Unseasonal rains have not only damaged crops but have also hit the sales of battery manufacturers. Rain delayed the onset of summer, impacting consumer purchases. Home inverter revenue of Exide Industries Ltd is estimated to have fallen by 10-12% in the March quarter. With around one-fifth of the company’s turnover coming from inverter batteries, the sales drop made a significant dent to its revenue, which grew just 2% in the March quarter.

Amara Raja Batteries Ltd derives a lesser amount of its revenues from inverter batteries. But subdued consumer demand means the company is also expected to report a drop in home inverter revenue, when it releases its earnings later in the month. “Inverter revenues of Amara Raja may also fall in Q4, but the company mostly trades in inverter batteries," said Jay Kale, an analyst at Elara Securities (India) Pvt. Ltd.

The summer season is still under way. But sales may not come back in a big way. That is due to improving electricity supplies. The electricity situation in the country is improving. Several large states saw negligible electricity deficit of less than 1% in March, data from Central Electricity Authority (CEA) shows. The low electricity deficit can be either due to subdued demand or better electricity availability.

In fact, the situation is a far cry from what it was a couple of years ago. Data from CEA shows that overall electricity deficit in India halved from 8.5% in 2011-12 to 3.6% in the last fiscal year. Deficits in states like Bihar, Madhya Pradesh and Maharashtra fell drastically.

If indeed electricity supplies continue to improve, then the inverter batteries business can be in for a “structural decline," Emkay Global Financial Services Ltd warns.

According to Kale of Elara Securities, if electricity supplies improve as projected “then it will have a bearing on the inverter battery sales in the long run."

Perhaps that is the reason why, after rising sharply in 2014, the stocks are trailing the broader markets since the beginning of current calendar year. While Exide is down almost 14%, Amara Raja increased just 1% since the beginning of this year.

Of course these companies predominantly depend on automobile and industrial batteries for their sales. But a significant amount of the business—inverter batteries—is facing the threat of a rapid decline. That means recovery in the core automobile and industrial batteries should be stronger for companies to maintain revenue momentum.

The writer doesn’t own shares in the above-mentioned companies.

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