RACL Geartech's Q2 FY25 Financial Results Show Significant Decline in Profitability and Increasing Reliance on Non-Business Income and Borrowings

RACL Geartech, a microcap company in the auto ancillary industry, has recently declared its financial results for the quarter ending September 2024. According to the data released on November 14, 2024, the company has seen a significant decline in its financial performance, with a score of -28 compared to -19 in the previous quarter.

The profit before tax (PBT) has fallen by 61.7% to Rs 4.12 crore, which is significantly lower than the average PBT of the previous four quarters at Rs 10.77 crore. The profit after tax (PAT) has also decreased by 24.8% to Rs 6.54 crore, compared to the average PAT of Rs 8.70 crore in the previous four quarters. This indicates a negative trend in the company’s near-term profitability.

The company’s ability to manage interest payments has also deteriorated, with the operating profit to interest ratio at its lowest in the last five quarters. The inventory turnover ratio has also decreased, indicating a slower pace of selling inventory. Additionally, the dividend payout ratio has fallen each year in the last five years, with the company distributing a lower proportion of profits as dividends.

RACL Geartech’s interest costs have increased by 15.95% quarter-on-quarter, indicating a rise in borrowings. The operating profit and PBT have also hit their lowest in the last five quarters, further highlighting the negative trend in the company’s profitability.

The company’s reliance on non-business income is also a cause for concern, with it accounting for 50.48% of the PBT. This may not be a sustainable business model in the long run. The earnings per share (EPS) have also decreased to its lowest in the last five quarters, indicating a decline in profitability and lower returns for shareholders.

Moreover, RACL Geartech’s debt-equity ratio is at its highest in the last five half-yearly periods, indicating a higher reliance on borrowing to fund its operations. The debtors turnover ratio has also decreased, indicating a slower pace of settling debts.

In conclusion, RACL Geartech’s financial performance for the quarter ending September 2024 has been very negative, with a decline in profitability and increasing reliance on non-business income and borrowings. Investors should take note of these factors before making any investment decisions.