The quarter's results revealed multiple pressure points: revenue contracted 5.50% sequentially to ₹106.51 crores, whilst operating margins compressed to 43.71% from 48.56% in the previous quarter. More alarmingly, the profit after tax margin collapsed to just 9.53%, down from 13.65% in Q1 FY26 and significantly below the 21.00% margin recorded in Q2 FY25. With the stock now trading 46.16% below its 52-week high of ₹303.00 and firmly in bearish technical territory, Aditya Birla Money faces mounting questions about its ability to navigate an increasingly challenging operating environment.
Financial Performance: A Quarter of Disappointing Declines
The second quarter of FY2026 painted a troubling picture of Aditya Birla Money's operational health. Net sales declined 5.50% quarter-on-quarter to ₹106.51 crores from ₹112.71 crores in Q1 FY26, marking the company's inability to sustain the revenue momentum from the previous quarter. The year-on-year comparison was equally concerning, with revenue down 16.19% from ₹127.08 crores in Q2 FY25, suggesting structural challenges beyond seasonal fluctuations.
Operating profit excluding other income fell to ₹46.56 crores, representing a 14.93% sequential decline and a stark 31.61% drop year-on-year. The operating margin compression was particularly pronounced, sliding from 48.56% in Q1 FY26 to 43.71% in Q2 FY26, and well below the 53.55% margin achieved in the corresponding quarter last year. This deterioration in operational efficiency occurred despite employee costs rising only marginally to ₹30.00 crores from ₹27.89 crores, indicating broader revenue challenges rather than cost inflation.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 106.51 | -5.50% | 10.15 | -34.01% | 9.53% |
| Jun'25 | 112.71 | +13.32% | 15.38 | +64.85% | 13.65% |
| Mar'25 | 99.46 | -6.20% | 9.33 | -57.23% | 9.38% |
| Dec'24 | 106.03 | -16.56% | 21.81 | -18.29% | 20.57% |
| Sep'24 | 127.08 | +6.42% | 26.69 | +63.16% | 21.00% |
| Jun'24 | 119.41 | +4.69% | 16.36 | -0.61% | 13.70% |
| Mar'24 | 114.06 | +12.59% | 16.46 | +8.65% | 14.43% |
| Dec'23 | 101.31 | +5.13% | 15.15 | +27.10% | 14.95% |
Interest expenses remained elevated at ₹30.00 crores in Q2 FY26, down slightly from ₹31.59 crores in the previous quarter but still above the ₹29.63 crores recorded in Q2 FY25. This persistent interest burden, combined with declining operating profits, resulted in profit before tax of just ₹14.21 crores—a 30.89% sequential decline and a dramatic 60.76% drop year-on-year. The tax rate of 28.57% in Q2 FY26 was marginally higher than the previous quarter's 25.24%, further compressing bottom-line profitability.
Critical Performance Indicators
Profit Before Tax (excluding Other Income): At ₹13.60 crores, this metric has fallen 39.2% compared to the previous four-quarter average, signalling fundamental earnings weakness.
Operating Margin: At 43.71%, this represents the lowest margin in recent quarters, indicating deteriorating operational efficiency and pricing power.
PBDIT: At ₹46.56 crores, this is the lowest level in recent quarters, reflecting compressed operating profitability across the business.
Balance Sheet Strength Amidst Earnings Weakness
Despite the concerning earnings trajectory, Aditya Birla Money maintains a relatively robust balance sheet position. Shareholder funds stood at ₹236.13 crores as of March 2025, comprising equity capital of ₹5.65 crores and reserves of ₹230.48 crores. The company's return on equity remains impressive at 31.00%, demonstrating strong capital efficiency despite recent profit declines. This high ROE indicates that when the company generates profits, it does so efficiently relative to shareholder capital—a positive indicator of underlying business quality.
The company's leverage profile shows a debt-to-equity ratio of 8.26, which appears elevated but is characteristic of financial services businesses. Importantly, the company maintains a net cash position of negative ₹31 crores (meaning net debt), which is manageable given the business model. Current assets of ₹1,055.74 crores as of March 2025 provide adequate liquidity coverage against current liabilities of ₹2,283.15 crores, though the substantial current liability base reflects the nature of the stockbroking and financial services business with client deposits and payables.
Fixed assets remain modest at ₹16.54 crores, reflecting the asset-light nature of the brokerage business. The company has steadily built reserves from ₹157.06 crores in March 2024 to ₹230.48 crores in March 2025, demonstrating historical profit retention and capital accumulation. However, the current quarter's weak performance raises questions about whether this positive trend can continue if earnings remain under pressure.
Operational Challenges: Margin Compression and Revenue Headwinds
The quarter's most concerning aspect was the sharp compression in profitability margins across all levels. The PAT margin of 9.53% in Q2 FY26 represented a significant deterioration from 13.65% in Q1 FY26 and a dramatic decline from the 21.00% margin in Q2 FY25. This margin erosion occurred despite the company maintaining a reasonable operating margin structure, suggesting that interest costs and potentially higher operating expenses are eating into bottom-line profitability.
The gross profit margin similarly declined to 16.12% from 20.69% in the previous quarter, indicating pricing pressure or unfavourable revenue mix shifts. In the competitive stockbroking and financial services industry, maintaining pricing power is crucial, and the current margin trends suggest Aditya Birla Money is struggling to defend its profitability in a challenging market environment characterised by intense competition and regulatory pressures.
Quality of Earnings Concern
The decline in operating profit before depreciation, interest, and tax (PBDIT) to ₹46.56 crores—the lowest in recent quarters—raises concerns about the sustainability of current earnings levels. With revenue declining and margins compressing simultaneously, the company faces a dual challenge of top-line growth and bottom-line protection. The absence of significant other income (just ₹0.61 crores in Q2 FY26) means the company cannot rely on non-operating gains to cushion operational weakness.
Industry Context: Navigating a Challenging Brokerage Landscape
The Indian stockbroking and financial services industry has witnessed significant disruption over the past few years, with discount brokers gaining market share and traditional full-service brokers facing margin pressure. Aditya Birla Money operates in this intensely competitive environment where transaction-based revenue models face challenges from zero-brokerage platforms and increased price competition.
Market volatility and trading volumes play a crucial role in determining brokerage revenues. The recent quarter's revenue decline of 16.19% year-on-year suggests that either trading volumes have softened, or the company has lost market share, or pricing has come under pressure—or a combination of all three factors. The broader market context shows that whilst equity markets have remained relatively resilient, retail participation patterns have become more price-sensitive, favouring low-cost providers.
Regulatory changes, including enhanced disclosure requirements and compliance costs, have also impacted the profitability of financial intermediaries. The company's elevated interest costs suggest significant borrowings, likely to fund margin trading facilities and other client-facing financial services, which carry inherent credit and operational risks in volatile market conditions.
Peer Comparison: Struggling Against Industry Standards
Comparing Aditya Birla Money's performance against its peer group in the finance and NBFC sector reveals a mixed picture. The company's return on equity of 31.00% stands out positively, significantly higher than peers such as 5Paisa Capital (0.75% ROE), Emkay Global Financial Services (20.65% ROE), and Arihant Capital Markets (14.62% ROE). This superior ROE demonstrates that Aditya Birla Money generates strong returns on shareholder capital when profitable.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) |
|---|---|---|---|---|
| Aditya Birla Money | 13.50 | 4.18 | 31.00 | 0.00 |
| 5Paisa Capital | 21.16 | 0.16 | 0.75 | 0.00 |
| Emkay Global Financial | 17.10 | 2.69 | 20.65 | 1.25 |
| Arihant Capital | 22.86 | 2.98 | 14.62 | 0.45 |
| Shriram Asset Management | NA (Loss Making) | 11.59 | -28.43 | 0.00 |
However, Aditya Birla Money's price-to-book ratio of 4.18x is higher than most peers except Shriram Asset Management, suggesting the market has historically priced in expectations of sustained high ROE performance. With a P/E ratio of 13.50x, the stock trades at a discount to peers like 5Paisa Capital (21.16x) and Arihant Capital (22.86x), potentially reflecting market concerns about near-term earnings sustainability given recent performance trends.
The company's lack of dividend yield (0.00%) contrasts with Emkay Global (1.25%) and Arihant Capital (0.45%), indicating that Aditya Birla Money has prioritised capital retention over shareholder distributions. This strategy makes sense for a growing financial services business, but the current earnings trajectory raises questions about whether retained earnings are being deployed effectively to generate future growth.
Valuation Analysis: Premium Pricing Meets Performance Questions
At the current market price of ₹163.15, Aditya Birla Money trades at a P/E ratio of 13.50x trailing twelve-month earnings and a price-to-book value of 4.18x. The company's valuation has been classified as "EXPENSIVE" since July 2025, when the stock was trading at ₹173.50. The subsequent price decline to ₹163.15 represents a 6.0% drop, yet the valuation remains stretched relative to current earnings trends.
The enterprise value to EBITDA multiple of 4.22x and EV/Sales of 2.16x suggest the market continues to ascribe a premium valuation to the business, likely based on the Aditya Birla Group parentage and historical growth trajectory. However, with recent quarters showing declining profitability and margin compression, this valuation premium appears increasingly difficult to justify on fundamental grounds.
The PEG ratio of 0.61x (below 1.0) might superficially suggest the stock is undervalued relative to growth, but this metric becomes less reliable when earnings are declining rather than growing. The company's book value per share of ₹41.79 provides a tangible asset backing, though the 4.18x price-to-book multiple implies significant goodwill for franchise value and future earnings potential that current performance is failing to validate.
"With profit margins collapsing from 21% to under 10% year-on-year and revenue declining 16%, Aditya Birla Money's premium valuation appears increasingly disconnected from operational reality."
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
The shareholding structure of Aditya Birla Money reveals a highly promoter-dominated ownership pattern with minimal institutional participation. Promoter holding has remained rock-solid at 73.53% across the last five quarters, with Aditya Birla Capital Limited holding the entire promoter stake. This unwavering promoter commitment provides stability and signals long-term confidence from the parent company, though it also means limited free float for market participants.
| Quarter | Promoter | FII | Mutual Funds | Insurance | Other DII | Non-Institutional |
|---|---|---|---|---|---|---|
| Sep'25 | 73.53% | 0.07% | 0.00% | 0.00% | 0.05% | 26.35% |
| Jun'25 | 73.53% | 0.03% | 0.00% | 0.00% | 0.05% | 26.38% |
| Mar'25 | 73.53% | 0.02% | 0.00% | 0.00% | 0.05% | 26.39% |
| Dec'24 | 73.53% | 0.30% | 0.00% | 0.00% | 0.23% | 25.94% |
| Sep'24 | 73.53% | 0.02% | 0.00% | 0.00% | 0.00% | 26.46% |
Foreign institutional investor (FII) holdings increased marginally to 0.07% in September 2025 from 0.03% in June 2025, but this remains negligible in absolute terms. The number of FII holders actually decreased from 4 to 2, suggesting that whilst one or two institutions may have increased stakes, overall FII interest remains minimal. This lack of institutional participation is concerning, as it indicates that sophisticated investors see limited value or growth potential in the current business trajectory.
Mutual fund and insurance company holdings remain at zero, a stark indicator of the company's inability to attract institutional capital despite being part of a prestigious business group. Other domestic institutional investor (DII) holdings stand at just 0.05%, unchanged quarter-on-quarter. The non-institutional shareholding of 26.35% represents primarily retail investors, whose participation has remained relatively stable with minor fluctuations.
The absence of promoter pledging (0.00%) is a positive signal, indicating the parent company's financial strength and long-term commitment. However, the overall picture of minimal institutional interest combined with deteriorating financial performance suggests that sophisticated investors remain unconvinced about the company's near-term prospects.
Stock Performance: Significant Underperformance Across Timeframes
Aditya Birla Money's stock performance presents a stark contrast between longer-term gains and recent sharp underperformance. Over the past week, the stock declined 6.61%, significantly underperforming the Sensex which gained 0.13%, resulting in a negative alpha of 6.74 percentage points. The one-month performance was even worse, with the stock falling 10.13% whilst the Sensex gained 0.15%, creating a negative alpha of 10.28 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -6.61% | +0.13% | -6.74% |
| 1 Month | -10.13% | +0.15% | -10.28% |
| 3 Months | -7.09% | -0.27% | -6.82% |
| 6 Months | +6.70% | +9.14% | -2.44% |
| YTD | -38.06% | +4.98% | -43.04% |
| 1 Year | +5.60% | +0.07% | +5.53% |
| 2 Years | +65.23% | +23.76% | +41.47% |
| 3 Years | +159.17% | +41.63% | +117.54% |
The year-to-date performance is particularly troubling, with the stock down 38.06% whilst the Sensex gained 4.98%—a massive negative alpha of 43.04 percentage points. This severe underperformance in 2025 has erased much of the gains from previous years, with the stock now trading at ₹163.15, down 46.16% from its 52-week high of ₹303.00 reached earlier in the year.
Longer-term performance metrics paint a more favourable picture: two-year returns of 65.23%, three-year returns of 159.17%, and five-year returns of 266.63% all significantly outpaced the Sensex. However, these historical gains provide little comfort to investors who entered positions in recent months and now face substantial mark-to-market losses. The stock's beta of 1.18 indicates it tends to move with greater volatility than the broader market, amplifying both gains and losses.
From a technical perspective, the stock trades below all key moving averages—5-day (₹174.99), 20-day (₹176.17), 50-day (₹177.11), 100-day (₹180.17), and 200-day (₹178.39)—a bearish configuration that suggests continued downward pressure. The technical trend is classified as "Mildly Bearish," having changed from "Bearish" on 13 October 2025. Multiple technical indicators including MACD, Bollinger Bands, and KST all point to bearish or mildly bearish conditions, providing little technical support for a near-term recovery.
Investment Thesis: Fundamental Concerns Outweigh Historical Strengths
The investment case for Aditya Birla Money rests on several pillars, but current performance trends are severely undermining the bull thesis. The company's proprietary Mojo Score of just 14 out of 100 places it firmly in "STRONG SELL" territory, a dramatic decline from a score of 38 (SELL rating) just two months ago in August 2025. This deterioration reflects the compounding concerns around earnings trajectory, valuation, and technical momentum.
The quality assessment rates the company as "BELOW AVERAGE," unchanged from recent quarters. Whilst the five-year sales growth of 21.77% and EBIT growth of 41.15% demonstrate historical expansion capability, these backward-looking metrics provide little assurance given current headwinds. The financial trend is classified as "FLAT" as of June 2025, but the recent quarter's sharp profit decline suggests this assessment may soon worsen to "NEGATIVE."
From a valuation perspective, the stock's classification as "EXPENSIVE" combined with deteriorating fundamentals creates an unfavourable risk-reward profile. The technical trend remains "MILDLY BEARISH," and with the stock trading below all major moving averages, technical factors provide no support for contrarian positioning. The near-term drivers assessment is "NEUTRAL," but the quarterly financial trend is decidedly "NEGATIVE," creating a challenging outlook.
Key Strengths ✓
- Strong ROE: At 31.00%, demonstrates excellent capital efficiency when profitable
- Promoter Commitment: Stable 73.53% holding with zero pledging signals long-term confidence
- Group Backing: Aditya Birla Group parentage provides brand strength and potential support
- Historical Growth: Five-year sales CAGR of 21.77% and EBIT CAGR of 41.15% show past expansion capability
- Asset-Light Model: Low fixed asset base provides operational flexibility
- Net Cash Position: Manageable debt levels relative to cash generation potential
Key Concerns ⚠
- Collapsing Profitability: Net profit down 61.96% YoY and 34.01% QoQ in Q2 FY26
- Margin Compression: PAT margin collapsed to 9.53% from 21.00% year-ago, operating margin at multi-quarter low
- Revenue Decline: Sales down 16.19% YoY, indicating market share loss or volume weakness
- Minimal Institutional Interest: Near-zero FII, MF, and insurance holdings despite group credentials
- Expensive Valuation: P/BV of 4.18x difficult to justify with deteriorating earnings
- Technical Weakness: Stock below all moving averages, bearish trend, 38% YTD decline
- Quality Rating: Below Average grade with flat-to-negative financial trend
Outlook: What to Watch
The outlook for Aditya Birla Money hinges on management's ability to arrest the earnings decline and restore margin stability. Investors should monitor several critical indicators in coming quarters to assess whether the company can stage a turnaround or if the current weakness represents a structural deterioration.
Positive Catalysts
- Revenue stabilisation or return to growth in Q3 FY26
- Operating margin recovery towards 48-50% historical levels
- Market share gains in key brokerage segments
- Institutional investor participation increasing
- Technical trend reversal above 200-day moving average
Red Flags
- Further sequential revenue or profit declines in Q3
- Operating margins falling below 40%
- Continued institutional investor absence
- Stock breaking below ₹155 support levels
- Market share losses to discount brokers accelerating
The company operates in a structurally challenging industry where pricing power is limited and competition intense. Without clear evidence of stabilisation in the next quarter, the investment case remains weak despite the strong promoter backing and historical growth credentials.
The Verdict: Avoid Until Stabilisation Emerges
Score: 14/100
For Fresh Investors: Avoid initiating positions. The combination of deteriorating fundamentals (61.96% YoY profit decline, collapsing margins), expensive valuation (P/BV 4.18x), bearish technical setup (38% YTD decline, below all moving averages), and minimal institutional interest creates an unfavourable risk-reward profile. Wait for clear evidence of earnings stabilisation and margin recovery before considering entry.
For Existing Holders: Consider reducing exposure on any technical bounce towards ₹175-180 levels. The sharp deterioration in quarterly performance, absence of positive catalysts, and negative momentum suggest further downside risk. Whilst promoter backing provides some comfort, operational challenges appear structural rather than temporary. Reassess only if Q3 FY26 results show meaningful improvement in both revenue and margins.
Fair Value Estimate: ₹140-145 (11-14% downside from current levels), based on sustainable earnings normalisation at lower margin levels and peer-comparable P/BV multiples of 3.0-3.5x adjusted for ROE differential.
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
