Borosil Renewables Q2 FY26: Stellar Turnaround Masks Structural Concerns

The September quarter marked a significant inflection point for Borosil Renewables, with net sales reaching a record ₹378.88 crores—up 9.32% sequentially and 1.55% year-on-year. More impressively, operating profit excluding other income surged to ₹118.61 crores, translating to an exceptional 31.31% operating margin, the highest in the company's recent history. This operational excellence drove the profit turnaround, though the recovery comes against a backdrop of two consecutive loss-making fiscal years and persistent questions about long-term profitability sustainability.

The stock's muted post-result reaction—declining 3.47% to ₹675.45—suggests the market remains sceptical about whether this quarterly outperformance represents a genuine structural improvement or a cyclical uptick in what has been a volatile earnings trajectory. With the company trading at 9.83 times book value despite loss-making status on a trailing twelve-month basis, valuation concerns loom large even as operational metrics show marked improvement.

Financial Performance: Margin Expansion Drives Profitability

The quarterly trend reveals a company in transformation. Q2 FY26 revenue of ₹378.88 crores represents the highest quarterly sales figure on record, driven by improved capacity utilisation and favourable pricing dynamics in the solar glass market. More significantly, the operating profit margin of 31.31% marks a dramatic expansion from 18.18% in Q1 FY26 and just 7.88% in the year-ago quarter, reflecting both operational leverage and improved cost management.

On a half-yearly basis for H1 FY26, the company generated consolidated revenue of ₹725.46 crores, with the profitability inflection particularly pronounced in Q2. Employee costs showed significant volatility, declining to ₹22.01 crores in Q2 FY26 from ₹36.34 crores in Q1 FY26, suggesting either seasonal factors or restructuring initiatives. Interest costs remained manageable at ₹3.61 crores, down from ₹4.20 crores sequentially, aided by debt reduction efforts.

The profit after tax margin of 16.25% in Q2 FY26 represents a stunning reversal from the -3.52% margin reported a year earlier, driven primarily by the operating leverage benefits as fixed costs were spread over higher revenue. However, the quality of earnings remains a concern, with the company reporting losses of ₹86.00 crores in FY25 and ₹51.00 crores in FY24, raising questions about whether the current quarter's performance is sustainable or cyclical.

Operational Excellence: Return Ratios Show Improvement

Borosil Renewables' return on capital employed (ROCE) for H1 FY26 reached 9.30%, the highest level in recent periods and a significant improvement from the company's average ROCE of -0.72% over the past five years. This metric, which measures how efficiently the company generates profits from its capital base, suggests that the recent capacity expansions and operational improvements are beginning to bear fruit. The operating profit to interest coverage ratio stood at an impressive 32.86 times in Q2 FY26, indicating comfortable debt servicing capability.

The company's return on equity (ROE), however, remains subdued at 5.26% on an average basis, significantly below the peer group average of approximately 17%. This weak ROE reflects the accumulated losses from FY24 and FY25, which have eroded shareholder equity. The latest quarter's profitability, if sustained, could gradually improve this metric, but the company needs several consecutive quarters of strong performance to rebuild credibility with investors concerned about capital efficiency.

Balance sheet quality has improved materially, with shareholder funds rising to ₹997.42 crores as of March 2025 from ₹873.06 crores in the prior year. Current assets of ₹487.07 crores provide adequate liquidity, though cash and cash equivalents for H1 FY26 declined to ₹66.86 crores, the lowest in recent periods, warranting monitoring. The company's net debt to equity ratio of 0.16 remains comfortable, providing room for strategic investments if market conditions warrant expansion.

The Profitability Challenge: Structural Concerns Persist

Despite the impressive Q2 FY26 results, Borosil Renewables faces significant structural challenges that temper enthusiasm. The company's five-year EBIT growth rate stands at -193.46%, reflecting the severe profitability pressures experienced during capacity expansion and market downcycles. The company reported operating losses in multiple quarters over the past two years, with FY25 EBITDA margin of just 3.9% and FY24 at 4.2%—far below the double-digit margins achieved in FY23 (16.0%) and earlier years.

The cyclical nature of the solar glass industry, coupled with intense competition and pricing pressures, has made consistent profitability elusive. While Q2 FY26's 31.31% operating margin appears exceptional, it contrasts sharply with the -9.02% margin in Q1 FY24 and the -2.79% margin in Q4 FY24. This volatility suggests that external factors—such as raw material costs, energy prices, and customer demand—can dramatically swing profitability, making earnings forecasting challenging.

Industry Leadership: How Borosil Renewables Compares to Peers

Within the industrial products sector, Borosil Renewables occupies a unique position as a specialised solar glass manufacturer. The company ranks as the second-largest by market capitalisation in its peer group, with a ₹9,469.06 crore valuation. However, its financial metrics reveal significant valuation and quality gaps compared to diversified industrial products peers.

The peer comparison reveals Borosil Renewables trading at a substantial valuation premium despite inferior fundamentals. With a price-to-book ratio of 9.83 times—the highest in the peer group—the stock commands a significant premium to the sector average of approximately 6.4 times. This premium appears unjustified given the company's ROE of 5.26%, which trails peers by a wide margin. Timken India, Grindwell Norton, and SKF India all deliver ROEs above 17%, more than three times Borosil's return on equity.

The loss-making status on a trailing twelve-month basis further distinguishes Borosil Renewables from its profitable peers, all of which trade at positive P/E multiples ranging from 19.34 times (SKF India) to 58.37 times (Carborundum Universal). While the company's debt-to-equity ratio of 0.16 compares favourably—most peers operate with net cash positions—this advantage is offset by weaker profitability and return ratios. The absence of dividend payments, contrasted with yields of 0.45% to 1.07% among peers, reflects the company's need to conserve cash and reinvest in the business.

Valuation Analysis: Premium Valuation Despite Structural Risks

Borosil Renewables' current valuation presents a complex picture. Trading at ₹675.45 with a market capitalisation of ₹9,469.06 crores, the stock commands a price-to-book ratio of 9.83 times—nearly double the peer group average. The EV/EBITDA multiple of 174.45 times appears extremely elevated, though this metric is distorted by the company's depressed EBITDA base following two years of losses.

The valuation assessment categorises the stock as "RISKY," reflecting both the premium multiples and the uncertain earnings trajectory. The company's valuation grade history shows volatility, having oscillated between "Very Attractive" and "Very Expensive" over recent years, with the current "Risky" designation assigned in May 2024. This classification acknowledges both the growth potential in India's solar energy sector and the execution risks inherent in the company's business model.

The stock's 52-week range of ₹420.00 to ₹720.85 illustrates the volatility that has characterised trading over the past year. Currently trading 6.30% below its 52-week high and 60.82% above its 52-week low, the stock reflects improved sentiment following the Q2 results, though considerable uncertainty remains. The absence of a meaningful dividend—the last payout of ₹0.65 per share occurred in December 2019—underscores the company's capital-intensive growth phase and inability to generate consistent free cash flow.

Shareholding: Stable Promoter Base, Limited Institutional Interest

The shareholding pattern reveals a stable promoter base holding 61.85% as of September 2025, with the Kheruka family maintaining control through various trusts and holding companies. Promoter holdings have remained largely steady over the past year, declining marginally from 62.20% in March 2025, suggesting confidence in the business despite recent operational challenges. Importantly, there is zero promoter pledging, eliminating concerns about financial stress at the promoter level.

Institutional participation remains notably limited, with foreign institutional investors holding just 4.81% and mutual funds a mere 0.37% as of the latest quarter. The sharp decline in mutual fund holdings from 0.99% in March 2025 to 0.37% in September 2025—a reduction of 0.62 percentage points—signals waning confidence among domestic institutional investors following the loss-making quarters in FY25. The presence of 84 FIIs and only 8 mutual funds indicates some international interest, though overall institutional ownership of just 5.59% reflects scepticism about the company's earnings sustainability.

Stock Performance: Impressive Long-Term Gains Amid Recent Volatility

Borosil Renewables has delivered exceptional long-term returns, with the stock surging 574.44% over five years compared to the Sensex's 94.57% gain—an alpha of 479.87 percentage points. This remarkable outperformance reflects the secular growth story in India's renewable energy sector and the company's positioning as a key supplier to the solar industry. The one-year return of 44.13% also significantly outpaces the Sensex's 7.23% gain, demonstrating continued investor interest despite operational challenges.

However, shorter-term performance reveals elevated volatility. The stock trades above all key moving averages—5-day (₹672.55), 20-day (₹658.29), 50-day (₹614.07), 100-day (₹590.31), and 200-day (₹556.55)—indicating technical strength. Yet the one-year volatility of 45.73% classifies this as a "HIGH RISK HIGH RETURN" investment, with a beta of 1.35 suggesting the stock moves 35% more than the broader market. The three-year underperformance relative to the Sensex (alpha of -13.14%) highlights the impact of the FY24 and FY25 losses on shareholder returns.

Investment Thesis: Recovery Potential Versus Execution Risk

The investment case for Borosil Renewables rests on several competing factors. The company's current Mojo Score of 51/100 with a "HOLD" rating reflects the balanced view that while near-term operational improvements are encouraging, structural concerns about profitability consistency persist. The score breakdown reveals the complexity: positive marks for financial trend and technical momentum, but below-average quality assessment and risky valuation classification.

The quality grade of "Below Average" stems from the -193.46% five-year EBIT growth and weak average return ratios (ROCE of -0.72%, ROE of 5.26%). While the company demonstrates healthy long-term sales growth at 28.60% CAGR and maintains zero promoter pledging, the inconsistent profitability and high debt-to-EBITDA ratio of 5.28 times raise red flags about financial stability. Institutional holdings of just 5.59% further signal limited confidence from sophisticated investors.

The near-term drivers appear favourable, with quarterly financial trends turning positive and technical indicators signalling bullish momentum. The stock's current trend classification as "BULLISH" since October 3, 2025, combined with positive readings across MACD, Bollinger Bands, and KST indicators, suggests technical tailwinds. However, the on-balance volume showing "Mildly Bearish" on a weekly basis hints at underlying distribution despite price strength.

Key Strengths & Risk Factors

Outlook: What to Watch

The forward outlook hinges critically on whether Borosil Renewables can sustain the operational excellence demonstrated in Q2 FY26 across subsequent quarters. The company must prove that the 31.31% operating margin and strong profitability represent a structural shift rather than a temporary confluence of favourable factors. Investors should monitor quarterly results closely for consistency in margins, revenue growth acceleration, and continued balance sheet strengthening.

The broader solar energy sector's trajectory will significantly influence the company's prospects. Government policy support for renewable energy, solar capacity addition targets, and potential anti-dumping duties on imported solar glass could all provide tailwinds. Conversely, any slowdown in solar panel installations, oversupply conditions, or aggressive competition could quickly reverse the recent margin gains and return the company to loss-making status.