CG Power Unfazed By One-Off Q2 Net Profit Decline, Says CEO

The decline in the second quarter net profit of CG Power and Industrial Solutions Ltd. is primarily due to a one-off impact from strategic investments, according to Managing Director and Chief Executive Officer Amar Kaul.

In an interview with NDTV Profit, he said that the drop in Q2 profit is not a concern for the company. “I am not worried about it because we invested Rs 36 crore into strategic initiatives. I call it an investment for a short-term hit, but a gain in the future. We continue to get the momentum,” he said.

CG Power and Industrial Solutions reported a net profit of Rs 220 crore in the quarter ending Sept. 2024, representing a 9% year-on-year decline. The company had posted a profit of Rs 242 crore in the year-ago period.

Revenue rose 21% to Rs 2,413 crore during this time, while Ebitda margins slipped to 12.2% from 15.4% a year ago.

While the company’s power segment has done well, stress from the industrial sector resulted in contraction of margins, the top executive said.

“On the industrial side, we had some stress on the motor piece in the last 2–3 quarters. But I think it has already hit the bottom and started sliding up,” he said.

Kaul asserted that the margins will be back to where they were previously. “We should get close to where we were, say between 14% to 15%. That’s where we would expect margins to be.”

The power sector has been one of the growth drivers for the company, contributing significantly to its order book. CG Power witnessed its order book rising 50% YoY in Q2.

“As you know, this sector is booming and whatever we add to our capacity, we keep falling short of it. That’s why we need to keep investing more and more to expand our capacity,” Kaul said.

CG Power also forayed into the Indian Railways’ anti-collision system Kavach space by acquiring a 55% stake in GG Tronics Pvt., which manufactures and deploys the safety system.

Kaul said that CG Power has already received a developing order from the Indian Railways, which should get executed in the next 8–10 months.

“Plus, there is also a big tender worth Rs 7,500 crore that has been floated. Even if we get 10% of that, it needs to be executed within 12 months,” he said.

Shares of CG Power and Industrial Solutions closed 2.4% lower at Rs 757 apiece, in comparison with the benchmark Nifty 50’s decline of 1.25%.