Are Nila Spaces Ltd latest results good or bad?

Nila Spaces Ltd's latest financial results reflect a complex operational landscape characterized by robust revenue growth alongside challenges in profitability and cash flow management. In Q2 FY26, the company reported net sales of ₹42.18 crores, marking a 3.31% increase from the previous quarter and a significant 32.18% year-on-year growth. This performance indicates strong demand and effective project execution, as revenue reached an all-time quarterly high.
However, the net profit for the same quarter was ₹5.46 crores, which represents a 6.83% decline compared to the previous quarter, despite a 47.57% increase year-on-year. This divergence suggests that while sales are strong, profitability is under pressure, as evidenced by the operating margin which contracted to 23.40%, down from 29.61% in the prior quarter. The decline in margins indicates rising cost pressures or shifts in project mix that may be impacting profitability.

Additionally, the company's operational cash flow has raised concerns, with a reported negative cash flow of ₹40.47 crores for FY25, primarily due to adverse movements in working capital. This situation highlights potential issues with revenue quality and timing, particularly in a capital-intensive sector like real estate. The reliance on other income, which constituted a significant portion of profit before tax, further complicates the sustainability of earnings.

Despite these challenges, Nila Spaces has shown improvements in return on equity (ROE) and return on capital employed (ROCE), reflecting operational leverage as the business scales. The company has also seen an adjustment in its evaluation, indicating a recognition of its evolving financial fundamentals.

In summary, while Nila Spaces Ltd demonstrates strong revenue growth and operational potential, it faces critical challenges related to profitability and cash flow that require careful monitoring as it navigates the competitive real estate landscape.