A low stock price can be tempting—it gives the impression of a bargain waiting to be picked up. But in reality, not all low-priced stocks are undervalued gems. Some are priced low for a reason: weak fundamentals, poor capital allocation, or fading growth prospects. However, others may be a real value buy, and have a stable business.
On similar lines, we have selected two stocks that have strong brand recall, market leadership, and trade at a lower valuation.
Let’s take a look..
#1 Amara Raja Energy and Mobility
Incorporated in 1985, Amara Raja, the flagship company of the Amara Raja Group, is India’s second-largest battery manufacturer after Exide Industries.
It enjoys strong brand recognition through its well-known brands – Amaron and PowerZone. The company boasts a production capacity of 50 million automotive batteries and 2.3 billion ampere-hours of Industrial batteries.
It has had a long-term, highly successful joint venture with global battery major Clarios for over 20 years. Amara Raja exports to over 50 countries worldwide and is steadily expanding its international presence. As of FY24, 87% of revenue comes from the domestic market, while the remaining 13% comes from exports.
The company has a diversified presence across the automotive batteries and industrial segments. In automotive, it caters to two-wheelers, three-wheelers, four-wheelers (4W), and commercial vehicles. It is also the largest exporter of 4W batteries from India. The automotive segment leads with a 67% contribution to its total revenue in FY24.
The industrial segment accounts for 29% of its revenue, with the remaining 4% coming from the new energy segment. The industrial sector caters to telecoms, railways, electrical control, solar and uninterruptible power supply (UPS).
In addition, Amara Raja is expanding into the new energy sector with investments across the entire value chain, from Li-ion cell and battery pack manufacturing to EV charging products and energy storage systems. In 2022, the company also announced a capex of ₹95 billion over the next 10 years to set up the Giga Corridor in Telangana.
It is also setting up E-Positive Energy Labs, an innovation and research facility focused on new energy technologies. Amara Raja aims to have a 16-gigawatt-hour capacity over the next decade.
Its financial performance has remained strong, led by volume growth, new product launches, and higher demand across segments. Amara Raja’s strength lies in its ability to consistently outperform market leader Exide in all areas, including growth and margins.
Revenue has grown at a compound annual growth rate (CAGR) of 16% over the past three years, reaching ₹112.6 billion in FY24, an 8% increase from FY23. While, net profit grew at a 12% CAGR to ₹9.0 billion, up 24% from the previous year, driven by improved margins. Margin improved by around 2.4 percentage points over FY21–24.
With profit growth, Amara Raja’s return ratios also improved. Return on capital employed increased from 15.6% in FY22 to 18.6% in FY24. The return on equity (RoE) increased by 2.5 percentage points to 14.2% during the period.
Amara Raja Share Price
In 9MFY25, Amara Raja’s revenue increased 11% to ₹97.9 billion, driven by momentum in its new energy business. The net profit also surged 11% to ₹7.8 billion, with a margin of 13%.
Looking ahead, Amara Raja has also diversified into the lubricants market. It aims to leverage its extensive distribution network to pursue growth in this business. This will open up new revenue sources, helping the company strengthen its market position.
The company is well-positioned to benefit from the rising adoption of electric vehicles. According to reports, it is anticipated that total battery demand will reach 100 gigawatt-hours by 2030. With its planned 16 gigawatt-hour gigafactory, it aims to secure at least 16% market share by then.
Its EV charger business has also gained traction, with a strong order book helping it build a presence in the charging infrastructure segment. Besides, it also acquired Mangal Industries’ plastic business and established a recycling facility.
It trades at a price-to-earnings multiple of 20x, a 14.5% discount to a 10-year median of 23.4x. Relatively, too, its valuation is a 50% discount to Exide Industries. While it operates in a cyclical sector, its diversified segments offer some protection, though not complete immunity.
#2 Indus Towers
Indus Towers is involved in setting up, operating, & maintaining wireless communication towers. It plays a crucial role in supporting India’s digital infrastructure by enabling mobile network connectivity in both urban and rural areas.
It is India’s second-largest tower company, by number of towers, and the largest in terms of tenancies. As of December 31, 2024, it has a portfolio of 2.3 lakh towers and 3.8 lakh tenancies.
The business model offers stable revenue visibility, backed by long-term (10 years) Master Service Agreements (MSAs) with telecom operators. These contracts provide for annuity-type fixed revenue during the term, with annual escalation. Agreements also include exit penalties, fixed advance deposit and timely receipt from tenants.
This structure also reduces churn, as telecom players are dependent on tower infrastructure for network continuity. These attributes support Indus’ business and revenue growth.
Indus Tower Share Price
The Company’s revenue in FY24 grew 0.8% to ₹286 billion compared to the previous year, driven by growth in tower and tenancy operations, as well as 5G deployment on its towers. Growth was modest due to a high base in FY23, which included a one-time gain of ₹11 billion from the settlement of legacy dues for one of its customers.
However, the underlying business remained stable, supported by tenancy additions and 5G deployment. EBITDA grew 50% to ₹146.9 billion, with margin expanding to 51.4% from 34% in FY23, albeit on a lower base. This recovery was driven by the absence of a one-time provision of ₹53 billion it made last year.
With the lower base and margin recovery, the Indus Tower’s net profit tripled from last year to ₹60.4 billion. The company boasts a strong RoCE of 19.4%, reflecting efficient capital allocation.
The growth momentum continued in 9MFY25 as well, with revenue growing 5% to ₹224 billion. Net profit surged a record 95% to ₹81.5 billion, led by the reversal of ₹48.5 billion in earlier provisions.
Going forward, the company aims to expand its market share and strengthen its balance sheet by improving collections of past-due accounts and enhancing its tower portfolio. The company plans to incur capital expenditure of ₹85 billion in FY25, to support the ongoing 5G rollout and network expansion in rural areas.
Indus has also recently acquired 12,700 towers from Bharti Airtel for ₹21.7 billion, which are expected to generate revenue from FY26 and contribute to future growth. However, the primary concern for Indus Towers remains its exposure to mobile network operators with weak credit profiles, which contribute 30-35% of its revenues.
The company is cash-rich, with ₹59 billion in free cash flow in 9MFY25. Its cash accrual in FY26 is expected to be ₹80 billion. Its 100% free cash flow payout policy could support strong shareholder returns, provided operational momentum sustains.
Indus trades at a P/E of 11x, a 35% discount to its 10-year median multiple of 17x.
Conclusion
Amara Raja operates in an industry dominated by Exide. However, Amara Raja, being the second-largest, has a stronger growth and margin profile than Exide’s.
Also, the company has recently ventured into lithium-ion batteries, and ongoing capital expenditure to pursue growth opportunities in the new energy segment may present a compelling case for analysing the business in-depth.
Whereas, Indus Towers’ business is largely stable, with recurring stable revenue generation. With ongoing capital expenditure expected to decrease as 5G monetisation is underway, free cash flow is expected to increase. This could support a higher dividend payout in the future.
This, coupled with potential capital appreciation, may offer investors a low-risk, low-return opportunity. However, as with any investment, both also carry inherent risk.
Disclaimer:
Note: We have relied on data from throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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