Aryaman Capital Markets Q2 FY26: Sharp Profit Decline Raises Sustainability Concerns

The most alarming aspect of Q2 FY26 results is the dramatic 59.45% quarter-on-quarter revenue collapse to ₹10.43 crores from ₹25.72 crores in Q1 FY26. This sharp contraction in top-line performance, despite the company maintaining strong operating margins of 75.46%, underscores the volatility inherent in Aryaman Capital's business model. The company operates in a highly competitive NBFC space where deal flow and transaction volumes can fluctuate significantly, and the latest quarter appears to reflect a particularly challenging period for revenue generation.

Financial Performance: Margin Strength Masks Revenue Volatility

Whilst the 59.45% quarter-on-quarter revenue decline to ₹10.43 crores is undeniably concerning, Aryaman Capital demonstrated remarkable margin resilience in Q2 FY26. The company's operating margin expanded substantially to 75.46% from 50.62% in the previous quarter, whilst the PAT margin improved to 64.43% from 42.88%. This margin expansion suggests strong cost discipline and favourable business mix, though the sustainability of such elevated margins remains questionable given the lumpy nature of the company's revenue streams.

On a half-yearly basis (H1 FY26), the company reported consolidated revenue of ₹36.15 crores and net profit of ₹17.75 crores, translating to a PAT margin of 49.10%. Compared to H1 FY25, where revenue stood at ₹24.31 crores and net profit at ₹5.93 crores, the company has demonstrated strong year-on-year growth. However, the extreme quarter-to-quarter fluctuations—Q1 FY26 saw revenue of ₹25.72 crores whilst Q2 FY26 collapsed to ₹10.43 crores—highlight the unpredictable nature of earnings that makes forecasting and valuation particularly challenging.

The company's full-year FY25 performance provides additional context. Annual revenue stood at ₹74.00 crores with net profit of ₹22.00 crores, representing robust year-on-year growth of 138.70% and 266.67% respectively from FY24. The operating margin for FY25 improved to 36.50% from 25.80% in FY24, whilst the PAT margin expanded to 29.70% from 19.40%. These figures suggest that whilst quarterly volatility is pronounced, the longer-term trajectory has been positive, albeit from a low base.

Capital Efficiency: Exceptional ROE Justifies Premium Valuation

One of Aryaman Capital's most compelling attributes is its exceptional return on equity of 32.11%, which ranks significantly above the NBFC sector average and reflects highly efficient capital deployment. This strong ROE, combined with a debt-free balance sheet (debt-to-equity ratio of 0.00), positions the company favourably in terms of financial stability and capital efficiency. The absence of leverage means the company's returns are generated purely from equity capital, which is particularly impressive given the capital-intensive nature of financial services.

The company's balance sheet as of March 2025 shows shareholder funds of ₹77.38 crores, comprising share capital of ₹11.98 crores and reserves of ₹65.41 crores. The substantial growth in reserves—from ₹29.17 crores in FY24 to ₹65.41 crores in FY25—reflects strong profit retention and internal capital generation. Current assets of ₹98.65 crores against current liabilities of ₹48.08 crores provide a comfortable current ratio of approximately 2.05, indicating adequate short-term liquidity.

The company's cash flow statement reveals healthy operating cash generation of ₹27.00 crores for FY25, up from ₹8.00 crores in FY24. The closing cash balance of ₹50.00 crores as of March 2025 provides a strong liquidity cushion and represents approximately 64.62% of total shareholder funds. This substantial cash position, whilst providing financial flexibility, also raises questions about capital allocation efficiency—whether the company is adequately deploying its capital to generate growth or allowing excess cash to remain idle on the balance sheet.

Business Model Volatility: The Core Challenge

The fundamental challenge facing Aryaman Capital Markets is the inherent volatility in its business model, as evidenced by the dramatic quarterly fluctuations in revenue and profitability. The company's 5-year sales CAGR of -2.40% contrasts sharply with its 5-year EBIT CAGR of 94.51%, suggesting that whilst the company has significantly improved operational efficiency and margin profile, it has struggled to achieve consistent top-line growth over the medium term.

This disconnect between revenue growth and profit growth indicates that the company's recent strong performance may be driven more by operational improvements and margin expansion rather than sustainable business expansion. For Q2 FY26, whilst operating margin reached an exceptional 75.46%, the absolute revenue base of ₹10.43 crores remains modest for a company with a market capitalisation of ₹587.00 crores, implying a price-to-sales ratio of approximately 14.08 times on a trailing twelve-month basis.

Peer Comparison: Premium Valuation Relative to NBFC Sector

Aryaman Capital Markets trades at a P/E ratio of 25.59 times, which is above the NBFC industry average of 23 times but below several peers such as Yogi Ltd. (37.76x) and Corporate Merch (284.00x). However, the company's valuation appears more reasonable when considering its exceptional ROE of 32.11%, which significantly exceeds the peer group average. The price-to-book ratio of 5.99 times, whilst appearing elevated in absolute terms, is justified by the company's superior return profile—a P/BV of 6x combined with an ROE of 32% implies a sustainable long-term earnings yield.

Compared to peers, Aryaman Capital demonstrates the highest ROE in the group at 32.11%, substantially above the peer average of approximately 10.39%. This superior capital efficiency, combined with zero leverage, provides fundamental justification for the company's premium valuation multiples. However, the company's negative 5-year sales CAGR of -2.40% raises concerns about growth sustainability, particularly when compared to peers who may be delivering more consistent revenue expansion.

Valuation Analysis: Expensive Despite Strong Fundamentals

At the current price of ₹489.90, Aryaman Capital Markets carries a "Very Expensive" valuation grade, reflecting stretched multiples relative to historical norms and peer benchmarks. The EV/EBITDA ratio of 22.38 times and EV/Sales ratio of 7.29 times suggest the market is pricing in significant growth expectations that may prove difficult to meet given the company's track record of revenue volatility. The PEG ratio of 0.10, whilst appearing attractive, may be misleading given the inconsistent growth profile and small absolute earnings base.

The company's enterprise value to capital employed ratio of 9.89 times indicates that the market is valuing the company's deployed capital at nearly 10 times its book value, which is justifiable only if the company can sustain its exceptional ROE of 32.11% over the long term. However, the recent quarterly performance—with revenue declining 59.45% quarter-on-quarter—raises doubts about whether such elevated returns can be maintained consistently.

Based on a normalised earnings estimate of ₹20-22 crores annually (reflecting the volatility seen in quarterly results) and applying a more conservative P/E multiple of 18-20 times (below the current 25.59x), a fair value estimate for Aryaman Capital would be in the range of ₹300-366 per share. This suggests the stock is currently trading at a 33-39% premium to its intrinsic value, implying significant downside risk if the company fails to deliver consistent earnings growth or if market sentiment towards micro-cap NBFCs deteriorates.

Shareholding Pattern: Stable Promoter Base, Zero Institutional Interest

The shareholding pattern reveals a highly concentrated ownership structure with promoters holding a stable 74.28% stake across the last five quarters, demonstrating strong promoter commitment. Notably, there is zero pledging of promoter shares, which is a positive indicator of financial health and confidence. However, the complete absence of institutional investors—with 0.00% holdings from FIIs, mutual funds, insurance companies, and other domestic institutional investors—is a significant red flag.

The absence of institutional ownership suggests that sophisticated investors have not found the company's business model, governance, or growth prospects compelling enough to warrant investment. This lack of institutional validation is particularly concerning for a company trading at premium valuations, as it indicates that the recent price appreciation has been driven primarily by retail speculation rather than fundamental institutional buying. The complete lack of mutual fund or insurance company holdings also means there is no institutional support to cushion the stock during market downturns.

Stock Performance: Spectacular Returns Mask Underlying Volatility

Aryaman Capital Markets has delivered extraordinary returns across multiple timeframes, with the stock appreciating 118.02% over the past year, 583.64% over two years, and an astounding 2,444.94% over the past decade. These returns have massively outperformed the Sensex, generating alpha of 108.17% (1-year), 565.91% (2-year), and 2,180.92% (10-year). However, these impressive figures mask significant volatility, with the stock currently trading 35.01% below its 52-week high of ₹753.85.

The stock's beta of 1.50 indicates it is 50% more volatile than the broader market, which is consistent with its micro-cap status and concentrated shareholding. The risk-adjusted return of 2.44 over the past year, whilst positive, comes with a volatility of 48.32%—more than four times the Sensex volatility of 11.44%. This high-risk, high-return profile makes the stock suitable only for aggressive investors with high risk tolerance and the ability to withstand significant drawdowns.

Technical indicators present a mixed picture. The stock is currently in a "Mildly Bullish" trend since October 27, 2025, having declined from a "Bullish" classification. The stock trades below its 20-day, 50-day, 100-day, and 200-day moving averages, suggesting weakening momentum. Weekly MACD shows a "Mildly Bearish" signal, whilst the monthly timeframe remains "Bullish," indicating short-term weakness within a longer-term uptrend. The 12.35% decline over the past three months contrasts with the 1-year gain of 118.02%, highlighting the recent loss of momentum.

Investment Thesis: Quality Constrained by Predictability Issues

Aryaman Capital Markets presents a paradoxical investment case—exceptional capital efficiency metrics (32.11% ROE, zero debt) combined with concerning revenue unpredictability and stretched valuation. The company's "Below Average" quality grade reflects its weak 5-year sales CAGR of -2.40% despite strong EBIT growth of 94.51%. The "Negative" short-term financial trend, driven by the 59.45% quarter-on-quarter revenue decline in Q2 FY26, further undermines confidence in near-term performance.

The proprietary Mojo Score of 28 out of 100 places the stock firmly in "Strong Sell" territory, reflecting the combination of negative financial trends, expensive valuation, and below-average quality. The "Mildly Bullish" technical trend provides limited support, particularly given that the stock trades below all major moving averages and has lost 12.35% over the past three months.

Key Strengths & Risk Factors

Outlook: What to Watch in Coming Quarters