Force Motors Q4: Strong show, but can the momentum last?

The light commercial vehicle (LCV) manufacturer, which announced its results after market hours on 25 April, reported a significant improvement in its consolidated performance. The company’s net profit tripled while revenue grew steadily, reflecting strong operational efficiency and better product mix.

So, what drove the company’s performance? Can it sustain this momentum in the future? Let’s find out.

Q4 profit soars on exceptional gains

Force Motors reported a whopping 210% year-on-year (YoY) jump in net profit for the March quarter to ₹434.7 crores.

This was on the back of a one-time exceptional gain of ₹394.6 crores. The company received this amount as an incentive under the Madhya Pradesh Industrial Investment Promotion Assistance Scheme. It was sanctioned for FY23 and FY24 and received in March 2025.

An increase in revenue also boosted the company’s net profit. Revenue rose 17% year on year (YoY) to ₹2,356 crores on account of steady demand growth across key segments. The company’s revenue stood at ₹2,011 crores in the same period last year.

Due to the increase in revenue, the company reported an 18% YoY increase in operating profit to ₹329 crores.

Operating margin also came in marginally higher at 14% despite the increase in raw material, employee, and other expenses. Raw material costs continued to be the largest expense for the company followed by employee benefit expenses and other operating expenses.

This is, however, the highest ever operating profit margin reported by the company. Crisil expects margins to stabilize at 12-13% in the medium term supported by sustained healthy product mix, ensuring strong annual cash generation.

Net profit margin also expanded 11.5% YoY to 18.5%, reflecting the company's strong profitability.

Also Read: Force Motors is shifting gears—will the rally keep rolling?

Record FY25 performance

Force Motors also reported a standout performance for the financial year 2025. It was the company’s best year ever, with record revenue and net profit, as the company maintained a strong momentum across its businesses.

The company’s revenue from operations rose 15% YoY to ₹8,071 crores driven by demand across segments.

Operating profit also followed suit, rising 20% YoY to ₹1,093 crores on the back of operational efficiency. Operating margin rose 0.5% YoY to 13.5% even as expenses rose.

Overall, the company registered a net profit of ₹801 crores, more than double its bottom line of ₹388 crores in FY24 on the back of government incentives received in the March 2025 quarter.

The decline in finance costs and increase in other income further boosted its net profit for the year. Net profit margin of the company, too, rose 4.4% YoY to 9.9%.

Even when adjusting for the exceptional income, Force Motors showed solid progress. The company’s profit before taxes & share of joint ventures and exceptional items came in higher by 36% YoY at ₹843 crores.

The board of directors of the company recommended a dividend of ₹40 per share for FY25, signaling confidence in the company’s sustainable earnings growth.

The dividend payout while generous, still leaves sufficient reserves to fund the company's future expansion plans.

Robust ratios & healthy cash reserves

The exceptional performance of the company in FY25 resulted in an improvement of many of its financial ratios. While both operating and net profit margins increased in FY25, what really stood out was the improvement in return ratios.

Return on equity (RoE) of the company rose to 30.3x from 18.8x in FY24 while return on capital employed (RoCE) rose to 23.4x from 23.1x, both indicating outstanding returns on investment.

The company’s total equity also increased significantly to ₹3,036 crores compared to ₹2,257 crores, primarily driven by retained earnings from higher profitability.

Borrowings, on the other hand, dropped sharply, resulting in a debt-to-equity ratio of 0.005x for FY25, down from 0.23x in FY24, reflecting a low risk profile.

The company’s liquidity position remained strong, with a current ratio of 1.5x, up from 1.25x in FY24, supported by robust cash generation from operations.

Interest coverage ratio of more than 30x also showed that the company generates enough profit to cover its finance costs multiple times over.

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Gearing up for new markets and EV push

The company is shifting gears by entering the premium LCV segment with its high-end LCV - ‘Urbania’ to capitalize on the growing demand for luxury and high-end commercial vehicles.

It also plans to expand its business overseas in Africa, West Asia and Latin America, and grow its exports business.

Apart from this, the company plans to enter the electric vehicle (EV) segment. Of the ₹2,000 crores it plans for capex over the next 3-4 years, ₹200-300 crores is expected to be on EVs.

While these plans seem right on the nose, the company could face many hurdles. Any slowdown in the broader economy, disruptions in supply chains, or fluctuations in raw material prices could put pressure on its margins.

Exports, too, could see a downturn due to geopolitical issues. For reasons unknown, the company’s exports for the month of March dropped by a whopping 77% YoY, with only 94 units shipped in the month compared to 420 units in March 2024.

Sales data for the month also revealed that the company’s total sales increased only marginally to 3,700 units, up 0.87% from 3,668 units in the year-ago period.

While this could be a temporary blip, it cannot be ignored.

Then there are execution risks associated with its EV expansion plans. Regulatory changes around emissions, safety standards, and EV policies could demand further investments or even delay product launches.

The sector is also highly competitive with companies such as Tata Motors, and Mahindra & Mahindra having already made an entry into the segment.

Valuations

While the company reported robust results for the quarter and the year, shares of the company did not respond with the same enthusiasm. The stock is up only marginally while the Sensex is up more than 1,000 points.

Earlier this month, the stock had fallen over 7% after the company announced a fall in exports in its sales data for March 2025. However, since then the stock has recovered, rising steadily. It is up 1.6% over the last month and over 40% in the past six months.

Despite the recent dip in share price, the stock is still expensive, trading at price to book value of 4.04x, a 190% premium to its five-year average of 1.39x. 

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In conclusion

Going ahead, Force Motors appears well-positioned financially to continue its growth trajectory.

For FY25, the company's management targeted a top-line growth of 10-15% and was successful in meeting that target. However, for the next two years, it plans to grow at a rate of 40%, which will require immense financial discipline and stability.

So far, the company seems to be checking all the boxes required to make the jump – a sharp rise in profitability, healthy cash reserves and a virtually debt-free status.

It also has many expansion plans underway including a big EV push on the horizon, which could take it to the next level.

However, EV expansion plans, while promising, carry execution risks. Achieving a 40% growth rate will also require favourable external conditions.

While Force Motors is well-positioned today, careful navigation of these risks will be key to realizing its ambitious growth aspirations.

For more such analyses, read Profit Pulse.

Ayesha Shetty is a research analyst registered with the Securities and Exchange Board of India. She is a certified Financial Risk Manager (FRM) and is working toward the Chartered Financial Analyst (CFA) designation.

Disclosure: The author does not hold shares in any of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers should conduct their own research and consult a financial professional before making investment decisions.