Tata Elxsi shares shed 3% after Q3 profit declines 45% YoY

Shares of Tata Elxsi fell 3.2% in early trade to a day’s low of Rs 5,609.15 on the BSE on Wednesday, January 14, after the Bengaluru-based engineering research and development (ER&D) firm reported a 45.3% year-on-year decline in net profit for the quarter ended December 31.

The company posted a profit of Rs 1.09 billion ($12.1 million) for the quarter, sharply lower than the year-ago period, primarily due to a one-time exceptional charge linked to changes in India’s labour laws.

Tata Elxsi took an exceptional charge of Rs 956.9 million during the quarter to provide for a one-time increase in employee benefit provisions following the implementation of the new labour codes, which came into effect in November.


The revised labour regulations require companies to ensure wages account for at least 50% of the cost to company (CTC) and mandate a recalibration of employee benefits such as provident fund and gratuity based on the revised wage structure.

Tata Elxsi was not alone in absorbing such costs. Other major IT firms, including TCS and HCLTech, also recorded one-time charges of Rs 21.3 billion and Rs 9.6 billion, respectively, citing similar adjustments arising from the labour code overhaul.

Despite pressure on the bottom line, Tata Elxsi reported a marginal 1.5% year-on-year increase in revenue to Rs 9.53 billion for the quarter, supported by continued growth in its software development and services segment.

Excluding the exceptional item and taxes, the company’s adjusted profit stood at Rs 2.42 billion, down 5.4% from the same period last year.

Also read: Mukul Agrawal reshapes Rs 6,500-crore portfolio in Q3: Two new stocks, one exit. Do you own?

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)