Shares of KEI Industries took a sharp hit, falling by 7% on October 16 after the company's operating margins contracted during the second quarter of FY25. Despite growth in both revenue and net profit, the company's EBITDA margin declined by 70 basis points to 9.7%, down from 10.4% in the same period last year. This drop was driven by increased raw material costs, higher finance charges, and rising employee expenses.
The company faced multiple headwinds that impacted its margins, including:
As of the end of Q2, KEI Industries reported a strong pending order book of approximately Rs 3,847 crore, indicating a steady demand pipeline for the upcoming quarters.
In a significant development, KEI Industries also announced its intention to raise up to Rs 2,000 crore through a Qualified Institutional Placement (QIP). The funds will be raised through the issuance of equity shares or other eligible securities, although the company has yet to specify how the proceeds will be allocated.
At 9:56 am, KEI Industries' shares were trading at Rs 4,432 on the NSE, reflecting the market's reaction to the contraction in margins despite overall revenue and profit growth.
This quarterly performance reflects the impact of rising costs on margins, even as the company continues to post steady growth in revenue and profit. Investors will closely watch how KEI Industries navigates these cost pressures and utilizes the proceeds from its upcoming QIP.