Are EFC (I) latest results good or bad?

EFC (I) Limited's latest financial results for Q2 FY26 reflect a significant revenue momentum, with net sales reaching ₹254.59 crores, marking a 15.92% increase from the previous quarter and a 52.96% growth year-on-year. This performance underscores the company's successful transition from a trading entity to a focused player in the commercial real estate sector, particularly in office leasing and co-working spaces.
The consolidated net profit for the quarter stood at ₹44.63 crores, representing a 29.70% increase compared to the previous quarter and a 54.27% rise year-on-year. This growth in profitability is supported by a notable reduction in interest costs, which fell sharply to ₹6.47 crores from ₹11.56 crores in the prior quarter, indicating improved debt management.

However, the operating margin, excluding other income, contracted to 43.52%, down from 46.56% in the previous quarter and 47.67% a year ago. This decline of 303 basis points sequentially and 415 basis points year-on-year raises concerns about the sustainability of margins amidst rising operational costs associated with the company's rapid expansion.

EFC's return on equity for the first half of FY26 reached 18.29%, the highest in its history, highlighting effective capital utilization. The company's balance sheet shows total shareholder funds of ₹543.01 crores, with long-term debt increasing to ₹210.89 crores, resulting in a debt-to-equity ratio of 0.39. While this leverage is manageable, it indicates aggressive growth funding through borrowings.

In summary, EFC (I) Limited's Q2 FY26 results demonstrate strong revenue and profit growth, driven by its strategic focus on the commercial real estate market. However, the contraction in operating margins and rising debt levels warrant close monitoring as the company navigates its growth trajectory. Additionally, the company saw an adjustment in its evaluation, reflecting the complexities of its current valuation in light of these operational trends.