Everest Kanto Cylinder Limited , a prominent player in the cylinder manufacturing industry, has been hit with a significant penalty for failing to meet its Net Foreign Exchange (NFE) obligations. The Office of the Development Commissioner, Kandla Special Economic Zone, has imposed a fine of ₹11.29 crores on the company for non-achievement of cumulative positive NFE for the block period 2020-21 to 2024-25.

Penalty Details

The penalty, which amounts to 1% of the shortfall in FOB (Free On Board) value, was levied under SEZ Rules 2006. According to the order:

Implications and Company Response

The company has been directed to deposit the penalty amount within the specified timeline. This financial obligation is expected to impact Everest Kanto Cylinder's Statement of Profit and Loss to the extent of the penalty amount.

In response to the order, Everest Kanto Cylinder has stated that it will comply with the authority's directive and deposit the amount within the given timeline or any extended period that may be allowed.

Regulatory Action

While the penalty is substantial, it's noteworthy that the proposed cancellation of the Letter of Approval under Section 16 of SEZ Act 2005 has been dropped. However, the company has received a warning against future contraventions.

Disclosure and Transparency

In compliance with SEBI regulations, Everest Kanto Cylinder has made the necessary disclosures to the stock exchanges. The company's prompt reporting of this regulatory action demonstrates its commitment to transparency with investors and regulatory bodies.

This incident underscores the importance for companies operating in Special Economic Zones to carefully manage their foreign exchange obligations and maintain compliance with SEZ regulations. It also highlights the potential financial risks associated with non-compliance in international trade operations.

Everest Kanto Cylinder Limited (EKC) has kicked off the fiscal year with a strong financial performance in the first quarter, demonstrating significant growth across key metrics.

Financial Highlights

• Consolidated revenue reached Rs. 386.90 crore, marking a 12.9% year-on-year increase
• Consolidated EBITDA surged by 47.8% to Rs. 61.30 crore, with an improved EBITDA margin of 15.8%
• Profit After Tax (PAT) saw a substantial rise of 84.9%, reaching Rs. 51.60 crore, including an exceptional gain of Rs. 12.60 crore

Segment-wise Performance

India Operations

US Operations

Order Book and Future Outlook

EKC maintains a healthy order book, with the US division holding orders worth USD 70 million and the India operations having an order book of approximately Rs. 60.00 crore. The management is optimistic about the company's growth trajectory, projecting a 10-15% revenue growth for the year with conservative EBITDA margins of 13-14%.

Expansion Plans

The company is actively expanding its production capabilities with two new state-of-the-art facilities:

1. Mundra, India:

   • Capacity: 200,000 cylinders
   • Investment: Rs. 125.00 crore
   • Expected commissioning: Last quarter of FY26

2. Egypt:

   • Capacity: 120,000 cylinders
   • Investment: Rs. 120.00 crore
   • Expected commissioning: Last quarter of FY26

These new facilities are anticipated to enhance EKC's supply capabilities significantly from FY27 onwards.

Market Drivers and Opportunities

EKC is benefiting from favorable government policies promoting CNG adoption, green energy initiatives, and high-tech manufacturing. The company is witnessing emerging opportunities in sectors such as compressed biogas, semiconductors, and green hydrogen, where its high-pressure gas cylinders are finding new applications.

Management Commentary

Puneet Khurana, Managing Director of EKC, commented on the results during the earnings call, stating, "The fiscal year has begun on a strong note for EKC. With healthy demand visibility, upcoming capacity additions, a widening set of applications for our products, and a strong balance sheet position, we are well-positioned to capture the next phase of growth and continue delivering value to our stakeholders."

Challenges

Despite the strong performance, EKC faces a contingent GST liability of Rs. 352.00 crore. The company has appealed to the High Court and made representations to the government, expressing confidence in a favorable resolution of this classification matter.

In conclusion, Everest Kanto Cylinder Limited's Q1 results demonstrate robust growth and operational efficiency. With strategic expansions underway and a positive outlook in key markets, the company appears well-positioned for sustained growth in the high-pressure gas cylinder industry.