In a bid to hedge itself against the rising cost of lead, Exide Industries has backward-integrated itself by acquiring a lead smelter for Rs 25 crore.
KOLKATA: In a bid to hedge itself against the rising cost of lead, Exide Industries, India’s largest automotive and industrial battery manufacturer, has backward-integrated itself by acquiring a lead smelter for Rs 25 crore.
“We have bought out a local smelter as part of our plans to enter the lead smelting and recycling business in India. For this we have invested Rs 25 crore,” P K Kataky, Exide’s director-automotive told DNA Money. He, however, did not reveal the name or other details of the smelter.
Industry sources, though, hinted that the plant may be located near Pune and the deal may be struck by the month-end.
The move will help the company to not only reduce its dependence on imported lead, but also comply with the collection of scrap batteries under the battery manufacture and handling regulations.
Lead accounts for almost 70% of the company’s input cost. The Rs 2,400 crore lead acid storage batteries manufacturer has traditionally relied on local smelters and imports for its lead requirements. It consumes around 1,20,000 tonnes of lead annually.
Over the past few years, the company has had to cope with soaring prices of the metal, which have zoomed from $435 per tonne four years back to $3,000 per tonne today. In fact prices have risen by 30-35% in the last few months alone. This has forced it to increase prices over the last one year.
T V Ramanathan, managing director and CEO, Exide said, “In a scenario where the price of lead has been highly volatile, having a stake in a local smelter would be a significant step towards increasing the reliance on domestic sourcing of recycled lead.”
The economics of setting up a high energy cost smelter would still be cheaper than importing the entire lead, he added. Exide currently imports lead from various countries including Australia, China and South Korea.
Setting up the smelter would also help Exide enhance the collection of scrap battery as per regulations. Kakaty said, “The used batteries are sent to smelters, which in turn pass the lead to battery manufacturers. The direct foray into smelting will help us increase our commitment to protect the environment, through use of recycled materials as part of our corporate social responsibility initiatives.”
As per regulations, 75% of the batteries sold are supposed to be taken back by the company.
But, industry sources said the figure falls far short of the regulatory target, due to lucrative prices offered by middlemen. Exide is said to be able to collect only 25% of its used batteries at present.
The total organised automotive battery market is in the region of Rs 4,000 crore with market leader Exide commanding a 79% market share in the OE segment and a 70% share in the replacement battery category. It has a 36% market share in the overall auto battery market, which includes an almost equally large unorganised segment.
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