Revenue and Operating Performance
Varvee Global's net sales have experienced a notable decline, dropping from ₹824.42 crores in March 2018 to ₹564.68 crores by March 2020. This represents a contraction of approximately 31.5% over the two-year period. Correspondingly, total operating income mirrored this trend, decreasing from ₹827.06 crores in 2018 to ₹564.68 crores in 2020. The absence of other operating income in the latter years further accentuates the reliance on core sales.
On the expenditure front, raw material costs reduced in line with sales, falling from ₹542.71 crores in 2018 to ₹348.38 crores in 2020. Employee costs also declined modestly, from ₹55.66 crores to ₹43.17 crores over the same period. However, other expenses surged to ₹140.61 crores in 2020 from zero in 2018, indicating a shift in cost structure. Manufacturing expenses, significant at ₹190.36 crores in 2018, were reported as nil by 2020, suggesting operational changes or reclassification.
Operating profit before depreciation and interest (PBDIT) excluding other income fell sharply from ₹80.24 crores in 2018 to ₹34.08 crores in 2020, reflecting margin pressures. Operating profit margin declined from 9.7% in 2018 to 6.07% in 2020, signalling reduced operational efficiency.
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Profitability and Margins
Despite a positive profit before tax of ₹6.38 crores in 2018 and a marginal ₹1.73 crores in 2019, Varvee Global reported a significant loss of ₹55.53 crores in 2020. This downturn was driven by rising interest expenses, which increased from ₹43.46 crores in 2018 to ₹52.98 crores in 2020, and higher depreciation charges, which rose from ₹32.95 crores to ₹38.35 crores over the same period.
Consequently, the company posted a net loss after tax of ₹41.93 crores in 2020, reversing modest profits of ₹5.61 crores and ₹1.09 crores in the preceding two years. Earnings per share (EPS) followed suit, declining from ₹2.39 in 2018 to a negative ₹17.87 in 2020. The profit after tax margin also deteriorated from 0.68% in 2018 to -7.47% in 2020, underscoring the challenges faced in maintaining profitability.
Balance Sheet and Financial Position
Varvee Global's shareholder funds decreased from ₹271.69 crores in 2018 to ₹230.99 crores in 2020, reflecting accumulated losses and reserve adjustments. Total reserves showed a decline from ₹248.23 crores in 2018 to ₹207.53 crores in 2020. The company's total liabilities also contracted from ₹918.68 crores in 2018 to ₹842.80 crores in 2020, with total debt rising from ₹376.71 crores to ₹411.43 crores, indicating increased leverage.
Long-term borrowings grew substantially from ₹83.23 crores in 2018 to ₹141.71 crores in 2020, while short-term borrowings remained relatively stable around ₹270 crores. The net block of fixed assets fluctuated, peaking at ₹388.97 crores in 2019 before falling to ₹349.81 crores in 2020. Current assets declined from ₹538.49 crores in 2018 to ₹489.60 crores in 2020, with cash and bank balances reducing from ₹23.09 crores to ₹11.13 crores.
Cash Flow Analysis
Operating cash flow showed improvement, rising from ₹37.76 crores in 2018 to ₹64.00 crores in 2020, despite the net loss in the latest year. Cash flow from investing activities turned positive in 2020 at ₹4.00 crores, reversing prior years' negative outflows. Financing activities, however, reflected a net outflow of ₹70.00 crores in 2020, contrasting with a small inflow in 2019. The closing cash and cash equivalents remained low, at ₹1.00 crore in 2020, down from ₹1.91 crores in 2018.
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Summary of Historical Performance
Over the three-year period ending March 2020, Varvee Global has faced significant headwinds, with declining sales and profitability pressures. The company’s operating margins have contracted, and net losses in the latest fiscal year have weighed on shareholder equity and earnings per share. Rising interest costs and depreciation have further impacted bottom-line results. While operating cash flows have improved, the overall financial health reflects challenges in sustaining growth and profitability amid a changing cost structure and increased leverage.
Investors analysing Varvee Global’s historical performance should consider these trends alongside sectoral dynamics and broader market conditions. The company’s ability to stabilise revenues, control costs, and manage debt will be critical to reversing recent losses and enhancing shareholder value going forward.
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