Amara Raja Batteries Ltd: Empowering India

Abstract

The growth rate of a company has become a common parameter to judge its economic health with respect to its contemporary companies in a given industry. In the literature a number of different definitions of high growth are used. For the current research project, the term “high growth” is used to refer to all firms which sustain levels of growth in turnover or employee numbers which can be considered high by comparison to the majority of businesses. To be more specific, we have used the “Rate of Growth of Profit After Tax” (ROG-PAT) number of a firm, compared with its competitors, over a 4 year period as a criterion for high growth. Firms can show growth due to broadly two reasons: a) Growth caused due the expansion of the industry or the economy in general, and b) Growth that is due to factors inherent to the company. Several studies have indicated that rapid-growth and slow-growth companies differ in a number of ways from each other. However, to identify these factors, when all the companies in an industry show a high rate of growth is extremely difficult. Hence, analyzing those high-growth companies that are going against the common trend presents a useful opportunity to see what drives the growth in companies. It is generally seen that through their policies and strategic placement in the market, such firms are able to differentiate themselves from the rest and provide for the unfulfilled service/product related needs of the market. By identifying these policies and strategic decisions, we might be able to come up with a generic recommendation that can help companies grow, across various industries. These recommendations would be especially useful for entrepreneurial firms and start-ups. It would enable them to not only have longer periods of high-growth but more importantly, develop a strategy that allows them to have sustainable competitive advantage with respect to the incumbent firms of their industry. However, at this point, a caveat should be mentioned. Though the approach of this research work would be towards identifying a generic strategy, it is not necessary that the end-result would be a blanket solution for all companies, across all industries. Most of the suggestions of this research work would require some amount of modulation to meet specific demands, which would depend on how the management of such companies implements them. For carrying out this study, we carried out a mix of primary and secondary research. Primary research included face-to-face and telephonic interviews. Emails were exchanged with specific stakeholders to clarify specific issues. Secondary research involved an analysis of financial, organizational, and other generic information on the group. Several databases such as Capitaline, Indiastat, etc. were consulted. Company and analyst presentations were also used as reference sources. Amara Raja is a diversified group with interests in Batteries, electronics, precision metal works, plastics, and food sectors. Its battery business, Amara Raja Batteries Ltd., is a publicly listed company. This company has shown a ROG-PAT of around 100% year-on-year for the last 4 years, leaving aside the year 2008-09 – which can be ignored due to global financial slowdown/recession. This rate is significantly higher than any of its other competitors. Therefore, based on the criterion defined above, Amara Raja Batteries is an ideal company to base our research on. This report is constituted of two parts – a case study on Amara Raja Batteries, and its parent group, and a case analysis section wherein we have tried to apply some frameworks to identify the cause behind Amara Raja’s consistent, superior showing. Vijay Anand, the head of Industrial Batteries Division of Amara Raja Batteries Ltd. had a lot to be proud about. He had started his job in the now infamous “license raj” era, wherein it did not matter whether you had a product which boasted the best of domain technology, not only in the country but in the world. At the end of the day, if you could not meet the “lowest price” criterion, an integral part of the “tender” floating process, you would not get the business from the government agencies. To make matter worse, due to an underdeveloped private market, the government companies and agencies had a monopoly on almost every business which he could sell his product to. From that, to being a part of a half a billion dollar conglomerate, he had come a long way. However, sitting in his car as he made his half an hour trip from his office to the factory site in Karakambadi, the challenges before him had kept him worried.