Sona Comstar's profit down by 22% in June quarter

Gurugram, August 4, 2025:  Sona BLW Precision Forgings Ltd (NSE: SONACOMS | BSE: 543300) reported a 22% year-on-year (YoY) decline in consolidated net profit to ₹1,217.09 million for the quarter ended June 30, 2025 (Q1 FY26), impacted by higher tax costs and forex losses. However, the recent acquisition of Escorts Kubota’s Railway Business is expected to augment future revenue streams.

Despite the announcement, the shares of the company closed 1.25% or ₹5.45 higher at ₹443.00. The shares made an intraday high of ₹446.20 and a low of ₹432.40.

Key Financial Highlights (₹ in million)

For the quarter ended June 30, 2025 (Q1 FY26), Sona BLW Precision Forgings Ltd reported a revenue from operations of ₹8,539.07 million. This represents a 4.2% year-on-year decrease from ₹8,911.77 million in Q1 FY25 and a 1.3% quarter-on-quarter decline from ₹8,647.50 million in Q4 FY25. Total income stood at ₹8,950.86 million, a marginal 0.5% year-on-year decrease from ₹8,999.90 million, and a 2.8% quarter-on-quarter drop from ₹9,205.78 million. Profit Before Tax (PBT) was ₹1,652.39 million, down 12.5% year-on-year from ₹1,888.75 million and 23.0% quarter-on-quarter from ₹2,146.79 million. Consequently, Net Profit (PAT) for the quarter was ₹1,217.09 million, reflecting a 14.1% year-on-year decrease from ₹1,417.14 million and a 25.6% quarter-on-quarter decline from ₹1,636.85 million. Basic and Diluted Earnings Per Share (EPS) for Q1 FY26 stood at ₹2.01, a 17.0% year-on-year decrease from ₹2.42 and a 23.9% quarter-on-quarter decrease from ₹2.64.

Segment Update & Strategic Moves

Sona Comstar made significant strategic moves during the quarter. The company successfully acquired Escorts Kubota’s Railway Business for ₹16,382 million on a slump sale basis, with the transaction effective from June 1, 2025. The Q1 results reflect initial consolidation of this business, which is anticipated to contribute to future growth in mobility solutions beyond the traditional automotive segments. Furthermore, Sona Comstar holds a 54% stake in NOVELIC, a Serbian firm specialising in radar and perception software. The final tranche of the ₹3,577.97 million acquisition for NOVELIC is scheduled for payment in September 2025. In terms of capital deployment, out of the ₹24,000 million raised through a Qualified Institutional Placement (QIP) in FY25, ₹22,979 million has already been utilised, with the remaining ₹715.56 million temporarily parked in financial instruments.

Standalone Financial Performance

On a standalone basis for Q1 FY26, Sona BLW Precision Forgings Ltd reported revenue from operations of ₹7,673.14 million, which is a 7.6% year-on-year decrease compared to ₹8,300.65 million in Q1 FY25. The standalone Net Profit (PAT) declined by 22.5% year-on-year, coming in at ₹1,201.30 million for Q1 FY26, down from ₹1,549.60 million in Q1 FY25. Consequently, the standalone Earnings Per Share (EPS) (Basic/Diluted) also decreased by 26.9% year-on-year, standing at ₹1.93 in Q1 FY26 compared to ₹2.64 in Q1 FY25.

Exceptional Item (Q1FY26):

• ₹91.74 million expenses related to acquisition activities.

Depreciation Update:

• Change in useful life estimates of machinery led to lower depreciation by ₹82.35 million, increasing Q1 net profit by ₹61.62 million.

Management Commentary

Vivek Vikram Singh, Managing Director and Group CEO, stated:

“While Q1 saw some margin pressure and one-time acquisition costs, our focus remains on strategic expansion and technology-driven mobility solutions. The integration of Escorts Kubota’s Railway division and progress at NOVELIC are critical growth levers for FY26.”

Dividend Update

• Shareholders approved a final dividend of ₹1.60 per share for FY25 at the AGM held on July 25, 2025.

Insights For Investors

• Profit Decline Despite Revenue Base: Net profit dropped by 22% YoY to ₹1,217.09 million, driven mainly by higher tax outgo and forex losses, which impacted margins. Still, the company’s operating base remains strong, suggesting the issue may be temporary.
• Resilience in Stock Performance: Despite weak earnings, the stock closed up 1.25%, reflecting investor optimism around long-term strategic acquisitions and the company’s future roadmap.
• Strategic Diversification Underway: The acquisition of Escorts Kubota’s Railway business (₹16,382 million) and majority ownership in Serbia-based NOVELIC reflect a move to diversify revenue streams beyond core automotive and into mobility tech and rail, which may support future top-line growth.
• Operational Challenges Evident: Revenue from operations fell 4.2% YoY and 1.3% QoQ, showing a mild slowdown in core business, perhaps due to demand cyclicality or product mix changes. This is a near-term headwind to monitor.
• Strong Capital Deployment: The company has effectively utilised ₹22,979 million from its QIP fundraise, suggesting disciplined capital allocation and execution capability. Only ₹715.56 million remains, temporarily parked.
• One-time Items Affecting Profit: Acquisition-related costs (₹91.74 million) and depreciation changes (which inflated profit by ₹61.62 million) indicate some distortion in bottom-line metrics, and investors should focus on underlying earnings trends.
• Dividend Continuity: The ₹1.60/share final dividend approval reinforces shareholder return visibility, despite profit pressures.
• Focus on Long-Term Growth Drivers: Management’s emphasis on technology-led solutions and strategic expansion (e.g., radar tech, railway mobility) signals a pivot towards future-proof sectors, which could drive medium- to long-term re-rating.

Future Outlook

Despite experiencing short-term margin compression, the management anticipates a stronger performance in the coming quarters. This optimism is driven by strategic diversification into railway and Advanced Driver-Assistance Systems (ADAS)-led businesses, as well as an improved product mix expected from the global electric vehicle (EV) market.

About the Company:

Sona BLW Precision Forgings Ltd, listed on NSE and BSE, is a leading automotive technology supplier specialising in the design, manufacture, and supply of precision-forged components. Its product portfolio includes differential assemblies, differential gears, conventional and micro-hybrid starter motors, and advanced solutions for electric vehicles (EVs) such as traction motors and motor-related components. The company operates globally with manufacturing and assembly facilities across India, USA, Mexico, China, and Serbia, serving various automotive original equipment manufacturers (OEMs) worldwide. Sona Comstar is known for its engineering capabilities and focus on innovative, technology-driven solutions for the evolving mobility sector.

REF:https://nsearchives.nseindia.com/corporate/SONACOMS_04082025155055_outcome.pdf

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