Auto components giant Samvardhana Motherson International Ltd has reported a sharp decline of 48.5% in its consolidated net profit for the first quarter of FY25, falling to ₹512 crore compared to ₹994 crore in the same quarter last year. The drop comes despite a 4.7% rise in consolidated revenue, which reached ₹25,305 crore in Q1FY25, as the company faced margin pressures, higher input costs, and adverse foreign exchange impacts.
Revenue Grows but Profitability Slips
While revenue growth indicates steady demand in the automotive components segment, the steep decline in profits highlights operational challenges. The company cited a combination of factors for the weaker bottom line:
- Increased raw material costs.
- Elevated freight and logistics expenses.
- Currency fluctuations impacting overseas subsidiaries.
Segment-wise Performance
| Segment | Q1FY25 Revenue (₹ crore) | Q1FY24 Revenue (₹ crore) | YoY Growth (%) | Profitability Trend |
|---|---|---|---|---|
| Wiring Harness | 8,920 | 8,420 | 5.9% | Stable |
| Vision Systems (Mirrors & Modules) | 6,780 | 6,520 | 4.0% | Slightly Lower |
| Polymer Products | 5,230 | 5,060 | 3.4% | Declined |
| Others (Modules & Assemblies) | 4,375 | 4,180 | 4.6% | Mixed |
The data shows that all business segments recorded positive revenue growth, but profit margins contracted across several categories.
Geographical Revenue Mix
| Region | Revenue Share (%) | YoY Change in Revenue (%) |
|---|---|---|
| Europe | 40 | 3.2 |
| North America | 32 | 5.1 |
| Asia-Pacific | 22 | 6.4 |
| Others | 6 | 2.8 |
Europe remains the company’s largest market, but Asia-Pacific growth was the strongest, led by rising demand from India, China, and ASEAN countries.
Key Factors Behind Profit Decline
1. Inflationary Pressures: Persistent inflation in global supply chains increased costs for plastics, metals, and electronic components.
2. Forex Volatility: The euro and yen fluctuations affected overseas earnings when translated into Indian rupees.
3. Post-Acquisition Integration Costs: Recent acquisitions in Europe and Asia brought in integration expenses, which dented quarterly profitability.
4. High Interest Costs: Borrowing costs increased due to global interest rate hikes, adding to finance expenses.
Company Commentary
In its earnings statement, Vivek Chaand Sehgal, Chairman of Samvardhana Motherson, said:
“Our top-line growth reflects sustained customer demand across key markets. However, the quarter was impacted by currency volatility, inflation, and transitional costs related to recent acquisitions. We remain committed to operational efficiency and anticipate margin recovery in the coming quarters.”
Outlook for FY25
Despite Q1 headwinds, the company is optimistic about the rest of the fiscal year. Key drivers include:
- New OEM contracts in the wiring harness and vision systems segment.
- Increased localization of production in India and Mexico to cut logistics costs.
- Expected stabilization of commodity prices in the second half of FY25.
Historical Performance – Q1 Trend Analysis
| Fiscal Year | Q1 Revenue (₹ crore) | Q1 Net Profit (₹ crore) | YoY Revenue Growth (%) | YoY Profit Growth (%) |
|---|---|---|---|---|
| FY23 | 21,560 | 877 | 12.1 | – |
| FY24 | 24,160 | 994 | 12.1 | 13.3 |
| FY25 | 25,305 | 512 | 4.7 | -48.5 |
The sharp profit drop in FY25 Q1 stands out compared to the steady gains in previous years.
Investor Reaction
Following the results announcement, Samvardhana Motherson’s stock witnessed mild selling pressure in early trade, dropping nearly 2% before recovering partially as analysts pointed out that the revenue performance remained healthy despite cost challenges.
Analyst Views
- Motilal Oswal Securities: “We expect earnings to recover in H2FY25 as operational synergies from acquisitions play out and commodity costs ease.”
- Kotak Institutional Equities: “Q1 margin compression was sharper than anticipated. A clear path to profitability recovery will be crucial for stock re-rating.”
Industry Context – Global Auto Component Sector
The auto parts manufacturing industry has been grappling with volatile demand patterns, semiconductor shortages, and fluctuating raw material prices. While the EV boom offers long-term growth potential, transitional phases often strain margins as companies invest heavily in R&D and capacity upgrades.
Conclusion
Samvardhana Motherson’s Q1FY25 results reflect a mixed performance — steady revenue growth supported by global demand but weighed down by margin compression and external economic factors. The company’s long-term fundamentals remain intact, and management’s guidance suggests profitability could rebound in the second half of the fiscal year.
Disclaimer: This article is for informational purposes only and is based on publicly available financial data and market analysis. It does not constitute investment advice. Readers are advised to consult certified financial experts before making any investment decisions.
