Booming growth of EV sector in India: Which companies are taking advantage of it?

Booming growth of EV sector in India: Which companies are taking advantage of it?

The year 2023 has witnessed a record-breaking surge in the sale of electric vehicles (EVs) across India. The EV sector is booming, but which companies are really riding this trend? And by companies, I don’t just mean EV manufacturers but the entire value chain. In today’s blog post, we are going to dive deep into this ecosystem.

Before we begin, don’t forget to like, share, and subscribe to the blog to stay updated with the latest insights. Ready? Let’s start our EV sector deep dive!

The Criteria for Choosing Companies

We can’t talk about all the companies, so we’ve filtered out a few. Here are the basic filters we used:

1. The company’s market cap should be more than ₹2000 crore.
2. The PE ratio should be less than 30.
3. The company’s ROE (Return on Equity) should be above 10%.
4. The ROCE (Return on Capital Employed) should also be above 10%.
5. The company should pay dividends to its shareholders.
6. Lastly, the promoter holding in the company should be more than 35%. You know why!

After applying these filters, we have four stocks ready to discuss.

1. Tata Chemicals: Connecting the Dots

I know what you’re thinking – what does Tata Chemicals have to do with electric vehicles? Let me explain. Tata Chemicals generates around 57% of its revenue from soda ash, and it is the third-largest producer of soda ash globally. But how is this related to the EV ecosystem?

Soda ash is used as a raw material to process lithium for lithium-ion batteries. In fact, for every ton of lithium produced, about 2 tons of soda ash is required. This creates a strong connection between Tata Chemicals and the growing demand for EV batteries.

Tata Chemicals is also venturing into specialty chemicals, focusing on precipitated silica used in green tires and fuel-efficient EVs. Additionally, they are investing in lithium-ion cell production, with a new factory at Tata Motors’ Sanand Plant in Gujarat.

2. Gravita India: Recycling for the Future

Next up is Gravita India, a company specializing in lead recycling. So, how does that fit into the EV narrative? Well, EVs use 12-volt lead-acid batteries in addition to lithium-ion ones. As the demand for metals increases, the need for recycling will grow too, benefiting companies like Gravita.

Gravita has also hinted at plans to enter the lithium-ion battery recycling space by 2030, a crucial area as more EV batteries reach the end of their lifespan. With 11 recycling plants and a robust procurement network, Gravita is poised to ride the recycling wave.

3. HEG: The Power of Graphite

Here’s a fun question: Do you know what the tip of a pencil is made of? Graphite! But graphite isn’t just for pencils; it plays a crucial role in the EV ecosystem as well. HEG is the world’s largest producer of graphite electrodes, used in electric arc furnaces for steel production.

But more importantly, graphite is the most successful anode material for lithium-ion batteries. About 20-25% of an EV battery’s volume is graphite, and this component is vital for EV battery performance. HEG is now investing in manufacturing anodes for lithium-ion batteries to capitalize on the growing EV market.

4. Hindalco: Aluminum and Copper Powerhouses

Finally, we have Hindalco, a leading producer of aluminum and copper—two metals critical for the EV industry. Aluminum is lighter and more environmentally friendly than steel, making it ideal for electric vehicles. A lighter body means better driving range.

Meanwhile, copper is crucial for the electrical systems in EVs. However, there’s a global shortage of copper, and Hindalco is well-positioned to benefit from this. They are expanding their capacities to meet the growing demand driven by green energy and electric vehicles.

Conclusion: The Future of EV Stocks

So, there you have it! These are some of the key companies involved in the booming EV ecosystem. It’s not just about making cars; the entire supply chain is buzzing with opportunity.

Remember, the information shared here is purely for educational purposes and not a stock recommendation. Always do your own research before investing. Make sure to subscribe for more such insights, and feel free to check out the additional reading resources in the description.

Let me know in the comments which sector you’d like to explore next! See you in the next post. Take care, and happy investing!