Sobhagya Mercantile Q2 profit falls 22% on associate losses

Sobhagya Mercantile Limited reported consolidated profit of Rs 3.65 crore for the quarter ended September 30, 2026, down 22% from Rs 4.70 crore a year earlier, as its Rs 5.34 crore profit after tax was reduced by a Rs 1.69 crore share of losses from three associates.

Why did Sobhagya Mercantile’s Q2 consolidated profit fall?

Sobhagya Mercantile’s consolidated profit fell because a Rs 1.69 crore share of losses from associates reduced its September-quarter profit after tax of Rs 5.34 crore to Rs 3.65 crore. In the quarter ended September 30, 2025, profit after tax and consolidated profit were both Rs 4.70 crore because no associate-profit or loss amount was reported.

The difference was also visible against the preceding quarter. Consolidated profit was Rs 4.08 crore in the quarter ended June 30, 2026, compared with Rs 3.65 crore in the September quarter, while basic earnings per share declined to Rs 3.69 from Rs 4.25 and diluted earnings per share to Rs 3.56 from Rs 3.75.

The associates included Nag Ham 182 Highway Pvt Ltd, Nag Ham 183 Highway Pvt Ltd and Adyal L.I.S JV. Joshi & Shah Chartered Accountants stated in its November 13, 2026 limited review that the Rs 1.69 crore associate loss was based on financial results prepared by the associates’ managements and provided to the auditor.

How did Sobhagya Mercantile’s revenue and expenses change in Q2?

Sobhagya Mercantile’s revenue from operations declined to Rs 44.26 crore in the September 2026 quarter from Rs 51.22 crore a year earlier, while total income was Rs 49.24 crore against Rs 51.22 crore. The latest quarter included Rs 4.97 crore of other income, whereas the comparable prior-year quarter reported no other-income amount.

Total expenses fell to Rs 42.11 crore from Rs 44.93 crore, lifting profit before tax to Rs 7.13 crore from Rs 6.28 crore. Current tax increased to Rs 1.80 crore from Rs 1.59 crore, leaving profit after tax before the associate-loss share at Rs 5.34 crore, compared with Rs 4.70 crore a year earlier.

Cost of materials consumed increased to Rs 25.52 crore from Rs 18.61 crore and subcontract charges rose to Rs 21.99 crore from Rs 10.44 crore. These movements were offset in part by a Rs 22.01 crore inventory adjustment, compared with a Rs 3.88 crore inventory increase presented as an expense in the September 2025 quarter.

Power and fuel charges rose to Rs 4.38 crore from Rs 31.56 lakh, while finance and interest cost increased to Rs 87.84 lakh from Rs 56.13 lakh. Machinery-hire charges were Rs 5.72 crore, broadly unchanged from Rs 5.76 crore a year earlier.

Which Sobhagya Mercantile segments affected the quarterly result?

Sobhagya Mercantile’s engineering segment remained its larger revenue contributor, with September-quarter sales of Rs 33.12 crore, compared with Rs 11.14 crore from metal sale, or the stone-crusher segment. Engineering revenue declined from Rs 42.99 crore a year earlier, while metal-sale revenue increased from Rs 8.23 crore.

Engineering earnings before interest, depreciation, tax and amortisation, or EBDITA, were Rs 16.24 crore, down from Rs 19.42 crore in the September 2025 quarter. The metal-sale segment recorded an EBDITA loss of Rs 5.05 crore, compared with a Rs 4.90 crore loss a year earlier, leaving combined segment EBDITA at Rs 11.18 crore against Rs 14.52 crore.

At the earnings before interest and tax level, engineering contributed Rs 16.15 crore and metal sale posted a Rs 5.05 crore loss. Finance cost of Rs 43.85 lakh and unallocable expenses of Rs 8.50 crore were partly offset by Rs 4.97 crore of other income, resulting in the reported profit before tax of Rs 7.13 crore.

For the half year ended September 30, 2026, engineering revenue fell to Rs 66.94 crore from Rs 78.91 crore, and metal-sale revenue declined to Rs 18.69 crore from Rs 24.63 crore. The metal-sale segment’s half-year EBDITA changed to a Rs 12.71 crore loss from a Rs 2.11 crore profit, while consolidated half-year profit fell to Rs 7.72 crore from Rs 10.32 crore.

What changed in Sobhagya Mercantile’s cash, assets and funding?

Sobhagya Mercantile’s consolidated assets were Rs 436.55 crore at September 30, 2026, compared with Rs 349.93 crore at March 31, 2026. Trade receivables rose to Rs 173.88 crore from Rs 134.44 crore, inventories rose to Rs 26.75 crore from Rs 3.01 crore, and current investments increased to Rs 124.20 crore from Rs 78.53 crore.

Cash and cash equivalents fell to Rs 15.67 lakh at September 30 from Rs 62.54 crore at March 31. The half-year cash-flow statement recorded Rs 89.70 crore used in operating activities and Rs 47.45 crore used in investing activities, against Rs 74.77 crore generated from financing activities, producing a Rs 62.38 crore net decrease in cash and cash equivalents.

Current borrowings rose to Rs 44.08 crore from Rs 21.49 crore during the six months, while total trade payables were Rs 103.38 crore at September 30. Those payables comprised Rs 37.25 crore due to micro and small enterprises and Rs 66.13 crore due to other creditors; total consolidated liabilities rose to Rs 180.87 crore from Rs 156.93 crore.

The company received Rs 32.91 crore against 650,500 share warrants and allotted 650,500 equity shares on July 13, 2026, with a face value of Rs 10 each and a premium of Rs 664.49 per share. Another 650,500 warrants remained outstanding, while paid-up equity share capital was Rs 10.40 crore at September 30, compared with Rs 8.40 crore a year earlier.

What investments did Sobhagya Mercantile make in promoter-group vehicles?

Sobhagya Mercantile said it invested Rs 28.41 crore during the period in promoter-group special-purpose vehicles through equity shares and optionally convertible debentures, or OCDs. It also disclosed that Rs 4.49 crore was used for general corporate purposes.

The disclosed investments included Rs 1.91 crore of equity in Nag Ham 182 Highway Pvt Ltd and Rs 1.46 crore in Nag Ham 183 Highway Pvt Ltd. OCD subscriptions were Rs 12.80 crore in Nag Ham 182 Highway Pvt Ltd, Rs 9.48 crore in Nag Ham 183 Highway Pvt Ltd and Rs 2.76 crore in Kitadi Torgaon Highway Pvt Ltd.

Nag Ham 182 Highway Pvt Ltd and Nag Ham 183 Highway Pvt Ltd were also among the three associates whose combined loss share was Rs 1.69 crore in the September quarter. The filing does not provide separate quarterly profit or loss figures for each associate, so it does not identify the contribution of either highway company to the consolidated associate loss.

Conclusion

Sobhagya Mercantile’s September-quarter result combined a rise in profit after tax before associate share, to Rs 5.34 crore from Rs 4.70 crore, with lower revenue of Rs 44.26 crore from Rs 51.22 crore. The Rs 1.69 crore loss share from associates ultimately reduced consolidated profit to Rs 3.65 crore, below Rs 4.70 crore a year earlier.

The next reported results can clarify the performance of the three associates, particularly the two Nag Ham highway companies in which Sobhagya Mercantile made disclosed equity and OCD investments of Rs 25.65 crore. Investors can also monitor the exercise of the 650,500 outstanding warrants and whether operating cash flow changes from the half-year outflow of Rs 89.70 crore.