The company's Q3 FY26 performance represents the highest quarterly revenue and profit in its recent history, with net sales reaching ₹717.47 crores. Operating profit before depreciation, interest, and tax (excluding other income) stood at ₹163.04 crores, delivering a margin of 22.72%, a sequential improvement from 22.59% in Q2 FY26. The consistent margin expansion over the past year reflects improving operational efficiency and better cost management across the organisation.
| Quarter | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 | Jun'24 |
|---|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 717.47 | 646.72 | 620.74 | 602.25 | 601.67 | 542.88 | 519.50 |
| QoQ Growth | +10.94% | +4.19% | +3.07% | +0.10% | +10.83% | +4.50% | — |
| Net Profit (₹ Cr) | 119.32 | 110.51 | 105.50 | 103.07 | 100.22 | 91.99 | 86.59 |
| QoQ Growth | +7.97% | +4.75% | +2.36% | +2.84% | +8.95% | +6.24% | — |
| Operating Margin | 22.72% | 22.59% | 22.51% | 22.24% | 21.83% | 20.88% | 20.11% |
| PAT Margin | 16.63% | 17.09% | 17.00% | 17.11% | 16.66% | 16.94% | 16.67% |
Financial Performance: Consistent Revenue Acceleration
Affle's Q3 FY26 revenue of ₹717.47 crores represents a significant acceleration from the preceding quarter's ₹646.72 crores, marking a robust 10.94% quarter-on-quarter growth. On a year-on-year basis, the company posted a 19.25% increase, demonstrating sustained momentum in its core mobile advertising technology business. For the nine-month period ending December 2025, cumulative revenue stood at ₹1,984.93 crores, reflecting strong demand for the company's consumer platform and enterprise solutions.
The operating profit trajectory has been equally impressive, with PBDIT (excluding other income) reaching ₹163.04 crores in Q3 FY26, up from ₹146.12 crores in Q2 FY26. This translates to an operating margin of 22.72%, the highest in seven quarters, indicating improved operational leverage and effective cost control measures. Employee costs, whilst growing in absolute terms to ₹63.71 crores, have remained well-managed as a percentage of revenue.
Net profit for Q3 FY26 reached ₹119.32 crores, representing a PAT margin of 16.63%. Whilst this margin is marginally lower than the 17.09% recorded in Q2 FY26, it remains consistent with the company's historical performance range. The tax rate for the quarter stood at 18.34%, in line with the previous quarter, reflecting stable tax management. Interest costs have continued their declining trend, falling to ₹1.26 crores in Q3 FY26 from ₹1.17 crores in Q2 FY26, benefiting from the company's net cash position.
Capital Efficiency: Strong ROCE Despite Moderate ROE
Affle's return on capital employed (ROCE) averaged 22.39% over the assessment period, demonstrating efficient deployment of capital in revenue-generating activities. This metric is particularly impressive for a technology services company, indicating strong pricing power and operational efficiency. The latest ROCE of 19.74%, whilst lower than the average, still reflects healthy capital productivity.
ROE Performance: Room for Improvement
The company's average return on equity (ROE) stands at 15.44%, with the latest reading at 12.88%. Whilst this represents satisfactory capital efficiency, it lags behind several IT sector peers who consistently deliver ROE above 20%. The moderate ROE suggests that whilst the company generates healthy profits, there is scope to enhance shareholder value creation through improved capital allocation or higher profitability. For a company trading at premium valuations, investors would ideally prefer to see ROE trending upwards towards the 20% mark.
The company's balance sheet reflects financial prudence with negligible debt. As of March 2025, long-term debt stood at just ₹10.66 crores against shareholder funds of ₹2,946.46 crores, resulting in a debt-to-equity ratio of 0.004. The net debt-to-equity ratio averaged -0.31, indicating Affle is a net cash company with cash reserves of ₹1,047 crores as of March 2025. This strong balance sheet provides significant financial flexibility for growth investments, acquisitions, or shareholder returns.
Industry Context: Navigating Digital Advertising Headwinds
The mobile advertising technology sector has faced headwinds from changing privacy regulations, platform policy changes, and macroeconomic uncertainties affecting advertising budgets. Despite these challenges, Affle has demonstrated resilience with consistent revenue growth, suggesting strong competitive positioning and product-market fit. The company's five-year sales growth of 44.00% and EBIT growth of 38.38% underscore its ability to capture market share in a dynamic industry.
The broader IT services sector has experienced mixed performance, with concerns about demand slowdown in key markets. However, Affle's specialised focus on mobile advertising technology and its presence across emerging markets provides some insulation from broader sector trends. The company's ability to maintain operating margins above 22% whilst growing revenues demonstrates pricing power and operational efficiency that distinguish it from pure-play IT services providers.
Quality Credentials: A Well-Managed Business
Affle maintains a "Good" quality rating based on its long-term financial performance. Key strengths include zero promoter pledging, strong interest coverage of 27.78 times, and institutional holdings of 34.15%. The company has demonstrated consistent profitability with minimal debt, positioning it as a financially stable player in its segment. The five-year sales CAGR of 44.00% reflects sustained growth momentum, whilst the average ROCE of 22.39% indicates efficient capital deployment.
Peer Comparison: Premium Valuation Relative to Fundamentals
When compared to industry peers in the computers software and consulting space, Affle's valuation metrics reveal a mixed picture. The company trades at a price-to-earnings ratio of 52.61 times trailing twelve-month earnings, representing a significant premium to the industry average of approximately 16 times. This valuation premium is not fully justified by the company's return on equity of 15.44%, which lags behind peers such as Tata Elxsi (34.06%), KPIT Technologies (23.79%), and Inventurus Knowledge Solutions (29.58%).
| Company | P/E (TTM) | ROE (%) | Price to Book | Debt to Equity |
|---|---|---|---|---|
| Affle 3i | 52.61 | 15.44% | 6.77 | -0.31 |
| Tata Elxsi | 50.86 | 34.06% | 12.27 | -0.41 |
| KPIT Technologies | 37.69 | 23.79% | 8.81 | -0.19 |
| Inventurus Knowledge | 54.91 | 29.58% | 11.91 | 0.24 |
| Tata Technologies | 45.29 | 19.78% | 7.35 | -0.22 |
| Sagility | 26.67 | 8.98% | 2.63 | 0.14 |
Affle's price-to-book ratio of 6.77 times is lower than the peer group average, suggesting some relative value on this metric. However, the company's PEG ratio of 2.39 indicates the stock is expensive relative to its growth rate, with investors paying a premium for each unit of earnings growth. The negative debt-to-equity ratio of -0.31 is a positive differentiator, indicating a net cash position that provides financial flexibility.
Valuation Analysis: Stretched Multiples Limit Upside
Affle's current valuation multiples place it in the "Very Expensive" category across multiple parameters. The P/E ratio of 53 times represents a substantial premium to both the industry average of 16 times and the broader market. The EV/EBITDA multiple of 38.17 times and EV/EBIT multiple of 47.69 times further underscore the premium valuation. Such elevated multiples leave limited room for multiple expansion and make the stock vulnerable to any disappointment in growth or profitability metrics.
The stock currently trades at ₹1,568.00, approximately 28.30% below its 52-week high of ₹2,186.80 and 28.41% above its 52-week low of ₹1,221.05. This positioning suggests the recent correction has provided some valuation relief, but the absolute multiples remain elevated. The company does not pay dividends, with a dividend payout ratio of zero, directing all profits towards growth investments and balance sheet strengthening.
Shareholding Pattern: Institutional Confidence Remains Mixed
The shareholding pattern reveals stable promoter holding at 54.95% as of December 2025, with minimal quarterly changes. This consistency provides governance stability and alignment of interests. Foreign institutional investor (FII) holdings declined to 17.79% in Q3 FY26 from 19.01% in Q2 FY26, representing a reduction of 122 basis points. This sequential decline in FII participation warrants attention, as it may signal concerns about valuation or growth prospects.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoters | 54.95% | 54.97% | 55.00% | -0.02% |
| FII | 17.79% | 19.01% | 18.41% | -1.22% |
| Mutual Funds | 13.23% | 11.81% | 11.19% | +1.42% |
| Insurance | 2.73% | 2.44% | 2.34% | +0.29% |
| Other DII | 0.40% | 0.43% | 0.29% | -0.03% |
| Non-Institutional | 10.91% | 11.35% | 12.78% | -0.44% |
On a positive note, mutual fund holdings increased to 13.23% from 11.81%, reflecting growing domestic institutional interest. Insurance company holdings also rose marginally to 2.73%. The combined institutional holding of 34.15% provides a reasonable base of informed investors. However, the declining FII stake and reducing non-institutional holdings suggest profit-booking at current valuations. With 162 FII investors and 31 mutual funds holding the stock, the investor base remains reasonably diversified.
Stock Performance: Technical Weakness Overshadows Fundamentals
Affle's stock has experienced significant volatility over recent months, with the technical trend turning decisively bearish on January 19, 2026, at ₹1,710. The stock currently trades below all major moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating strong downward momentum. The three-month return of -18.91% and six-month return of -20.58% reflect substantial erosion in shareholder value despite improving operational metrics.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -0.76% | 0.90% | -1.66% |
| 1 Month | -11.56% | -2.84% | -8.72% |
| 3 Months | -18.91% | -2.53% | -16.38% |
| 6 Months | -20.58% | 0.97% | -21.55% |
| 1 Year | 4.95% | 7.18% | -2.23% |
| 2 Years | 31.44% | 15.65% | +15.79% |
| 3 Years | 47.26% | 38.27% | +8.99% |
The one-year return of 4.95% underperforms the Sensex return of 7.18%, resulting in negative alpha of -2.23%. However, longer-term performance remains respectable, with two-year returns of 31.44% and three-year returns of 47.26% outperforming the broader market. The stock's beta of 1.35 indicates higher volatility than the market, with a volatility reading of 32.52% placing it in the high-risk category. The current bearish technical setup across weekly and monthly indicators suggests the path of least resistance remains downward in the near term.
Investment Thesis: Quality Business, Questionable Entry Point
Affle presents a compelling operational story with consistent revenue growth, improving margins, and a debt-free balance sheet. The company's specialised positioning in mobile advertising technology and its track record of execution are genuine strengths. However, the investment case is significantly constrained by valuation concerns. Trading at 53 times earnings with a PEG ratio of 2.39, the stock offers limited margin of safety for investors.
The proprietary Mojo score of 43 out of 100 places the stock in the "SELL" category, down from a "HOLD" rating in December 2025. This downgrade reflects the deteriorating technical picture and stretched valuation metrics. Whilst the company's financial trend remains positive and quality assessment is good, these positives are insufficient to overcome the valuation and technical headwinds.
KEY STRENGTHS
- Consistent revenue growth of 19.25% YoY in Q3 FY26
- Operating margins improving to 22.72%, highest in seven quarters
- Debt-free balance sheet with net cash of ₹1,047 crores
- Strong ROCE of 22.39% demonstrating capital efficiency
- Zero promoter pledging and stable promoter holding
- Five-year sales CAGR of 44.00% reflecting sustained growth
- Institutional holdings of 34.15% providing investor confidence
KEY CONCERNS
- Valuation multiples extremely stretched at 53x P/E
- ROE of 15.44% lags sector peers significantly
- PEG ratio of 2.39 suggests expensive growth
- Stock in bearish technical trend below all moving averages
- FII holdings declining sequentially by 122 basis points
- Three-month return of -18.91% indicates momentum loss
- High volatility of 32.52% increases investment risk
Outlook: What to Watch
The near-term outlook for Affle hinges on the company's ability to sustain revenue momentum whilst managing costs effectively. The Q4 FY26 results will be crucial in determining whether the current growth trajectory can be maintained. Investors should closely monitor margin trends, particularly whether operating margins can be sustained above 22% as the company scales. Additionally, any commentary on demand trends, client additions, and geographic expansion will provide insights into future growth potential.
POSITIVE CATALYSTS
- Sustained revenue growth above 15% YoY
- Operating margin expansion beyond 23%
- Increasing mutual fund participation
- Technical trend reversal to bullish
- Valuation correction providing better entry points
RED FLAGS
- Further decline in FII holdings
- Revenue growth deceleration below 10% YoY
- Margin compression below 20%
- Break below ₹1,221 (52-week low)
- Continued negative alpha vs Sensex
From a technical perspective, the stock needs to reclaim the 20-day moving average at ₹1,692.95 to signal any meaningful reversal. Until then, the bearish technical setup suggests limited near-term upside. The key support level at ₹1,221.05 (52-week low) becomes critical; a break below this level could trigger further selling pressure. On the positive side, any improvement in ROE towards the 20% mark and sustained margin expansion could help justify the premium valuation over time.
The Verdict: Quality Business, Poor Entry Point
Score: 43/100
For Fresh Investors: Avoid initiating positions at current valuations. The stock trades at stretched multiples of 53x P/E with a PEG ratio of 2.39, offering limited margin of safety. Wait for a meaningful correction towards ₹1,200-1,300 levels or evidence of multiple compression before considering entry. The bearish technical setup and declining FII participation add to near-term headwinds.
For Existing Holders: Consider booking profits or reducing exposure at current levels. Whilst the operational performance remains strong, the premium valuation and negative technical momentum suggest limited near-term upside. Holders with significant gains may use rallies towards ₹1,650-1,700 to trim positions. Those with longer investment horizons can hold with a trailing stop-loss below ₹1,220.
Fair Value Estimate: ₹1,300-1,400 (15-20% downside from current levels based on normalised P/E of 40-45x)
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ 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.
