Are Zee Learn latest results good or bad?

Zee Learn's latest financial results for Q2 FY26 reveal a complex situation characterized by significant revenue growth alongside substantial operational challenges. The company reported net sales of ₹74.25 crores, reflecting a year-on-year growth of 27.60% from ₹58.19 crores in the same quarter last year. However, this figure represents a sequential decline of 31.48% from the previous quarter, indicating seasonal fluctuations typical in the education services sector.
Despite the revenue growth, Zee Learn faced a net loss of ₹6.14 crores, marking a deterioration compared to a profit of ₹1.90 crores in Q1 FY26. The profit after tax (PAT) margin turned negative at -8.27%, a significant decline from the positive margin of 1.75% in the prior quarter. This sharp decline in profitability highlights the company's struggles with cost management, particularly as employee expenses surged to 57.78% of revenues, a notable increase from previous periods.

The operating profit before depreciation, interest, and tax (PBDIT) stood at ₹12.16 crores, yielding an operating margin of 16.38%. While this margin shows some year-on-year improvement, it represents a contraction from the 27.45% margin achieved in the prior quarter, primarily due to rising employee costs and interest expenses, which increased significantly year-on-year.

Zee Learn's financial position is further complicated by a high debt burden, with a debt-to-equity ratio averaging 5.55 times, raising concerns about financial sustainability. The company’s interest burden consumed its operating profit, leaving little room for profitability. Additionally, the current liabilities exceeded current assets, indicating a working capital deficit.

Overall, while Zee Learn demonstrated revenue growth, the underlying operational challenges and negative profitability trends suggest a precarious financial situation. The company has seen an adjustment in its evaluation, reflecting the market's concerns regarding its ability to manage costs and achieve sustainable profitability amidst a competitive landscape.