The micro-cap company, with a market capitalisation of ₹658.00 crores, saw its stock decline 4.75% to ₹140.45 following the results announcement. The sharp quarterly setback has overshadowed the company's 44.1% revenue growth achieved in FY25, highlighting the volatile nature of its business operations.
Financial Performance: A Troubling Quarter-on-Quarter Collapse
The second quarter of FY26 marked a significant deterioration across all key financial metrics for Batliboi. Net sales plunged 41.58% sequentially to ₹69.54 crores from ₹119.04 crores in Q1 FY26, whilst also declining 26.15% year-on-year from ₹94.16 crores in Q2 FY25. This sharp revenue contraction appears to stem from the cyclical nature of the machine tool and textile engineering machinery business.
More concerning than the revenue decline was the complete erosion of profitability. Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) turned negative at -₹1.65 crores, compared to a positive ₹7.32 crores in the previous quarter. The operating margin collapsed from 6.15% in Q1 FY26 to -2.37% in Q2 FY26, indicating severe operational stress. The PAT margin deteriorated to -3.51% from 4.58% sequentially.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Net Sales | ₹69.54 Cr | ₹119.04 Cr | ₹94.16 Cr | -41.58% | -26.15% |
| Operating Profit | -₹1.65 Cr | ₹7.32 Cr | ₹5.09 Cr | -122.53% | -132.42% |
| Net Profit | -₹2.58 Cr | ₹5.45 Cr | ₹2.92 Cr | -147.34% | -188.36% |
| Operating Margin | -2.37% | 6.15% | 5.41% | -852 bps | -778 bps |
| PAT Margin | -3.51% | 4.58% | 3.10% | -809 bps | -661 bps |
Employee costs remained elevated at ₹16.87 crores in Q2 FY26, consuming 24.26% of revenues compared to 12.86% in the previous quarter. This fixed cost burden, combined with sharply lower revenues, created significant operating leverage in reverse. Interest costs rose to ₹1.49 crores from ₹1.27 crores sequentially, adding further pressure on profitability.
Critical Concern: Revenue Volatility
Batliboi's quarterly revenues have shown extreme volatility, swinging from ₹119.04 crores in Q1 FY26 to ₹69.54 crores in Q2 FY26—a 41.58% sequential decline. This level of instability raises questions about order book visibility, customer concentration, and the predictability of future earnings.
Operational Challenges: Weak Returns and High Leverage
Batliboi's operational efficiency metrics paint a concerning picture of capital productivity. The company's average return on equity (ROE) over the past five years stands at a weak 3.87%, significantly below industry standards and indicating poor capital allocation. The average return on capital employed (ROCE) of 3.26% is similarly anaemic, suggesting the company struggles to generate adequate returns from its invested capital base.
The balance sheet reveals a company with elevated leverage relative to its earnings power. Long-term debt stood at ₹60.09 crores as of March 2025, up from ₹55.79 crores in the previous year. With an average debt-to-EBITDA ratio of 7.45 times, Batliboi carries a heavy debt burden that limits financial flexibility. The EBIT-to-interest coverage ratio of just 1.55 times provides minimal cushion for earnings volatility.
Working capital management has deteriorated significantly. Current assets increased to ₹186.29 crores in FY25 from ₹103.39 crores in FY24, whilst current liabilities rose to ₹124.53 crores from ₹91.22 crores. Trade payables surged to ₹67.05 crores from ₹38.80 crores, suggesting potential liquidity pressures. The cash flow statement shows negative cash generation from operations at ₹2.00 crores for FY25, down from ₹6.00 crores in FY24.
Capital Efficiency Concerns
With ROE of 3.87% and ROCE of 3.26%, Batliboi generates returns well below its cost of capital. For context, the company's debt carries interest costs whilst equity investors typically expect double-digit returns. This fundamental mismatch suggests the business model requires restructuring or the company needs to significantly improve operational efficiency to create shareholder value.
Annual Performance: Strong FY25 Masks Quarterly Weakness
Whilst the quarterly results are deeply concerning, Batliboi's full-year FY25 performance tells a more positive story. Annual revenues grew 44.1% to ₹412.00 crores from ₹286.00 crores in FY24, marking the company's strongest top-line expansion in recent years. Net profit for FY25 reached ₹13.00 crores, up 44.4% from ₹9.00 crores in the previous year.
The company's five-year sales compound annual growth rate (CAGR) of 14.35% and EBIT growth of 20.90% demonstrate reasonable long-term momentum. However, this growth has come at the cost of margin stability. Operating margins (excluding other income) have ranged from -3.1% in FY20 to 5.9% in FY23, reflecting significant earnings volatility.
| Year | Revenue | YoY Growth | Net Profit | Operating Margin | PAT Margin |
|---|---|---|---|---|---|
| FY25 | ₹412.00 Cr | +44.1% | ₹13.00 Cr | 5.3% | 3.2% |
| FY24 | ₹286.00 Cr | +13.0% | ₹9.00 Cr | 5.6% | 3.1% |
| FY23 | ₹253.00 Cr | +29.1% | ₹10.00 Cr | 5.9% | 4.0% |
| FY22 | ₹196.00 Cr | +29.8% | -₹4.00 Cr | 3.6% | -2.0% |
| FY21 | ₹151.00 Cr | -22.6% | ₹8.00 Cr | 2.0% | 5.3% |
Industry Leadership: How Batliboi Compares to Peers
Within the industrial manufacturing sector, Batliboi's valuation appears stretched relative to its operational performance. Trading at a price-to-earnings (P/E) ratio of 109.12 times trailing twelve-month earnings, the stock commands a significant premium to the sector average of approximately 46 times. This valuation appears difficult to justify given the company's weak profitability metrics and recent quarterly loss.
The company's price-to-book value (P/BV) ratio of 3.08 times is roughly in line with the peer group average, but this multiple seems high for a business generating sub-4% returns on equity. Peers such as Axtel Industries demonstrate superior capital efficiency with an ROE of 21.26%, whilst International Conveyors achieves 16.05% ROE at a far more attractive P/E multiple of just 5.10 times.
| Company | P/E (TTM) | P/BV | ROE | Div Yield | Debt/Equity |
|---|---|---|---|---|---|
| Batliboi | 109.12x | 3.08x | 3.87% | 0.41% | 0.21 |
| Axtel Industries | 49.00x | 6.32x | 21.26% | 2.29% | -0.64 |
| Guj Apollo Inds | NA (Loss Making) | 1.19x | 3.09% | 0.40% | 0.10 |
| Intl. Conveyors | 5.10x | 1.58x | 16.05% | 0.83% | -0.55 |
| Hercules Hoists | 105.91x | N/A | N/A | N/A | N/A |
| Cellecor Gadgets | 22.82x | N/A | N/A | N/A | N/A |
Batliboi's dividend yield of 0.41% ranks amongst the lowest in its peer group, offering minimal income support to investors. The company declared a dividend of ₹0.60 per share with an ex-dividend date of August 1, 2025, representing a conservative payout ratio of 20.90%. Given the recent quarterly loss and cash flow challenges, maintaining dividend payments may become increasingly difficult.
Valuation Analysis: Premium Unjustified by Fundamentals
At the current market price of ₹140.45, Batliboi trades at valuation multiples that appear disconnected from underlying business fundamentals. The P/E ratio of 109.12 times significantly exceeds the industry average of 31 times, implying the market expects dramatic earnings growth—an expectation that seems unrealistic given recent quarterly performance and structural profitability challenges.
The enterprise value-to-EBITDA (EV/EBITDA) multiple of 59.35 times and EV/EBIT of 101.94 times are extraordinarily high for a capital-intensive manufacturing business with volatile earnings. These multiples typically apply to high-growth technology companies or asset-light service businesses, not traditional industrial manufacturers facing competitive pressures and cyclical demand patterns.
Historical valuation grades show the stock has oscillated between "Expensive," "Fair," and "Attractive" over the past year, with the current assessment at "Fair" as of November 3, 2025. However, this grade appears generous considering the deteriorating financial trend. The stock has declined 17.38% from its 52-week high of ₹170.00 but remains 87.27% above its 52-week low of ₹75.00, suggesting significant downside risk if earnings fail to recover.
"With a P/E ratio exceeding 100 times and ROE below 4%, Batliboi's valuation implies expectations that fundamentals simply cannot support."
Shareholding: Promoter Consolidation Amid Institutional Exit
The shareholding pattern reveals significant structural changes over recent quarters. Promoter holding increased dramatically from 62.69% in March 2025 to 72.76% in June 2025, representing a 10.07 percentage point increase. This consolidation has remained stable through September 2025, suggesting promoters have confidence in the long-term prospects despite near-term challenges.
However, institutional investor activity tells a different story. Foreign institutional investor (FII) holdings declined to zero by June 2025 from 0.33% in December 2024, indicating foreign investors have completely exited the stock. Other domestic institutional investor (DII) holdings similarly dropped to zero from 0.29% in September 2024. The absence of any mutual fund or insurance company holdings (0.00% across all periods) reflects a complete lack of institutional interest.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 72.76% | 72.76% | 62.69% | 0.00% |
| FII | 0.00% | 0.00% | 0.00% | 0.00% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.00% | 0.00% | 0.00% | 0.00% |
| Non-Institutional | 27.24% | 27.24% | 37.30% | 0.00% |
The promoter group is led by Nirmal Pratap Bhogilal (29.89%), Bhogilal Family Trust (14.90%), and Kabir Nirmal Bhogilal (11.26%). Positively, there is zero promoter pledging, indicating the controlling shareholders have not leveraged their holdings. The complete absence of institutional investors (0.00% combined) is concerning, as it suggests sophisticated investors see limited value or growth potential in the current business trajectory.
Stock Performance: Short-Term Surge Masks Long-Term Underperformance
Batliboi's stock has exhibited extreme volatility across different timeframes, making it challenging for investors to assess true performance trends. Over the past week, the stock surged 23.80%, significantly outperforming the Sensex's -0.86% return and generating alpha of 24.66 percentage points. The one-month return of 47.08% appears impressive, delivering 45.51 percentage points of outperformance versus the benchmark.
However, zooming out reveals a far less attractive picture. On a one-year basis, the stock has declined 12.55%, underperforming the Sensex's 4.62% gain by 17.17 percentage points. This underperformance aligns closely with the Industrial Manufacturing sector's -12.84% return, suggesting sector-wide headwinds rather than company-specific issues alone.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 23.80% | -0.86% | +24.66% |
| 1 Month | 47.08% | 1.57% | +45.51% |
| 3 Months | 14.51% | 3.22% | +11.29% |
| 6 Months | 57.99% | 3.06% | +54.93% |
| YTD | 7.79% | 6.50% | +1.29% |
| 1 Year | -12.55% | 4.62% | -17.17% |
| 3 Years | 197.25% | 36.01% | +161.24% |
| 5 Years | 1698.34% | 98.64% | +1599.70% |
The longer-term returns appear extraordinary, with the stock delivering 197.25% over three years and a staggering 1,698.34% over five years. However, these returns reflect recovery from extremely depressed levels during the pandemic period rather than sustainable value creation. The high beta of 1.50 indicates the stock is 50% more volatile than the broader market, with volatility of 60.48% versus the Sensex's 12.39%.
From a technical perspective, the stock currently trades above all key moving averages—5-day (₹123.77), 20-day (₹100.13), 50-day (₹99.50), 100-day (₹111.64), and 200-day (₹107.44)—suggesting short-term momentum remains positive despite fundamental concerns. The overall technical trend is classified as "Mildly Bearish" as of October 27, 2025, indicating technical analysts see limited upside from current levels.
Investment Thesis: Quality Concerns Overshadow Growth
Batliboi's investment case rests on conflicting signals across key parameters. The company demonstrates reasonable long-term growth with a 14.35% sales CAGR over five years and 20.90% EBIT growth. However, this growth has not translated into shareholder value creation, as evidenced by the weak ROE of 3.87% and ROCE of 3.26%.
The quality assessment grades the company as "Below Average," reflecting long-term financial underperformance and elevated valuation parameters relative to historical norms. Whilst the financial trend was marked as "Positive" in September 2025 based on certain quarterly metrics reaching record highs, the Q2 FY26 results suggest this assessment requires urgent revision.
Mojo Score Assessment: Strong Sell at 28/100
The proprietary Mojo Score of 28 out of 100 places Batliboi firmly in "Strong Sell" territory (0-30 range). The score reflects multiple concerns: bearish technical trend, weak fundamental strength despite operating losses, and significant underperformance versus the market over the past year. The score declined from 33 (Sell) in August 2025 to the current Strong Sell rating.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Long Heritage: 133-year operating history demonstrates business resilience through multiple economic cycles
- Strong FY25 Growth: Full-year revenue growth of 44.1% and profit growth of 44.4% show capability for expansion
- Zero Pledging: Promoters have not pledged shares, indicating financial stability at ownership level
- Increased Promoter Stake: Promoter holding rose from 62.69% to 72.76%, demonstrating insider confidence
- Diversified Product Mix: Presence in both machine tools and textile engineering provides revenue diversification
- Long-Term Returns: Five-year returns of 1,698% reward patient long-term investors despite volatility
⚠ KEY CONCERNS
- Quarterly Loss: Q2 FY26 net loss of ₹2.58 crores versus ₹5.45 crores profit in Q1 signals operational instability
- Revenue Volatility: 41.58% sequential revenue decline demonstrates lack of earnings visibility and predictability
- Weak Capital Returns: ROE of 3.87% and ROCE of 3.26% indicate poor capital productivity well below cost of capital
- High Leverage: Debt-to-EBITDA of 7.45x and interest coverage of only 1.55x limit financial flexibility
- Zero Institutional Interest: Complete absence of FII, MF, and insurance holdings signals lack of professional investor confidence
- Expensive Valuation: P/E of 109x and EV/EBITDA of 59x appear unjustified by fundamentals
- Negative Operating Cash Flow: Operating cash generation of ₹2.00 crores in FY25 down from ₹6.00 crores in FY24
Outlook: What to Watch
POSITIVE CATALYSTS
- Return to quarterly profitability in Q3 FY26 would restore investor confidence
- Improvement in operating margins above 5% sustainably
- Reduction in debt levels and improvement in interest coverage ratio
- Entry of institutional investors (FII/MF) signalling improved credibility
- Stabilisation of quarterly revenue volatility with improved order book visibility
RED FLAGS
- Another quarter of losses or declining profitability in Q3 FY26
- Further deterioration in working capital or cash flow generation
- Increase in debt levels or breach of debt covenants
- Reduction in promoter stake or any promoter pledging
- Continued absence of institutional investor interest
The Verdict: Avoid Until Operational Stability Returns
Batliboi Ltd. presents a classic case of a company caught between impressive long-term growth and troubling near-term operational challenges. Whilst the 44.1% revenue growth in FY25 and 133-year operating history command respect, the recent quarterly loss, extreme revenue volatility, and weak capital returns raise fundamental questions about business quality and sustainability.
The valuation appears entirely disconnected from fundamentals, with a P/E ratio exceeding 100 times for a business generating sub-4% returns on equity. The complete absence of institutional investors and recent FII/DII exits suggest professional market participants have already reached a negative conclusion. The high debt burden, weak interest coverage, and negative operating cash flow further limit the company's ability to navigate challenging periods.
Investment Verdict
Score: 28/100
For Fresh Investors: Avoid initiating positions at current valuations. The combination of quarterly losses, extreme revenue volatility, weak returns on capital, and expensive valuation multiples creates an unfavourable risk-reward profile. Wait for at least two consecutive quarters of profitable operations and evidence of margin stability before considering entry.
For Existing Holders: Consider exiting positions on any technical bounce. The Q2 FY26 results represent a significant deterioration in business fundamentals that may take several quarters to rectify. With better opportunities available in the industrial manufacturing space offering superior returns on capital at more reasonable valuations, maintaining exposure appears difficult to justify.
Fair Value Estimate: ₹85-95 per share (39-32% downside from current levels), based on 50-60x P/E on normalised earnings of ₹1.50-1.60 per share, assuming return to historical profitability levels.
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. The author and publisher are not responsible for any investment decisions made based on information contained in this article.
