AKG Exim Q1 FY26: Why Profits PLUNGED Over 70% & What It Means For Investors

AKG Exim Limited (AKG) has just unveiled its financial results for Q1 FY26, covering the quarter ended June 30, 2025. For investors keen on understanding the company’s trajectory, these numbers offer a critical glimpse, especially when viewed against the backdrop of current Indian economic trends. While the Board meeting highlights the routine reappointments of key directors, our focus remains squarely on the financial pulse of the business.

So, how did AKG perform? Let’s dissect the numbers to gauge the health of this trading and import/export player.

A Mixed Bag for Revenue, But Profitability Takes a Hit 📉

At first glance, AKG’s top-line performance presents a complex picture. On a consolidated basis, revenue from operations for Q1 FY26 stood at ₹2,855.54 Lakhs. This marks a 3.4% sequential decline from the ₹2,956.38 Lakhs reported in Q4 FY25. More significantly, it’s a stark 29.3% year-on-year drop compared to the ₹4,038.27 Lakhs generated in Q1 FY25.

This performance aligns with the broader market context where export-linked sectors, like AKG’s trading business, have been underperforming due to softer global demand and uncertainties. The strong Q1 rally in Nifty and Sensex largely bypassed these segments, which are now contributing to the ongoing July correction.

Interestingly, on a standalone basis, AKG’s revenue actually saw a 46.0% sequential increase from ₹1,025.65 Lakhs in Q4 FY25 to ₹1,497.00 Lakhs in Q1 FY26. However, even standalone revenue saw a 39.0% year-on-year decline from ₹2,453.41 Lakhs in Q1 FY25. This suggests that while the standalone entity may have seen some recovery from a very weak preceding quarter, the overall group (consolidated) still faces significant headwinds, primarily from its subsidiary operations.

The Alarming Dive in Earnings 📉📉

While revenue contraction is a concern, the real story lies in the company’s profitability. AKG’s net profit has taken a substantial hit, signaling deeper operational challenges.

Consolidated Net Profit for Q1 FY26 plummeted to just ₹7.77 Lakhs. This is a massive 71.7% decrease quarter-on-quarter from ₹27.42 Lakhs in Q4 FY25 and an even more shocking 65.3% decline year-on-year from ₹22.45 Lakhs in Q1 FY25. Basic and Diluted EPS also mirrored this decline, falling from ₹0.09 in Q4 FY25 (and ₹0.07 in Q1 FY25) to a mere ₹0.02 in Q1 FY26.

Let’s dissect the expenses to understand where the pressure points are:

• Cost of Materials Consumed & Inventory Dynamics: The cost of materials consumed (which likely represents cost of goods for trading) was ₹2,380.78 Lakhs in Q1 FY26. What’s crucial to note is the “change in inventories.” A positive change of ₹321.45 Lakhs in Q1 FY26 indicates that inventories increased. This means AKG acquired more goods than it sold during the quarter, effectively tying up capital and adding to the cost base for the period. In contrast, Q4 FY25 saw a negative change (-₹377.26 Lakhs), suggesting inventory drawdown, which helped profitability. The current quarter’s inventory build-up, coupled with declining sales, raises questions about demand visibility.
• Gross Margins Under Pressure: Our calculations show a consistent decline in consolidated gross margins: from 6.78% in Q1 FY25 to 5.94% in Q4 FY25, further shrinking to 5.37% in Q1 FY26. This indicates increasing pressure on the company’s core trading profitability, suggesting either lower selling prices or higher procurement costs, or a combination of both.
• Rising Finance Costs: Despite lower overall revenue, consolidated finance costs actually rose to ₹21.54 Lakhs in Q1 FY26 from ₹17.87 Lakhs in Q4 FY25. As a percentage of revenue, this means finance costs rose from 0.60% to 0.75%, a concerning trend as debt servicing costs eat into an already shrinking revenue pie.
• Other Expenses Also Inch Up: Other operational expenses (excluding power & fuel) also increased to ₹122.39 Lakhs in Q1 FY26 from ₹98.21 Lakhs in Q4 FY25. As a percentage of revenue, they rose from 3.32% to 4.29%, indicating a lack of cost control commensurate with the revenue decline.

The Role of ‘Other Income’ and True Operational Performance

Perhaps the most revealing aspect of Q1 FY26 earnings is the significant contribution of ‘Other Income’. In Q1 FY26, other income soared to ₹32.32 Lakhs, a substantial jump from ₹6.32 Lakhs in Q4 FY25 and ₹2.59 Lakhs in Q1 FY25.

When we strip out this ‘Other Income’ from the consolidated Profit Before Tax (PBT) of ₹10.90 Lakhs, the true operational picture emerges: AKG’s PBT from core operations would actually be negative (₹-21.42 Lakhs) for Q1 FY26. This clearly indicates that the company’s core trading and import/export activities are currently unprofitable, and the reported PBT and Net Profit are propped up by non-operational income. This is not a sustainable model for long-term growth and points to AKG being a “turnaround” candidate rather than a “fast grower” or “stalwart.”

Working Capital: An Unusual Figure

The segment-wise data presents an unusual figure in the “Segment Liabilities” for the Trading segment in Q1 FY26, showing a negative value of ₹-848.64 Lakhs. While this contributes to a higher “Capital Employed” (Segment Assets Less Segment Liabilities = ₹5,342.50 Lakhs), a negative liability is highly uncommon in standard financial reporting. It could imply a significant net current asset position (current assets greatly exceeding current liabilities) or an accounting reclassification. Without further clarification from the company, this anomaly warrants caution for investors.

The increase in inventories (as discussed under cost analysis) suggests that working capital might be getting tied up, which could impact the company’s cash conversion cycle if sales don’t pick up.

Outlook and Classification

Given the consistent decline in consolidated revenue and a sharp fall into operational unprofitability (excluding other income), AKG Exim Limited currently appears to be a slow grower or even a cyclical company experiencing a downturn. The lack of management guidance for future quarters or years in the provided document leaves investors in the dark about potential recovery plans or market outlook.

The company’s performance resonates with the broader Indian economic context of underperforming export-linked sectors and cautious guidance from companies. Until there is a clear improvement in global demand, a revival in the trading segment, and a return to profitability from core operations, AKG’s journey seems challenging.

Key Takeaways for Investors:

• Revenue Contraction: Significant year-on-year decline in consolidated revenue, aligning with broader headwinds for export-linked sectors.
• Profitability Plunge: Consolidated net profit has plummeted over 65% YoY and 70% QoQ.
• Reliance on Other Income: Core operational activities are unprofitable; reported profits are significantly boosted by non-operational income. This is a major red flag.
• Margin Erosion: Gross margins continue to shrink, and finance and other operational costs are increasing as a percentage of revenue, highlighting efficiency challenges.
• Inventory Build-up: A positive change in inventories suggests goods are accumulating faster than they are being sold, tying up capital.
• Uncertainty Ahead: With no forward guidance, the path to recovery for AKG’s core business remains unclear.

Investors will need to closely monitor future quarters for signs of a reversal in core operational profitability and a clearer strategy to navigate the challenging global trade environment.

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