The Delhi-based NBFC, formerly known as Hindustan Everest Tools Limited before its transformation in 2022, has demonstrated resilience in revenue generation during Q3 FY26, with net sales reaching ₹52.40 crores—a 2.16% sequential increase and 5.14% year-on-year growth. However, the company's profitability trajectory presents a mixed picture, with net profit margins compressing to 11.20% in Q3 FY26 from 12.26% in the previous quarter, reflecting rising operational costs and elevated interest expenses that surged to ₹1.24 crores from ₹0.51 crores quarter-on-quarter.
The stock's technical posture has deteriorated sharply, with the price currently trading below all key moving averages—5-day (₹58.92), 20-day (₹61.15), 50-day (₹61.41), 100-day (₹63.60), and 200-day (₹63.77)—signalling sustained bearish momentum. The technical trend officially turned bearish on February 6, 2026, at ₹59.32, with multiple indicators including MACD, Bollinger Bands, and KST confirming the negative bias. For a stock trading at such elevated multiples, this technical weakness compounds the fundamental concerns around valuation sustainability.
Financial Performance: Revenue Growth Amid Margin Pressures
Algoquant Fintech's Q3 FY26 performance reflects a company navigating operational challenges whilst attempting to maintain growth momentum. Net sales of ₹52.40 crores represent a sequential improvement of 2.16% over Q2 FY26's ₹51.29 crores and a 5.14% year-on-year increase from Q3 FY25's ₹49.84 crores. Whilst the revenue trajectory remains positive, the pace of growth has moderated significantly compared to the company's historical performance, particularly when viewed against the robust 50.0% revenue growth achieved in FY25.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 (Q3) | 52.40 | +2.16% | 5.87 | -6.68% | 11.20% |
| Sep'25 (Q2) | 51.29 | -5.89% | 6.29 | +41.67% | 12.26% |
| Jun'25 (Q1) | 54.50 | +0.89% | 4.44 | +627.87% | 8.15% |
| Mar'25 (Q4) | 54.02 | +8.39% | 0.61 | -88.02% | 1.13% |
| Dec'24 (Q3) | 49.84 | -23.58% | 5.09 | -58.52% | 10.21% |
| Sep'24 (Q2) | 65.22 | -0.62% | 12.27 | -11.85% | 18.81% |
| Jun'24 (Q1) | 65.63 | — | 13.92 | — | 21.21% |
The operating profit (PBDIT excluding other income) for Q3 FY26 stood at ₹11.17 crores, the highest in recent quarters, with the operating margin improving to 21.32% from 20.41% in Q2 FY26. This represents a notable recovery from the depressed 5.18% margin witnessed in Q4 FY25. However, this improvement has not translated into proportionate bottom-line growth due to a sharp spike in interest costs. Interest expenses surged to ₹1.24 crores in Q3 FY26 from just ₹0.51 crores in Q2 FY26—a staggering 143% quarter-on-quarter increase—eroding profitability gains from operational improvements.
Employee costs remained elevated at ₹11.46 crores in Q3 FY26, up from ₹10.02 crores in the previous quarter, indicating ongoing investments in human capital. The tax rate normalised to 33.90% in Q3 FY26 from 29.52% in Q2 FY26, closer to standard corporate tax rates after several quarters of anomalous tax provisions. Net profit margins compressed to 11.20% from 12.26% sequentially, though they remained above the 10.21% recorded in Q3 FY25.
Balance Sheet Quality: Debt-Free but Capital Efficiency Concerns
Algoquant Fintech maintains a pristine balance sheet from a leverage perspective, with zero long-term debt as of March 2025 and a net debt-to-equity ratio of -1.21, indicating the company holds more cash than debt. Shareholder funds strengthened to ₹100.95 crores in FY25 from ₹68.90 crores in FY24, driven by retained earnings and a doubling of share capital from ₹1.61 crores to ₹3.12 crores. Current assets stood at ₹186.55 crores, providing adequate liquidity coverage against current liabilities of ₹123.65 crores.
However, the company's capital efficiency metrics raise concerns. The average return on capital employed (ROCE) stands at a negative -6.65%, reflecting inefficient deployment of capital relative to operating profits. This metric is particularly troubling for a financial services company expected to generate consistent returns from its asset base. In contrast, the average return on equity (ROE) of 26.57% appears robust, indicating strong profitability relative to shareholder equity. The latest ROE for FY25, however, has moderated to 11.59%, suggesting the high historical average may not be sustainable at current operational scales.
Capital Efficiency Red Flag
Whilst Algoquant Fintech boasts a healthy ROE of 26.57% on average, the negative ROCE of -6.65% signals concerning capital deployment inefficiencies. For an NBFC, this divergence suggests that whilst the company generates decent returns for equity shareholders, its overall capital structure and asset utilisation require significant improvement. The sales-to-capital-employed ratio of just 0.97x further underscores limited revenue generation per unit of capital deployed.
The company's working capital management has shown improvement, with cash flow from operations turning positive at ₹60.00 crores in FY25 compared to a negative ₹10.00 crores in FY24. However, closing cash declined sharply to ₹2.00 crores from ₹13.00 crores, primarily due to ₹33.00 crores deployed in investing activities and ₹37.00 crores in financing outflows. This cash consumption pattern warrants monitoring, particularly given the company's growth ambitions and elevated valuation multiples.
Valuation Disconnect: Premium Pricing Without Proportionate Quality
Algoquant Fintech's valuation metrics present perhaps the most concerning aspect of the investment thesis. Trading at a P/E ratio of 126x compared to the NBFC industry average of 31x, the stock commands a valuation premium of over 300% relative to its peers. The price-to-book value multiple of 14.56x similarly dwarfs the industry norm, with the stock trading far above its book value of ₹3.62 per share. The EV/EBITDA multiple of 56.40x and EV/Sales ratio of 7.18x further reinforce the stretched valuation landscape.
| Valuation Metric | Algoquant Fintech | Industry Average | Premium/(Discount) |
|---|---|---|---|
| P/E Ratio (TTM) | 126.00x | 31.00x | +307% |
| Price to Book Value | 14.56x | ~2.40x | +507% |
| EV/EBITDA | 56.40x | — | — |
| EV/Sales | 7.18x | — | — |
The company's valuation grade has consistently remained in the "Very Expensive" category since November 2022, with brief interludes into "Risky" territory. Currently assessed as "Very Expensive," the stock's premium pricing appears disconnected from fundamental performance, particularly given the flattening financial trend and modest growth rates. The absence of dividend yield further diminishes the investment appeal for income-seeking investors, with the company maintaining a zero dividend payout ratio.
Compared to the 52-week range, the stock trades 37.31% below its high of ₹91.70 but remains 30.54% above its low of ₹44.04, suggesting significant volatility and uncertainty around fair value. The current price of ₹57.49 reflects a market grappling with the disconnect between the company's operational reality and its lofty valuation multiples. With a PEG ratio marked as "NA" due to inconsistent growth patterns, traditional valuation frameworks struggle to justify current price levels.
Peer Comparison: Expensive Relative to Sector
A comparative analysis against NBFC peers highlights Algoquant Fintech's valuation anomaly. Whilst the company demonstrates superior ROE of 26.57% compared to the peer average of approximately 7%, this profitability advantage does not justify the extreme valuation premium. The company's P/E ratio of 125.65x stands significantly above peers such as Ugro Capital (16.86x), Summit Securities (15.58x), and Arman Financial (61.52x), with only Ashika Credit (170.14x) trading at a higher multiple.
| Company | P/E (TTM) | Return on Equity | Debt to Equity | Price to Book |
|---|---|---|---|---|
| Algoquant Fintech | 125.65x | 26.57% | -1.21 | 14.56x |
| Mufin Green | 107.53x | 5.88% | 2.72 | 6.32x |
| Ugro Capital | 16.86x | 4.53% | 3.28 | 0.85x |
| Summit Securities | 15.58x | 0.86% | 0.00 | 0.17x |
| Arman Financial | 61.52x | 14.19% | 1.37 | 2.00x |
| Ashika Credit | 170.14x | 9.08% | 0.00 | 2.67x |
The price-to-book multiple of 14.56x similarly stands out, with the peer average hovering around 2.40x. Only Mufin Green's 6.32x P/BV comes remotely close, though still substantially below Algoquant's level. The company's debt-free status (net debt-to-equity of -1.21) provides some comfort relative to leveraged peers like Ugro Capital (3.28) and Mufin Green (2.72), but this balance sheet strength alone cannot justify the valuation chasm.
Algoquant Fintech's market capitalisation of ₹1,616 crores positions it as the sixth-largest entity within the peer group analysed, suggesting the company operates at a scale that should command reasonable valuations but not the extreme premiums currently observed. The absence of dividend yields across the peer group reflects the sector's growth-oriented capital allocation, though Algoquant's zero payout combined with modest growth rates raises questions about capital deployment priorities.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
The shareholding structure of Algoquant Fintech reveals a stable promoter base controlling 73.68% of equity, unchanged over the past five quarters through December 2025. The promoter group, led by Algoquant Financials LLP (51.62%), Dhruv Gupta (18.50%), and Devansh Gupta (3.56%), demonstrates unwavering commitment to the company. However, the presence of 32.42% pledged shares within the promoter holding raises governance concerns and suggests potential liquidity constraints or financing arrangements that warrant scrutiny.
| Quarter | Promoter | FII | Mutual Funds | Other DII | Non-Institutional |
|---|---|---|---|---|---|
| Dec'25 | 73.68% | 0.64% | 0.00% | 3.42% | 22.25% |
| Sep'25 | 73.68% | 0.61% | 0.00% | 3.42% | 22.29% |
| Aug'25 | 73.68% | 0.64% | 0.00% | 3.45% | 22.23% |
| Jul'25 | 73.68% | 0.70% | 0.00% | 3.45% | 22.17% |
| Jun'25 | 73.68% | 0.70% | 0.00% | 3.45% | 22.17% |
Institutional participation remains negligible, with foreign institutional investors (FIIs) holding a mere 0.64% as of December 2025, marginally up from 0.61% in September 2025. The complete absence of mutual fund holdings (0.00% across all quarters) signals institutional scepticism about the stock's risk-reward profile. Other domestic institutional investors (DIIs) maintain a modest 3.42% stake, unchanged sequentially, reflecting limited conviction from sophisticated investors.
The non-institutional shareholding of 22.25% represents retail and other investors, declining marginally from 22.29% in the previous quarter. With only four FIIs holding positions and zero mutual fund participation, the stock lacks the institutional endorsement typically associated with quality small-cap opportunities. This institutional apathy, combined with the elevated valuation multiples and modest operational performance, suggests the market's premium pricing reflects retail enthusiasm rather than institutional validation.
Stock Performance: Significant Underperformance in Recent Months
Algoquant Fintech's stock price trajectory tells a tale of two narratives—exceptional long-term returns marred by recent significant underperformance. Over the past year, the stock delivered 20.18% returns, outperforming the Sensex's 9.70% gain by 10.48 percentage points. However, this outperformance masks severe weakness in recent months, with the stock declining 25.44% over six months whilst the Sensex gained 3.36%—a negative alpha of 28.80 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.63% | -0.91% | -1.72% |
| 1 Month | -12.51% | -0.32% | -12.19% |
| 3 Months | -10.90% | -1.49% | -9.41% |
| 6 Months | -25.44% | +3.36% | -28.80% |
| 1 Year | +20.18% | +9.70% | +10.48% |
| 3 Years | +190.82% | +35.85% | +154.97% |
| 5 Years | +5,139.02% | +59.88% | +5,079.14% |
The stock's volatility of 40.12% over the past year significantly exceeds the Sensex's 11.53%, resulting in a risk-adjusted return of just 0.50 compared to the market's 0.84. With a beta of 1.35, Algoquant Fintech exhibits 35% higher volatility than the broader market, classifying it as a high-beta, high-risk stock. This elevated volatility, combined with recent negative momentum, positions the stock unfavourably for risk-averse investors seeking stable returns.
The technical deterioration is evident across all moving averages, with the stock trading below its 5-day (₹58.92), 20-day (₹61.15), 50-day (₹61.41), 100-day (₹63.60), and 200-day (₹63.77) moving averages. The bearish technical trend that emerged on February 6, 2026, reflects sustained selling pressure, with MACD, Bollinger Bands, and KST indicators all confirming negative momentum. The stock's underperformance relative to the NBFC sector (-4.18% over one year) by 24.36 percentage points further underscores company-specific challenges beyond broader sector headwinds.
Investment Thesis: Quality Concerns Overshadow Valuation Premium
The investment case for Algoquant Fintech rests on shaky foundations despite certain positive attributes. The company's proprietary advisory score of 42 out of 100 places it firmly in "SELL" territory, downgraded from "HOLD" in September 2025. The overall assessment reveals mixed signals across critical parameters—bearish technical trends, flat financial performance in the latest quarter, and a "Very Expensive" valuation grade that has persisted since November 2022.
The quality assessment grades the company as "Average," an improvement from "Below Average" prior to October 2024, but insufficient to justify the valuation premium. Whilst the company benefits from zero debt, strong historical ROE of 26.57%, and impressive five-year sales growth of 191.52%, these positives are offset by weak ROCE of -6.65%, elevated pledged shares at 32.42%, and minimal institutional holdings of just 4.06%. The absence of mutual fund participation and negligible FII interest speaks volumes about institutional confidence—or lack thereof.
Mojo 4 Dots Analysis
Near Term Drivers: Mixed (Flat quarterly financial trend, Bearish technicals)
Quality: Average (Improved from Below Average but concerns remain)
Valuation: Very Expensive (Trading at significant premium to peers and historical averages)
Overall Assessment: Mixed signals with valuation concerns dominating the narrative
Key Strengths & Risk Factors
Key Strengths ✓
- Debt-Free Balance Sheet: Zero long-term debt and net debt-to-equity of -1.21 provides financial flexibility and reduces solvency risk.
- Strong Historical ROE: Five-year average ROE of 26.57% demonstrates robust profitability relative to shareholder equity.
- Impressive Long-Term Growth: Five-year sales CAGR of 191.52% reflects exceptional historical expansion, though sustainability remains questionable.
- Stable Promoter Holding: Consistent 73.68% promoter stake over five quarters signals management confidence and alignment.
- Improving Operating Margins: Q3 FY26 operating margin of 21.32% marks recovery from depressed levels in Q4 FY25.
- Positive Operating Cash Flow: FY25 operating cash flow of ₹60.00 crores versus negative ₹10.00 crores in FY24 indicates improving cash generation.
- Quality Upgrade: Quality assessment improved from "Below Average" to "Average," reflecting operational enhancements.
Key Concerns ⚠
- Extreme Valuation Multiples: P/E of 126x (vs industry 31x) and P/BV of 14.56x lack fundamental justification given modest growth rates.
- Negative ROCE: Average ROCE of -6.65% signals severe capital deployment inefficiencies and poor asset utilisation.
- Flattening Growth Momentum: Sequential profit decline of 6.68% and moderating revenue growth indicate loss of operational momentum.
- Elevated Pledged Shares: 32.42% promoter pledging raises governance concerns and suggests potential liquidity constraints.
- Minimal Institutional Participation: Zero mutual fund holdings and just 0.64% FII stake reflect institutional scepticism.
- Bearish Technical Trend: Trading below all major moving averages with negative momentum across multiple indicators.
- High Volatility: 40.12% volatility with beta of 1.35 indicates elevated risk unsuitable for conservative investors.
- Surging Interest Costs: Interest expenses jumped 143% QoQ to ₹1.24 crores, eroding profitability gains.
- Declining Cash Position: Closing cash fell to ₹2.00 crores from ₹13.00 crores, raising liquidity concerns.
Outlook: What to Monitor
Positive Catalysts
- Margin Expansion: Sustained improvement in operating margins above 21% would demonstrate operational efficiency gains.
- Interest Cost Normalisation: Stabilisation or reduction in quarterly interest expenses from current elevated levels.
- Institutional Accumulation: Entry of mutual funds or increased FII participation would validate investment thesis.
- Capital Efficiency Improvement: ROCE turning positive would address key capital deployment concerns.
- Consistent Quarterly Growth: Return to double-digit sequential profit growth would restore confidence in growth trajectory.
Red Flags to Watch
- Further Profit Declines: Additional sequential profit compression would confirm deteriorating operational momentum.
- Margin Contraction: Operating margins falling below 20% would signal intensifying competitive or cost pressures.
- Increased Promoter Pledging: Any rise in pledged shares beyond current 32.42% would heighten governance concerns.
- Technical Breakdown: Breach of 52-week low at ₹44.04 would trigger further selling pressure.
- Cash Flow Deterioration: Return to negative operating cash flow would raise serious liquidity concerns.
- Institutional Exits: Further reduction in already minimal FII/DII holdings would signal weakening confidence.
The Verdict: Valuation Concerns Outweigh Operational Positives
Score: 42/100
For Fresh Investors: Avoid initiating positions at current valuation levels. The P/E ratio of 126x and P/BV of 14.56x present unfavourable risk-reward dynamics, particularly given flattening operational momentum, bearish technical trends, and minimal institutional validation. Wait for significant valuation compression or demonstrable improvement in growth trajectory and capital efficiency metrics before considering entry.
For Existing Holders: Consider reducing exposure or exiting positions, particularly if holding unrealised gains from lower price levels. The 25.44% decline over six months may present an opportunity to reassess the investment thesis. The combination of extreme valuation multiples, deteriorating technicals, and modest near-term growth prospects suggests limited upside potential with substantial downside risk. The bearish technical trend and negative momentum across all timeframes reinforce the case for profit booking.
Fair Value Estimate: ₹38-42 per share (approximately 30-35% downside from current levels), based on normalised P/E of 50-55x applied to trailing twelve-month earnings, representing a significant but still premium valuation given the company's quality grade and growth profile.
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. Past performance does not guarantee future results. The views expressed herein are based on information available as of the publication date and are subject to change without notice.
