Are Karnavati Financ latest results good or bad?

Karnavati Finance's latest financial results for the quarter ending September 2025 present a complex picture of operational challenges and significant financial distress. The company reported net sales of ₹5.86 crores, reflecting a substantial year-on-year growth of 1,992.86% compared to ₹0.28 crores in the same quarter last year. However, this surge in sales appears to be an anomaly rather than indicative of a sustainable growth trajectory, given the company's historical sales performance, which has fluctuated dramatically over recent quarters.
Despite the impressive sales figure, Karnavati Finance faced a net loss of ₹4.29 crores, a deterioration from previous periods, primarily driven by an overwhelming interest expense of ₹5.84 crores that exceeded total revenue. This resulted in a negative operating margin of -73.21%, highlighting severe operational distress and a highly leveraged capital structure. The operating margin, when excluding other income, showed a recovery to 26.45%, a notable improvement from -50.0% in the prior quarter, yet this was overshadowed by the interest burden.

The company's return on equity (ROE) stood at -21.21%, indicating significant capital erosion and reflecting ongoing challenges in generating value for shareholders. Additionally, the balance sheet reveals alarming trends, with reserves declining by 90.32% over the past year, raising concerns about capital adequacy and the ability to sustain operations.

Overall, while Karnavati Finance experienced a remarkable spike in sales, the underlying financial metrics suggest a company grappling with critical issues, including unsustainable debt levels and operational volatility. The company saw an adjustment in its evaluation, reflecting the complexities of its financial situation. Investors should be cautious, as the combination of deepening losses, high interest expenses, and a lack of institutional confidence signals ongoing risks for the company's future.