V-Guard Industries' margins could return to the pre-Covid levels by the end of the current financial year despite some pressure in the second quarter, according to Chief Operating Officer V Ramachandran.
For the quarter ended Sept. 2024, V-Guard has reported an Ebitda margin (including other income) of 8.8%, a 60 basis points year-on-year drop from 9.4% in the corresponding period of last fiscal.
Ramachandran told NDTV Profit that the pressure on Q2 margins was primarily due to the wired category, which saw a price reduction from May. “So, about 0.7% impact is there because of wires. Subsequently, this would recover as the lower-cost commodity will play through,” he said.
The top executive explained that price increases or decreases in the wiring segment are immediately passed on to the market, because the dependence on copper is strong in the case of wires. “The wiring segment is pretty straightforward and commodity price increases or decreases are immediately reflected in prices.”
“As commodity prices increase or decrease, we have to see the impact of that on our inventory and the valuation of it, and that impacts our margins,” he added.
Ramachandran said that when there is a significant reduction in commodity prices, it can impact margins. “This is because the price decrease happens immediately, but you probably have an inventory of 45–60 days, on which the impact will be reflected.”
The COO predicted that the company's margins will fully recover as and when its factories in Hyderabad and Vapi become operational.
“Our factories are coming up to speed and will reflect output levels that are in line with the plan. That should happen towards Q4. We continue to walk towards the recovery in our pre-Covid margins,” he said.
He emphasised that the higher output from factories and improvement in margins will drive the margins on track.
The Kochi-headquartered company had released its Q2 earnings on Tuesday, reporting a 14.1% year-on-year increase in revenue at Rs 1,294 crore versus Rs 1,134 crore a year ago.
Net profit for the quarter under review rose 7.5% YoY to Rs 63 crore against Rs 59 crore in the second quarter of last fiscal.
Shares of V-Guard Industries Ltd. were trading 0.11% higher at Rs 423.50 apiece on the NSE against the benchmark Nifty 50's decline of 0.3%.
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