Are SagarSoft (India) Ltd latest results good or bad?

SagarSoft (India) Ltd's latest financial results for the quarter ended December 2025 reveal a complex picture of growth in net sales but significant challenges in profitability. The company reported net sales of ₹43.29 crores, reflecting a year-on-year growth of 27.74%, which is a notable improvement compared to the previous year's decline. However, the consolidated net profit stood at ₹0.92 crores, showing a year-on-year decrease of 32.85%. This indicates a troubling disconnect between revenue growth and profitability realization. The operating margin, excluding other income, was recorded at a mere 0.30%, a significant drop from 5.49% in the same quarter last year. This compression in margins highlights the company's struggles with escalating employee costs, which constituted 75% of net sales in the latest quarter, up from 70.64% a year prior. The operating profit before depreciation, interest, tax, and other income (PBDIT) was only ₹0.13 crores, down sharply from ₹1.86 crores in the previous year. Additionally, the return on equity (ROE) has fallen to a critically low level of 0.32%, indicating that the company is generating virtually no returns for its shareholders. The return on capital employed (ROCE) is also negative at -6.84%, suggesting that the company is currently destroying value rather than creating it. In terms of market performance, SagarSoft's stock has underperformed significantly compared to both the Sensex and its sector peers over the past year, with a decline of 44.18%. This underperformance reflects investor concerns regarding the company's growth prospects and operational efficiency. Overall, while SagarSoft has achieved revenue growth, the substantial challenges in profitability and operational efficiency overshadow these gains. The company saw an adjustment in its evaluation, reflecting the ongoing difficulties it faces in a competitive IT services landscape.