The third quarter results reveal a troubling pattern for the 153-year-old company, which has struggled to achieve sustained profitability despite its diversified operations spanning tea estates across Assam, Darjeeling, and Dooars, as well as electrical equipment manufacturing units in West Bengal and Tamil Nadu. The company's operating profit before depreciation, interest, and tax (excluding other income) stood at a loss of ₹13.78 crores in Q3 FY26, representing a deterioration from the ₹4.61 crore loss reported in the previous quarter.
Financial Performance: Revenue Growth Fails to Translate into Profitability
On a standalone basis, Andrew Yule posted net sales of ₹75.00 crores in Q3 FY26, reflecting a sequential improvement of 4.87% quarter-on-quarter and a year-on-year growth of 9.76% compared to ₹68.33 crores in Q3 FY25. However, this top-line expansion proved insufficient to offset mounting operational costs, with employee expenses remaining elevated at ₹49.99 crores, consuming 66.65% of total revenues during the quarter.
The company's standalone net loss for Q3 FY26 stood at ₹10.56 crores, compared to a loss of ₹1.36 crores in Q2 FY26 and ₹13.73 crores in the corresponding quarter of the previous fiscal year. The profit after tax margin contracted sharply to -14.21% in Q3 FY26 from -1.90% in Q2 FY26, underscoring the deteriorating profitability profile despite improved revenue realisation.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|
| Dec'25 | 75.00 | +4.87% | -10.56 | -14.21% |
| Sep'25 | 71.52 | +27.40% | -1.36 | -1.90% |
| Jun'25 | 56.14 | -42.96% | 23.68 | 42.68% |
| Mar'25 | 98.43 | +44.05% | -12.72 | -13.04% |
| Dec'24 | 68.33 | -23.59% | -13.73 | -20.28% |
| Sep'24 | 89.42 | +61.03% | 13.14 | 14.84% |
| Jun'24 | 55.53 | — | -12.24 | -22.17% |
A notable feature of Q3 FY26 was the significant decline in other income, which fell to ₹9.64 crores from ₹59.71 crores in Q1 FY26 and ₹11.00 crores in Q2 FY26. This extraordinary other income in Q1 FY26 had temporarily boosted profitability, but its absence in subsequent quarters has exposed the underlying operational weaknesses. Interest expenses rose to ₹5.33 crores in Q3 FY26, the highest quarterly figure in recent periods, further pressuring the bottom line.
Operational Challenges: Persistently Negative Operating Margins Signal Structural Issues
The company's operational performance remains deeply concerning, with operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) recording a loss of ₹13.78 crores in Q3 FY26, representing an operating margin of -18.54%. This marks a substantial deterioration from the -6.45% margin in Q2 FY26 and compares unfavourably to the -29.05% margin in Q3 FY25, though the year-on-year comparison shows marginal improvement.
The company's return on equity stands at a meagre 1.34%, significantly below industry standards and indicative of poor capital efficiency. This weak ROE reflects the company's inability to generate adequate returns for its shareholders despite having shareholder funds of ₹339.01 crores as of March 2025. The return on capital employed (ROCE) paints an even bleaker picture at -26.94% for the latest period, highlighting the company's struggle to generate returns from its deployed capital base.
Critical Operational Red Flags
Persistent Operating Losses: The company has recorded negative operating margins (excluding other income) for seven consecutive quarters, with Q3 FY26 showing a particularly sharp deterioration to -18.54%. This sustained pattern of operational unprofitability raises serious questions about the viability of the company's core business model and its ability to achieve sustainable turnaround without significant restructuring.
High Fixed Cost Burden: Employee costs of ₹49.99 crores in Q3 FY26 consumed 66.65% of revenues, reflecting the company's inability to achieve operational leverage. With 12 tea estates and 2 manufacturing units, the company carries a substantial fixed cost structure that requires significantly higher revenue levels to achieve breakeven profitability.
On the balance sheet front, Andrew Yule maintained a relatively conservative debt profile with long-term debt of ₹1.53 crores as of March 2025, down from ₹3.77 crores in the previous year. However, current liabilities surged to ₹363.02 crores from ₹310.54 crores, driven by increased trade payables of ₹105.44 crores and other current liabilities of ₹123.79 crores. The company's current assets stood at ₹242.81 crores, resulting in a negative working capital position that could pose liquidity challenges if operational performance does not improve.
The Tea Business Conundrum: Legacy Assets Struggling in Competitive Market
Andrew Yule's core tea business, which operates 12 estates across Assam (7 estates), Dooars (4 estates), and Darjeeling (1 estate), faces structural challenges in an increasingly competitive and cost-intensive industry. The labour-intensive nature of tea cultivation, combined with rising wage costs and volatile tea prices, has made it difficult for the company to achieve consistent profitability. The company's employee cost structure, which has remained stubbornly high at around ₹198 crores annually, reflects the challenges of managing legacy tea estates with large workforces.
The electrical equipment and engineering divisions, operating from facilities in Kalyani (West Bengal) and Chennai (Tamil Nadu), have similarly struggled to generate positive operating margins. These divisions manufacture transformers, regulators, circuit breakers, industrial fans, and tea machinery, but face intense competition from private sector players with more modern infrastructure and flexible cost structures.
Government Ownership: A Double-Edged Sword
With promoter holding (President of India) at 89.25% and minimal institutional participation (just 2.21% held by other domestic institutional investors), Andrew Yule operates under the constraints typical of government-owned enterprises. While this ownership structure provides a certain stability and access to government support, it may also limit the company's ability to undertake aggressive restructuring measures, close unviable operations, or pursue strategic partnerships that could enhance competitiveness. The lack of institutional investor interest reflects broader market scepticism about the company's turnaround prospects.
Peer Comparison: Significant Underperformance Across Key Metrics
When benchmarked against FMCG sector peers, Andrew Yule's operational and financial metrics reveal substantial underperformance. The company's return on equity of 1.52% (average) trails significantly behind peers such as Lotus Chocolate (35.32%), Jindal Photo (15.58%), and HMA Agro Industries (13.82%). This wide performance gap underscores the company's fundamental operational challenges and its inability to compete effectively in its chosen markets.
| Company | P/E (TTM) | ROE (%) | Price to Book | Debt to Equity |
|---|---|---|---|---|
| Andrew Yule & Co | 226.70x | 1.52% | 3.04x | 0.19 |
| Lotus Chocolate | 168.28x | 35.32% | 15.75x | 3.06 |
| Apex Frozen Food | 55.71x | 5.15% | 2.27x | 0.05 |
| Godavari Bioref. | 31.97x | 6.45% | 2.06x | 0.63 |
| Jindal Photo | 9.31x | 15.58% | 1.35x | 0.06 |
| HMA Agro Inds. | 12.00x | 13.82% | 1.72x | 0.53 |
Despite having one of the lowest ROEs in the peer group, Andrew Yule trades at an elevated price-to-earnings ratio of 226.70x, nearly ten times the FMCG sector average P/E of 23x. This valuation disconnect suggests that the market may be pricing in expectations of a turnaround that has yet to materialise, or alternatively, that the stock is significantly overvalued relative to its fundamentals. The company's price-to-book ratio of 3.04x, while lower than some peers, appears unjustified given the persistent operational losses and weak return metrics.
Valuation Analysis: Elevated Multiples Inconsistent with Operational Reality
Andrew Yule's current valuation presents a stark disconnect between market pricing and underlying business fundamentals. Trading at ₹22.30 per share with a market capitalisation of ₹1,090.36 crores, the stock commands a trailing twelve-month P/E ratio of 226.70x, which appears grossly inflated for a company generating minimal profits and struggling with persistent operating losses.
The company's enterprise value-to-EBITDA ratio stands at -12.39x (negative due to negative EBITDA), while the EV-to-sales ratio of 3.96x suggests the market is valuing the company at nearly four times its annual revenue despite the absence of consistent profitability. The price-to-book ratio of 3.04x implies investors are paying three times the company's book value of ₹6.93 per share, a premium that appears difficult to justify given the 1.34% return on equity.
The stock has declined 40.61% from its 52-week high of ₹37.55, currently trading just 10.18% above its 52-week low of ₹20.24. This price action reflects growing market recognition of the company's fundamental challenges, though the current valuation still appears disconnected from the operational reality. The proprietary Mojo Score of 17 out of 100 places the stock firmly in "Strong Sell" territory, reflecting concerns across valuation, quality, financial trends, and technical indicators.
Shareholding Pattern: Stable but Uninspiring Ownership Structure
Andrew Yule's shareholding pattern has remained remarkably stable over the past five quarters, with the President of India maintaining a consistent 89.25% promoter stake. This dominant government ownership has shown no change, reflecting the company's status as a nationalised enterprise with limited prospects for ownership restructuring or strategic sale in the near term.
| Quarter | Promoter | FII | Mutual Funds | Other DII | Non-Institutional |
|---|---|---|---|---|---|
| Dec'25 | 89.25% | 0.00% | 0.00% | 2.21% | 8.55% |
| Sep'25 | 89.25% | 0.00% | 0.00% | 2.21% | 8.55% |
| Jun'25 | 89.25% | 0.00% | 0.00% | 2.21% | 8.55% |
| Mar'25 | 89.25% | 0.00% | 0.00% | 2.21% | 8.55% |
| Dec'24 | 89.25% | 0.00% | 0.00% | 2.21% | 8.55% |
The complete absence of foreign institutional investor (FII) participation and negligible mutual fund holdings (zero) signal a lack of institutional confidence in the company's prospects. Only one mutual fund holds a position in the stock, and other domestic institutional investors account for just 2.21% of total shareholding. This institutional apathy reflects broader market concerns about the company's ability to deliver sustainable returns and execute a credible turnaround strategy.
The non-institutional holding of 8.55%, comprising retail investors and other non-classified shareholders, has also remained static. The absence of any meaningful change in shareholding pattern over multiple quarters suggests limited trading interest and poor liquidity, which could pose challenges for investors seeking to exit positions.
Stock Performance: Sustained Underperformance Across All Timeframes
Andrew Yule's stock price performance has been dismal across virtually all timeframes, with the share significantly underperforming both the broader Sensex and its FMCG sector peers. Over the past one year, the stock has plummeted 36.56% whilst the Sensex gained 10.20%, resulting in a negative alpha of 46.76 percentage points. This dramatic underperformance reflects deteriorating fundamentals and eroding investor confidence.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +3.00% | +0.75% | +2.25% |
| 1 Month | +1.32% | +0.07% | +1.25% |
| 3 Months | -12.89% | -0.62% | -12.27% |
| 6 Months | -13.83% | +4.62% | -18.45% |
| YTD | -3.21% | -1.50% | -1.71% |
| 1 Year | -36.56% | +10.20% | -46.76% |
| 2 Years | -54.02% | +18.10% | -72.12% |
| 3 Years | -4.70% | +38.32% | -43.02% |
The two-year performance paints an even grimmer picture, with the stock declining 54.02% whilst the Sensex gained 18.10%, resulting in a staggering negative alpha of 72.12 percentage points. Even over longer timeframes, the stock has consistently underperformed, with the three-year return of -4.70% comparing poorly to the Sensex's 38.32% gain. The ten-year return of 16.75%, whilst positive, pales in comparison to the Sensex's remarkable 265.17% gain over the same period.
The stock's high beta of 1.47 indicates significantly higher volatility than the broader market, with an annualised volatility of 35.10% compared to the Sensex's 11.44%. This elevated volatility, combined with negative returns, places the stock in the "High Risk Low Return" category – an unattractive combination for investors. The risk-adjusted return of -1.04 for the one-year period reflects the poor reward-to-risk profile.
From a technical perspective, the stock remains in a bearish trend that began on August 6, 2025, with the current price of ₹22.30 trading below all key moving averages – the 5-day (₹22.09), 20-day (₹21.66), 50-day (₹22.50), 100-day (₹24.22), and 200-day (₹26.81) moving averages. Technical indicators including MACD, Bollinger Bands, and KST all signal bearish or mildly bearish trends, suggesting limited near-term upside potential.
Investment Thesis: Multiple Red Flags Overwhelm Limited Positives
The investment case for Andrew Yule is severely challenged by fundamental operational weaknesses, persistent losses, and unfavourable valuation metrics. The company's Mojo Score of 17 out of 100 reflects poor performance across all four key assessment parameters: valuation (Risky), quality (Below Average), financial trend (Flat), and technical trend (Bearish).
The company's quality assessment reveals structural weaknesses that are difficult to overcome in the near term. The five-year sales growth of just 0.05% and five-year EBIT growth of -240.14% highlight the company's inability to expand its business or improve profitability over an extended period. The average ROCE of -11.82% and average ROE of 1.52% underscore poor capital allocation and operational efficiency.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Government Backing: 89.25% promoter holding by President of India provides stability and potential access to government support during challenging periods.
- Low Debt Burden: Long-term debt of just ₹1.53 crores as of March 2025 provides financial flexibility and reduces interest burden.
- Diversified Operations: Presence across tea cultivation, electrical equipment, and engineering provides multiple revenue streams, though none are currently profitable.
- Zero Promoter Pledging: No pledging of promoter shares eliminates concerns about forced selling or loss of control.
- Asset Base: Fixed assets of ₹191.72 crores and investments of ₹243.03 crores provide tangible asset backing, though utilisation remains suboptimal.
⚠ KEY CONCERNS
- Persistent Operating Losses: Negative operating margins for seven consecutive quarters indicate fundamental business model challenges requiring urgent restructuring.
- Weak Return Metrics: ROE of 1.34% and ROCE of -26.94% reflect extremely poor capital efficiency and inability to generate adequate returns.
- High Fixed Costs: Employee costs consuming 66.65% of revenues in Q3 FY26 limit operational flexibility and profitability potential.
- Negative Working Capital: Current liabilities exceeding current assets by ₹120.21 crores as of March 2025 raises liquidity concerns.
- Zero Institutional Interest: Complete absence of FII holdings and minimal mutual fund participation signals lack of investor confidence.
- Elevated Valuation: P/E of 226.70x and P/BV of 3.04x appear unjustified given persistent losses and weak operational performance.
- Bearish Technical Trend: Stock trading below all key moving averages with multiple technical indicators signalling continued weakness.
Outlook: Limited Catalysts for Near-Term Improvement
The outlook for Andrew Yule remains challenging, with limited visibility on operational turnaround despite marginal revenue improvements. The company's financial trend assessment of "Flat" for Q3 FY26 suggests no meaningful progress in addressing underlying structural issues. Without significant restructuring measures, cost rationalisation, or strategic interventions, the company is likely to continue reporting losses in the near term.
POSITIVE CATALYSTS
- Government intervention or support package to address operational challenges
- Successful cost restructuring programme to reduce employee cost burden
- Divestment or closure of loss-making units to improve overall profitability
- Strategic partnership or joint venture to modernise operations and improve competitiveness
RED FLAGS TO MONITOR
- Further deterioration in operating margins below -20% on a sustained basis
- Working capital position worsening with current liabilities exceeding ₹400 crores
- Quarterly losses exceeding ₹15 crores on a standalone basis
- Any increase in debt levels to fund operating losses
- Stock price breaking below 52-week low of ₹20.24
The company's ability to achieve sustainable profitability hinges on its capacity to address the high fixed cost structure, particularly the elevated employee costs that consume two-thirds of revenues. Without aggressive rationalisation measures or significant revenue growth, the path to profitability remains unclear. The government ownership structure, whilst providing stability, may also constrain the company's ability to undertake difficult but necessary restructuring decisions.
The Verdict: Exit or Avoid
Score: 17/100
For Fresh Investors: Avoid initiating any position. The combination of persistent operating losses, weak return metrics, elevated valuation multiples, and bearish technical trends presents an unfavourable risk-reward profile. Better opportunities exist in the FMCG sector with companies demonstrating consistent profitability and stronger fundamentals.
For Existing Holders: Consider exiting positions at current levels or on any technical bounce towards ₹24-25 levels. The stock has underperformed the Sensex by 46.76 percentage points over the past year, and limited near-term catalysts exist for meaningful turnaround. The high beta of 1.47 means continued volatility without corresponding returns.
Fair Value Estimate: ₹15.00-17.00 (32-39% downside from current levels), based on conservative 2.0-2.5x price-to-book multiple applied to book value of ₹6.93, reflecting the company's below-average quality and persistent operational challenges.
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.
