Effective 1st April 2019 the Company has adopted Ind AS 116 "Leases" and applied to lease contracts existing on 1st April 2019 by electing "modified retrospective approach". Accordingly, comparatives for the year ended 31st March 2019 have not been retrospectively adjusted and the Company has taken the cumulative adjustment to retained earnings on the date of initial application. On transition, the adoption of the new standard resulted in recognition of Right-of-use assets (ROU) of Rs 4.30 crore and a lease liability of Rs 4.00 crore. The cumulative effective of applying the standard resulted in adjusting the retained earnings as at 1st April 2019 with Rs 0.30 crore. Further Leasehold Lands having WDV of Rs 3.36 crore has been reclassified from Property, plant and equipment to Right-to-use Assets (ROU). In the Statement of Profit and Loss for the current period, the nature of expenses in respect of operating leases has changed from lease rent to depreciation on right of use assets and finance cost for interest accrued on lease liability using the effective interest method. The adoption of the standard has no material impact on the standalone financial results for the quarter ended 30th Sep 2019.

• Strong 73% growth in sales was driven largely by strong growth in revenue of engineering business. Segment revenue of engineering business more than doubled (up 127%) to Rs 268.34 crore (or 65% of sales vs. 49% in Q2FY19). The segment revenue of chemicals was up by 14% to Rs 111.30 crore (or 27% of sales vs. 40% in Q2FY19) and the segment revenue of consumer products was up by 26% to Rs 33.72 crore (or 8% of sales vs. 11% in Q2FY19).

• EBIT was up by 96% to Rs 31.94 crore and strong upside in EBIT was largely due to strong growth in profit of both engineering and chemical business. The segment profit of engineering jumped up by 174% to Rs 16.33 crore aided by both higher sales as well as 100 bps expansion in OPM to 6.1%. The segment profit of chemicals was up by strong 57% to Rs 17.20 crore driven by higher sales and sharp 430 bps expansion in segment margin to 15.5%. But the segment loss of consumer products increased to Rs 1.59 crore from Rs 0.64 crore of loss in corresponding previous period.

• Expansion in OPM to the tune of 210 bps despite increased contribution to topline from lower margin engineering business was largely due to sharp expansion in margin of chemicals as well as engineering. Material cost as % of sales net of stocks was up by 850 bps to 70.4%. However the cost of traded goods was down by 150 bps to 2.4%, the staff cost was down by 450 bps to 8.9%, the OE was down by 440 bps to 11.1%.

• Other income was down by 17% to Rs 12.25 crore. However the interest cost was down by 17% to Rs 3.24 crore and that of depreciation was up by 18% to Rs 5.30 crore. Thus the PBT was up by 78% to Rs 33.32 crore.

• Taxation in absolute term was down by 6% to Rs 6.24 crore and the effective tax rate for the quarter was lower at 18.73% compared to 35.53% in the corresponding previous period. The Company elected to exercise the option permitted under Section 115BAA of the Income-tax Act, 1961 as introduced by the Taxation Law (Amendment) Ordinance, 2019. Accordingly, the Company has recognized Provision for Income Tax for the six months ended 30th September 2019 and re-measured its Deferred Tax Assets or Liabilities basis the reduced tax rate prescribed in the said section. The impact of above change recognized in the statement of Profit & Loss for Quarter ended 30th September 2019 is Rs 2.00 crore of which Rs 0.11 crore pertains to earlier years and Rs 1.89 crore pertains to Quarter ended 30th June 2019. 

• The PAT thus eventually was higher by 125% to Rs 27.08 crore. 

Consolidated sales were higher by 68% to Rs 409.40 crore. Spurred further by 140 bps expansion in OPM to 8%, the operating profit was up by 104% to Rs 32.88 crore. But the growth at PBT was restricted at 81% to Rs 32.44 crore largely due to lower other income as the interest and depreciation cost stood lower for the period as proportion of operating profit. After accounting for lower share of profit from associate, the PBT after share of P/L from associate was up by 795 to Rs 32.49 crore. With taxation stand flat at Rs 6.83 crore, the PAT more than doubled (up 127%) to Rs 25.66 crore. Eventually the net profit after MI was up by 127% to Rs 25.36 crore as minority interest double to Rs 0.30 crore.

Half yearly performance 

Standalone sales were up by 61% to Rs 396.95 crore. Higher sales together with 230 bps expansion in operating profit margin (OPM) to 7.3%, helped operating profit to more than double (up 136%) to Rs 51.47 crore. But the growth at PBT was restricted at 60% to Rs 57.09 crore hit largely by lower other income (down 275 to Rs 22.60 crore) as interest and depreciation stand lower as proportion to operating profit. As taxation stand higher by 15% to Rs 14.61 crore, the PAT was up by 85% to Rs 42.48 crore.

Segment profit of engineering stood higher by 78% to Rs 26.43 crore on a sale of Rs 442.04 crore (up 96%). The segment profit of chemicals up by 67% to Rs 33.43 crore on a sale of Rs 227.45 crore (up 25%). However the segment loss of consumer products increased to Rs 3.45 crore (up from Rs 1.72 crore in Q2FY19) with its sales stand higher by 25% to Rs 227.45 crore.

The stock hovers around Rs 688.95.