All E Technologies Q2 FY26: Profit Surge Masks Revenue Concerns Amid Sharp Stock Decline

The quarter's profit growth was driven primarily by a substantial 66.81% surge in other income to ₹3.77 crores, which now constitutes 37.22% of profit before tax—a concerning reliance on non-core earnings. Operating profit excluding other income rose modestly to ₹6.69 crores, reflecting a 20.06% margin, up from 19.20% in Q1 FY26 but still below the 26.28% achieved in Q4 FY25.

The company's revenue trajectory has stalled, with Q2 FY26 sales of ₹33.35 crores marking the lowest quarterly figure in recent periods. This represents a sequential decline from ₹34.07 crores in Q1 and a year-on-year drop of 7.13% from ₹35.91 crores in Q2 FY25. For the half-year period H1 FY26, revenue stood at ₹67.42 crores, up just 0.44% from ₹69.04 crores in H1 FY25, signalling a sharp deceleration from the company's historical growth rates.

Financial Performance: Profit Growth Driven by Non-Core Income

All E Technologies' Q2 FY26 financial performance presents a paradox—rising profitability alongside declining core business revenue. Net profit of ₹7.38 crores grew 16.77% sequentially and 10.48% year-on-year, but this expansion was almost entirely attributable to other income, which surged to ₹3.77 crores from ₹2.26 crores in Q1 FY26. This non-operating component now represents 37.22% of profit before tax, raising questions about earnings quality and sustainability.

Core operating performance tells a different story. Revenue of ₹33.35 crores declined 2.11% quarter-on-quarter and 7.13% year-on-year, marking the lowest quarterly sales figure in the available data set. Operating profit excluding other income stood at ₹6.69 crores with a 20.06% margin—an improvement from Q1's 19.20% but significantly below the 26.28% achieved in Q4 FY25. The margin compression from peak levels suggests pricing pressure or unfavourable project mix.

Employee costs of ₹11.46 crores declined 3.94% sequentially, providing some relief to margins despite revenue contraction. However, the absolute level remains elevated at 34.37% of revenue, indicating limited operating leverage. The company's gross profit margin of 31.33% in Q2 FY26 showed improvement from Q1's 25.80%, though it remains well below the 38.31% recorded in Q4 FY25.

Tax expense of ₹2.76 crores translated to an effective tax rate of 27.25%, up from 25.47% in Q1 FY26. The higher tax incidence partially offset the benefits from increased other income. Net profit margin expanded to 22.13% from 18.55% in the previous quarter, though this improvement is largely cosmetic given the revenue decline and non-operating income contribution.

Operational Challenges: Stagnating Top-Line Growth

The most concerning aspect of All E Technologies' recent performance is the stagnation in revenue growth. After posting robust 19.80% annual growth in FY2025 to reach ₹139.00 crores, the company's sales momentum has evaporated. Q2 FY26 revenue of ₹33.35 crores represents the lowest quarterly figure in recent periods, falling below even the ₹33.13 crores recorded in Q2 FY24.

For the half-year period H1 FY26, total revenue stood at ₹67.42 crores, barely ahead of the ₹69.04 crores achieved in H1 FY25. This near-flat performance marks a dramatic deceleration from the company's historical trajectory, which saw five-year sales growth of 23.65% compounded annually. The company's inability to sustain growth momentum in a sector that typically benefits from digital transformation spending raises concerns about competitive positioning and demand environment.

Return on equity stands at a respectable 20.44% on a trailing basis, indicating efficient capital deployment. However, the average ROE of 16.60% over recent periods, whilst healthy, has room for improvement given the company's minimal debt burden. The company operates with a net cash position, as evidenced by the negative net debt-to-equity ratio of -0.97, providing financial flexibility but also suggesting underutilised capital.

The balance sheet remains robust with shareholder funds of ₹144.31 crores as of March 2025, supported by reserves of ₹120.62 crores. Current assets of ₹162.80 crores comfortably exceed current liabilities of ₹24.42 crores, ensuring strong liquidity. However, the company's inability to deploy this capital effectively into revenue-generating activities represents a missed opportunity for growth.

Industry Context: Underperforming Sector Trends

All E Technologies operates in the Computers - Software & Consulting sector, which has faced headwinds over the past year. The company's 46.47% stock price decline significantly outpaces the sector's 19.04% drop, indicating company-specific challenges beyond broader industry trends. The underperformance of 27.43 percentage points versus the sector average suggests investors are particularly concerned about the firm's growth prospects and business model sustainability.

The IT services sector in India has experienced mixed demand conditions, with discretionary spending cuts from global clients affecting smaller players disproportionately. Large-cap IT firms have navigated this environment through diversified client bases and service portfolios, whilst micro-cap firms like All E Technologies face greater concentration risk and pricing pressure. The company's stagnating revenue growth aligns with broader challenges faced by smaller IT services providers in securing new business and expanding existing accounts.

Peer Comparison: Valuation Discount Reflects Concerns

All E Technologies trades at a significant valuation discount to its peer group, reflecting market scepticism about its growth trajectory. With a price-to-earnings ratio of 17.42x, the company is valued well below the peer average of approximately 56x, suggesting either a value opportunity or justified concerns about earnings quality and sustainability. Given the company's elevated dependence on non-operating income and stagnating revenue, the latter interpretation appears more plausible.

The company's price-to-book ratio of 3.58x sits in the middle of the peer range, which spans from 0.91x to 25.71x. This multiple appears reasonable given the company's ROE of 16.60%, though it lags peers like TechD Cybersecurity (52.71% ROE) and Sigma Solve (25.56% ROE). The ROE differential suggests All E Technologies is less efficient at generating returns on shareholder capital despite its healthy absolute level.

All E Technologies' dividend yield of 0.59% provides modest income support, ranking second amongst peers that pay dividends. The company declared a dividend of ₹1.50 per share with an ex-dividend date of September 19, 2025, representing a payout ratio of 17.42%. This conservative payout leaves substantial room for capital deployment, though the company's inability to reinvest effectively for growth raises questions about capital allocation strategy.

Valuation Analysis: Attractive Multiples Mask Fundamental Concerns

At the current price of ₹255.85, All E Technologies trades at what appears to be attractive valuation multiples on a standalone basis. The P/E ratio of 17.42x sits well below broader market averages, whilst the EV/EBITDA of 12.29x and EV/EBIT of 12.77x suggest reasonable pricing relative to cash generation. The PEG ratio of 0.48x, calculated using historical growth rates, theoretically indicates undervaluation relative to growth prospects.

However, these metrics must be interpreted with caution given the deteriorating revenue trends and elevated non-operating income contribution. The company's market capitalisation of ₹515.00 crores has contracted sharply from higher levels, with the stock trading 59.58% below its 52-week high of ₹633.00. The dramatic decline from peak valuations reflects market recognition of fundamental challenges that surface-level multiples may not fully capture.

The company's valuation grade has fluctuated between "Very Attractive" and "Fair" over recent months, currently standing at "Very Attractive" as of November 2025. This assessment is based purely on quantitative metrics and does not fully account for qualitative concerns around revenue stagnation and earnings quality. The book value per share of ₹71.46 provides some downside support, though the current price of ₹255.85 trades at a substantial 3.58x premium to book value.

Shareholding Pattern: Stable Promoter Base, Limited Institutional Interest

All E Technologies' shareholding pattern reflects a stable promoter base with minimal institutional participation. Promoter holding stood at 50.06% as of September 2025, virtually unchanged from prior quarters and with zero pledging—a positive indicator of promoter confidence and financial health. The promoter group, led by Ajay Mian (49.27%) and Suman Mian (0.79%), maintains majority control whilst leaving room for public participation.

Institutional interest remains negligible, with FII holdings at just 0.87% as of September 2025, down from 1.77% in March 2025. This 90-basis-point decline in foreign institutional ownership signals waning international investor interest, likely driven by concerns about the company's growth trajectory and micro-cap liquidity constraints. Mutual fund holdings remain at zero, indicating domestic institutional investors have not established positions in the stock.

Non-institutional holdings surged to 48.06% in September 2025 from 40.09% in March 2025, a substantial 7.97 percentage point increase. This shift suggests retail investor accumulation, potentially driven by the stock's sharp price correction and attractive headline valuation multiples. However, the absence of institutional validation—particularly from mutual funds and insurance companies—raises concerns about informed investor sentiment towards the company's prospects.

Stock Performance: Severe Underperformance Across Timeframes

All E Technologies' stock performance has been dismal across virtually all timeframes, with the shares trading at ₹255.85 as of November 7, 2025, down 0.97% on the day. The stock has generated negative alpha versus the Sensex across every measured period except the two-year horizon, indicating systematic underperformance that extends beyond short-term volatility.

Over the past year, the stock has plunged 46.47% whilst the Sensex gained 4.62%, resulting in negative alpha of 51.09 percentage points. Year-to-date performance is even more troubling, with the stock down 50.94% against the Sensex's 6.50% gain—a 57.44 percentage point underperformance. This severe decline has pushed the stock close to its 52-week low of ₹250.05, with minimal cushion remaining.

Technical indicators paint a uniformly bearish picture. The stock trades below all key moving averages—5-day (₹263.70), 20-day (₹258.76), 50-day (₹274.19), 100-day (₹311.03), and 200-day (₹351.36)—indicating sustained downward momentum. The technical trend classification has been "Bearish" since August 5, 2025, when the stock broke down from ₹313. Multiple technical indicators including MACD, Bollinger Bands, and Moving Averages all signal bearish conditions.

The stock's beta of 1.50 indicates high volatility relative to the market, with annualised volatility of 50.17% classifying it as a "HIGH RISK LOW RETURN" investment. The negative risk-adjusted return of -0.93 over the past year confirms that investors have been poorly compensated for the elevated volatility they've endured. With the stock trading just 2.32% above its 52-week low and 59.58% below its 52-week high, technical damage is severe.

Investment Thesis: Attractive Valuation Insufficient to Offset Fundamental Concerns

All E Technologies presents a challenging investment case where attractive headline valuation metrics are overshadowed by deteriorating fundamental performance. The company's Mojo Score of 40 out of 100 with a "SELL" rating reflects this dichotomy—very attractive valuation (the company's lone strength) cannot compensate for flat financial trends, average quality, and bearish technical momentum.

The valuation component scores highly, with the stock trading at just 17.42x earnings and showing a PEG ratio of 0.48x based on historical growth rates. However, this attractiveness is predicated on past performance that may not be repeatable. The company's financial trend is classified as "Flat" following consecutive quarters of revenue decline and elevated non-operating income dependence. Quality assessment stands at "Average," reflecting decent ROE but below-peer performance and limited institutional validation.

The technical picture remains decisively bearish, with the stock in a confirmed downtrend since August 2025. Multiple technical indicators signal continued weakness, whilst the stock's position near 52-week lows provides little support for contrarian positioning. The combination of negative technical momentum and flat fundamental trends creates a challenging environment for potential investors.

Key Strengths & Risk Factors

Outlook: What to Watch in Coming Quarters

The coming quarters will be critical in determining whether All E Technologies can reverse its revenue stagnation and rebuild investor confidence. Management commentary on demand pipeline, client additions, and strategies to reduce non-operating income dependence will be key factors to monitor. Any signs of sustained revenue growth resumption could trigger a re-rating, though the burden of proof lies heavily with the company to demonstrate operational turnaround.