5Paisa Capital Ltd., the Mumbai-based discount brokerage and financial services platform, reported a consolidated net profit of ₹9.48 crores for Q2 FY26 (July-September 2025), marking a steep decline of 56.71% year-on-year from ₹21.90 crores in Q2 FY24. The quarter-on-quarter performance also deteriorated, with profits falling 17.92% from ₹11.55 crores in Q1 FY26. With a market capitalisation of ₹1,199 crores, the micro-cap fintech player continues to face mounting pressure as revenue contraction and margin compression weigh heavily on profitability.
The latest quarterly performance underscores a troubling trend for 5Paisa Capital, which has witnessed consistent erosion in both top-line and bottom-line metrics over the past year. Net sales for Q2 FY26 stood at ₹77.17 crores, down 23.43% from ₹100.79 crores in the corresponding quarter last year. Sequential revenue also declined marginally by 0.67% from Q1 FY26's ₹77.69 crores, indicating stagnation in business momentum. The company's profit after tax margin compressed to 12.28% in Q2 FY26 from 21.73% a year earlier, reflecting deteriorating operational efficiency and rising cost pressures.
The stock has mirrored this fundamental weakness, plunging 38.87% over the past year and trading at ₹329.30 as of 12 October 2025—significantly below all key moving averages and closer to its 52-week low of ₹311.25 than its high of ₹607.40. The year-to-date decline stands at a painful 30.00%, with the stock underperforming the Sensex by a massive 35.58 percentage points. Technical indicators have turned decisively bearish, with the trend officially shifting to 'Bearish' in early August 2025, reinforcing negative sentiment among investors.
Financial Performance: Revenue Contraction and Margin Erosion
A granular examination of 5Paisa Capital's financials reveals a company grappling with structural headwinds. Net sales declined 23.43% year-on-year in Q2 FY26, continuing a downward trajectory that began in Q4 FY25 when revenues fell 36.85% compared to the prior year. The sequential decline of 0.67% quarter-on-quarter suggests the business has hit a plateau, with little sign of near-term recovery. On a half-yearly basis for H1 FY26 (April-September 2025), revenue aggregated to ₹154.86 crores, representing a sharp contraction from the levels achieved in the same period last year.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | YoY Change | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 77.17 | -0.67% | 9.48 | -56.71% | 12.28% |
| Jun'25 | 77.69 | +9.01% | 11.55 | -42.51% | 14.87% |
| Mar'25 | 71.27 | -16.42% | 10.07 | +74.22% | 14.13% |
| Dec'24 | 85.27 | -15.40% | 16.18 | +7.22% | 18.98% |
| Sep'24 | 100.79 | -1.42% | 21.90 | +15.02% | 21.73% |
| Jun'24 | 102.24 | -9.41% | 20.09 | +38.17% | 19.65% |
| Mar'24 | 112.86 | +12.57% | 5.78 | -59.89% | 5.12% |
| Dec'23 | 100.26 | +3.47% | 15.09 | +36.93% | 15.05% |
Operating profit before depreciation, interest, and tax (excluding other income) stood at ₹22.96 crores in Q2 FY26, down from ₹38.48 crores in Q2 FY24—a decline of 40.33%. The operating margin contracted sharply to 29.75% from 38.18% year-on-year, losing 843 basis points. This margin erosion reflects both lower revenue realisation and rising operational costs. Employee costs remained elevated at ₹20.51 crores in Q2 FY26, up slightly from ₹20.31 crores in the year-ago quarter, despite the significant revenue decline. This suggests limited cost flexibility and raises concerns about operational leverage.
Interest expenses increased to ₹7.97 crores in Q2 FY26 from ₹6.03 crores in Q2 FY24, adding further pressure on profitability. The company's profit before tax for the quarter came in at ₹12.74 crores, down 56.53% year-on-year from ₹29.31 crores. The effective tax rate remained stable at around 25.59%, resulting in a net profit of ₹9.48 crores—the lowest quarterly profit in the last eight quarters barring the anomalous Q4 FY24 result of ₹5.78 crores.
Operational Challenges: Weak Capital Efficiency and Profitability
Beyond the headline numbers, 5Paisa Capital's operational metrics paint a concerning picture. The company's return on equity (ROE) stood at 11.30% in Q2 FY26, significantly below the peer group average of approximately 23%. While this is not alarming in absolute terms, it reflects suboptimal capital efficiency compared to competitors in the fintech and NBFC space. The five-year average ROE of 8.78% further underscores the company's struggle to generate superior returns on shareholder capital.
Return on assets (ROA) was recorded at 4.12%, indicating modest asset utilisation. The company's balance sheet reveals shareholder funds of ₹603.64 crores as of March 2025, with negligible long-term debt but substantial current liabilities of ₹1,077.62 crores. The debt-to-equity ratio of 0.72 indicates moderate leverage, though the company maintains a net cash position of ₹1,121 crores when accounting for liquid assets. Current assets stood at ₹1,402.29 crores, down from ₹1,829.62 crores in the previous year, suggesting reduced business activity or asset redeployment.
⚠ Critical Concerns: Deteriorating Fundamentals
Revenue Decline: Net sales have fallen for three consecutive quarters on a year-on-year basis, with Q2 FY26 marking a 23.43% decline—the sharpest contraction in recent quarters.
Margin Compression: Operating margins have collapsed from 38.18% in Q2 FY24 to 29.75% in Q2 FY26, losing over 840 basis points due to revenue pressure and sticky costs.
Profitability Erosion: PAT margin has nearly halved from 21.73% to 12.28% year-on-year, with absolute profit down 56.71%, signalling severe stress on earnings quality.
Weak ROE: At 11.30%, the company's return on equity lags peers significantly, indicating suboptimal capital deployment and lower profitability relative to equity base.
Cash flow dynamics also warrant attention. For the fiscal year ending March 2025, the company generated ₹97.00 crores from operations, a reversal from the negative ₹91.00 crores in FY24. However, cash flow from financing activities turned negative at ₹141.00 crores, resulting in a net cash outflow of ₹50.00 crores for the year. This suggests the company may be returning capital to shareholders or reducing leverage, but it also raises questions about future growth capital allocation.
Industry Context: Discount Brokerage Under Pressure
The discount brokerage and fintech sector in India has experienced significant turbulence over the past year. Heightened competition, regulatory scrutiny, and volatile market conditions have compressed revenue per client and increased customer acquisition costs. While retail participation in equity markets remains robust, the monetisation environment has become challenging, with brokerages facing pressure on brokerage rates and ancillary income streams.
5Paisa Capital operates in a fiercely competitive landscape dominated by larger players with deeper pockets and more diversified revenue streams. The company's revenue model, heavily reliant on brokerage income, leaves it vulnerable to market volatility and trading volume fluctuations. The sharp revenue decline in recent quarters suggests either a loss of market share, reduced client activity, or both. Without significant diversification into wealth management, lending, or other high-margin businesses, the company's growth prospects remain constrained.
Peer Comparison: Valuation Discount Reflects Weak Fundamentals
A comparative analysis with peers in the finance and NBFC space highlights 5Paisa Capital's relative underperformance. The company trades at a price-to-earnings (P/E) ratio of 18.07x based on trailing twelve-month earnings, below the peer average of approximately 22x. However, this valuation discount is justified by the company's inferior ROE of 11.30% compared to the peer average of around 23%.
| Company | PE (TTM) | ROE (%) | Debt/Equity | P/BV | Div Yield (%) |
|---|---|---|---|---|---|
| 5Paisa Capital | 18.07x | 11.30% | 0.36 | 1.79x | 0.00% |
| Arihant Capital | 23.47x | 14.62% | 0.25 | 3.06x | 0.44% |
| Aditya Birla Money | 13.48x | 31.00% | 7.11 | 4.18x | 0.00% |
| Wealth First Portfolio | 33.99x | 27.46% | 0.00 | 9.85x | 1.68% |
| Emkay Global Financial | 16.98x | 20.65% | 0.15 | 2.68x | 1.26% |
The company's price-to-book value (P/BV) ratio of 1.79x is also considerably lower than the peer average of approximately 4.9x, reflecting investor scepticism about the sustainability of earnings and growth prospects. Notably, 5Paisa Capital does not pay dividends, unlike several peers who offer modest yields, further reducing its appeal to income-focused investors. The company's debt-to-equity ratio of 0.36 is among the lowest in the peer group, indicating conservative leverage—a positive but insufficient to offset profitability concerns.
Valuation Analysis: Attractive on Paper, Risky in Reality
At the current market price of ₹329.30, 5Paisa Capital trades at a P/E ratio of 18.07x and a P/BV ratio of 1.79x. While these multiples appear reasonable relative to the company's historical averages and certain peer comparisons, they must be viewed in the context of deteriorating fundamentals. The company's valuation grade has been classified as "Very Attractive" since August 2025, down from "Attractive" earlier, reflecting the significant price correction.
However, attractive valuation alone does not constitute a compelling investment case when underlying business trends are negative. The stock's 52-week range of ₹311.25 to ₹607.40 illustrates the dramatic de-rating over the past year. Currently trading just 5.80% above its 52-week low and 45.79% below its high, the stock reflects deep pessimism. The market capitalisation of ₹1,199 crores values the company at modest levels, but without visible catalysts for a turnaround, value traps remain a real risk.
Valuation Snapshot
P/E Ratio (TTM): 18.07x | P/BV Ratio: 1.79x | Dividend Yield: 0.00%
Market Cap: ₹1,199 Crores | Book Value per Share: ₹193.25
52-Week Range: ₹311.25 - ₹607.40 | Current Price: ₹329.30
Valuation Grade: Very Attractive (but fundamentals weak)
Shareholding Pattern: Stable Promoter Base, Marginal FII Interest
The shareholding pattern as of June 2025 reveals a stable promoter holding of 32.75%, unchanged from the previous quarter. Key promoters include Nirmal Bhanwarlal Jain (19.86%) and Madhu N Jain (5.91%). Promoter pledging is nil, which is a positive indicator of confidence and financial stability at the promoter level.
| Shareholder Category | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|
| Promoter | 32.75% | 32.75% | 32.77% | 0.00% |
| FII | 21.62% | 21.57% | 21.59% | +0.05% |
| Mutual Funds | 0.25% | 0.25% | 0.25% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.01% | 0.00% | 0.00% | +0.01% |
| Non-Institutional | 45.37% | 45.42% | 45.40% | -0.05% |
Foreign institutional investor (FII) holdings stood at 21.62% in June 2025, up marginally by 0.05% quarter-on-quarter. However, FII holdings have declined from 22.70% in June 2024, indicating some profit booking or reallocation by foreign investors. Mutual fund participation remains negligible at 0.25%, unchanged for several quarters, while insurance holdings are absent. The lack of institutional interest from domestic mutual funds and insurance companies is a red flag, suggesting limited conviction among professional investors about the company's prospects.
Non-institutional shareholders hold 45.37%, down slightly from 45.42% in the previous quarter. The number of non-institutional shareholders decreased from 58,073 to 56,862, indicating retail investor attrition. Overall, the shareholding pattern suggests a stable but unenthusiastic investor base, with limited fresh institutional buying despite the stock's sharp correction.
Stock Performance: Severe Underperformance Across All Timeframes
The stock's price performance has been dismal across all timeframes, significantly underperforming both the Sensex and its sector peers. Over the past year, 5Paisa Capital has declined 38.87%, while the Sensex gained 1.09%, resulting in a negative alpha of 39.96 percentage points. The year-to-date decline of 30.00% compares unfavourably with the Sensex's 5.58% gain, translating to a 35.58 percentage point underperformance.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -7.58% | +1.59% | -9.17% |
| 1 Month | -11.24% | +1.32% | -12.56% |
| 3 Months | -19.72% | -0.83% | -18.89% |
| 6 Months | -11.66% | +11.72% | -23.38% |
| YTD | -30.00% | +5.58% | -35.58% |
| 1 Year | -38.87% | +1.09% | -39.96% |
| 2 Years | -23.16% | +24.85% | -48.01% |
| 3 Years | -4.69% | +42.26% | -46.95% |
Longer-term returns are equally disappointing. Over three years, the stock has declined 4.69% while the Sensex surged 42.26%, resulting in a 46.95 percentage point underperformance. The five-year return stands at negative 9.92% against the Sensex's impressive 103.66% gain, highlighting chronic underperformance. The stock's beta of 1.50 indicates high volatility relative to the market, amplifying downside risk during market corrections.
Technical indicators remain uniformly negative. The stock trades below all major moving averages—5-day (₹344.84), 20-day (₹356.16), 50-day (₹364.27), 100-day (₹384.53), and 200-day (₹386.56)—signalling persistent weakness. The MACD, RSI, Bollinger Bands, and KST indicators all flash bearish signals on both weekly and monthly timeframes. The overall technical trend turned decisively bearish in early August 2025 and has remained so, with no signs of reversal. Delivery volumes have spiked recently, but this may reflect forced selling or panic rather than accumulation.
"With revenue declining 23.43% year-on-year, margins compressing by over 840 basis points, and profitability down 56.71%, 5Paisa Capital faces a crisis of growth and profitability that shows no signs of abating."
Investment Thesis: Weak Fundamentals Override Valuation Appeal
The investment case for 5Paisa Capital is severely compromised by deteriorating fundamentals across all key parameters. The company's proprietary Mojo Score stands at just 29 out of 100, placing it firmly in the "Strong Sell" category. This score reflects a confluence of negative factors: weak financial trends, bearish technical indicators, below-average quality metrics, and persistent underperformance relative to peers and the broader market.
The financial trend is classified as "Negative," driven by sharp declines in quarterly net sales (down 23.43% YoY) and net profit (down 56.71% YoY). The company's profit before tax excluding other income has hit multi-quarter lows, while earnings per share (EPS) for Q2 FY26 stands at a disappointing ₹3.03. The quality grade remains "Average," constrained by a modest ROE of 11.30%, limited institutional participation, and lack of dividend payouts. Technical momentum is firmly bearish, with all major indicators pointing downward.
Key Strengths & Risk Factors
✓ Key Strengths
- Zero Promoter Pledging: Promoters hold 32.75% with no pledging, indicating financial stability and confidence at the promoter level.
- Net Cash Position: Despite operational challenges, the company maintains a net cash position of ₹1,121 crores, providing some financial cushion.
- Moderate Leverage: Debt-to-equity ratio of 0.72 is conservative compared to peers, reducing financial risk.
- Established Brand: 5Paisa is a recognised name in the discount brokerage space with an established customer base.
- Valuation Discount: Trading at 18.07x P/E and 1.79x P/BV, the stock is cheaper than several peers on a relative basis.
⚠ Key Concerns
- Severe Revenue Decline: Net sales down 23.43% YoY in Q2 FY26, with no signs of stabilisation or recovery in sight.
- Margin Collapse: Operating margin compressed from 38.18% to 29.75% YoY, losing 843 basis points due to revenue pressure and sticky costs.
- Profitability Erosion: Net profit down 56.71% YoY, with PAT margin nearly halving from 21.73% to 12.28%.
- Weak ROE: At 11.30%, significantly below peer average of ~23%, indicating poor capital efficiency.
- Limited Institutional Interest: Mutual fund holding at just 0.25%, insurance holdings nil, reflecting lack of conviction among professional investors.
- Persistent Underperformance: Stock down 38.87% over one year, underperforming Sensex by 39.96 percentage points.
- Bearish Technical Trend: Trading below all moving averages with uniformly negative technical indicators.
Outlook: What to Watch
Positive Catalysts
- Stabilisation of revenue decline and return to sequential growth
- Cost rationalisation leading to margin improvement
- Successful diversification into higher-margin businesses
- Increased institutional participation (mutual funds, insurance)
- Market share gains in core brokerage or ancillary services
Red Flags
- Further revenue contraction in upcoming quarters
- Continued margin compression below 25%
- Decline in customer base or trading volumes
- Increased competitive pressure from larger players
- Regulatory changes adversely impacting business model
Looking ahead, 5Paisa Capital faces an uphill battle. The discount brokerage industry remains highly competitive, and the company's inability to stem revenue decline or protect margins raises serious questions about its competitive positioning. Without a clear turnaround strategy, diversification into adjacent high-margin businesses, or significant market share gains, the outlook remains challenging. Investors should monitor quarterly results closely for signs of stabilisation, particularly in revenue trends and operating margins.
The Verdict: Avoid Until Turnaround Evidence Emerges
Score: 29/100
For Fresh Investors: Avoid initiating positions. The combination of deteriorating financials, weak profitability, margin compression, and bearish technical momentum makes 5Paisa Capital unsuitable for fresh investment. While valuations appear attractive on paper, the lack of visible catalysts and persistent negative trends suggest value trap risk. Wait for concrete evidence of business stabilisation—such as sequential revenue growth, margin recovery, or successful diversification—before considering entry.
For Existing Holders: Consider exiting on any technical bounce or relief rally. The fundamental deterioration over the past year has been severe, with profits down 56.71% and margins collapsing. The stock has underperformed the Sensex by nearly 40 percentage points over one year, and technical indicators remain uniformly bearish. Without a credible turnaround plan or management commentary indicating near-term improvement, holding onto the stock exposes investors to further downside risk. Reallocate capital to higher-quality names with better growth visibility and stronger competitive moats.
Fair Value Estimate: Given the negative earnings trajectory and lack of growth visibility, assigning a fair value is challenging. Current trading levels around ₹329 reflect deep pessimism, but further downside to ₹300 or below cannot be ruled out if fundamentals continue to deteriorate. Any fair value estimate would require evidence of stabilisation in revenue and margins, which is currently absent.
