The quarter witnessed substantial revenue contraction on a sequential basis, with net sales declining 40.01% to ₹105.83 crores from ₹176.41 crores in Q1 FY26, reflecting the seasonal nature of the fertiliser business. Operating margins deteriorated to 6.18% in Q2 FY26 from 4.94% in the previous quarter, whilst PAT margins compressed to 0.93% from 1.43%. The company's performance remains hampered by weak profitability metrics, elevated debt levels, and persistent pressure on return ratios, raising questions about its ability to navigate the challenging operating environment.
Financial Performance: Seasonal Weakness Weighs on Profitability
Basant Agro Tech's Q2 FY26 results reflect the inherent seasonality of the fertiliser industry, with revenue declining sharply on a sequential basis. Net sales of ₹105.83 crores in Q2 FY26 represented a 40.01% drop from ₹176.41 crores in Q1 FY26, though the company managed a 25.81% year-on-year improvement from ₹84.12 crores in Q2 FY25. This sequential decline is typical for fertiliser companies, as demand peaks during the kharif sowing season (Q1) and moderates thereafter.
Operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) stood at ₹6.54 crores in Q2 FY26, down 25.00% quarter-on-quarter from ₹8.72 crores but up 12.37% year-on-year from ₹5.82 crores. Operating margins improved to 6.18% from 4.94% in Q1 FY26, suggesting better cost management despite the revenue contraction. However, PAT margins compressed to 0.93% from 1.43% in the previous quarter, reflecting the impact of fixed interest costs and depreciation charges on a lower revenue base.
Interest expenses remained elevated at ₹3.65 crores in Q2 FY26, marginally lower than ₹3.88 crores in Q1 FY26, whilst depreciation held steady at ₹1.86 crores. The company's profit before tax fell 64.04% quarter-on-quarter to ₹1.05 crores from ₹2.92 crores, whilst the effective tax rate declined to 6.67% from 13.70% in the previous quarter. The low tax incidence provided some relief to bottom-line profitability, though the overall earnings trajectory remains concerning.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 105.83 | -40.01% | 0.98 | -61.11% | 6.18% | 0.93% |
| Jun'25 | 176.41 | +33.12% | 2.52 | +119.13% | 4.94% | 1.43% |
| Mar'25 | 132.52 | +63.54% | 1.15 | +202.63% | 6.24% | 0.87% |
| Dec'24 | 81.03 | -3.67% | 0.38 | +11.76% | 6.58% | 0.47% |
| Sep'24 | 84.12 | -49.04% | 0.34 | -85.15% | 6.92% | 0.40% |
| Jun'24 | 165.08 | +66.24% | 2.29 | -66.02% | 5.03% | 1.39% |
| Mar'24 | 99.30 | — | 6.74 | — | 12.16% | 6.79% |
Operational Challenges: Weak Returns and Elevated Leverage
Basant Agro Tech's operational performance continues to be constrained by structurally weak return ratios and elevated debt levels. The company's average return on capital employed (ROCE) over the past five years stands at just 8.29%, whilst the average return on equity (ROE) is even weaker at 6.70%. These metrics fall significantly short of industry standards and reflect inefficient capital deployment. The latest ROCE of 6.95% and ROE of 2.47% indicate further deterioration in profitability and capital efficiency.
The company's balance sheet reveals a debt-to-EBITDA ratio of 3.54 times and a net debt-to-equity ratio of 0.72 times, indicating moderate but persistent leverage. Long-term debt stood at ₹34.16 crores as of March 2025, marginally lower than ₹34.56 crores in the previous year. However, the company's ability to service this debt remains constrained by weak EBIT-to-interest coverage of just 2.55 times on average, leaving limited cushion for any operational setbacks.
Current liabilities of ₹187.04 crores as of March 2025 include trade payables of ₹50.69 crores and other current liabilities of ₹39.47 crores, whilst current assets stood at ₹292.81 crores. The company generated robust operating cash flow of ₹43.89 crores in FY25, a significant turnaround from negative ₹12.00 crores in FY24, driven by favourable working capital movements. However, the sustainability of this improvement remains uncertain given the volatile nature of the fertiliser business.
Critical Concern: Structurally Weak Profitability
Basant Agro Tech's average ROCE of 8.29% and average ROE of 6.70% over the past five years highlight persistent challenges in generating adequate returns on invested capital. The latest quarter's ROE of 2.47% suggests further deterioration, raising serious questions about the company's ability to create shareholder value. Investors should monitor whether management initiatives can meaningfully improve these metrics over the coming quarters.
Industry Context: Navigating a Challenging Fertiliser Landscape
The Indian fertiliser industry operates in a highly regulated environment characterised by government subsidies, price controls, and seasonal demand patterns. Companies like Basant Agro Tech face persistent pressure on margins due to volatile raw material costs, particularly phosphoric acid and ammonia, whilst realisation prices remain largely dictated by government policy. The sector's profitability is heavily dependent on timely subsidy disbursements and efficient working capital management.
Basant Agro Tech's product portfolio comprises NPK mixture granulated fertilisers and single super phosphate (SSP) fertilisers, marketed under the "Krishi Sanjivani" brand. The company also manufactures hybrid seeds, providing some diversification beyond commodity fertilisers. However, intense competition from larger players, limited pricing power, and the capital-intensive nature of the business continue to weigh on profitability. The company's micro-cap status and limited institutional investor interest further restrict access to growth capital.
The broader fertiliser sector has delivered a one-year return of 9.73%, whilst Basant Agro Tech has underperformed significantly with a negative return of 29.80%, resulting in an alpha of -39.53 percentage points. This substantial underperformance reflects investor concerns about the company's weak fundamentals, elevated debt, and limited earnings visibility. The stock's high beta of 1.50 indicates elevated volatility relative to the broader market, adding to the risk profile.
Peer Comparison: Lagging on Valuation and Quality Metrics
A comparison with listed fertiliser peers reveals Basant Agro Tech's relative positioning in the industry. Whilst the company's price-to-earnings ratio of 27.91 times appears moderate compared to some peers, its weak return on equity of 6.70% and price-to-book value of 0.69 times suggest limited investor confidence in the company's ability to generate sustainable profits. The dividend yield of 0.37% provides minimal income support to shareholders.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Basant Agro Tech | 27.91 | 0.69 | 6.70 | 0.72 | 0.37 |
| Nagarjuna Fert. | NA (Loss Making) | -0.31 | 0.00 | 0.06 | — |
| Teesta Agro Ind. | 8.82 | 0.06 | 4.18 | -0.04 | — |
| Phosphate Co | 25.13 | 0.60 | 3.55 | 0.13 | — |
| Bharat Agri Fert | 267.55 | 3.34 | 0.53 | 1.26 | — |
Basant Agro Tech's ROE of 6.70% is higher than most listed peers in the micro-cap fertiliser space, though this remains well below acceptable thresholds for a capital-intensive business. The company's moderate debt-to-equity ratio of 0.72 times provides some financial flexibility, though the weak interest coverage limits the ability to take on additional leverage for growth initiatives. The price-to-book value of 0.69 times suggests the market values the company below its stated net worth, reflecting scepticism about the quality of earnings and asset valuations.
Valuation Analysis: Attractive Multiples Mask Fundamental Concerns
At the current market price of ₹13.57, Basant Agro Tech trades at a price-to-earnings ratio of 27.91 times trailing twelve-month earnings, in line with the industry average P/E of approximately 25 times. However, the company's PEG ratio of 6.17 suggests the stock is expensive relative to its growth potential, with five-year sales growth of just 9.80% and EBIT growth of 7.73% failing to justify the valuation multiple. The price-to-book value of 0.69 times offers some margin of safety, though this discount reflects justified concerns about asset quality and return generation.
The stock has declined 37.00% from its 52-week high of ₹21.54, trading just 23.36% above its 52-week low of ₹11.00. The valuation grade has oscillated between "Very Attractive" and "Attractive" over recent months, currently standing at "Very Attractive" as of August 2025. However, this attractive valuation must be viewed in the context of weak fundamentals, with the company's proprietary investment score standing at just 26 out of 100, firmly in "Strong Sell" territory.
Valuation Dashboard
Shareholding Pattern: Stable Promoter Base, Negligible Institutional Interest
Basant Agro Tech's shareholding pattern has remained remarkably stable over the past five quarters, with promoter holding steady at 53.07% and no sequential changes recorded. The Bhartia family, which promoted the company, maintains control through various family members, with Shashikant C Bhartia (9.18%) and Deepak C. Bhartia (9.16%) being the largest individual shareholders. Importantly, there is zero promoter pledging, indicating confidence in the business and eliminating concerns about potential distress sales.
However, institutional investor interest remains virtually non-existent, with mutual fund holdings at a negligible 0.02% and zero foreign institutional investor (FII) or insurance company participation. The lack of institutional backing reflects concerns about the company's limited scale, weak profitability metrics, and insufficient liquidity. Non-institutional investors hold 46.91% of the equity, unchanged over the past five quarters, suggesting limited trading activity and investor apathy towards the stock.
| Quarter | Promoter (%) | FII (%) | Mutual Funds (%) | Insurance (%) | Non-Inst. (%) |
|---|---|---|---|---|---|
| Sep'25 | 53.07 | 0.00 | 0.02 | 0.00 | 46.91 |
| Jun'25 | 53.07 | 0.00 | 0.02 | 0.00 | 46.91 |
| Mar'25 | 53.07 | 0.00 | 0.02 | 0.00 | 46.91 |
| Dec'24 | 53.07 | 0.00 | 0.02 | 0.00 | 46.91 |
| Sep'24 | 53.07 | 0.00 | 0.02 | 0.00 | 46.91 |
Stock Performance: Sustained Underperformance Across Timeframes
Basant Agro Tech's stock performance has been dismal across most timeframes, with the share price declining 29.80% over the past year compared to a 4.90% gain in the Sensex, resulting in a negative alpha of 34.70 percentage points. The stock has underperformed across shorter timeframes as well, falling 2.30% over the past month against a 1.08% gain in the benchmark index. The three-month return of -12.28% versus the Sensex's 3.46% gain highlights persistent selling pressure and lack of investor confidence.
However, the stock has delivered positive returns over longer horizons, with a five-year return of 168.71% significantly outperforming the Sensex's 91.29% gain, translating to an alpha of 77.42 percentage points. This suggests that patient, long-term investors who bought at significantly lower valuations have been rewarded, though recent performance indicates the stock has lost momentum. The year-to-date decline of 25.40% against the Sensex's 6.72% gain underscores the challenging operating environment and deteriorating investor sentiment.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -1.88% | -0.08% | -1.80% |
| 1 Month | -2.30% | +1.08% | -3.38% |
| 3 Months | -12.28% | +3.46% | -15.74% |
| 6 Months | +5.60% | +4.96% | +0.64% |
| YTD | -25.40% | +6.72% | -32.12% |
| 1 Year | -29.80% | +4.90% | -34.70% |
| 3 Years | -30.23% | +34.95% | -65.18% |
| 5 Years | +168.71% | +91.29% | +77.42% |
The stock's technical indicators paint a uniformly bearish picture, with the MACD, Bollinger Bands, and KST all signalling bearish trends on both weekly and monthly timeframes. The stock is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, indicating sustained downward momentum. The overall technical trend turned bearish on November 3, 2025, at ₹14.44, following a brief period of mildly bearish sentiment.
Investment Thesis: Attractive Valuation Insufficient to Offset Weak Fundamentals
Basant Agro Tech presents a complex investment proposition characterised by attractive valuation multiples but fundamentally weak business quality. The company's proprietary investment score of 26 out of 100 places it firmly in "Strong Sell" territory, reflecting concerns across multiple parameters. The quality grade is assessed as "Below Average," with the company struggling to generate adequate returns on capital despite modest growth in sales and EBIT over the past five years.
The financial trend is classified as "Flat" as of September 2025, indicating neither meaningful improvement nor sharp deterioration in recent quarters. However, the technical trend is decisively "Bearish," with all major indicators pointing to continued downward pressure on the stock price. The valuation, whilst graded as "Very Attractive," must be viewed with caution, as low multiples often reflect justified concerns about earnings quality and sustainability rather than genuine investment opportunities.
Investment Parameters Dashboard
Key Strengths & Risk Factors
KEY STRENGTHS
- Strong YoY Revenue Growth: Q2 FY26 sales grew 25.81% year-on-year, reflecting market share gains or improved pricing power
- Zero Promoter Pledging: No promoter shares are pledged, indicating confidence and eliminating governance concerns
- Improved Operating Cash Flow: FY25 operating cash flow of ₹43.89 crores marks a sharp turnaround from negative territory in FY24
- Established Brand Presence: "Krishi Sanjivani" brand enjoys recognition amongst the farming community in its operating regions
- Diversified Product Portfolio: Presence in both fertilisers and hybrid seeds provides some revenue diversification
- Attractive Valuation Multiples: P/BV of 0.69x and moderate P/E of 27.91x offer some downside protection
KEY CONCERNS
- Structurally Weak ROE: Average ROE of 6.70% and latest ROE of 2.47% indicate poor capital efficiency and value destruction
- Low ROCE: Average ROCE of 8.29% falls well short of industry standards and cost of capital requirements
- High Leverage: Debt-to-EBITDA of 3.54x and weak interest coverage of 2.55x limit financial flexibility
- Razor-Thin Margins: PAT margin of just 0.93% in Q2 FY26 leaves no cushion for operational setbacks
- Negligible Institutional Interest: Zero FII holding and 0.02% mutual fund holding reflect lack of investor confidence
- High Volatility: Beta of 1.50 indicates elevated risk, with the stock significantly more volatile than the broader market
- Bearish Technical Outlook: All major technical indicators signal continued downward pressure on share price
Outlook: What to Monitor in Coming Quarters
POSITIVE CATALYSTS
- Sustained improvement in operating margins above 7-8% on a consistent basis
- Reduction in debt levels and improvement in interest coverage ratio above 3.5x
- ROE improvement towards double digits through better asset utilisation
- Stable or growing promoter holding with continued zero pledging
- Entry of institutional investors (mutual funds or FIIs) signalling confidence
RED FLAGS TO WATCH
- Further deterioration in ROE below 2% or negative territory
- PAT margins compressing below 0.5% for multiple consecutive quarters
- Increase in debt levels or deterioration in interest coverage below 2x
- Any promoter share pledging or reduction in promoter holding
- Negative operating cash flows returning in any fiscal year
"Whilst Basant Agro Tech trades at attractive valuation multiples, the company's structurally weak return ratios, elevated leverage, and razor-thin margins make it unsuitable for investors seeking quality compounders or stable income generation."
The Verdict: Exit Recommended Despite Attractive Valuation
Score: 26/100
For Fresh Investors: Avoid initiating positions at current levels. The company's weak return on equity of 6.70%, structurally thin margins, and elevated leverage create an unfavourable risk-reward profile. Whilst valuation multiples appear attractive with a P/BV of 0.69x, these low multiples reflect justified concerns about earnings quality and sustainability. The bearish technical outlook and lack of institutional investor interest further underscore the risks. Fresh capital should be deployed in higher-quality fertiliser companies with stronger return ratios and better earnings visibility.
For Existing Holders: Consider exiting positions on any price rallies towards ₹15-16 levels. The company's proprietary investment score of 26 out of 100 places it firmly in "Strong Sell" territory, reflecting fundamental weaknesses across quality, profitability, and financial health parameters. The latest ROE of just 2.47% and PAT margin of 0.93% indicate value destruction rather than creation. Whilst the company generated positive operating cash flow in FY25, the sustainability of this improvement remains questionable given the volatile nature of the fertiliser business. The stock's 29.80% decline over the past year and bearish technical indicators suggest limited near-term upside potential.
Fair Value Estimate: ₹11.00-12.00 (9-12% downside from current levels of ₹13.57)
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.
