The quarter's performance reveals a company grappling with margin pressures and profitability challenges despite maintaining stable revenue levels. Whilst net sales remained virtually flat at ₹338.75 crores (down 0.47% quarter-on-quarter), the company's ability to convert revenue into bottom-line profit has deteriorated significantly compared to the previous year, raising questions about operational efficiency and competitive positioning in an increasingly challenging consumer products landscape.
The December quarter results underscore a challenging operating environment for Borosil, with the company's profitability metrics deteriorating substantially from the previous year despite maintaining revenue stability. The 342 basis points decline in PAT margin year-on-year represents a significant erosion in profitability, suggesting either pricing pressures, cost inflation, or operational inefficiencies that management has struggled to address effectively.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 338.75 | -0.47% | 23.95 | +5.46% | 7.07% |
| Sep'25 | 340.36 | +46.27% | 22.71 | +30.44% | 6.67% |
| Jun'25 | 232.69 | -13.88% | 17.41 | +56.28% | 7.48% |
| Mar'25 | 270.18 | -20.09% | 11.14 | -68.60% | 4.12% |
| Dec'24 | 338.10 | +21.52% | 35.48 | +93.67% | 10.49% |
| Sep'24 | 278.23 | +28.33% | 18.32 | +97.20% | 6.58% |
| Jun'24 | 216.81 | — | 9.29 | — | 4.28% |
Financial Performance: Flat Revenue Growth Masks Margin Deterioration
Borosil's Q3 FY26 financial performance presents a mixed picture characterised by revenue stagnation and profitability challenges. Net sales for the quarter stood at ₹338.75 crores, virtually unchanged from the previous quarter's ₹340.36 crores, representing a marginal 0.47% sequential decline. On a year-on-year basis, revenue growth was anaemic at just 0.19%, indicating the company's struggle to drive top-line expansion in a competitive market environment.
The company's operating profit (PBDIT excluding other income) improved sequentially to ₹52.88 crores from ₹48.30 crores in Q2 FY26, translating to an operating margin of 15.61%, up 142 basis points quarter-on-quarter. However, this improvement fails to mask the underlying year-on-year deterioration, with the operating margin declining 47 basis points from 16.08% in December 2024. This suggests that whilst management has made some progress in cost control on a sequential basis, the company faces structural margin pressures compared to the previous year.
Employee costs remained elevated at ₹30.60 crores in Q3 FY26, up from ₹30.09 crores in the previous quarter, representing approximately 9.03% of net sales. Depreciation charges stood at ₹21.71 crores, marginally lower than the previous quarter's ₹22.06 crores, reflecting the company's substantial fixed asset base. Interest costs declined to ₹1.34 crores from ₹1.48 crores quarter-on-quarter, indicating improved debt management or reduced borrowing levels.
The most concerning aspect of the quarter's performance lies in the substantial year-on-year profitability decline. Net profit of ₹23.95 crores represents a 32.50% decrease from ₹35.48 crores in December 2024, despite revenue remaining virtually flat. This disproportionate profit decline relative to revenue performance indicates significant operational challenges, potentially stemming from raw material cost inflation, pricing pressures, or increased competition that has compressed margins.
Operational Challenges: Weak Return Ratios Signal Efficiency Concerns
Borosil's operational efficiency metrics reveal fundamental challenges in capital deployment and profitability generation. The company's average return on equity (ROE) stands at a weak 8.36%, significantly below industry standards and peer performance. This low ROE indicates that the company generates less than ₹8.40 of profit for every ₹100 of shareholder equity, reflecting poor capital efficiency and suggesting that management has struggled to deploy shareholders' capital productively.
Similarly, the company's average return on capital employed (ROCE) of 10.30% indicates suboptimal utilisation of total capital invested in the business. Whilst the company maintains a healthy balance sheet with low leverage (average net debt to equity of just 0.05), the returns generated on this capital remain disappointing. The latest ROCE figure of 10.32% shows minimal improvement, suggesting persistent structural challenges in achieving operational excellence.
⚠️ Capital Efficiency Warning
Weak Return Metrics: Borosil's ROE of 8.36% and ROCE of 10.30% fall well below acceptable thresholds for a consumer products company. These weak returns indicate that the company struggles to generate adequate profits relative to the capital employed, raising concerns about competitive positioning and operational efficiency. For context, quality consumer products companies typically deliver ROE above 15% and ROCE above 18%.
Implication: The combination of stagnant revenue growth and weak return ratios suggests the company may be trapped in a low-margin, capital-intensive business model that limits value creation for shareholders.
From a balance sheet perspective, Borosil maintains a relatively conservative financial structure. As of March 2025, the company reported shareholder funds of ₹807.65 crores and long-term debt of ₹43.43 crores, resulting in a debt-to-equity ratio of approximately 0.05. This low leverage provides financial flexibility but also highlights the company's inability to generate strong returns even with a predominantly equity-funded balance sheet.
The company's cash flow dynamics present additional concerns. For FY25, Borosil reported negative operating cash flow of ₹19 crores, a significant deterioration from positive ₹48 crores in FY24. This negative operating cash generation, driven primarily by adverse working capital movements of ₹179 crores, suggests the company is tying up increasing amounts of capital in inventory and receivables, further straining operational efficiency.
Industry Context: Struggling in a Competitive Consumer Products Landscape
Borosil operates in the highly competitive diversified consumer products sector, where the company faces intense competition from both organised players and unorganised manufacturers. The company's 0.19% year-on-year revenue growth in Q3 FY26 stands in stark contrast to the broader sector's performance, with the diversified consumer products sector delivering 32.72% returns over the past year whilst Borosil's stock declined 33.30%.
This massive underperformance of 66.02 percentage points versus the sector benchmark indicates that Borosil faces company-specific challenges beyond broader industry headwinds. The company's inability to capitalise on sector growth trends suggests either market share losses to competitors, product portfolio challenges, or geographic concentration risks that have limited its growth potential.
The consumer products industry in India has witnessed significant premiumisation trends and channel evolution, with e-commerce and modern retail gaining share. Companies that have successfully adapted to these changes through product innovation, brand building, and omnichannel distribution have thrived, whilst those lagging in these areas have struggled. Borosil's stagnant revenue growth suggests the company may be falling behind in adapting to these structural shifts in the industry.
Sector Underperformance: A Troubling Divergence
Borosil's 33.30% stock price decline over the past year contrasts sharply with the diversified consumer products sector's 32.72% gain, resulting in a staggering 66.02 percentage point underperformance. This divergence suggests investors have lost confidence in the company's ability to compete effectively, with concerns centring on weak profitability, stagnant growth, and management's inability to improve operational metrics despite favourable industry conditions.
Peer Comparison: Valuation Discount Reflects Fundamental Weakness
A comparative analysis of Borosil against its peers in the diversified consumer products sector reveals why the stock trades at a relative discount despite appearing expensive on absolute metrics. The company's PE ratio of 35.95x, whilst elevated in absolute terms, trades below the peer average of approximately 44x, reflecting the market's recognition of Borosil's inferior quality and growth profile.
Most tellingly, Borosil's ROE of 8.36% significantly lags peers such as Safari Industries (18.46%), Kajaria Ceramics (16.14%), and Cera Sanitaryware (17.11%). This ROE gap of 700-1000 basis points explains the company's lower price-to-book multiple of 3.67x compared to peers like Safari Industries (9.85x) and Cera Sanitaryware (4.82x). The market clearly values companies with superior capital efficiency at higher multiples, and Borosil's weak returns justify its relative valuation discount.
| Company | P/E Ratio (TTM) | ROE (%) | P/BV Ratio | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Borosil | 35.95 | 8.36 | 3.67 | — | 0.05 |
| Kajaria Ceramics | 34.49 | 16.14 | 4.98 | 1.31 | -0.09 |
| Safari Industries | 61.92 | 18.46 | 9.85 | 0.17 | -0.09 |
| Cera Sanitaryware | 26.40 | 17.11 | 4.82 | 1.28 | -0.47 |
| Midwest | 53.49 | 0.00 | 8.19 | — | 0.00 |
| VIP Industries | NA (Loss Making) | 8.67 | 11.87 | — | 1.58 |
The peer comparison also highlights Borosil's lack of dividend payments, with the company not distributing any dividends to shareholders despite maintaining positive profitability. In contrast, peers like Kajaria Ceramics and Cera Sanitaryware offer dividend yields of 1.31% and 1.28% respectively, providing tangible returns to shareholders beyond capital appreciation. This absence of dividend payments, combined with weak stock price performance, leaves Borosil shareholders with no return avenue, further dampening investment appeal.
Valuation Analysis: Expensive Despite Relative Discount
Borosil's current valuation presents a paradox: the stock appears expensive on absolute metrics yet trades at a discount to higher-quality peers. At a PE ratio of 35.95x trailing twelve-month earnings, the stock commands a significant premium to its historical averages, particularly concerning given the deteriorating profitability trends. The company's price-to-book ratio of 3.67x, whilst below some peers, remains elevated for a business generating sub-10% ROE.
The stock's enterprise value metrics further underscore the valuation challenge. With an EV/EBITDA multiple of 17.82x and EV/EBIT of 34.38x, Borosil trades at levels typically reserved for high-growth, high-margin businesses. However, the company's 0.19% revenue growth and declining profitability hardly justify such rich valuations. The EV/Sales ratio of 2.67x appears particularly stretched given the company's 7.07% PAT margin and weak return ratios.
The stock's current price of ₹260.75 sits 35.84% below its 52-week high of ₹406.40, reflecting the market's reassessment of the company's growth and profitability prospects. Whilst this decline might appear to offer value, the fundamental deterioration in business metrics suggests the correction reflects genuine concerns rather than temporary market pessimism. The stock's classification as "expensive" by valuation grade assessments, despite the significant price decline, underscores the challenge: even after falling substantially, Borosil remains overvalued relative to its earnings power and growth prospects.
Shareholding Pattern: Stable Promoter Base Amidst Institutional Apathy
Borosil's shareholding structure reveals a stable promoter base but minimal institutional interest, reflecting the market's cautious stance on the company's prospects. Promoter holding has remained remarkably stable at 64.62% as of December 2025, with only marginal sequential changes over the past several quarters. This high and stable promoter stake provides governance comfort and suggests promoter confidence in the business, though it also limits free float and potentially liquidity.
Institutional participation in Borosil remains notably weak, with total institutional holdings (FII + MF + Insurance + Other DII) at just 6.45% as of the latest quarter. Mutual fund holdings declined marginally to 3.47% from 3.57% in the previous quarter, whilst FII holdings remained negligible at 0.35%. This low institutional ownership indicates that professional investors have largely avoided the stock, likely due to concerns about growth prospects, profitability metrics, and valuation.
| Shareholder Category | Dec'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter Holding | 64.62% | 64.63% | 64.65% | 64.68% | -0.01% |
| FII Holding | 0.35% | 0.35% | 0.29% | 0.80% | 0.00% |
| Mutual Fund Holding | 3.47% | 3.57% | 3.12% | 3.11% | -0.10% |
| Other DII Holdings | 2.63% | 2.57% | 3.16% | 2.33% | +0.06% |
| Non-Institutional | 28.93% | 28.89% | 28.79% | 29.09% | +0.04% |
The absence of insurance company holdings and minimal FII participation (just 28 foreign institutional investors hold the stock) further underscores the lack of institutional conviction. With only four mutual funds holding positions in Borosil, the stock clearly fails to meet the investment criteria of most professional fund managers, who typically seek companies with strong growth visibility, robust profitability metrics, and attractive risk-reward profiles.
On a positive note, promoter holdings show no pledging, eliminating concerns about financial stress or potential forced selling at the promoter level. The promoter group, led by key stakeholders including Kiran Kheruka (23.95%) and Rekha Kheruka (13.11%), maintains significant skin in the game, aligning their interests with minority shareholders.
Stock Performance: Severe Underperformance Across All Timeframes
Borosil's stock price performance has been dismal across virtually all meaningful timeframes, with the stock significantly underperforming both the Sensex and its sector peers. Over the past year, the stock has declined 33.30% whilst the Sensex gained 6.44%, resulting in negative alpha of 39.74 percentage points. This substantial underperformance reflects the market's loss of confidence in the company's ability to deliver profitable growth.
The underperformance extends across multiple timeframes. Over three months, Borosil declined 26.21% versus the Sensex's marginal 0.17% decline, generating negative alpha of 26.04 percentage points. The six-month performance shows a similar pattern, with the stock down 20.16% against the Sensex's 3.23% gain. Even the recent one-week performance, whilst positive at 6.62%, has underperformed the stock's longer-term trend, suggesting any rallies remain shallow and unsustainable.
| Period | Stock Return | Sensex Return | Alpha | Performance |
|---|---|---|---|---|
| 1 Week | 6.62% | 0.91% | +5.71% | Outperformance |
| 1 Month | -7.22% | -2.49% | -4.73% | Underperformance |
| 3 Month | -26.21% | -0.17% | -26.04% | Severe Underperformance |
| 6 Month | -20.16% | 3.23% | -23.39% | Severe Underperformance |
| YTD | -7.32% | -2.24% | -5.08% | Underperformance |
| 1 Year | -33.30% | 6.44% | -39.74% | Severe Underperformance |
| 2 Years | -24.78% | 16.15% | -40.93% | Severe Underperformance |
| 3 Years | -8.32% | 36.94% | -45.26% | Severe Underperformance |
From a technical perspective, Borosil's stock remains firmly in bearish territory, with the current trend classified as "bearish" since December 5, 2025. The stock trades below all key moving averages—5-day (₹257.74), 20-day (₹262.65), 50-day (₹283.58), 100-day (₹313.75), and 200-day (₹326.79)—a clear indication of sustained selling pressure and lack of buying interest. Technical indicators including MACD, Bollinger Bands, and KST all signal bearish momentum on both weekly and monthly timeframes.
The stock's high beta of 1.35 indicates it tends to be more volatile than the broader market, amplifying both gains and losses. However, in the current environment, this high beta has worked against shareholders, magnifying the downside during market weakness. The risk-adjusted return of -0.98 over the past year, compared to the Sensex's 0.56, underscores the poor risk-reward profile, with the stock delivering negative returns despite elevated volatility of 34.00%.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
Borosil's investment thesis faces significant headwinds across multiple dimensions. The company's proprietary advisory score of 34/100 places it firmly in "SELL" territory, reflecting concerns about valuation, quality, financial trends, and technical momentum. The stock's classification as "expensive" on valuation metrics, "average" on quality assessment, "flat" on financial trend, and "bearish" on technical trend creates a challenging backdrop for potential investors.
The quality assessment, whilst rated "average," masks underlying weaknesses. The company's 5-year sales CAGR of 17.48% and EBIT growth of 58.12% appear impressive on the surface, but recent quarters reveal a sharp deceleration in growth momentum. More concerning, the company's average ROE of 8.36% and ROCE of 10.30% indicate persistent challenges in generating adequate returns on capital, a fundamental requirement for long-term value creation.
Key Strengths & Risk Factors
KEY STRENGTHS
- Strong Balance Sheet: Low debt-to-equity ratio of 0.05 with no promoter pledging provides financial flexibility and reduces solvency risk
- Stable Promoter Base: 64.62% promoter holding with no pledging indicates long-term commitment and alignment with minority shareholders
- Sequential Margin Improvement: Operating margin improved 142 bps QoQ to 15.61%, suggesting some progress on cost management
- Established Market Position: Presence in diversified consumer products with recognised brand in certain segments
- Strong Interest Coverage: EBIT to interest ratio of 29.23x indicates comfortable debt servicing capability
KEY CONCERNS
- Profitability Collapse: Net profit declined 32.50% YoY despite flat revenue, indicating severe margin compression and operational challenges
- Weak Return Ratios: ROE of 8.36% and ROCE of 10.30% significantly lag peers and industry standards, reflecting poor capital efficiency
- Revenue Stagnation: Near-zero revenue growth of 0.19% YoY signals market share losses or demand challenges
- Expensive Valuation: PE of 35.95x and P/BV of 3.67x appear unjustified given weak fundamentals and deteriorating trends
- Negative Operating Cash Flow: FY25 operating cash flow of -₹19 crores raises concerns about working capital management
- Minimal Institutional Interest: Just 6.45% institutional holdings indicates professional investors avoid the stock
- Severe Stock Underperformance: 33.30% decline over one year with 66.02 percentage points underperformance versus sector
Outlook: Limited Catalysts Amidst Multiple Headwinds
The outlook for Borosil remains challenging in the near to medium term, with limited positive catalysts visible to drive a meaningful re-rating. The company faces structural challenges in improving profitability metrics, with margin pressures likely to persist given competitive intensity in the consumer products sector. Management's ability to reverse the profitability decline and reignite revenue growth will be critical in determining whether the stock can stabilise and recover.
Key factors to monitor include quarterly revenue growth trends, margin trajectory, working capital management, and any strategic initiatives to improve capital efficiency. Investors should watch for signs of market share gains, successful product launches, or operational improvements that could signal a turnaround. However, given the current trajectory, any recovery appears likely to be gradual rather than swift.
POSITIVE CATALYSTS
- Sustained improvement in operating margins beyond 16% levels
- Return to double-digit revenue growth on consistent basis
- Improvement in ROE towards 12-15% range through better capital deployment
- Successful new product launches or market expansion initiatives
- Meaningful improvement in working capital efficiency
RED FLAGS TO WATCH
- Further deterioration in profitability or margins below 15%
- Continued revenue stagnation or negative growth in coming quarters
- Persistent negative operating cash flows indicating working capital stress
- Further institutional selling or decline in mutual fund holdings
- Any increase in debt levels without corresponding improvement in returns
The Verdict: Avoid Until Fundamentals Improve
Score: 34/100
For Fresh Investors: Avoid initiating positions in Borosil at current levels. The combination of expensive valuation (PE 35.95x for a business generating 8.36% ROE), deteriorating profitability (net profit down 32.50% YoY), stagnant revenue growth (0.19% YoY), and bearish technical momentum creates an unfavourable risk-reward profile. The stock offers no dividend yield whilst delivering negative returns, providing no tangible benefit to shareholders. Wait for clear signs of operational turnaround, sustained margin improvement, and valuation correction before considering entry.
For Existing Holders: Consider reducing positions or exiting on any meaningful rallies. The fundamental deterioration in business metrics, particularly the sharp profitability decline despite stable revenues, suggests structural challenges that may take considerable time to resolve. The stock's severe underperformance versus peers (66 percentage points over one year) and bearish technical setup indicate limited near-term recovery prospects. Existing holders should reassess their investment thesis and consider redeploying capital to higher-quality opportunities with better growth visibility and profitability metrics.
Fair Value Estimate: ₹210-230 (19.45% downside from current levels), based on normalised earnings power, peer multiples adjusted for inferior ROE, and discounted cash flow analysis assuming gradual margin recovery.
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. All investments carry risk, including the potential loss of principal. The views expressed herein are those of the author and do not necessarily reflect the views of any affiliated organisations.
