The quarter's performance reflects severe operational challenges, with the company posting its lowest operating profit margin on record at negative 4.66%. Revenue declined sequentially by 7.31% to ₹1,157.19 crores from ₹1,248.42 crores in Q1 FY26, whilst also registering a marginal year-on-year decline of 0.21% from ₹1,159.67 crores. The deterioration in profitability metrics underscores mounting pressures across the sugar industry, compounded by weak realisations and elevated operational costs.
With 100% promoter holding and minimal institutional participation at 9.73%, the company faces significant financial headwinds. The stock has shed 40.42% from its 52-week high of ₹35.40, currently trading near its 52-week low of ₹16.56. Technical indicators point to a bearish trend, with the stock trading below all key moving averages, whilst fundamental metrics reveal a company grappling with persistent losses and deteriorating operational efficiency.
Financial Performance: Deepening Operational Losses
Bajaj Hindusthan Sugar's Q2 FY26 results paint a concerning picture of operational distress. The company's operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) plunged to negative ₹53.90 crores, the lowest level recorded in recent quarters, compared to negative ₹26.85 crores in Q1 FY26. This represents a sharp sequential deterioration, with the operating margin excluding other income contracting to negative 4.66% from negative 2.15% in the previous quarter.
The revenue trajectory shows weakness across both sequential and annual comparisons. Net sales of ₹1,157.19 crores in Q2 FY26 declined 7.31% quarter-on-quarter from ₹1,248.42 crores and fell marginally by 0.21% year-on-year from ₹1,159.67 crores. This marks the lowest quarterly sales figure amongst recent periods, indicating subdued demand conditions and pricing pressures in the sugar segment.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Operating Profit (₹ Cr) | Margin % | Net Profit (₹ Cr) |
|---|---|---|---|---|---|
| Sep'25 | 1,157.19 | -7.31% | -53.90 | -4.66% | -105.09 |
| Jun'25 | 1,248.42 | -19.65% | -26.85 | -2.15% | -173.75 |
| Mar'25 | 1,553.66 | +5.28% | 285.59 | 18.38% | 220.28 |
| Dec'24 | 1,475.75 | +27.26% | -24.48 | -1.66% | -101.96 |
| Sep'24 | 1,159.67 | -16.31% | 1.00 | 0.09% | -75.40 |
| Jun'24 | 1,385.68 | -25.91% | 27.63 | 1.99% | -66.49 |
| Mar'24 | 1,870.27 | — | 169.75 | 9.08% | 90.79 |
The profit and loss account reveals severe stress at multiple levels. The company's interest coverage ratio turned deeply negative, with operating profit to interest standing at negative 21.22 times in Q2 FY26. Interest expenses, whilst declining sequentially to ₹2.54 crores from ₹5.52 crores, remain a burden given the negative operating profits. Depreciation charges of ₹54.24 crores remained relatively stable, but combined with negative operating profits, pushed the company to a pre-tax loss of ₹105.55 crores.
Employee costs remained elevated at ₹88.42 crores in Q2 FY26, marginally lower than ₹88.95 crores in Q1 FY26 but higher than ₹88.07 crores in Q2 FY25. The company's inability to generate positive operating cash flows at the operational level, combined with high fixed costs, has resulted in persistent losses. On a half-yearly basis (H1 FY26), the company reported a consolidated net loss of ₹278.84 crores, significantly wider than the ₹141.89 crores loss in H1 FY25.
Operational Challenges: Structural Weaknesses Persist
The company's operational metrics reveal deep-seated structural challenges that extend beyond cyclical industry pressures. Return on equity (ROE) stands at a dismal 0.0%, whilst return on capital employed (ROCE) languishes at just 0.05% on average and 0.96% for the latest period. These metrics underscore the company's inability to generate adequate returns on the capital employed in its business, a critical concern for any manufacturing enterprise.
The balance sheet reflects significant leverage, with long-term debt standing at ₹3,561.17 crores as of March 2025, marginally higher than ₹3,553.21 crores in the previous year. The company's debt to EBITDA ratio averaged a concerning 25.96 times, indicating that it would take nearly 26 years of current EBITDA generation to repay existing debt. Net debt to equity averaged 0.83, representing moderate but meaningful leverage given the weak earnings profile.
Critical Alert: Operating Losses and Weak Coverage
Operating Profit to Interest Coverage: At negative 21.22 times in Q2 FY26, the company's operating profits are insufficient to cover interest obligations, raising serious concerns about debt serviceability.
Persistent Losses: The company has reported net losses in six of the last seven quarters, with only Q4 FY25 showing profitability. This pattern suggests structural rather than cyclical challenges.
Negative Operating Margins: With operating margins excluding other income at negative 4.66%, the company is destroying value at the operational level, indicating severe pricing pressure or cost inefficiencies.
The company's asset base comprises fixed assets of ₹7,325.57 crores and investments of ₹4,268.73 crores as of March 2025. However, the efficiency of asset utilisation remains questionable, with sales to capital employed averaging just 0.79 times. This indicates that the company generates less than one rupee of sales for every rupee of capital employed, a concerning metric for capital-intensive manufacturing operations.
Working capital management shows mixed signals. Current assets stood at ₹3,534.41 crores against current liabilities of ₹6,187.98 crores as of March 2025, resulting in negative working capital. Trade payables of ₹3,545.20 crores represent a significant portion of current liabilities, suggesting extended payment cycles to suppliers. The company's closing cash balance improved to ₹71.00 crores in FY25 from ₹51.00 crores in FY24, but this remains modest relative to the scale of operations and debt obligations.
Industry Context: Sugar Sector Headwinds
The sugar industry in India faces a complex operating environment characterised by government regulations, fluctuating cane prices, and volatile sugar realisations. Bajaj Hindusthan Sugar, with its 14 manufacturing units all located in Uttar Pradesh, is particularly exposed to regional dynamics in cane procurement and state-level policies. The company's performance in recent quarters reflects broader sector challenges, including soft sugar prices and mandated ethanol blending requirements that have altered the economics of sugar production.
The company's five-year sales growth rate stands at negative 3.05%, indicating a contraction in topline over the medium term. More concerning is the five-year EBIT growth rate of negative 36.58%, suggesting that profitability has deteriorated at a much faster pace than revenues. This divergence points to margin compression driven by rising input costs, regulatory pressures, and competitive dynamics in the sugar segment.
Key Industry Challenges
The sugar sector faces structural headwinds from government-mandated fair and remunerative prices (FRP) for sugarcane, which have risen consistently whilst sugar realisations have remained under pressure. The push towards ethanol production, whilst offering diversification, requires significant capital expenditure and operates on different margin profiles. Bajaj Hindusthan's concentration in Uttar Pradesh exposes it to state-specific policies and cane availability dynamics.
Cash flow generation provides some respite amidst operational losses. For FY25, the company generated operating cash flows of ₹280.00 crores, down from ₹646.00 crores in FY24. This decline reflects the deterioration in operational performance during the year. However, the company has consistently generated positive operating cash flows over the past five years, with FY24 and FY23 showing particularly strong generation at ₹646.00 crores and ₹792.00 crores respectively. These cash flows have been primarily deployed towards debt reduction, with cash outflows from financing activities of ₹280.00 crores in FY25.
Peer Comparison: Lagging Industry Standards
Bajaj Hindusthan Sugar's performance metrics lag significantly behind industry peers, highlighting competitive disadvantages and operational inefficiencies. The company's return on equity of 0.0% compares unfavourably with peers such as Balrampur Chini (13.34%), Triveni Engineering (14.85%), and Piccadily Agro (13.09%). This substantial gap indicates that competitors are generating meaningful returns on shareholder capital whilst Bajaj Hindusthan continues to report losses.
| Company | P/E (TTM) | P/BV | ROE % | Div Yield % | Debt/Equity |
|---|---|---|---|---|---|
| Bajaj Hindusthan | NA (Loss Making) | 0.64 | 0.0% | — | 0.83 |
| Balrampur Chini | 22.39 | 2.31 | 13.34% | 0.67% | 0.19 |
| Triveni Engineering | 31.09 | 2.63 | 14.85% | 0.67% | 0.22 |
| Piccadily Agro | 57.19 | 7.80 | 13.09% | — | 0.27 |
| Shree Renuka Sugar | NA (Loss Making) | -2.59 | 0.0% | — | -2.67 |
| Bannari Amman | 36.26 | 2.43 | 7.43% | 0.35% | -0.05 |
The valuation discount reflects the company's weak fundamentals. Trading at a price-to-book value of 0.64 times, Bajaj Hindusthan trades at a significant discount to profitable peers such as Balrampur Chini (2.31x), Triveni Engineering (2.63x), and Piccadily Agro (7.80x). Whilst this might appear attractive on the surface, the discount is justified given the persistent losses and weak return ratios. The company's inability to command a P/E multiple due to loss-making status further underscores its competitive disadvantages.
Leverage metrics also reveal relative weakness. Bajaj Hindusthan's debt-to-equity ratio of 0.83 is substantially higher than most profitable peers, with Balrampur Chini at 0.19, Triveni Engineering at 0.22, and Piccadily Agro at 0.27. Only Shree Renuka Sugar, another loss-making entity, shows a negative debt-to-equity ratio due to negative net worth. The higher leverage combined with negative returns creates a challenging financial profile that limits strategic flexibility and increases financial risk.
Valuation Analysis: Discount Reflects Fundamental Weakness
Bajaj Hindusthan Sugar's current valuation reflects the market's assessment of its weak financial performance and uncertain turnaround prospects. Trading at ₹21.09, the stock commands a market capitalisation of ₹2,680 crores. The company's enterprise value metrics reveal stretched multiples on operational parameters: EV/EBITDA stands at 26.29 times, whilst EV/EBIT reaches an astronomical 310.86 times, reflecting the minimal EBIT generation relative to enterprise value.
The price-to-book value of 0.64 times represents a discount to book value, with the stock trading below its stated book value per share of ₹33.12. However, this discount must be viewed in the context of persistently negative returns on equity. When a company consistently fails to generate returns above its cost of capital, book value becomes a less reliable indicator of intrinsic worth, as the assets are not creating economic value.
The stock's valuation grade of "Attractive" appears contradictory given the fundamental weakness, but this classification reflects the significant price decline from highs and the discount to book value. However, investors must distinguish between statistical cheapness and genuine value. A stock trading below book value with negative ROE and persistent losses represents a value trap rather than a genuine opportunity unless there are credible catalysts for operational turnaround.
Historical price action provides context for current valuation levels. The stock reached a 52-week high of ₹35.40 in the past year but has since declined 40.42% to current levels. The 52-week low of ₹16.56 suggests potential downside risk of approximately 21.48% from current levels if operational performance continues to deteriorate. The absence of dividend payments since 2013 further reduces the total return proposition for investors.
Shareholding Pattern: Concentrated Promoter Holding with Declining Institutional Interest
Bajaj Hindusthan Sugar's shareholding structure is characterised by complete promoter dominance, with the promoter group maintaining a steady 100.00% stake across the last five quarters. This concentrated ownership structure, led by members of the Bajaj family including Kushagra Bajaj (7.52%) and Bajaj Resources Pvt. Ltd. (6.89%), provides strategic stability but also raises concerns about governance and minority shareholder interests given the persistent financial underperformance.
| Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 100.00% | 100.00% | 100.00% | 100.00% | 0.00% |
| FII | 1.89% | 2.16% | 2.61% | 3.42% | -0.27% |
| Mutual Funds | 0.00% | 0.23% | 0.20% | 0.18% | -0.23% |
| Insurance | 3.38% | 3.38% | 3.38% | 3.38% | 0.00% |
| Other DII | 4.46% | 4.51% | 4.52% | 4.52% | -0.05% |
| Non-Institutional | 65.32% | 64.76% | 64.33% | 63.55% | +0.56% |
Foreign institutional investor (FII) holdings have declined consistently over recent quarters, dropping from 3.42% in December 2024 to 1.89% in September 2025. This represents a cumulative reduction of 1.53 percentage points, signalling waning confidence amongst sophisticated international investors. The most recent quarter saw FII holdings decline by 0.27 percentage points, continuing the trend of institutional exit.
Mutual fund participation has virtually disappeared, with holdings falling to 0.00% in September 2025 from 0.23% in June 2025. This complete exit by domestic mutual funds is particularly telling, as these institutions typically conduct thorough fundamental analysis before making investment decisions. The declining institutional interest stands in stark contrast to rising non-institutional holdings, which increased to 65.32% in September 2025 from 63.55% in December 2024, suggesting retail investor accumulation even as institutions exit.
Stock Performance: Severe Underperformance Across Timeframes
Bajaj Hindusthan Sugar's stock performance has been dismal across most relevant timeframes, with the company significantly underperforming both the broader market and its sectoral peers. Over the past year, the stock has declined 30.92%, generating a negative alpha of 40.04 percentage points relative to the Sensex's 9.12% gain. This underperformance extends to the year-to-date period, with the stock down 39.05 percentage points relative to the benchmark.
| Period | Stock Return | Sensex Return | Alpha | Sugar Sector |
|---|---|---|---|---|
| 1 Week | -0.94% | +1.76% | -2.70% | — |
| 1 Month | -3.43% | +2.97% | -6.40% | — |
| 3 Months | -4.48% | +5.26% | -9.74% | — |
| 6 Months | +1.44% | +4.47% | -3.03% | — |
| 1 Year | -30.92% | +9.12% | -40.04% | -16.72% |
| 2 Years | -36.48% | +30.55% | -67.03% | — |
| 3 Years | +96.74% | +37.19% | +59.55% | — |
Near-term performance has been particularly weak, with the stock declining across all short-term timeframes. The one-month return of negative 3.43% compares unfavourably with the Sensex's gain of 2.97%, resulting in a negative alpha of 6.40 percentage points. The three-month return shows a similar pattern, with the stock down 4.48% against the Sensex's 5.26% gain. Even the marginal six-month gain of 1.44% significantly lags the benchmark's 4.47% advance.
The stock has also underperformed its sectoral peers, with the broader sugar sector declining 16.72% over the past year compared to Bajaj Hindusthan's 30.92% fall. This 14.20 percentage point underperformance relative to the sector indicates company-specific challenges beyond broader industry headwinds. The risk-adjusted returns paint an even grimmer picture, with the stock delivering a negative risk-adjusted return of -0.76 over the past year, categorising it as a "HIGH RISK LOW RETURN" investment.
Longer-term returns provide some historical context, with the stock delivering strong gains over three-year (96.74%) and five-year (371.81%) periods. However, these historical gains have largely evaporated in recent years, with the two-year return standing at negative 36.48%. The stock's beta of 1.35 indicates higher volatility than the broader market, amplifying both gains and losses but currently working against investors given the negative trend.
Technical Analysis: Bearish Trend with Multiple Resistance Levels
Technical indicators for Bajaj Hindusthan Sugar uniformly point to a bearish outlook, with the stock trading below all key moving averages and displaying negative momentum across multiple timeframes. The overall technical trend classification stands at "BEARISH" as of November 11, 2025, having deteriorated from "Mildly Bearish" in recent weeks. The stock currently trades at ₹21.09, positioned just 27.36% above its 52-week low of ₹16.56 but 40.42% below its 52-week high of ₹35.40.
Moving average analysis reveals consistent weakness, with the stock trading below the 5-day moving average (₹21.24), 20-day moving average (₹21.77), 50-day moving average (₹21.36), 100-day moving average (₹22.86), and 200-day moving average (₹22.52). This alignment of the stock below all key moving averages represents a classic bearish configuration, suggesting persistent selling pressure and lack of buying interest at current levels.
Key Technical Levels
Immediate Support: ₹16.56 (52-week low) – A break below this level would signal fresh lows and potentially accelerate downside momentum.
Immediate Resistance: ₹21.77 (20-day MA) – The stock needs to reclaim this level to signal any near-term stabilisation.
Major Resistance: ₹22.52-₹22.86 zone (200-day and 100-day MAs) – A move above this zone would be required to suggest trend reversal.
Strong Resistance: ₹35.40 (52-week high) – Represents significant overhead supply and is far from current levels.
Technical indicator summary across weekly and monthly timeframes shows predominantly bearish signals. The MACD indicator displays "Mildly Bullish" on the weekly chart but remains "Bearish" on the monthly timeframe, suggesting any short-term positive momentum is not supported by longer-term trends. Bollinger Bands show "Bearish" readings on both weekly and monthly charts, indicating the stock is trading in the lower band and experiencing downward price pressure. The KST indicator also registers "Bearish" across both timeframes, confirming negative momentum.
Investment Thesis: Weak Fundamentals Outweigh Valuation Discount
The investment case for Bajaj Hindusthan Sugar is severely challenged by persistent operational losses, deteriorating financial metrics, and lack of visible catalysts for turnaround. The company's Mojo Score of 14 out of 100 places it firmly in "STRONG SELL" territory, reflecting the confluence of negative factors across valuation, quality, financial trends, and technical indicators.
Whilst the valuation appears "Attractive" based on the price-to-book discount, this metric is misleading given the company's inability to generate returns on the stated book value. The quality grade of "Below Average" reflects weak long-term financial performance, with five-year sales growth at negative 3.05% and five-year EBIT growth at negative 36.58%. The financial trend classification of "Negative" captures the deteriorating quarterly performance, whilst the "Bearish" technical trend indicates lack of market confidence.
✓ KEY STRENGTHS
- Largest sugar manufacturer in India with 14 manufacturing units
- Part of the established Bajaj Group with strong promoter backing
- Positive operating cash flow generation in most years (₹280 crores in FY25)
- Trading at significant discount to book value (0.64x P/BV)
- Strategic positioning in Uttar Pradesh, a key sugar-producing state
- Diversification into ethanol production provides alternative revenue streams
- Stable promoter holding at 100% provides strategic continuity
⚠️ KEY CONCERNS
- Persistent net losses in six of last seven quarters
- Operating margins turned negative at -4.66% in Q2 FY26
- Return on equity at 0.0% indicates value destruction
- High debt-to-EBITDA ratio of 25.96 times raises solvency concerns
- Declining institutional interest (FII down from 4.32% to 1.89%)
- Negative five-year growth rates in sales (-3.05%) and EBIT (-36.58%)
- Stock underperformed sector by 14.20 percentage points over past year
- Below average quality grade with weak fundamental strength
- Bearish technical trend with stock below all moving averages
Outlook: What to Monitor
The path forward for Bajaj Hindusthan Sugar requires significant operational improvements and favourable industry dynamics to justify investment consideration. Investors should closely monitor quarterly financial performance for signs of margin stabilisation and return to profitability. Any indication of sustained operating profit generation would represent a positive inflection point, though current trends suggest this remains a distant prospect.
POSITIVE CATALYSTS
- Return to positive operating margins and sustained profitability
- Successful ramp-up of ethanol production capacity with improved margins
- Favourable sugar price movements and improved realisations
- Debt reduction initiatives improving financial flexibility
- Renewed institutional investor interest and FII buying
RED FLAGS
- Further deterioration in operating margins below -5%
- Continued quarterly losses extending beyond FY26
- Additional decline in institutional holdings below 5%
- Breach of 52-week low at ₹16.56
- Rising debt levels or covenant breaches
- Market share loss to more efficient competitors
Industry-level developments will also play a crucial role in the company's prospects. Favourable government policies on sugar pricing, ethanol blending mandates, and cane procurement could provide tailwinds. However, the company's weak competitive position relative to peers suggests it may struggle to capitalise on industry improvements even if they materialise. The lack of dividend payments since 2013 and minimal institutional interest further limit the investment appeal for income-oriented or institutional investors.
"With operating margins turning negative, return on equity at zero, and persistent losses across six of the last seven quarters, Bajaj Hindusthan Sugar exemplifies a value trap rather than a value opportunity – statistical cheapness without fundamental merit."
The Verdict: Avoid This Value Trap
Score: 14/100
For Fresh Investors: Avoid initiating positions. The combination of persistent losses, negative operating margins, zero return on equity, and bearish technical trends creates a high-risk, low-return proposition. The valuation discount to book value is a trap rather than an opportunity, as the company consistently destroys shareholder value through negative returns on capital employed.
For Existing Holders: Consider exiting positions on any technical bounce towards the ₹22-23 resistance zone. The deteriorating financial trend in Q2 FY26, with operating margins hitting record lows at negative 4.66%, suggests further downside risk. With institutional investors steadily reducing holdings and the stock underperforming both the market and sector significantly, holding onto this position exposes investors to continued capital erosion.
Risk Assessment: The company faces severe operational challenges with limited visibility on turnaround. High leverage (debt-to-EBITDA of 25.96x), weak interest coverage, and persistent losses create significant financial risk. The technical setup remains bearish with the stock trading below all moving averages, suggesting continued downward pressure.
Note– ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and all investments carry risk of loss.
