Varroc Engg tumbles after Q3 loss of Rs 137 cr

Varroc Engineering slumped 7.67% to Rs 420.05 after the company reported consolidated net loss of Rs 136.96 crore in Q3 FY21 compared with net profit of Rs 29.33 crore in Q3 FY20.

Net sales jumped 24.6% to Rs 3492.66 crore in Q3 FY21 over Q3 FY20. The India business revenue increased 29.2% year on year. The Global Lighting Business (VLS) revenue increased 9.0% YoY in Euro terms.

The company posted a pre-tax loss of Rs 112.86 crore in Q3 FY21 as against a pre-tax profit of Rs 48.64 crore in Q3 FY20. Current tax expense declined 23.8% to Rs 18.10 crore in Q3 FY21 over Q3 FY20.

Reported EBITDA declined 8.8% year on year to Rs 245.65 crore in Q3 FY21 over Q3 FY20. EBITDA margin declined to 7% in Q3 FY21 from 9.6% in Q3 FY20, mainly due to lower margins in VLS.

The company reported an exceptional loss of Rs 107.77 crore in Q3 FY21. The Czech subsidiary of the company had, in earlier years, recognised certain tax credits as deferred tax assets under two different incentive schemes available to the company. Accordingly, the company has prudently written-off these tax assets amounting to Rs 107.77 crore during the current quarter.

Commenting on company's performance, Tarang Jain, MD of Varroc Engineering said, "We have seen a strong recovery in Two-wheeler and Passenger Vehicle volumes across markets. We have seen robust demand in VLS business across regions as car manufacturers geared up their production schedules to cope with the pent-up demand. COVID-induced high absenteeism rate, mainly in our Czech plants, led to delivery backlogs, overtime and premium freight costs impacting margins adversely. The volumes ramp-up in our newer plants was slower than anticipated due to delays in product launches We have covered most of the production backlog and have rebuilt the pipeline of components and finished goods as we entered Q4. Our focus will be to steadily improve the margins in our VLS business on a sustainable basis in the coming quarters."

Varroc Engineering is engaged in design, manufacture and supply exterior lighting systems, plastic and polymer components, electrical-electronics components, and precision metallic components to passenger car, commercial vehicle, two-wheeler, three-wheeler and off-highway vehicle OEMs directly worldwide.

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