Tier 1 supplier Varroc Engineering (Varroc) has announced its results for the Q3 and 9-months of FY2024.
The company reported revenue of Rs 1,884 crore, up 9.4 percent, EBITDA of Rs 173 crore, up 24.5 percent and net profit of Rs 383 crore, compared to Rs 21 crore for the same period last year. The reported revenue was higher due to recognition of tax benefit on the write-off of loans impaired at the time of divestment of four-wheeler lighting businesses in Europe and Americas and the reversal of tax provisions created in the earlier quarters of the year.
For the 9-month period the revenue came at Rs 5,577 crore, up 7.4 percent YoY, EBITDA at Rs 540 crore, up 23.6 percent and net profit of Rs 494 crore versus a loss of 1.2 crore for the same period last year. The reported profit was higher due to recognition of tax benefit on write-off of loans given for the 4W European & American lighting business prior to divestment.
Tarang Jain, CMD, Varroc said, “The Indian economy continues to sustain its growth momentum with a GDP growth of 7.6% in Q2 FY24 exceeding market expectation. The automobile production in India during Q3 FY24 grew on a YoY basis for all the segments. Passenger vehicle grew by 5%, Commercial vehicle grew by 5.9% whereas 3W and 2W registered strong growth of 13.4% and 19.0% respectively. This growth was due to strong economy and late festive season this year. Sequentially, i.e. QoQ we have seen de-growth in all the segments, CV has de-grown by 8.3%, PV by 10.9%, 3W by 8.9% and 2W saw de-growth of 1.5%. The de-growth on QoQ basis seems to be mainly due to year-end phenomenon.”
“Our operations in Q3 FY24 mirrored the industry situation. Our revenue in India grew by 20.1% higher than both two-wheeler & passenger vehicle industry growth on YoY basis. However, our revenue from our overseas operations had a de-growth as two-wheeler production levels went down in certain markets like Vietnam and Italy. In addition, our customer concentration in these markets impacted our revenue.”
Interestingly during the 9-month period the company said it won new lifetime orders amounting Rs 6,757 crore with annual peak revenue of Rs 1,199 crore. In Q3, EV customers contributed 5.3% of revenue, supported by their strong performance.
“As we look forward in our overseas business, our focus is to drive customer diversification in the order book and hence mitigate our customer concentration risk. We also drive cost actions through insourcing and working capital optimisation. These efforts are likely to lead to a gradual recovery in overseas markets and improved financial performance in the medium term,” added Jain.
“These new orders will enable us to increase our revenue better than Industry as the content remains 5-6X higher than supplying to ICE variants. The focus of the Company remains to further strengthen the Indian operations, bringing back the profitability in overseas operations, control on capex and generation of free cash flow,” he concluded.
