Gujarat Toolroom Shares Hit Lower Circuit as Q3 Net Profit Plunges 90%
Shares of Gujarat Toolroom Limited, a small-cap company engaged in multiple sectors including mining, gemstone trading, and green energy solutions, plummeted on Thursday, February 20, 2025. The stock hit its 5% lower circuit on the Bombay Stock Exchange (BSE) at ₹2.34 per share, marking a sharp 4.88% decline in intraday trade.
The downfall in the stock price came after Gujarat Toolroom reported a massive 90% drop in its consolidated net profit for the third quarter of the financial year 2024-25 (Q3FY25). The company’s earnings report, released on Wednesday, February 19, showed a significant decline in profitability despite a substantial increase in revenue.
Gujarat Toolroom’s Q3FY25 Financial Performance
Net Profit Drops 90%
Gujarat Toolroom’s consolidated net profit for Q3FY25 fell to just ₹1.43 crore, compared to ₹14.32 crore in the same quarter last year (Q3FY24). This translates to a 90.01% year-on-year (YoY) decline in earnings, raising concerns among investors about the company’s profitability.
Revenue Sees Strong Growth
Despite the steep drop in profit, the company’s revenue from operations witnessed strong growth, surging 76.06% YoY to ₹230.74 crore in Q3FY25, up from ₹131.06 crore in Q3FY24. The rise in revenue suggests an increase in sales or business activity, but this was overshadowed by the company’s escalating expenses.
Expenses Nearly Double
The company’s total expenses for the December quarter skyrocketed 98.74% YoY, reaching ₹229.36 crore, compared to ₹115.41 crore in the same quarter last year. This sharp increase in costs likely led to the erosion of net profit despite higher revenues.
Board Approves Additional Bonus Shares
Along with its Q3 results, Gujarat Toolroom’s board of directors approved the issuance of additional bonus shares, boosting investor interest despite the weak financial performance.
Bonus Share Details
- The board approved an additional issuance of 1.16 crore bonus shares.
- This is in addition to the 23.21 lakh bonus shares announced earlier on February 6, 2025.
- The company’s paid-up equity share capital increased to ₹1.39 crore, consisting of 1.39 crore shares of ₹1 each.
- Investors holding Gujarat Toolroom shares as of the record date (February 18, 2025) will receive five additional shares for every one share held (5:1 bonus issue).
The move to issue bonus shares indicates that the company aims to reward existing shareholders despite the decline in net profit. However, the lower circuit hit suggests that investors remain cautious.
Stock Performance Overview
Short-Term Gains vs. YTD Losses
- 1-week return: The stock gained 14.61% over the past week.
- 1-month return: Gujarat Toolroom shares surged 30.12% in the last month.
- Year-to-date (YTD) performance: The stock has declined 14.39% since the start of 2025.
Market Capitalization
As of February 20, 2025, Gujarat Toolroom has a market capitalization of ₹325.82 crore, reflecting its position as a penny stock with high volatility.
Why is Gujarat Toolroom’s Profit Declining?
The massive drop in profit margins despite strong revenue growth suggests that the company is grappling with:
- Rising Operational Costs – A nearly 99% increase in total expenses indicates significant cost overruns.
- Lower Margins – The company’s profitability may be under pressure due to higher input costs, competitive pricing, or inefficiencies in operations.
- Market Conditions – The company operates in multiple sectors, including mining, gemstones, and infrastructure, where market fluctuations can impact earnings.
- Bonus Issue Dilution – The issuance of bonus shares increases the number of outstanding shares, which may lead to lower earnings per share (EPS).
About Gujarat Toolroom Limited
Company Overview
Gujarat Toolroom Limited is a diversified business with operations spanning across:
- Mining & Metals – Engaged in gemstone and precious metals trading.
- Green Energy – Investing in sustainable energy solutions.
- Textile Trading – Supplying textiles across domestic and international markets.
- Infrastructure Development – Providing construction and real estate services.
Global Presence
Gujarat Toolroom operates in India, Dubai, and Zambia, expanding its footprint in international markets. The company is headquartered in Ahmedabad, Gujarat.
Investor Outlook: Should You Buy, Hold, or Sell?
Bullish Factors
✔ Strong revenue growth suggests increasing demand for Gujarat Toolroom’s products and services.
✔ Bonus share issuance may attract long-term investors seeking higher stock holdings.
✔ Penny stock momentum – Despite the Q3 decline, the stock has delivered solid short-term gains.
Bearish Factors
✖ 90% drop in net profit raises serious concerns about profitability.
✖ Expenses nearly doubled, impacting the company’s bottom line.
✖ Stock hit the lower circuit, indicating panic selling and bearish sentiment.
Conclusion: Cautious Approach Recommended
Gujarat Toolroom has demonstrated strong revenue growth, but its declining profit margins and rising expenses remain a concern. Investors should closely monitor the company’s cost management strategy before making investment decisions.
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