Bodhi Tree Multimedia Q3 FY26: Revenue Surge Masks Profitability Concerns

With a market capitalisation of ₹141.00 crores, the Mumbai-based media and entertainment company delivered mixed signals during the quarter—revenue surged 131.30% year-on-year to ₹39.02 crores, but profitability came under pressure due to margin compression and rising costs. The nine-month performance showed net profit growth of 69.55%, yet the sequential profit decline raises questions about earnings sustainability.

The quarter highlighted the company's ability to scale revenues rapidly but also exposed challenges in translating topline growth into bottom-line expansion. Operating profit margin (excluding other income) contracted to 10.53% from 16.71% in the previous quarter, whilst PAT margin plummeted from 13.03% to 6.02%. This margin compression, coupled with elevated interest costs and tax expenses, significantly dented profitability despite the strong revenue performance.

Financial Performance: Growth Momentum Challenged by Margin Erosion

Bodhi Tree Multimedia's Q3 FY26 results presented a tale of two metrics—robust revenue expansion juxtaposed against deteriorating profitability. Net sales surged 66.75% sequentially to ₹39.02 crores, marking the second-highest quarterly revenue in the company's recent history. On a year-on-year basis, revenue growth accelerated to 131.30%, reflecting strong demand for the company's media and entertainment offerings. For the nine-month period ending December 2025, revenues stood at ₹80.54 crores, up 41.30% compared to the same period last year.

However, this topline strength failed to translate into proportionate profit growth. Consolidated net profit for Q3 FY26 came in at ₹1.45 crores, down 44.87% from ₹2.63 crores in Q2 FY26. The year-on-year comparison showed marginal growth of just 1.40%, highlighting the company's struggle to maintain profitability momentum. For the nine-month period, net profit reached ₹4.51 crores, representing a 69.55% increase over the previous year—a respectable performance, yet the sequential decline in Q3 raises sustainability concerns.

Margin performance deteriorated across the board during the quarter. Operating profit margin (excluding other income) contracted sharply to 10.53% from 16.71% in Q2 FY26, a decline of 618 basis points. PAT margin compressed even more dramatically, falling from 13.03% to 6.02%—a contraction of 701 basis points. This margin erosion appears driven by higher operational costs, increased interest expenses (up to ₹0.81 crores from ₹0.62 crores), and elevated depreciation charges (₹0.63 crores versus ₹0.08 crores in Q2).

The quality of earnings also warrants scrutiny. Other income declined to ₹0.56 crores from ₹1.00 crores in Q2 FY26, reducing the cushion for operating performance. Employee costs surged to ₹2.21 crores from ₹0.37 crores, suggesting either seasonal hiring or expansion-related investments. The tax rate remained elevated at 26.65%, marginally lower than the previous quarter's 27.55% but still above historical averages.

Operational Challenges: Weak Capital Efficiency and Leverage Concerns

Beneath the surface of revenue growth lie structural concerns about operational efficiency and capital deployment. Bodhi Tree's average return on equity (ROE) stands at a modest 8.83%, significantly below the threshold of 15% typically associated with quality businesses. This weak ROE indicates the company is generating insufficient returns relative to shareholder capital, a red flag for investors seeking efficient capital allocation.

Return on capital employed (ROCE) tells a slightly better story at 17.03% on average, though the latest figure has declined to 11.77%. This suggests the company is earning reasonable returns on its deployed capital, but the declining trend raises questions about whether recent expansion has been value-accretive. With a five-year EBIT growth rate of 16.50% lagging the sales CAGR of 25.77%, there are clear signs of operating leverage challenges.

The balance sheet reveals a company in expansion mode with mounting working capital pressures. Total current assets stood at ₹84.06 crores as of March 2025, up from ₹53.71 crores the previous year, whilst current liabilities surged to ₹58.77 crores from ₹33.64 crores. Trade payables increased significantly to ₹24.94 crores from ₹21.69 crores, suggesting extended payment cycles or supplier financing. The cash flow statement for FY25 showed negative operating cash flow of ₹14.00 crores, primarily driven by working capital expansion of ₹21.00 crores—a concerning sign of cash conversion inefficiency.

Leverage remains moderate with an average debt-to-EBITDA ratio of 2.24 times and net debt-to-equity of 0.28 times. Long-term debt has been virtually eliminated (₹0 crores versus ₹0.02 crores in March 2024), suggesting the company has prioritised deleveraging. However, interest coverage, measured by EBIT-to-interest, stands at a moderate 5.57 times on average, leaving limited cushion for earnings volatility.

Shareholding Dynamics: Promoter Dilution and Institutional Apathy

The shareholding pattern reveals significant structural changes that merit investor attention. Promoter holding declined sharply from 35.29% in March 2025 to 24.43% by May 2025, a reduction of 10.86 percentage points. This substantial dilution occurred in a single quarter, suggesting either equity fundraising, stake sale, or reclassification. Since May 2025, promoter holding has remained stable at 24.43% through December 2025, indicating no further dilution in recent quarters.

Institutional participation remains negligible, with total institutional holdings at just 9.04%. Foreign institutional investors (FIIs) hold a minuscule 0.39%, down from 3.86% in May 2025, indicating foreign capital has exited the stock. Mutual fund holding stands at zero, reflecting complete absence of domestic institutional interest. Other domestic institutional investors (DIIs) hold 8.64%, marginally down from 8.79% in the previous quarter. The lack of institutional sponsorship is a significant negative, as it limits liquidity and suggests professional investors see limited merit in the stock.

Non-institutional holdings dominate at 66.53%, comprising primarily retail and high-net-worth individuals. This concentration creates liquidity risk and potential volatility, as retail investors tend to be more sentiment-driven than institutional counterparts. The promoter group is led by Mautik Ajit Tolia (24.38%) and Sukesh Devdas Motwani (0.06%), though detailed information on pledged shares remains unavailable, adding to transparency concerns.

Valuation Analysis: Attractive Entry Point or Value Trap?

At the current price of ₹7.52, Bodhi Tree trades at a price-to-earnings (TTM) multiple of 20.23 times, in line with the media and entertainment industry average of 20 times. The price-to-book value stands at 1.69 times against a book value per share of ₹2.62, suggesting a moderate premium to net asset value. Enterprise value multiples paint a mixed picture—EV/EBITDA at 12.75 times and EV/EBIT at 13.09 times appear reasonable for a growing media company, whilst EV/Sales at 1.60 times reflects the market's tempered expectations for profitability.

The stock's valuation grade has improved from "Fair" to "Very Attractive" as of October 2025, primarily driven by the price correction from highs rather than fundamental improvement. This creates an interesting dynamic—the stock appears statistically cheap, yet the underlying business quality remains questionable. The PEG ratio of 0.24 suggests the stock is undervalued relative to growth, but this metric can be misleading when earnings quality is suspect.

Comparing Bodhi Tree to its peer group reveals relative undervaluation on most metrics but also highlights fundamental weaknesses. The company's ROE of 8.83% lags behind peers like Digicontent (43.71%) and Tips Films (19.23%), though it compares favourably to Sambhaav Media (1.18%). The P/E multiple of 20.23 times is significantly lower than 7Seas Entertainment's 85.04 times but higher than Digicontent's 7.32 times. The price-to-book ratio of 1.69 times sits in the middle of the peer range, neither cheap nor expensive on this metric.

The key question for investors is whether the current valuation reflects a genuine opportunity or a value trap. Whilst the stock appears cheap on traditional metrics, the weak ROE, deteriorating margins, negative operating cash flow, and lack of institutional interest suggest fundamental challenges that may justify the discount. A fair value estimate is difficult to establish given the earnings volatility, but based on peer multiples and quality considerations, the stock appears fairly valued at current levels rather than materially undervalued.

Stock Performance: Persistent Underperformance Across All Timeframes

Bodhi Tree's stock performance has been dismal across virtually all timeframes, significantly underperforming both the broader market and its sector peers. The stock is down 20.94% over the past year, whilst the Sensex gained 9.85%, resulting in negative alpha of 30.79 percentage points. This underperformance has accelerated in recent months, with the stock declining 16.26% year-to-date versus the Sensex's 1.81% decline.

The two-year performance is particularly alarming, with the stock plunging 58.41% whilst the Sensex gained 17.73%—a staggering negative alpha of 76.14 percentage points. Even relative to its sector, Bodhi Tree has underperformed, with the media and entertainment sector declining 14.01% over the past year compared to the stock's 20.94% decline, representing sector underperformance of 6.93 percentage points.

Technical indicators uniformly point to weakness. The stock trades below all key moving averages—5-day (₹7.80), 20-day (₹7.81), 50-day (₹8.08), 100-day (₹8.36), and 200-day (₹8.33)—indicating sustained downward pressure. The technical trend turned bearish on January 29, 2026, at ₹7.73, and multiple indicators including MACD, Bollinger Bands, and moving averages flash bearish signals. The stock's beta of 1.50 indicates high volatility, with price swings 50% greater than the broader market.

Risk-adjusted returns paint an equally concerning picture. With a volatility of 52.21% over the past year and negative absolute returns, the risk-adjusted return stands at -0.40, placing the stock firmly in the "high risk, low return" category. The Sharpe ratio is negative, indicating investors are not being compensated for the elevated risk. The stock's distance from its 52-week high of ₹10.60 stands at 29.06%, whilst it trades just 5.17% above its 52-week low of ₹7.15, suggesting limited downside cushion.

Investment Thesis: Speculative Bet with Limited Margin of Safety

The investment case for Bodhi Tree Multimedia rests on a few pillars: attractive statistical valuation, improving revenue trajectory, and a "very attractive" valuation grade. However, these positives are overwhelmed by a litany of concerns that make the stock unsuitable for conservative investors. The company's overall quality grade remains "below average," reflecting weak long-term financial performance and structural challenges.

The financial trend assessment shows "positive" based on nine-month PAT growth of 69.55% and quarterly revenue growth of 58.30% versus the previous four-quarter average. However, this positive classification masks the concerning sequential profit decline in Q3 FY26. The technical trend remains firmly bearish, with the stock trading below all key moving averages and multiple indicators flashing sell signals.

Key Strengths & Risk Factors

Outlook: What to Watch

The coming quarters will be critical in determining whether Bodhi Tree can sustain its revenue momentum whilst improving profitability and cash generation. Investors should closely monitor Q4 FY26 results for signs of margin recovery and cash flow improvement. Any further sequential profit decline or margin compression would validate concerns about the business model's sustainability. Conversely, evidence of operating leverage—where profit growth exceeds revenue growth—would provide confidence in the investment thesis.

Key monitoring points include: (1) quarterly operating margin trends—recovery above 15% would be positive; (2) operating cash flow conversion—positive cash generation would address a major concern; (3) institutional investor activity—any mutual fund or FII participation would signal improving sentiment; (4) working capital management—stabilisation of current liabilities relative to assets would ease liquidity concerns; and (5) technical price action—a sustained move above the 200-day moving average (₹8.33) would indicate trend reversal.