Sharda Motor Posts 28% Revenue Jump, But Margins Suffer

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AuthorRiya Kapoor|Published at:
Sharda Motor Posts 28% Revenue Jump, But Margins Suffer
Overview

Sharda Motor Industries reported a strong 28.49% YoY revenue growth to ₹881.55 Cr in Q3 FY26, with standalone PAT rising 7.24% to ₹80.13 Cr. However, PAT margins compressed to 9.09% from 10.83% YoY. The company also approved a new ₹20 Cr manufacturing unit in Haridwar.

📉 The Financial Deep Dive

Sharda Motor Industries Limited (SMIL) has announced its un-audited financial results for the third quarter and nine months ended December 31, 2025, revealing robust top-line growth overshadowed by margin compression and a significant shift in exceptional items.

The Numbers:

  • Standalone Revenue for Q3 FY26 surged by 28.49% YoY to ₹88,155.02 Lakh (₹881.55 Cr), up from ₹68,999.47 Lakh (₹690.00 Cr) in Q3 FY25. For the nine-month period (9M FY26), revenue grew 16.21% YoY to ₹2,42,500.75 Lakh (₹2,425.01 Cr).
  • Standalone Profit After Tax (PAT) in Q3 FY26 saw a more modest increase of 7.24% YoY, reaching ₹8,013.01 Lakh (₹80.13 Cr), compared to ₹7,472.02 Lakh (₹74.72 Cr) in the prior year. The nine-month PAT increased by 10.72% YoY to ₹25,462.54 Lakh (₹254.63 Cr).
  • Earnings Per Share (EPS) grew to ₹13.96 in Q3 FY26 from ₹13.02 YoY. The nine-month EPS stood at ₹44.35.

The Quality:

The primary concern arising from these results is the compression in PAT margins. Standalone PAT margins declined to 9.09% in Q3 FY26 from 10.83% in Q3 FY25. Similarly, 9M FY26 margins stood at 10.50%, down from 10.99% in 9M FY25. Consolidated PAT margins also saw a year-on-year decrease.

Adding to the divergence between revenue and PAT growth were exceptional items. Q3 FY26 recognized a net provision of ₹446.13 Lakh for employee benefits due to new Labour Codes. This contrasts sharply with Q3 FY25, which recorded an exceptional gain of ₹1,794.79 Lakh from the sale of property, plant, and equipment. Without this prior-year gain, PAT growth would appear stronger.

The Grill:

While no direct analyst questions are provided, the margin compression is the key point investors will scrutinize. Management will likely face questions regarding the sustainability of revenue growth against rising costs or input price pressures, and the impact of the new labour codes on operational expenses.

🚩 Risks & Outlook

Specific Risks:

  • The persistent margin pressure remains a significant risk. Continued deterioration could dampen investor sentiment despite revenue gains.
  • The successful and timely execution of the new manufacturing unit in Haridwar, with an investment of ₹20 Cr, is crucial. Commercial production is slated to begin by July 2026.
  • The impact of the recently notified Labour Codes on employee benefits and overall operational costs needs close monitoring.

The Forward View:

Investors will be watching SMIL's ability to pass on cost increases, maintain its revenue momentum, and improve its margins in the upcoming quarters. The new manufacturing capacity is a positive step towards meeting increased volume demands and potentially improving logistics. The favourable outcome from Income Tax appeals for certain assessment years provides some comfort on the regulatory front, although appeals for remaining years are pending.

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