Garden Reach Q3 Profit Sinks on Lower Revenue

Garden Reach Shipbuilders & Engineers (GRSE), the Kolkata, West Bengal based India’s leading builder and repairer of commercial and naval vessels, posted a near 38% drop in net profit to Rs 29.5 crore in the fiscal third quarter of the current fiscal, on the back of lower revenue.

The company had posted a net profit of Rs 47.3 crore in the corresponding period of 2018-19.

Revenue from the operation was at Rs 369.6 crore during the quarter under review as against Rs 488.6 crore, registered in the same period of the previous year.

Slower execution of orders during the quarter under review seems to have dented the state-run shipbuilder’s overall performance.

In fact, the company reported an operating loss. Loss before interest, tax, depreciation, and adjustments (Ebitda) stood at Rs 1.2 crore as compared to Ebitda Profit of Rs 41.1 crore.

The government’s decision to lower the corporate tax rate has saved the ship maker from sinking into losses at the net level.

GRSE is harping on defense contracts from the Indian Navy. The company is set to deliver anti-submarine warfare stealth corvette INS Kavaratti – the 104th ship to be constructed and delivered by the GRSE – to the Navy soon.

‘Kavaratti’ is the last of the four Anti-Submarine Warfare (ASW) stealth corvettes built by the GRSE for the Indian Navy under Project P28.

GRSE’s share price tanked over 14% to Rs 170 on the NSE following the disappointing earning performance.

GRSE is a shipbuilding company in India under the administrative control of the Ministry of Defence (MoD) and primarily adheres to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard

However, the biggest risk for GRSE is that its top two customers accounted for 93.7% of its revenue from operations and hence it faces uncertainty on the loss of orders either due to budgetary constraints or reprioritization of contracts.

Also since the government is a big buyer here there is also a fear that slower execution of orders could pose a bigger risk ahead.

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