Eureka Forbes Profit Plunges 71% on Labor Code Hit, Margins Expand

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AuthorVihaan Mehta|Published at:
Eureka Forbes Profit Plunges 71% on Labor Code Hit, Margins Expand
Overview

Eureka Forbes reported a 71.4% drop in December-quarter net profit to ₹10.02 crore, primarily due to a ₹40.44 crore one-time charge from new labor codes impacting retiral benefits. However, revenue climbed 8% to ₹645.4 crore, and EBITDA margins expanded to 10.6%, driven by steady demand and cost efficiencies. The stock fell 4% following the results.

One-Time Charge Hits Bottom Line

The sharp decline in net profit was primarily a result of a substantial one-time charge impacting retiral benefits. The company booked an exceptional loss of ₹40.44 crore, which it attributed to the estimated incremental impact on gratuity and compensated leave liabilities arising from the new labor codes.

Operating Performance Shines

Despite the exceptional item, the company's underlying operational performance strengthened considerably. Revenue from operations grew a healthy 8% year-on-year to ₹645.4 crore in the December quarter, driven by steady demand across its health and hygiene product portfolio. Earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 16.3% from the year-ago period to ₹68.5 crore from ₹59 crore.

Margin Expansion and Efficiency

This robust EBITDA growth translated into improved profitability margins. The EBITDA margin expanded to 10.6% from 9.8% in the year-ago period, reflecting the benefits of operating leverage and implemented cost efficiencies across the business. Profit before exceptional items and tax stood at a healthy ₹54.1 crore.

Nine-Month Performance

For the nine months ended December 31, 2025, consolidated revenue rose to ₹2,025 crore from ₹1,824 crore in the prior year. Profit after tax for the period stood at ₹111.6 crore, broadly flat compared to ₹114.9 crore in the corresponding period last year, weighed down by the exceptional charge booked during the year.

Regulatory Context and Market Reaction

Eureka Forbes clarified that the labor code-related impact is regulatory-driven and non-recurring in nature. The company stated it will continue to monitor further clarifications and rules. Nevertheless, the market reacted negatively to the headline profit figures, with shares of Eureka Forbes trading 4% lower at ₹524 following the earnings announcement.

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