Are Karnavati Finance Ltd latest results good or bad?

Karnavati Finance Ltd's latest financial results for Q3 FY26 present a mixed picture, characterized by significant volatility in revenue and ongoing concerns regarding its operational sustainability. The company reported a net profit of ₹0.70 crores, marking a return to profitability after two consecutive quarters of losses. This profit was accompanied by a dramatic year-on-year revenue growth of 456.10%, reaching ₹2.28 crores, which is a substantial increase from ₹0.41 crores in the same quarter last year. However, this growth must be contextualized within the company's historically low revenue base, as the revenue figures have fluctuated significantly over the past few quarters, raising questions about the consistency of its business operations. The operating margin for the quarter was exceptionally high at 97.81%, a notable improvement from 25.42% in the previous quarter. This sharp increase suggests that while the company has managed to generate a high level of operating profit, it may not necessarily indicate improved operational efficiency or a sustainable business model. The interest coverage ratio of 1.46 times indicates limited capacity to service its debt obligations, which is concerning given the company's substantial leverage, with a debt-to-equity ratio of 6.31 times. Additionally, the complete exit of promoters from the company raises significant governance concerns, as it suggests a lack of confidence in the company's future prospects. The absence of institutional investor interest further underscores the challenges facing Karnavati Finance as it navigates a highly competitive and consolidating NBFC landscape. Overall, while Karnavati Finance has shown a temporary rebound in profitability and revenue growth in the latest quarter, the underlying volatility, high leverage, and governance issues present substantial risks that warrant careful monitoring. The company has experienced an adjustment in its evaluation, reflecting these ongoing challenges and uncertainties.