As OPM expand by 400 bps to 22.2% from 18.2% in sequential previous quarter the operating profit leaped by 34% to Rs 94.19 crore. Strong expansion in OPM and profitability is largely due to weak base, as the company in Q2FY20 has accounted an expense (in P&L) an amount of Rs 21.63 crore towards special retiral benefit payable to managing director who retired by Oct 2019, as approved by the Board of Directors during the quarter under the head employee benefit expenses. Excluding this charge in corresponding previous period expense, the OPM would have declined by 160 bps to 22.2% from 23.8% in corresponding previous period and the growth at operating profit restricted at 2% to Rs 94.19 crore.

With other income stand higher by 66% to Rs 20.52 crore, the PBIDT was up by 39% to Rs 114.72 crore. Strong jump in OI was largely due to higher exchange gain at Rs 11.27 crore in Q3FY20 compared to a loss of Rs 0.02 in the corresponding previous period. Interest cost and depreciation though stood higher in absolute terms it was lower as % of sales, and thus the PBT was up by 45% to Rs 102.06 crore. Eventually the PAT was up by 51%qoq to Rs 75.42 crore (compared to Rs 49.81 crore in sequential previous quarter ended Sep 2019) facilitated by lower tax incidence.

Quarterly performance YoY comparison

Sales for the quarter ended Dec 2019 was up by 4% to Rs 423.44 crore. But with OPM contract by 320 bps to 22.2% from 25.4% in corresponding previous quarter, the operating profit was down by 9% to Rs 94.19 crore. But the PBIDT was up by 14% to Rs 114.72 crore spurred by higher other income that had a positive swing of Rs 23.21 crore to Rs 20.52 crore. Higher other income was largely due to higher exchange gain of Rs 11.63 crore compared to a loss of Rs 11.76 crore in corresponding previous period. Hit further by higher interest and higher depreciation, the growth at PBT was restricted at 8% to Rs 102.06 crore. Eventually the PAT was up by 14% to Rs 75.42 crore with taxation stand lower by 6%yoy to Rs 26.64 crore.

Nine month performance

Sales for the period was down by 2%yoy to Rs 1170.98 crore and with OPM crash by 660 bps to 20% (from 26.6%), the operating profit witnessed sharp fall of 26%yoy to Rs 234.40 crore.

Sharp contraction in OPM is largely as the company account/charge Rs 21.63 crore of expense towards special retiral benefit payable to managing director made during Q2FY20 under the head employee benefit expenses. Excluding this the OPM would have stood at 21.9%, a fall of 470 bps from 26.6% in corresponding previous period. Thus the operating profit would have been down by 19%yoy to Rs 256.03 crore.

With other income stand higher by 58% to Rs 45.02 crore, the fall at PBIDT has moderated to stand at 19% to Rs 279.43 crore. The PBT was down by 26% to Rs 242.68 crore hit further by higher interest (up to Rs 4.12 crore against nil) and higher depreciation (up 77% to Rs 32.63 crore). After accounting for taxation (down 36% to Rs 68.66 crore), the fall at PAT was restricted at 20% to Rs 174.02 crore.

Management Comment

Manoj Raghavan, CEO and Managing Director commenting on the result said, "This is a great quarter for the company with the highest ever top-line in its history, with double digit growth in Transportation and Healthcare verticals. This performance was led by strong execution and ramp-ups in large deals won in the previous quarters, along with the addition of leading customers and wins in the electric vehicles, medical devices and the OTT segments."