Exide has informed that the Company is evaluating foray into lithium-ion (li-ion) cell manufacturing and is details on Govt’s recently announced Production Linked Incentive (PLI) scheme for such batteries. The scheme’s outlay of Rs 18,100 crore is intended to establish 50 Giga Watt Hour (GWh) of advanced cell chemistry and 5 GWh of niche advanced cell chemistry.
Some key points to note –
- Company already has a technical JV with Leclanché SA (a Swiss firm) since 2018. JV is currently in the process of setting up a li-ion module manufacturing and battery pack assembling facility and expects to commence the same to be fully operative in the current fiscal year. It was originally scheduled to be completed in 2019 but Covid has delayed it.
- Infact, as per the original announcement, JV was also supposed to set up the cell manufacturing facility by 2020 but the same didn’t happen due to Covid. Leclanché has the requisite technical know how and intellectual property for li-ion cells.
- PLI scheme details are important to understand commercial benefits from the same. It’s important to note here that as per the management 1 GWH of the facility would roughly need Rs 700 crore of investment and the PLI scheme benefits would only be available for minimum of 5GWH implying a total capex of Rs3,000-3,500 crore. This is significant given the current Balance Sheet size of Exide. As on March 31, 2021 the Company had a total equity base of Rs 7,272 cr and debt of Rs 509 cr. Hence, a 5GWH facility would mean almost a 40-50% increase over current balance sheet levels (ignoring insurance business).
- Applications for Li-ion batteries include – electric vehicles and power sector (for storage). Company is also evaluating the market potential of these two segments. Exide is targeting to build battery energy storage system for renewable power plants and it is currently carrying out two trials – one at CESC with lead acid battery and the other at Tata Power with lithium battery technology.
With climate concerns globally, clean (renewable) power and electric vehicles are increasingly gaining traction. Of the two, renewable power after years’ of ups and downs seem to be getting settled and is seeing significant growth. Electric vehicles still have lot of structural challenges and the timelines for their wide adaptability remains uncertain.
However, these are future critical segments and Indian players like Exide and Amara Raja can not afford to ignore them.