Syrma SGS Tech plunges nearly 7% on sharp margin erosion in Q2

A spike in costs of raw material and finance expenses dragged the Syrma’s operational performance in Q2.

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Shares of Syrma SGS Technology plunged around 7 percent in opening trade on November 2 after the company reported a sharp margin erosion in Q2.

The company’s EBITDA margin contracted 320 basis points to 6.9 percent in July-September, sharply down from 10 percent recorded in the year-ago period. A spike in costs of raw material and finance expenses dragged the company’s operational performance.

The weak operational performance also weighed on Syrma’s consolidated net profit for the quarter which remained flattish on year at Rs 28.30 crore. The firm had reported a consolidated net profit of Rs 28.2 crore in the same quarter of the previous fiscal.

The weak performance on the bottom line and profitability fronts was despite a 52 percent surge in consolidated revenue to Rs 711.70 crore.

At 09.42 am, shares of Syrma SGS Technology were trading nearly 6 percent lower at Rs 562.55 on the National Stock Exchange.

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Meanwhile, the company’s board also approved the proposal of merger of arm SGS Teknis Manufacturing to Syrma SGS Technology. In the first stage, the amalgamation of the entire business and undertaking of SGS Infosystems with SGS Teknis Manufacturing will take place. Following that, the merger of the entire business and undertaking of SGS Teknis Manufacturing with Syrma SGS Technology will happen.

The merger is aimed at the consolidation and simplification of the group structure which will also create more value for stakeholders. It will also allow access to funds and better debt servicing abilities through improved cash flows.

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