The quarter's results highlight the persistent challenges facing this Kanpur-based leather processor: whilst revenue grew 1.56% year-on-year to ₹10.43 crores, operating margins contracted and net profit margins remained stubbornly below 1%. With a proprietary Mojo Score of just 14 out of 100 and a "STRONG SELL" rating, the company faces significant headwinds from high leverage, weak returns on capital, and deteriorating technical momentum.
The company's performance reflects the challenging dynamics of the leather manufacturing sector, where intense competition, volatile raw material costs, and thin operating leverage continue to pressure profitability. For a company carrying significant debt—with a debt-to-equity ratio of 2.20 times—the inability to generate meaningful returns on capital raises serious questions about long-term viability.
| Quarter | Revenue (₹ Cr) | QoQ Change | YoY Change | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 10.43 | -4.22% | +1.56% | 0.07 | 6.90% | 0.67% |
| Jun'25 | 10.89 | +13.20% | +11.58% | 0.07 | 7.99% | 0.64% |
| Mar'25 | 9.62 | -19.36% | -17.99% | 0.11 | 7.69% | 1.14% |
| Dec'24 | 11.93 | +16.16% | — | 0.06 | 4.86% | 0.50% |
| Sep'24 | 10.27 | +5.23% | — | 0.06 | 6.91% | 0.58% |
| Jun'24 | 9.76 | -16.79% | — | 0.07 | 6.05% | 0.72% |
| Mar'24 | 11.73 | — | — | 0.12 | 5.20% | 1.02% |
Financial Performance: Stagnant Profitability Amid Revenue Volatility
In Q2 FY26, Amin Tannery posted revenue of ₹10.43 crores, reflecting a marginal 1.56% year-on-year increase but a 4.22% sequential decline from Q1 FY26's ₹10.89 crores. This quarterly volatility has characterised the company's recent performance, with revenue swinging between ₹9.62 crores and ₹11.93 crores over the past seven quarters—a pattern that suggests challenges in maintaining consistent order flows and production schedules.
Net profit remained flat at ₹0.07 crores quarter-on-quarter, though it showed a 16.67% improvement year-on-year from ₹0.06 crores in Q2 FY25. However, this growth must be contextualised: the absolute profit figure remains minuscule for a company with ₹10.80 crores in equity capital, translating to an annualised earnings run rate of merely ₹0.28 crores. The profit after tax margin of 0.67% in Q2 FY26 represents one of the lowest profitability levels amongst listed manufacturing companies, barely covering the cost of capital.
Operating margins contracted to 6.90% in Q2 FY26 from 7.99% in the previous quarter, reflecting the company's limited pricing power and operational efficiency challenges. Employee costs rose to ₹1.06 crores from ₹0.86 crores sequentially, whilst interest expenses declined marginally to ₹0.43 crores from ₹0.55 crores—though the absolute interest burden remains substantial relative to operating profits.
On a half-yearly basis for H1 FY26, the company reported combined revenue of ₹21.32 crores with net profit of ₹0.14 crores, yielding a PAT margin of just 0.66%. This compares unfavourably to the company's own historical performance, where margins have consistently remained below 1.5% even during better quarters.
Operational Challenges: Weak Capital Efficiency and High Leverage
The fundamental weakness in Amin Tannery's business model becomes evident when examining its return on equity (ROE) and return on capital employed (ROCE). With an average ROE of just 2.17% and average ROCE of 4.24%, the company generates returns well below the cost of capital—a critical red flag for investors. These metrics indicate that the company is destroying shareholder value rather than creating it, as even risk-free government securities offer superior returns.
The company's capital structure reveals significant stress: with total debt creating a debt-to-equity ratio of 2.20 times and a debt-to-EBITDA ratio of 10.05 times, Amin Tannery operates under substantial financial leverage. Interest coverage remains weak, with EBIT-to-interest ratio averaging just 1.36 times—meaning operating profits barely cover interest obligations, leaving minimal cushion for principal repayments or business reinvestment.
Balance sheet analysis for FY25 shows shareholder funds of ₹12.82 crores against fixed assets of ₹7.18 crores and current assets of ₹54.10 crores. However, current liabilities stood at ₹47.89 crores, including trade payables of ₹17.55 crores, suggesting tight working capital management. The company's sales-to-capital-employed ratio of 0.98 times indicates relatively inefficient asset utilisation, requiring nearly one rupee of capital employed to generate one rupee of sales.
⚠️ Critical Leverage Concerns
High Debt Burden: With debt-to-equity at 2.20x and debt-to-EBITDA at 10.05x, the company operates under severe financial stress. Interest coverage of just 1.36x leaves minimal room for error, whilst ROE of 2.17% and ROCE of 4.24% indicate value destruction rather than creation. The combination of high leverage and weak profitability creates a precarious financial position.
Industry Context: Struggling in a Challenging Sector
The diversified consumer products sector, particularly leather manufacturing, faces structural headwinds including intense competition from low-cost producers, environmental compliance costs, and volatile raw material prices. Amin Tannery's performance reflects these broader industry challenges, with the company lacking the scale advantages enjoyed by larger competitors.
Over the past five years, the company has managed to grow sales at a compound annual growth rate of 10.67%, which appears respectable on the surface. However, this growth has not translated into profitability improvements—a concerning disconnect that suggests the company is buying revenue growth at the expense of margins, potentially through aggressive pricing or unfavourable contract terms.
The company's EBIT growth of 17.61% over five years initially seems encouraging, but given the absolute low base of operating profits (EBITDA of just ₹2.00 crores annually), this growth has been insufficient to materially improve the company's financial position or reduce leverage.
Peer Comparison: Underperforming on Key Metrics
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Market Cap (₹ Cr) |
|---|---|---|---|---|---|
| Amin Tannery | 66.53 | 1.61 | 2.17% | 2.20 | 21.00 |
| Pearl Polymers | NA (Loss Making) | 1.33 | 21.02% | -0.83 | — |
| Madhav Marbles | NA (Loss Making) | 0.29 | 0.00% | 0.08 | — |
| Technopack Poly. | 9.86 | 0.83 | 30.26% | 0.40 | — |
| NB Footwear | NA (Loss Making) | -6.80 | 0.00% | 0.00 | — |
Amin Tannery's peer comparison reveals significant underperformance on profitability metrics. With an ROE of 2.17%, the company substantially trails peers like Technopack Polymers (30.26% ROE) and Pearl Polymers (21.02% ROE). The company's P/E ratio of 66.53 times appears extremely elevated given its weak returns, suggesting the market may be overvaluing the stock relative to earnings quality.
The company's debt-to-equity ratio of 2.20 times stands out as particularly concerning when compared to peers like Technopack Polymers (0.40x) and Madhav Marbles (0.08x). This high leverage, combined with weak profitability, creates a toxic combination that limits strategic flexibility and increases financial risk.
Valuation Analysis: Elevated Multiples Unjustified by Fundamentals
At the current price of ₹1.91, Amin Tannery trades at a P/E ratio of 66.53 times trailing twelve-month earnings—a premium that appears wholly unjustified given the company's weak fundamentals. The industry average P/E of 35 times suggests the stock trades at nearly double the sector valuation, despite demonstrably inferior returns on capital and profitability metrics.
The price-to-book value of 1.61 times might appear reasonable in isolation, but when contextualised against the company's ROE of 2.17%, it becomes clear that investors are paying a premium for assets that generate sub-par returns. A simple DuPont analysis reveals that the company would need to improve ROE by over 500% to justify current valuations—an unrealistic expectation given historical performance trends.
The PEG ratio of 19.96 further underscores the valuation disconnect: investors are paying nearly 20 times the company's growth rate for earnings, when conventional wisdom suggests a PEG ratio above 2.0 indicates overvaluation. With EV/EBITDA at 16.80 times and EV/Sales at 1.14 times, the company's enterprise value appears stretched relative to operational metrics.
Shareholding Pattern: Stable Promoter Base, Zero Institutional Interest
| Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 58.78% | 58.78% | 58.78% | 58.78% | 0.00% |
| FII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Public/Others | 41.22% | 41.22% | 41.22% | 41.22% | 0.00% |
The shareholding pattern reveals a stable promoter holding of 58.78% with no pledging—a positive indicator of promoter confidence. Key promoters Veqarul Amin (47.92%) and Rumana Amin (10.86%) maintain substantial stakes, suggesting alignment with minority shareholders. Notably, promoter holding increased from 50.84% in September 2024 to 58.78% in December 2024, indicating promoters increased their stake by 7.94 percentage points.
However, the complete absence of institutional investors—zero holdings from FIIs, mutual funds, insurance companies, and other DIIs—speaks volumes about professional investors' assessment of the company's prospects. Institutional investors typically conduct rigorous due diligence, and their collective absence suggests fundamental concerns about the business model, financial health, or growth prospects that retail investors should carefully consider.
Stock Performance: Sustained Underperformance Across All Timeframes
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -4.50% | +1.62% | -6.12% |
| 1 Month | -5.45% | +3.09% | -8.54% |
| 3 Months | -5.91% | +4.92% | -10.83% |
| 6 Months | -18.38% | +3.97% | -22.35% |
| Year-to-Date | -23.60% | +8.22% | -31.82% |
| 1 Year | -18.38% | +9.00% | -27.38% |
| 2 Years | -13.18% | +30.23% | -43.41% |
| 3 Years | -26.54% | +37.22% | -63.76% |
Amin Tannery's stock performance has been uniformly dismal across all meaningful timeframes, with negative alpha generation against the Sensex benchmark in every period examined. The stock has declined 18.38% over the past year whilst the Sensex gained 9.00%, resulting in a negative alpha of 27.38 percentage points—a stark illustration of value destruction.
The year-to-date performance shows a 23.60% decline, underperforming the Sensex by 31.82 percentage points. More concerning is the three-year performance: a 26.54% decline whilst the broader market rallied 37.22%, creating a devastating 63.76 percentage point negative alpha. This persistent underperformance suggests fundamental business challenges rather than temporary market sentiment.
Technical indicators paint an equally bearish picture: the stock trades below all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), indicating sustained downward momentum. With a high beta of 1.50, the stock exhibits greater volatility than the market whilst delivering negative returns—a particularly unfavourable risk-return profile. The stock's volatility of 43.76% compared to Sensex volatility of 12.26% underscores the elevated risk investors bear.
"With negative alpha across all timeframes, elevated volatility, and bearish technical signals, Amin Tannery exemplifies a high-risk, low-return investment profile that prudent investors typically avoid."
Investment Thesis: Multiple Red Flags Overwhelm Limited Positives
Amin Tannery's investment thesis is fundamentally challenged across all key parameters. The company's Mojo Score of 14 out of 100 places it firmly in "STRONG SELL" territory, reflecting the confluence of weak fundamentals, unfavourable valuation, deteriorating technicals, and stagnant financial trends.
The quality assessment reveals a "BELOW AVERAGE" company characterised by weak long-term financial performance. With average ROE of 2.17% and average ROCE of 4.24%, the company consistently generates returns well below the cost of capital. The debt-to-equity ratio of 2.20 times and debt-to-EBITDA of 10.05 times indicate a highly leveraged balance sheet with limited financial flexibility.
From a valuation perspective, the stock "DOES NOT QUALIFY" for investment consideration. Trading at 66.53 times earnings—nearly double the industry average of 35 times—the stock appears significantly overvalued relative to its fundamental earnings power. The PEG ratio of 19.96 further confirms this overvaluation, suggesting investors are paying an unreasonable premium for modest growth prospects.
Key Strengths & Risk Factors
✓ Key Strengths
- Stable Promoter Holding: 58.78% promoter stake with zero pledging demonstrates promoter confidence and alignment with minority shareholders.
- Long-term Revenue Growth: Five-year sales CAGR of 10.67% indicates some ability to grow the top line, albeit without corresponding profitability improvement.
- Established Operations: Company has survived in a challenging sector with operations dating back to 2013, demonstrating some operational resilience.
- Niche Manufacturing Focus: Specialisation in finished leather and leather shoes/uppers provides a defined market segment.
- Recent Promoter Stake Increase: Promoter holding increased by 7.94 percentage points in December 2024, potentially signalling confidence in future prospects.
⚠ Key Concerns
- Extremely Weak Profitability: ROE of 2.17% and ROCE of 4.24% indicate systematic value destruction, with returns well below risk-free rates.
- Razor-Thin Margins: PAT margin of 0.67% in Q2 FY26 leaves virtually no room for operational setbacks or market downturns.
- High Financial Leverage: Debt-to-equity of 2.20x and debt-to-EBITDA of 10.05x create significant financial risk, with interest coverage of just 1.36x.
- Zero Institutional Interest: Complete absence of FII, mutual fund, insurance, and DII holdings suggests professional investors have rejected the investment case.
- Persistent Underperformance: Negative alpha across all timeframes (1-year alpha: -27.38%, 3-year alpha: -63.76%) demonstrates consistent value destruction.
- Elevated Valuation: P/E of 66.53x and PEG of 19.96x appear unjustified given weak fundamentals and limited growth prospects.
- Technical Weakness: Stock trades below all major moving averages with bearish trend signals and high volatility (43.76% vs market 12.26%).
Outlook: Limited Catalysts for Improvement
Positive Catalysts to Monitor
- Margin Expansion: Any sustained improvement in operating margins above 8-9% would indicate improving operational efficiency.
- Debt Reduction: Meaningful deleveraging bringing debt-to-equity below 1.5x would reduce financial risk.
- Order Book Growth: Securing large, high-margin export orders could improve revenue quality and stability.
- Institutional Interest: Entry of even small institutional investors would signal improved market confidence.
Red Flags Requiring Attention
- Further Margin Compression: Any decline in operating margins below 6% would be highly concerning given already thin profitability.
- Deteriorating Working Capital: Increase in debtor days or inventory levels would strain already tight liquidity.
- Covenant Breaches: Failure to meet debt covenants could trigger accelerated repayment demands.
- Continued Underperformance: Sustained negative alpha and stock price weakness would confirm fundamental deterioration.
- Loss-Making Quarters: Any quarter with negative PAT would be a critical warning signal.
Looking ahead, Amin Tannery faces an uphill battle to justify current valuations or generate meaningful shareholder returns. The company operates in a structurally challenging sector with intense competition, limited pricing power, and high working capital requirements. Without significant operational improvements—including substantial margin expansion, meaningful deleveraging, and improved capital efficiency—the investment case remains fundamentally weak.
The absence of institutional investors suggests that professional fund managers, after conducting thorough due diligence, have concluded that the risk-reward profile does not meet investment criteria. For retail investors, this should serve as a cautionary signal: if institutions with dedicated research resources avoid the stock, individual investors should carefully consider whether they possess superior information or analytical capabilities to justify a different conclusion.
The Verdict: Clear Exit Recommendation
Score: 14/100
For Fresh Investors: Avoid entirely. The combination of weak profitability (ROE 2.17%), high leverage (D/E 2.20x), elevated valuation (P/E 66.53x), and persistent underperformance (1-year alpha -27.38%) creates an unfavourable risk-reward profile. Zero institutional interest underscores fundamental concerns.
For Existing Holders: Consider exiting positions systematically. The stock has destroyed value across all meaningful timeframes, with no clear catalysts for reversal. Current technical weakness (bearish trend, trading below all moving averages) suggests further downside risk. The 36.96% decline from 52-week high may continue without fundamental improvement.
Fair Value Estimate: Based on peer P/E multiples of 35x applied to normalised earnings and adjusted for quality differential, fair value appears closer to ₹1.20-1.40 (30-37% downside from current levels). However, given fundamental weaknesses, even this may prove optimistic.
Rationale: Multiple red flags overwhelm limited positives. Weak profitability metrics, excessive leverage, elevated valuations, and persistent underperformance create a toxic combination. The company's inability to convert revenue growth into meaningful profits, combined with high debt burden and zero institutional interest, suggests systematic business model challenges rather than temporary setbacks. Until the company demonstrates sustained margin improvement, meaningful deleveraging, and improved returns on capital, the stock remains uninvestable at current levels.
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 is not indicative of future results. The stock market involves substantial risk of loss, and investors should be prepared for the possibility of losing their entire investment.
