RITES Limited gets ₹38.30 crore tax relief

RITES Limited received ₹38.30 crore relief on its FY20 tax, interest and penalty demand after the Gujarat appellate authority partially set aside the order. The relief follows an appeal against a State Tax Officer order for FY2019-20. The company had made a ₹1.93 crore pre-deposit while filing the appeal. RITES said there is no further tax, interest or penalty liability pursuant to the demand order, subject to applicable law. For investors, the immediate impact is positive because ₹38.30 crore of a disputed liability has been removed. The amount is meaningful, but it should not be treated as a recurring earnings driver. The bigger factor for RITES is still execution of its ₹9,450 crore order book. Management expects FY28 to be a stronger year as projects secured over the last few years start contributing to revenue and profit. My view is that the tax relief improves the near-term sentiment, but the stock needs operating performance to sustain a stronger move. I would watch quarterly revenue growth, order inflows and execution of the current order book. The next trigger is whether RITES can move beyond the ₹10,000 crore order book level while maintaining profitability. Call: Positive on the tax relief, but execution remains the key trigger. I would avoid chasing the stock only on this one-off development.

Disclaimer: This post is for informational purposes only and not a recommendation to buy or sell any securities. I, or my family, associates, or relatives, may have a financial interest in the securities mentioned.