in 2019.
However, costs and liabilities increased in both businesses.
Against an increase of around Rs 980 cr in the company’s revenue over the last two years, the company’s material costs have increased by almost Rs 900 cr.
The company’s life insurance business is facing uncertainties due to the ongoing COVID-19 pandemic, and it decided, on Sept 3 this year, to sell its life insurance unit, Exide Life lnsurance Company Limited (ELIC), to HDFC Life Insurance Company Limited (HLIC), for Rs 6,687 cr.
Out of this, Rs 726 cr would be paid as cash consideration and the remaining in the form of shares of HDFC Life Insurance Company Limited.
“Pending such regulatory approvals and completion of the sale transaction, the Holding Company has not considered any impact of the proposed sale of its shareholding in ELIC in the accompanying unaudited financial results,” it said in its notes to the second quarter results.
“The Group has assessed the impact ofCOVID-19 on the operations as well as the financial results of Exide Life lnsurance Company Limited (ELIC)..for the quarter and period ended September 30, 2021…
“The extent to which COVID-19 pandemic will affect ELlC’s performance particularly in the areas of revenue, claims, canying value of investments, solvency margin etc. will depend on future developments, which are presently uncertain. The Group will continue to monitor any future changes to the business and financial results of ELIC due to COVID-19,” it added.
The company said both the automotive and the industrial segments “are seeing demand recovery” compared to the same quarter previous year and to the previous quarter of the current year.
“However, gross profit increase was restricted due to unprecedented cost inflation of inputs. Exide has taken multiple initiatives in the past few quarters which should drive sales and help improve performance. Currently, as an ongoing focus area, sales transformation and cost compression remain the core strategies to improve efficiencies within the company,” it added.