The company's stock has been under severe pressure, trading at ₹45.50 as of November 18, 2025, down 61.11% from its 52-week high of ₹117.00. With a market capitalisation of just ₹92.00 crores, Cambridge Technology now finds itself in a precarious position, battling both financial underperformance and investor exodus.
The September 2025 quarter results expose deep-seated operational challenges at Cambridge Technology. Net sales declined 12.24% quarter-on-quarter to ₹44.11 crores, whilst year-on-year growth of just 2.46% suggests the company is losing competitive ground in India's otherwise vibrant IT services sector. More alarmingly, the operating profit margin excluding other income turned negative at -0.09%, a sharp reversal from the 6.05% margin achieved in Q1 FY26.
| Metric | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 44.11 | 50.26 | 50.53 | 51.58 | 43.05 |
| QoQ Change (%) | -12.24% | -0.53% | -2.04% | +19.81% | -19.92% |
| Net Profit (₹ Cr) | -5.21 | 0.59 | -6.23 | -4.43 | -28.96 |
| QoQ Change (%) | -983.05% | -109.47% | +40.63% | -84.70% | +243.13% |
| Operating Margin (%) | -0.09% | 6.05% | 1.21% | 1.59% | -54.63% |
| PAT Margin (%) | -11.81% | 1.17% | -12.33% | -8.59% | -67.27% |
Financial Performance: A Deteriorating Trajectory
Cambridge Technology's financial performance in Q2 FY26 reveals a company in distress. Net sales of ₹44.11 crores represent a 12.24% sequential decline and remain 9.70% below the previous four-quarter average. The year-on-year comparison shows marginal growth of 2.46%, far below the industry's typical double-digit expansion rates, indicating the firm is losing market share to more agile competitors.
The cost structure presents even graver concerns. Employee costs at ₹30.13 crores consumed 68.28% of revenues in Q2 FY26, down slightly from ₹31.00 crores in the previous quarter but still representing an unsustainable proportion. This elevated wage bill, combined with declining revenues, crushed operating profitability. The operating profit before depreciation, interest, tax and other income turned marginally negative at -₹0.04 crores, a dramatic reversal from the ₹3.04 crore profit in Q1 FY26.
Interest expenses surged 87.50% quarter-on-quarter to ₹2.85 crores, reflecting both higher debt levels and potentially deteriorating credit terms. Depreciation remained elevated at ₹3.20 crores. These fixed charges, combined with operational losses, pushed the company to a pre-tax loss of ₹5.04 crores. After accounting for taxes of ₹0.17 crores, the final net loss stood at ₹5.21 crores, translating to a negative PAT margin of -11.81%.
Operational Challenges: Weak Returns on Capital
The company's return metrics paint a picture of fundamental operational weakness. The latest Return on Equity (ROE) stands at a deeply negative -70.73%, a catastrophic decline from the five-year average of 7.74%. This indicates Cambridge Technology is actively destroying shareholder value, with losses eroding the equity base at an alarming rate. For context, a negative ROE of this magnitude suggests the company is losing more than 70 paise for every rupee of shareholder capital employed.
Return on Capital Employed (ROCE) tells a similar story. The latest ROCE of -31.38% compares unfavourably to the five-year average of just 1.89%, which itself was already weak. Even in its better years, Cambridge Technology struggled to generate meaningful returns on the capital deployed in the business, with average ROCE barely exceeding the cost of capital. The current negative ROCE confirms the business model is fundamentally broken at present scale and operational efficiency levels.
Balance sheet quality has deteriorated materially. Long-term debt increased to ₹49.28 crores as of March 2025, up from ₹29.44 crores a year earlier, pushing the net debt-to-equity ratio to 0.97. Cash and cash equivalents have dwindled to just ₹2.00 crores from ₹25.00 crores at the start of FY25, raising liquidity concerns. The company's shareholder funds declined to ₹67.95 crores from ₹112.47 crores a year ago, as accumulated losses of ₹48.00 crores in FY25 eroded the equity base.
Critical Alert: Capital Efficiency Crisis
Latest ROE: -70.73% | The company is destroying shareholder value at an accelerating rate, with losses consuming equity capital rapidly. The negative return on equity of over 70% indicates severe operational distress and raises questions about business viability at current scale.
Latest ROCE: -31.38% | Returns on capital employed have turned sharply negative, suggesting the business is unable to generate adequate returns on the total capital base. This metric has deteriorated from an already weak five-year average of 1.89%.
Industry Context: Underperforming a Buoyant Sector
Cambridge Technology's struggles stand in stark contrast to the broader Indian IT services sector, which has demonstrated resilience despite global macroeconomic headwinds. Whilst larger peers have navigated demand uncertainties through diversification, operational excellence, and margin management, this micro-cap player appears to lack the scale and capabilities to compete effectively.
The company's five-year sales CAGR of 13.04% initially appears respectable, but this masks recent deterioration. FY25 revenues of ₹198.00 crores actually declined 3.90% year-on-year, breaking a multi-year growth streak. More troublingly, the five-year EBIT growth of -209.40% reveals the company has failed to convert revenue growth into sustainable profitability, with operating losses mounting over time.
The IT consulting and software services industry typically operates on healthy double-digit EBITDA margins, with well-managed firms achieving 20-25% margins. Cambridge Technology's negative operating margin of -0.09% in Q2 FY26 and annual operating margin of -13.10% for FY25 underscore severe competitive disadvantages. Whether these stem from pricing pressures, project execution issues, or structural cost inefficiencies, the company has clearly lost its way operationally.
Sector Underperformance Analysis
Over the past year, Cambridge Technology's stock has declined 45.77%, significantly underperforming both the broader market (Sensex: +9.48%) and its own sector. The Computers - Software & Consulting sector declined 15.55% over the same period, meaning Cambridge Technology underperformed its peer group by 30.22 percentage points. This massive underperformance reflects investor concerns about the company's ability to return to profitability and compete effectively in a consolidating industry.
Peer Comparison: Lagging on Key Metrics
Comparing Cambridge Technology to its micro-cap IT services peers reveals mixed positioning. On the positive side, the company's five-year average ROE of 7.74% exceeds most comparable firms, though this metric is now deeply negative. The Price-to-Book ratio of 1.38x appears reasonable compared to peers like Odigma Consultancy (1.91x) and Focus Business Solutions (14.13x), though this reflects market scepticism about asset quality and earnings power rather than genuine value.
The company's debt-to-equity ratio of 0.97 positions it as more leveraged than most peers, with Athena Global Technologies at 0.57 and several others carrying minimal or negative net debt. This elevated leverage amplifies financial risk, particularly given the current loss-making status. Cambridge Technology's inability to generate a positive P/E ratio (shown as "NA - Loss Making") contrasts unfavourably with profitable peers, highlighting the earnings crisis.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Cambridge Tech. | NA (Loss Making) | 1.38x | 7.74% | 0.97 | NA |
| Athena Global | NA (Loss Making) | 0.83x | 21.36% | 0.57 | NA |
| Edvenswa Enter | 8.75x | 0.91x | 12.19% | -0.17 | NA |
| Odigma Consultancy | 247.21x | 1.91x | 0.77% | -0.21 | NA |
| Focus Business | 139.44x | 14.13x | 0.00% | 0.00 | 0.04% |
| SGL Resources | 107.62x | 0.53x | 1.50% | 0.04 | NA |
Valuation Analysis: Market Reflects Distress
Cambridge Technology's valuation has been downgraded to "RISKY" by market analysts, a dramatic fall from "Very Attractive" in June 2024. This rapid deterioration in valuation assessment mirrors the company's operational collapse. The stock trades at ₹45.50, down 61.11% from its 52-week high of ₹117.00, with the market capitalisation shrinking to just ₹92.00 crores.
Traditional valuation metrics offer limited insight given the loss-making status. The P/E ratio is not applicable, whilst the Price-to-Book ratio of 1.38x appears superficially reasonable but fails to account for rapidly eroding book value. The EV/EBITDA multiple of 36.02x seems elevated, though this reflects the denominator effect of near-zero EBITDA rather than genuine premium valuation. The negative EV/EBIT ratio of -13.31x confirms the market is pricing in significant restructuring risk.
Book value per share stands at ₹34.61, implying the stock trades at a 31.50% premium to book value despite ongoing losses. This premium appears unjustified given the negative ROE and deteriorating fundamentals. The stock's beta of 1.50 indicates high volatility, with price movements amplifying broader market swings. Combined with annualised volatility of 53.71%, this creates a high-risk, low-return profile that justifies the current "RISKY" valuation grade.
Shareholding Pattern: Promoter Stability Amidst Institutional Exodus
Promoter holding in Cambridge Technology stands at 50.91% as of September 2025, unchanged from the previous quarter but up 4.00 percentage points from March 2025. This increase suggests promoters have either purchased additional shares or other shareholders have reduced their stakes. Cloud Computing LLC remains the sole promoter entity, maintaining majority control with no pledging of shares—a positive signal amidst otherwise challenging fundamentals.
Institutional participation remains virtually non-existent, with Foreign Institutional Investors (FIIs) reducing their negligible 0.04% stake in Q2 FY26 to effectively zero. Mutual funds, insurance companies, and other domestic institutional investors maintain no positions in the stock, reflecting the lack of institutional confidence in the company's turnaround prospects. The absence of institutional investors limits liquidity and suggests sophisticated market participants see limited value in the current risk-reward profile.
Non-institutional shareholders hold 49.09% of equity, marginally up from 49.04% in the previous quarter. The lack of institutional buying despite the stock's 61% decline from peaks suggests the market views current valuations as insufficiently attractive given execution risks and the uncertain path to profitability.
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 50.91% | 50.91% | 50.91% | 0.00% |
| FII | 0.00% | 0.04% | 0.03% | -0.04% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% |
| Non-Institutional | 49.09% | 49.04% | 49.06% | +0.05% |
Stock Performance: Severe Underperformance Across All Timeframes
Cambridge Technology's stock performance has been disastrous across virtually all timeframes, with the equity losing 45.77% over the past year compared to the Sensex's 9.48% gain—a negative alpha of 55.25 percentage points. The year-to-date performance is even worse, with the stock down 56.87% versus the Sensex's 8.36% gain, representing a staggering 65.23 percentage point underperformance.
Recent price action shows accelerating declines. The stock fell 4.83% on the most recent trading day, 7.12% over the past week, and 15.03% over the past month. Even the three-month return of 5.91%, which appears positive, significantly lags the Sensex's 4.18% gain when adjusted for the stock's elevated risk profile (beta of 1.50). The six-month return of -8.78% further confirms the bearish trend.
Longer-term performance metrics reveal persistent value destruction. The two-year return of -35.05% compares unfavourably to the Sensex's 28.69% gain, whilst the three-year return of -23.53% lags the Sensex's 37.31% advance. Only the five-year return of 47.97% shows positive absolute performance, though this still underperforms the Sensex's 91.65% gain by 43.68 percentage points. The ten-year return of -53.33% versus the Sensex's 232.28% gain underscores the long-term wealth destruction.
| Period | CTE Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -7.12% | 0.96% | -8.08% |
| 1 Month | -15.03% | 0.86% | -15.89% |
| 3 Months | 5.91% | 4.18% | +1.73% |
| 6 Months | -8.78% | 2.85% | -11.63% |
| YTD | -56.87% | 8.36% | -65.23% |
| 1 Year | -45.77% | 9.48% | -55.25% |
| 2 Years | -35.05% | 28.69% | -63.74% |
| 3 Years | -23.53% | 37.31% | -60.84% |
Investment Thesis: Multiple Red Flags Dominate
Cambridge Technology's investment thesis is overwhelmingly negative across all critical parameters. The proprietary Mojo Score of just 17 out of 100 places the stock firmly in "STRONG SELL" territory, reflecting the confluence of deteriorating fundamentals, bearish technicals, risky valuation, and below-average quality metrics.
The technical picture remains firmly bearish, with the stock trading below all major moving averages (5-day, 20-day, 50-day, 100-day, and 200-day). The overall trend turned bearish in October 2025 and shows no signs of reversal. Weekly MACD signals remain mildly bullish, but this is overwhelmed by bearish readings from RSI, Bollinger Bands, and other indicators. The stock's high beta of 1.50 and elevated volatility of 53.71% amplify downside risks.
Financial trends are classified as "FLAT" for the latest quarter, a euphemistic assessment given the return to losses and margin compression. The quality grade of "BELOW AVERAGE" reflects weak return on capital metrics, with average ROCE of just 1.89% and average ROE of 7.74% (now deeply negative). The valuation grade of "RISKY" acknowledges the significant restructuring and execution risks embedded in the current share price.
Key Strengths & Risk Factors
Key Strengths
- Stable Promoter Holding: 50.91% promoter stake with zero pledging demonstrates management commitment and confidence in long-term prospects.
- Positive Operating Cash Flow: FY25 operating cash flow of ₹52.14 crores (highest on record) shows some underlying operational strength despite P&L losses.
- Long-Term Revenue Growth: Five-year sales CAGR of 13.04% demonstrates the company has historically grown its top line, though recent trends are concerning.
- Low Debt Burden: Debt-to-EBITDA ratio of 0.44 (five-year average) suggests manageable leverage levels in historical context.
- Valuation Correction: 61% decline from 52-week highs has brought valuations down significantly, though fundamental risks remain elevated.
Key Concerns
- Persistent Losses: Net loss of ₹5.21 crores in Q2 FY26 marks the fourth loss-making quarter in the past five, with no clear path to profitability.
- Collapsing Returns: ROE of -70.73% and ROCE of -31.38% indicate severe capital destruction and operational inefficiency.
- Margin Compression: Operating margin turned negative at -0.09% in Q2 FY26, down from 6.05% in the previous quarter, reflecting pricing pressure and cost overruns.
- Revenue Decline: Q2 FY26 sales fell 12.24% QoQ and remain 9.70% below the four-quarter average, suggesting demand weakness or market share loss.
- Elevated Employee Costs: Wage bill consuming 68.28% of revenues indicates structural cost inefficiency and lack of operational leverage.
- Liquidity Concerns: Cash position declined from ₹25.00 crores to ₹2.00 crores in FY25, raising questions about ability to fund operations and service debt.
- Zero Institutional Interest: Complete absence of mutual fund, FII, and insurance holdings reflects lack of confidence from sophisticated investors.
Outlook: What to Watch
Positive Catalysts
- Revenue Stabilisation: Return to sequential revenue growth would signal demand recovery and improved competitive positioning.
- Margin Recovery: Operating margins returning to historical 10-15% range would demonstrate cost control and pricing power restoration.
- Return to Profitability: Sustained quarterly profits (minimum two consecutive quarters) would rebuild investor confidence.
- Institutional Buying: Entry of mutual funds or FIIs would validate turnaround thesis and improve liquidity.
- Debt Reduction: Material reduction in debt levels would strengthen balance sheet and reduce financial risk.
Red Flags to Monitor
- Continued Losses: Further quarterly losses would erode equity base and raise going concern questions.
- Revenue Decline: Sustained QoQ revenue declines would indicate structural demand issues or client losses.
- Cash Depletion: Further decline in cash reserves below ₹2.00 crores would create immediate liquidity crisis.
- Promoter Selling: Any reduction in 50.91% promoter stake would signal loss of confidence in turnaround prospects.
- Debt Default: Inability to service debt obligations would trigger covenant breaches and potential restructuring.
"With negative ROE of 70.73%, collapsing margins, and persistent losses, Cambridge Technology faces an existential challenge requiring immediate and drastic operational restructuring to restore investor confidence."
The path forward for Cambridge Technology requires radical operational transformation. The company must address its bloated cost structure, particularly the 68% employee cost ratio, whilst simultaneously stabilising revenues and restoring pricing power. Management must demonstrate a credible turnaround plan with measurable milestones, including specific margin improvement targets and a timeline to profitability. Without such a plan, the stock's 17/100 Mojo Score accurately reflects the severe risks facing investors.
The micro-cap IT services segment remains highly competitive, with clients increasingly consolidating vendor relationships and demanding greater value. Cambridge Technology's inability to maintain profitability despite a 13% five-year revenue CAGR suggests fundamental flaws in the business model or execution capabilities. Whether these can be remedied at current scale remains an open question that will determine the company's long-term survival.
The Verdict: High-Risk Turnaround Situation
Score: 17/100
For Fresh Investors: Avoid initiating positions in Cambridge Technology at current levels. The company faces severe operational challenges, with negative ROE of 70.73%, collapsing margins, and persistent losses. Whilst the stock has corrected 61% from peaks, fundamental risks remain elevated with no clear path to profitability. The absence of institutional investors and bearish technical trend reinforce the negative outlook. Wait for sustained evidence of turnaround execution before considering entry.
For Existing Holders: Strongly consider exiting positions to preserve capital. The deteriorating financial trajectory, with Q2 FY26 losses deepening to ₹5.21 crores and operating margins turning negative, suggests the turnaround will be prolonged and uncertain. Declining cash reserves (₹2.00 crores) and elevated debt (₹49.28 crores) create liquidity concerns. Only investors with very high risk tolerance and long investment horizons should consider holding, and only if promoters articulate a credible restructuring plan.
Fair Value Estimate: ₹28-32 per share (38-30% downside from current ₹45.50), reflecting elevated restructuring risk, negative earnings, and uncertain recovery timeline.
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.
