Beryl Securities Q2 FY26: Losses Mount as Interest Costs Surge

The September 2025 quarter exposed fundamental weaknesses in Beryl Securities' business model, with the company struggling to maintain profitability despite robust top-line growth. Whilst net sales surged 92.31% year-on-year to ₹0.75 crores, the quarter-on-quarter decline of 7.41% from ₹0.81 crores signals momentum loss. More concerning is the dramatic deterioration in profitability metrics, with operating margins collapsing from 41.98% in Q1 FY26 to just 8.0% in Q2 FY26, reflecting severe operational challenges.

The company's return on equity stands at a meagre 2.66%, significantly below industry standards and highlighting poor capital utilisation. With a book value per share of ₹19.24 and current trading at ₹29.46, the stock commands a price-to-book ratio of 1.43x, which appears unjustified given the weak profitability profile. The technical trend has turned mildly bearish, with the stock trading below key moving averages and showing high volatility of 66.08%.

Financial Performance: Margin Collapse and Rising Debt Burden

The Q2 FY26 financial performance reveals a troubling pattern of deteriorating profitability despite revenue expansion. Net sales of ₹0.75 crores in Q2 FY26, whilst representing impressive 92.31% year-on-year growth, declined 7.41% sequentially from Q1 FY26's ₹0.81 crores. This sequential contraction suggests the company's growth momentum is faltering, raising questions about business sustainability.

Operating profit before depreciation, interest, tax, and other income (PBDIT) stood at merely ₹0.06 crores in Q2 FY26, translating to an anaemic operating margin of 8.0%. This represents a catastrophic collapse from the 41.98% margin achieved in Q1 FY26 and marks one of the weakest quarterly performances in recent history. The margin compression was driven primarily by a disproportionate increase in employee costs, which rose to ₹0.43 crores from ₹0.36 crores quarter-on-quarter, consuming 57.33% of revenues.

The interest expense burden escalated dramatically to ₹0.20 crores in Q2 FY26 from ₹0.12 crores in Q1 FY26, representing a 66.67% quarter-on-quarter surge. This sharp increase in financing costs pushed the company into negative territory, with profit before tax declining to -₹0.16 crores. The tax credit of ₹0.05 crores (reflecting a negative tax rate of -31.25%) was insufficient to prevent a net loss of ₹0.21 crores, compared to a ₹0.15 crores profit in the previous quarter.

The company's profitability trajectory has been highly erratic, alternating between profits and losses across recent quarters. Whilst Q1 FY26 showed promise with a ₹0.15 crores profit, the latest quarter's loss of ₹0.21 crores represents the worst performance since Mar'25, when the company posted a ₹0.15 crores loss. This volatility reflects fundamental operational instability rather than temporary setbacks.

Operational Challenges: Cost Structure and Capital Efficiency

Beryl Securities' operational metrics paint a concerning picture of a company struggling with cost management and capital efficiency. The employee cost burden has escalated significantly, rising to ₹0.43 crores in Q2 FY26 from ₹0.36 crores in Q1 FY26, representing 57.33% of net sales. This elevated cost base leaves minimal room for profitability, especially when combined with rising interest expenses.

The company's return on equity of 2.66% stands as a glaring weakness, ranking among the lowest in its peer group and signalling poor capital utilisation. For context, even modest performers in the NBFC sector typically achieve ROE levels above 10%, making Beryl Securities' 2.66% particularly concerning. This weak ROE indicates the company is failing to generate adequate returns for its shareholders, destroying rather than creating value.

The balance sheet reveals limited financial flexibility, with shareholder funds of ₹9.72 crores as of Mar'24 and minimal current assets of ₹1.06 crores. The company operates with a debt-to-equity ratio of 0.23, which whilst appearing conservative, has not prevented the recent surge in interest costs. Fixed assets remain minimal at ₹0.02 crores, reflecting the asset-light nature of the stockbroking business but also highlighting the lack of tangible asset backing.

NBFC Sector Context: Underperformance Against Peers

The broader NBFC sector has delivered robust returns of 25.11% over the past year, benefiting from strong credit demand and improving asset quality metrics across the industry. Beryl Securities, however, has significantly underperformed this sectoral trend, posting a negative return of -10.73% over the same period, representing an underperformance of 35.84 percentage points versus the sector benchmark.

The company's quality grade of "Below Average" reflects its weak long-term financial performance, with five-year sales growth of 23.56% offset by anaemic EBIT growth of just 1.55%. This divergence between top-line and bottom-line growth indicates deteriorating operational efficiency and margin compression over the medium term. The average ROE of 2.66% over this period confirms the structural profitability challenges facing the business.

Institutional investors have shown no interest in Beryl Securities, with zero holdings from foreign institutional investors, mutual funds, insurance companies, or other domestic institutional investors. This complete absence of institutional participation signals a lack of confidence in the company's business model and growth prospects. The promoter holding of 60.59% as of Sep'25 (up sharply from 22.70% in Jun'25) suggests recent consolidation of control, though this has not translated into improved operational performance.

Beryl Securities' price-to-book ratio of 1.43x appears elevated relative to its operational performance, particularly when compared to peers like Neil Industries (0.26x P/BV) and Daulat Securities (0.73x P/BV). Whilst the company's ROE of 2.66% exceeds some peers, it remains fundamentally weak and does not justify the current valuation premium. The company's loss-making status in recent quarters further undermines the valuation case.

Valuation Analysis: Expensive for a Loss-Making Entity

Beryl Securities trades at a price-to-book value of 1.43x, which appears significantly overvalued given the company's loss-making status and weak return on equity of 2.66%. The current market price of ₹29.46 represents a 53.08% premium to the book value per share of ₹19.24, a valuation gap that lacks fundamental justification. The stock has been graded as "Very Expensive" by proprietary valuation metrics, having oscillated between "Expensive" and "Very Expensive" ratings throughout October and November 2025.

The enterprise value-to-EBITDA multiple of 15.03x and EV-to-sales ratio of 5.52x appear elevated for a micro-cap NBFC with erratic profitability and minimal institutional interest. These multiples would be more appropriate for high-growth, consistently profitable companies, which Beryl Securities demonstrably is not. The absence of a trailing P/E ratio (due to losses) further highlights the disconnect between valuation and fundamentals.

The stock's 52-week range of ₹22.00 to ₹41.88 shows significant volatility, with the current price of ₹29.46 sitting 29.66% below the 52-week high but 33.91% above the 52-week low. This positioning suggests the stock has given back substantial gains from earlier in the year, likely reflecting investor recognition of deteriorating fundamentals. The year-to-date decline of 24.07% underscores the negative sentiment surrounding the stock.

Shareholding Pattern: Promoter Consolidation Amid Struggles

The shareholding pattern reveals a dramatic shift in ownership structure during Q2 FY26, with promoter holding surging to 60.59% in Sep'25 from just 22.70% in Jun'25, representing a substantial 37.89 percentage point increase. This sharp consolidation of promoter stake coincided with the quarter's poor financial performance, suggesting promoters may be attempting to stabilise the company through increased control. The promoter holding had previously declined sharply from 59.78% in Sep'24 to 23.01% in Dec'24, before the recent reconsolidation.

Non-institutional investors hold the remaining 39.41% of shares, with absolutely no participation from foreign institutional investors, mutual funds, insurance companies, or other domestic institutional investors. This complete absence of institutional interest is highly unusual and signals a lack of confidence in the company's business model, governance, or growth prospects. The zero institutional holding contrasts sharply with most listed NBFCs, where institutional investors typically hold significant stakes.

The key promoters include Vineet Bajpai (29.48%), Sanyam Jain (15.15%), Agam Gupta (15.15%), and Rani Sulochana Bajpai (0.81%). Positively, there is no promoter pledging reported, indicating the promoter group is not using shares as collateral for borrowings. However, the volatile promoter holding pattern over the past year raises questions about ownership stability and strategic direction.

Stock Performance: Significant Underperformance and High Volatility

Beryl Securities has delivered disappointing returns across most timeframes, significantly underperforming both the broader market and its sectoral peers. Over the past year, the stock declined 10.73% whilst the Sensex gained 9.00%, resulting in negative alpha of 19.73 percentage points. The year-to-date performance is even worse, with the stock down 24.07% compared to the Sensex's 8.22% gain, representing underperformance of 32.29 percentage points.

The stock's volatility of 66.08% is extraordinarily high, more than five times the Sensex volatility of 12.26%, placing it firmly in the "high risk, low return" category. The risk-adjusted return of -0.16 over the past year compares unfavourably to the Sensex's risk-adjusted return of 0.73, highlighting that investors are being inadequately compensated for the elevated risk. The stock's beta of 1.50 indicates it is 50% more volatile than the broader market, amplifying losses during market downturns.

Whilst longer-term returns appear impressive (270.57% over three years), these gains have been largely eroded in recent quarters as fundamental weaknesses have become apparent. The one-month return of 21.58% represents a temporary bounce rather than a sustainable trend, as evidenced by the subsequent decline. The technical trend has turned mildly bearish, with the stock trading below all key moving averages and showing no signs of stabilisation.

Investment Thesis: Multiple Red Flags Across Parameters

The investment thesis for Beryl Securities is fundamentally weak across all critical parameters. The company's Mojo score of 21 out of 100 places it firmly in "Strong Sell" territory, with the rating having deteriorated from "Sell" in June 2025. This comprehensive scoring system evaluates valuation, quality, financial trends, and technical factors, with Beryl Securities failing on most counts.

The valuation grade of "Very Expensive" reflects the unjustified premium the stock commands despite loss-making operations. The quality assessment of "Below Average" is driven by weak ROE of 2.66%, minimal institutional interest, and inconsistent financial performance. The financial trend is classified as "Flat" with the latest quarter showing a loss, whilst the technical trend has turned mildly bearish with the stock breaking below support levels.

Key Strengths and Risk Factors

Outlook: What Lies Ahead

The outlook for Beryl Securities remains challenging, with multiple headwinds outweighing limited positives. The company needs to demonstrate at least two consecutive quarters of profitability with sustainable margins above 25% to rebuild investor confidence. The path to improved ROE requires either significant profit growth or capital reduction, neither of which appears imminent given current trends. Until fundamental improvements materialise, the stock remains unsuitable for investment.