Valuation gap btw Exide, Amara Raja should come down: Irani

Mehraboon Irani of Nirmal Bang Securities feels the valuation gap between the two - Exide and Amara Raja - should come down further.
 
Irani told CNBC-TV18, “The last quarter by Amara Raja Batteries was brilliant, even December quarter has been very good. A top-line growth itself of 24 percent is praiseworthy. I think that has mainly happened to the traction we have seen in the automotive segment plus the growth of sales in the Uninterrupted Power Supply (UPS) segment.”
 
“Point two is other expenses have shot up very sharply mainly because of power shortage and the distribution cost has gone up sharply, but yet the company’s margins have hardly come down. The bottom-line is up 23 percent mainly because of lower tax rates,” Irani added.
 
Irani also said, “Now the company is planning an expansion of Rs 440 crore in the UPS segment. They are already planning an expansion of Rs 300 crore in the automotive segment.”
 
“I think both of these will be funded through internal accruals because it has got a lovely cash flow, but this expansion in an environment, which has not been all that great, indicates the management’s confidence and the commitment. So, the valuation gap between the two (Exide and Amara Raja) should come down further. So, Amara Raja is a pure hit on basis of numbers.”