Amara Raja announces backward integration move

Amara Raja Batteries has announced that it is taking a major step in its manufacturing strategy. As part of the plan, the plastics part of the battery business of Mangal Industries will be de-merged and brought under the ARBL umbrella.  

This proposed transaction is aimed at simplifying business operations by a backward integration of the supply chain and bringing plastic moulding capabilities of the battery business in-house. ARBL is expected to benefit from margin improvements and annual recurring post-tax synergies of Rs 5-6 crore.

In a stock market filing, the company said: The backward integration is expected to enhance the  control over the supply and inventory management of its raw materials. This would help with a unified approach on supply chain management and consequent synergies leading to optimisation of resource utilisation, reduced operational, logistics, supervisory and overhead / utilities costs, reduce duplication of administrative efforts and better procurement policies and prices.

Once the transaction is completed, MIL shareholders will receive 65 equity shares of ARBL for every 74 equity shares held by them in MIL.

MIL’s standalone turnover from operations was Rs 1,450 crore in the last fiscal year.

Jayadev Galla, chairman and MD, ARBL, said, “This is in keeping with our theme of consolidating and unlocking synergies as we continue to pursue value accretive growth opportunities that will lead ARBL to the leadership position in the energy and mobility space.”

Harshavardhana Gourineni, executive director, ARBL, “The move strengthens ARBL’s control of the supply chain and augments our battery recycling initiatives. It also helps us in improving margins by better utilization of manpower and reducing logistics costs.”

The scheme is subject to the necessary statutory and regulatory approvals from NCLT, stock exchanges, SEBI and the respective shareholders of each of the companies. Amara Raja now wants to see itself grow exponentially in the energy and mobility business.