Rupa & Company tanks 20% after disappointing Q4 performance, CEO's exit

Shares of Rupa & Company tanked 20 per cent to Rs 414 on the BSE in Tuesday’s trade after the company reported a disappointing operational performance in March quarter (Q4FY22), due to higher raw material cost.

With today’s fall, the stock of the garment & apparels manufacturer has corrected 29 per cent from its 52-week high level of Rs 585 touched on May 4, 2022.

At 11:10 am; it was trading 17 per cent lower at Rs 427, as compared to a 0.17 per cent decline in the S&P BSE Sensex.The trading volumes on the counter jumped four-fold with a combined 3.5 million equity shares changed hands on the NSE and BSE.

The company’s consolidated profit after tax (PAT) declined 25 per cent year on year (YoY) at Rs 49.3 crore, on the back of flat revenues at Rs 455.5 crore over the previous year quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) down 18 per cent YoY at Rs 74.2 crores, while margins contracted 370 bps to 16.3 per cent from 20.0 per cent in Q4FY21.

In Q4 FY22, the industry faced headwinds in the form of a COVID wave early in the quarter coupled with rising raw materials prices. The company incurred higher advertising & promotion expenses. Thus, a multitude of factors led to pressure on margins, the management said.

Flattish revenue growth with decline in gross profit margin and with expenses reverting back to normal has led to a decline in EBITDA margins of the company. The decline in gross margin is mainly due to increased raw material (cotton) prices, according to ICICI Securities.

The key monitorable will be the ability of the company to take calibrated price hikes to improve its gross margin profile. Also progress on improving the share of premium products, which has remained stagnant over last few years would be critical in improving the margin profile of the company, the brokerage said in a note.

Meanwhile, Dinesh Kumar Lodha, chief executive officer (CEO) of Rupa & Company has tendered his resignation on account of personal reasons. “The company is actively looking for a suitable candidate to fill in the position of the CEO. Lodha is and will be an active part in this process of selecting the new CEO,” the company said.

The company's CFO-Ramesh Agarwal- who is also a part of the promoter family has also resigned. "His resignation from the post of CFO is to free up his bandwidth from regular day to day activities and leverage his rich experience in overall growth and transformation of the company. Agarwal will continue to guide the company as a whole time director." it said.