Force Motors freezes at 20% upper circuit, hits 52-week high on robust Q4

Force Motors posted consolidated net profit of Rs 146.62 crore against loss of Rs 42.77 crore in the year ago quarter

Shares of Force Motors (FML) were locked in the 20 per cent upper circuit at Rs 1,718.10, which is also the stock's 52-week high level, on the BSE on Tuesday after the company reported robust earnings during the March quarter of FY23.

FML's consolidated net profit came in at Rs 146.62 crore as against a net loss of Rs 42.77 crore posted in the year-ago quarter (Q4FY22), and loss of Rs 15.57 crore in the previous quarter (Q3FY23).

The stock surpassed its previous high of Rs 1,622.95, touched on November 29, 2022. In the past two months, it has zoomed 48 per cent.

The company reported net exceptional income of Rs 208.32 crore during the quarter. This included exceptional income of  Rs 308 crore as part of Madhya Pradesh state government's Industrial Investment Promotion Assistance Scheme, 2010, recognized on the basis of sanction orders received on March, 2023 for the years 2017-18 to 2020-21.

In Q4FY23, Force Motors' revenue from operations grew 69 per cent to Rs 1,490 crore from Rs 881 crore in Q4FY22. Operating margins during the quarter stood at 10.65 per cent as compared to 0.86 per cent in the year ago quarter due to price hikes taken besides some cooling down of key raw material prices like steel.

FML is the flagship company of the Abhay Firodia group. The company is a fully vertically integrated manufacturer of small and light commercial vehicles (LCVs), multiutility vehicles, and agricultural tractors. Under the auto components division, engines are assembled for Mercedes-Benz India Pvt Ltd and BMW India Pvt Ltd. The primary brands in LCVs and multiutility vehicles include Traveller, Trax, Gurkha and Shaktiman, while the brands in tractors are Balwan, Orchard, Abhiman and Sanman.

CRISIL Ratings believes FML will continue to benefit from its leadership position in niche products segments, revenue diversity and stable operating profitability. Furthermore, the financial risk profile will improve over the medium term, with limited increase in total debt in future because of healthy cash accrual vis a vis progressive loan repayments and financial flexibility of the Abhay Firodia group.

The margins are expected to remain stable over the medium term. Lower than expected recovery in operating margins will remain key rating sensitivity factor, the rating agency had said in rationale.

The holding company of the Abhay Firodia group owns 57.38 per cent stake in FML, and has stakes of significant market value in the Bajaj group of companies, Bajaj Auto Ltd, Bajaj Holdings & Investment Ltd and Bajaj Finserve Ltd. This provides strong financial flexibility to the group, including FML, CRISIL said.