Tier 1 supplier Varroc Engineering (Varroc) has announced its financial results for the quarter ended June 30. The company reported revenue of Rs 1,635 crore, up 36 percent compared to Rs 1,210 crore reported for the same period last year. The net loss for the period came at Rs 84 crore compared to a loss of Rs 292 crore a year ago.
Tarang Jain, CMD, Varroc said, “Q1 of FY23 has started with stable outlook for automotive on back of forecast of a normal monsoon. The growth is visible mainly due to low base. Semiconductor supply continues to impact premium two-wheeler manufacturer whereas passenger vehicle manufacturers are seeing improvement supplies. Geopolitical issues have resulted in higher energy cost as well as food inflation which is forcing most of the central bank to hike Interest rate at a pace which has not been seen in last 2 decades. The operating environment for the business remains challenging.
In India, the auto production for all the segments in Q1 FY 2023 rose on YoY basis due to lower base of last year same quarter. On QoQ basis, we saw two-wheelers production to grow by 8.4%, as base is turning favourable whereas marginal fall on remaining segment due to cyclicity.”
He said that the company continues to improve its profitability on sequential basis as gross margin improved by more than 340 basis point. “The operational PBT before JV for continued operation has become positive in the quarter and it is Rs 13 crore. The reported PBT was impacted negatively by Mark to Market on Forex Items of Rs 9.6 crore and JV loss of Rs 4.5 crore. Reported PBT is negative of Rs 36 lakh.”
Jain further said that Varroc has clocked strong order wins for new business in Q1 FY23 across business units. During Q1 FY23, lifetime revenue from new orders was Rs 1,467 crore, and out of that, business win from 3 EV customers was for Rs 483 crore.
“Profitable business win, right capital allocation, sweating of assets, commercialisation of our R&D efforts and control on cost remains the focus of the company. Mass production of traction motors, controllers and telematics shows the capability of the team to industrialise first time right a new product. The R&D team also developed EFI for our esteemed customer in record time and the production has started from June’22. Our effort remains to move to 12% EBITDA and ROCE above 20% in medium term. Focus on operating leverage, expansion in gross margin as well as sweating of assets across business will help us in achieving the same,” concluded Jain.