Profit SHOCK: 71% Drop Revealed! But India Operations STRONG - What's Next for This Stock?

The company's financial performance in the second quarter of FY26 saw a steep 71% year-on-year decrease in profit after tax (PAT), settling at ₹8 crore. However, its total income for the quarter increased by 7% year-on-year, reaching ₹1,003 crore. The Indian business segment performed commendably, achieving 14% growth even as apparel exports from the country contracted by 2%. Operations in Africa experienced a significant 23% decline in performance. This downturn was attributed to reduced volumes stemming from delayed orders, largely influenced by uncertainty surrounding the AGOA (African Growth and Opportunity Act) rollover. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at ₹84 crore, showing no change from the previous year. The company managed to absorb a portion of the US tariff burden for its key customers, aided by cost control measures and productivity enhancements.

Sivaramakrishnan Ganapathi, Vice Chairman and Managing Director, commented that the Q2 performance was modest, primarily impacted by weak volumes in Africa due to AGOA-related uncertainty, while India operations remained robust. He added that margins were stable despite the tariff impact and startup costs for new units. The company anticipates a stronger order pipeline in the upcoming quarters, bolstered by the potential reinstatement of AGOA.

Impact: This news could impact investor sentiment for the company, highlighting vulnerabilities in international operations due to geopolitical and trade policy uncertainties like AGOA. However, the resilience of the India business provides a positive counterpoint. The company's ability to manage tariffs and costs indicates operational efficiency, which is crucial for future profitability. Rating: 6/10

Difficult Terms: Profit After Tax (PAT): The profit remaining after all taxes have been deducted from the company's income. Year-on-year (YoY): A comparison of financial data from one period to the same period in the previous year. Total Income: The total revenue generated by a company from all its operations. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance. AGOA: The African Growth and Opportunity Act is a United States trade act that provides eligible sub-Saharan African countries with preferential access to the U.S. market. Tariff: A tax imposed on imported goods or services.