Are Gowra Leasing latest results good or bad?

Gowra Leasing's latest financial results for Q2 FY26 highlight a significant year-on-year growth trajectory, with net sales increasing by 226.14% compared to the same quarter last year, reaching ₹2.87 crores. This impressive revenue growth is complemented by a net profit of ₹1.19 crores, which reflects a substantial year-on-year increase of 108.77%. The company's operating margin stands at a strong 83.62%, indicating robust profitability in its lending operations.
However, the results also reveal some complexities. While the net profit shows a strong year-on-year performance, it has experienced a sequential decline of 7.75% from the previous quarter. This decline is attributed to rising interest expenses, which surged to ₹0.81 crores, up from ₹0.68 crores in Q1 FY26, highlighting the company's increasing reliance on borrowed funds to support its expansion. Additionally, the operating profit before depreciation, interest, and tax (excluding other income) was reported at ₹2.40 crores, indicating a strong operational performance despite the challenges.

The balance sheet presents a more concerning picture, with current liabilities increasing dramatically to ₹21.91 crores, raising liquidity concerns. This surge in liabilities outpaces asset growth and signals a significant shift in the company's financial structure. Furthermore, the company reported negative operating cash flow of ₹32.00 crores for FY25, which raises questions about the sustainability of its growth strategy.

Overall, Gowra Leasing's financial performance illustrates a mix of explosive growth and emerging risks. The company has seen an adjustment in its evaluation, reflecting the need for careful monitoring of its ability to convert profits into positive cash flows and manage its expanding liabilities effectively. Investors may want to consider these factors when assessing the company's future prospects.