Looking at the future, sectors such as power and transportation will be fundamentally very different from what they are today, igniting opportunities for investment in new technologies that can bolster resilience and provide lower carbon emission. One of those key technologies is batteries, which are creating compelling solutions for storing and distributing renewable energy. A battery is an important component in an electric vehicle having an ability to store renewable energy and release it at a later stage proving it to be a decarbonisation tool. As more and more sophisticated battery technologies are produced, the cost of production is coming down. No wonder the cost of lithium ion battery packs have come down by nearly 13% in the last few years. As a result, currently 21% of the total cost of an electric vehicle is attributable to a battery! Apart from the automotive sector, the falling cost of the battery can be very useful for sectors like power generation assets. For example, power companies could buy and store the power when it is less expensive and release during peak demand time when prices are high alleviating transmission constraints. Research reports point out that energy storage technologies have an impressive market growth outlook for the next two decades. They forecast energy storage installations to grow more than 27 times and attract close to $400 billion worth of investment. In India, a new buzzword is taking shape—gigafactory. Investment is shifting to mega clusters for integrated battery manufacturers for a major transformation. A gigafactory is a gigantic battery production facility that brings multiple companies and components makers together to scale up for cheaper manufacturing. With our country at the cusp of a technology transformation, the government has indicated setting up mega battery manufacturing clusters. The government has identified Advanced Chemistry Cell (ACC) batteries to be a key engine for industries of the future. Reliance Industries Ltd has also indicated an investment of Rs 75,000 crore for new energy and setting up gigafactories in Gujarat. Other companies in the fray are Amara Raja Batteries, Samsung, Tata, Mahindra, Panasonic, etc. In a latest announcement, Hindustan Copper is planning to invest $1 billion to replace diesel vehicles at their facilities during the next five years. They plan to replace all current equipment and vehicles with battery operated equipments in the next 5-6 years’ time frame. Amara Raja Batteries has recently set up a technology hub with a large investment in its Tirupati facility in Andhra Pradesh to manufacture lithium ion cells. Moreover, the Indian Space Research Organisation (ISRO) will be transferring the technology to Amara Raja Batteries to manufacture lithium ion cells as part of the government’s effort to push for electric mobility. The electric vehicle revolution is just getting started in India and companies like Amara Raja Batteries, among others, will be a proxy play plus most likely to benefit from this electric economic boom. The Amara Raja Batteries stock is currently quoting at Rs 720 on the bourses and can be purchased by value portfolio investors for a multi-bagger opportunity to possibly double their investment in two years’ time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.