Indian Chemical Makers Can No Longer Ignore Lithium-Ion Battery Market
One of the key catalysts is the government production-linked incentive scheme to push domestic manufacturing of battery chemicals.
For India's chemical makers, the government's incentives and the potential growth in the nation's electric vehicle demand are now too big to ignore. They have started lining up fresh investments to manufacture components for lithium-ion batteries.
Top chemical companies, including Ami Organics Ltd., Neogen Chemicals Ltd., Gujarat Fluorochemicals Ltd., Aether Industries Ltd. and Himadri Speciality Chemical Ltd. plan to set up facilities to locally produce anodes and cathodes as electrolytes for Li-ion batteries.
One of the key catalysts is government subsidies to push domestic manufacturing of battery components. The Ministry of Heavy Industries will be issuing a fresh tender inviting bids for the Rs 18,000 crore advanced chemistry cells project under the production-linked incentive scheme.
Batteries contribute up to 60% of an electric vehicle's cost. To make EVs affordable and cut reliance on imports, local manufacturing is critical. The industry anticipates a much bigger EV boom as mass adoption of electric mobility takes off. That, according to the Indian Brand Equity Foundation, will propel the domestic lithium-ion battery market from 20 gigawatt hours in 2022 to 220 GWh by 2030, growing at an annualised rate of 50%.
EV Push
The government of India last week announced approval of the e-vehicle policy to promote India as a manufacturing destination for EVs. This policy comes with a minimum investment of Rs 4,150 crore and no cap on maximum investment. Companies setting up manufacturing facilities for EVs are to be allowed limited imports of cars at lower customs duty. This push for battery production ties in with India's objective to become a manufacturing destination for EVs.
New Plans
Ami Organics
Ami Organics has signed a memorandum of understanding with the global manufacturers of electrolytes, according to a statement. It has started manufacturing electrolyte additives and will ramp up output by FY25.
The company also signed an agreement with the Gujarat government for an investment of Rs 300 crore to set up an electrolyte facility.
Analyst view: KRChoksey Share and Securities Pvt., in its report for Q3 earnings, cited the ramping up of the electrolyte and additives business as one of the key growth drivers for Ami Organics in FY25. The other being the launch of blood-clot medicine apixaban in Europe, and UV absorbers used by the plastics industry.
Neogen Chemicals
The company's Neogen Ionics Ltd. unit recently acquired land in Gujarat's Dahej PCPIR to set up a battery material facility. The greenfield site will be its largest facility, dedicated solely to battery materials and new future business opportunities.
The company has a technology licence from Japan's MU Ionic Solutions Corp. to set up an electrolyte plant.
Neogen has planned a capex of Rs 1,500 crore over FY24, FY25 and FY26, with peak revenue potential ranging from Rs 2,500 crore to Rs 2,950 crore, depending on lithium prices.
Analyst view: Nirmal Bang Securities Pvt., according to its Q3 earnings analysis, expects future earnings trajectory to be "significantly different," led by the battery chemicals segment, as it said in a Q3 FY24 report.
The brokerage has an 'accumulate' rating on the stock, with a target price of Rs 1,300 apiece, implying a potential upside of 2%.
Aether Industries
In December, Aether Industries announced a strategic agreement with a global lithium-ion battery maker to expand into the electrolyte additives market. The company said there were also discussions to develop three additional products.
Himadri Speciality Chemical
The company will invest Rs 4,800 crore to set up India’s first lithium iron phosphate cathode active material plant in Odisha in two phases by 2030.
"At full capacity, the plant will manufacture 2 lakh tonnes of cathode material and will be set up over the next five to six years," Managing Director and Chief Executive Officer Anurag Choudhary told NDTV Profit in December.
Gujarat Fluorochemicals
Its subsidiary, GFCL EV Products Ltd., already makes battery salts, additives, electrolytes, cathode active materials and binders.
The company has planned a cumulative capex of Rs 6,000 crore over four to five years, with over half of it to be spent in the next three years. The company expects an asset turnover of about two times and an Ebitda margin of over 25% at full capacity utilisation.
Analyst View: The investments in battery components will drive the company's medium- to long-term growth and profitability, said KRChoksey in the third quarter earnings report.
The brokerage has an 'accumulate' rating with a target price of Rs 3,884, implying a potential upside of 8.6%.
