Syrma SGS Tech Sees Nearly 7% Decline Due to Significant Margin Erosion in Q2

On November 2, the shares of Syrma SGS Technology witnessed a sharp decline of nearly 7% during the opening trade session. This decline followed the company’s report of substantial margin erosion in the second quarter (Q2).

The company’s EBITDA margin experienced a notable contraction of 320 basis points, falling to 6.9% in the period of July-September, a significant drop from the 10% margin recorded in the same period last year. This decline in margin was primarily attributed to increased raw material costs and higher finance expenses, which negatively impacted the company’s operational performance.

Despite achieving a remarkable 52% surge in consolidated revenue, reaching Rs 711.70 crore, the weak operational performance had a notable impact on Syrma’s consolidated net profit for the quarter. The net profit remained nearly flat year-on-year, standing at Rs 28.30 crore. In the corresponding quarter of the previous fiscal year, the firm had reported a consolidated net profit of Rs 28.2 crore.

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

In addition to these developments, the company’s board approved the merger proposal of its subsidiary, SGS Teknis Manufacturing, into Syrma SGS Technology. The merger will occur in two stages, with the first stage involving the amalgamation of the entire business and undertaking of SGS Infosystems with SGS Teknis Manufacturing. Subsequently, the merger of the complete business and undertaking of SGS Teknis Manufacturing with Syrma SGS Technology will be executed.

The primary objective of this merger is to streamline and simplify the group structure, thereby creating additional value for stakeholders. It is expected to enhance access to funds and improve debt servicing capabilities through enhanced cash flows.