VST Industries stock shoots up 8% despite estimates of continued impact of Covid-19 on sales

The business operations of the company were adversely impacted in the form of disrupted supply chain and decline in consumer demand during lockdown.

Aug 04, 2020 09:08 IST India Infoline News Service

VST Industries Limited informed the exchanges Monday that the outbreak of Covid-19 pandemic has had an unprecedented impact on the Nation, its citizens, the economy and business. In order to curtail the impact, the Government of India imposed a nationwide lockdown from March 25, 2020.

The company's stock is currently trading at Rs3,496.55 up by Rs258.3 or 7.98% from its previous closing of Rs3,238.25 on the BSE.

As a result, the business operations of the company were adversely impacted in the form of disrupted supply chain and decline in consumer demand. Since mid-May 2020, while the manufacturing operations have gradually started returning to normalcy, we estimate the pandemic to continue having its impact on sales.

The company said that some States have selectively started re-imposing lockdowns. This could have some negative impact on operations, however, the management continues to monitor the changes and impact, if any.

“The MHA guidelines are being strictly followed by the company, especially the factory operations, where social distancing and time gap between the shifts is maintained and sanitization processes are being diligently followed. Complying with the guidelines impacts man hours that can be utilized and puts pressure on production capacities.

However, the company is giving its best to scale up its operations to pre-Covid levels. Though offices are open, office functioning continues to be primarily from home and the field sales force functioning has steadily improved as more outlets have started opening,” company said.

The company did not and does not foresee any defaults or non-fulfilment of obligations under any of its existing contracts with vendors or third party suppliers which will have a significant impact on the company's business performance, including its work force.

The company’s management has also considered the possible effect that may result from the continuing uncertainty relating to pandemic and its impact on the recoverability/carrying value of its assets viz. trade receivables, investments, financial instruments and effectiveness of its hedges. Based on analysis the company does not foresee any material impact in the recoverability of the carrying value of these assets.

In the challenging context of Covid-19 disrupting markets, the company delivered a resilient performance with the gross sales revenue for the quarter declining by 4% while the Profit after tax was flattish which is a reflection of its intrinsic strength.

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