Syrma SGS Tech falls about 7% in Q2 due to significant margin erosion

 Syrma SGS Tech falls about 7% in Q2 due to significant margin erosion

The Syrma's operating performance in Q2 was negatively impacted by an increase in raw material and financing prices.

Syrma SGS Technology's stock fell over 7% during the first trading session on November 2 after the company's announcement of a significant decline in its Q2 margin.

The company's EBITDA margin dropped dramatically from 10 percent in July to 6.9 percent in September, a decline of 320 basis points. The operational performance of the corporation was hindered by an increase in raw material prices and financing charges.

Additionally affected by the subpar operational performance was Syrma's consolidated net profit for the quarter, which came in at Rs 28.30 crore, flat year over year. In the same quarter of the preceding fiscal year, the company declared a consolidated net profit of Rs 28.2 crore.

Despite a 52% increase in consolidated sales to Rs 711.70 crore, the company's profitability and bottom line both performed poorly.

Shares of Syrma SGS Technology were down over 6% at Rs 562.55 on the National Stock Exchange at 09:42 a.m.

Concurrently, the merger proposal between SGS Teknis Manufacturing and Syrma SGS Technology was accepted by the board of the firm. The first phase will include the full business and project integration of SGS Infosystems with SGS Teknis Manufacturing. The whole company and project of SGS Teknis Manufacturing will thereafter be merged with Syrma SGS Technology.

Consolidation and simplicity of the corporate structure are the goals of the merger, which will also increase value for stakeholders. Additionally, it will make money more accessible and enhance cash flow management capabilities for better debt servicing.