Chartered Capital Q3 FY26: Profit Surge Masks Operational Concerns

The results present a paradox typical of asset-light financial services firms: strong absolute profit growth accompanied by negligible revenue generation. With net sales of merely ₹0.01 crores in Q3 FY26, the company's profitability stems primarily from other income of ₹0.91 crores rather than core merchant banking operations. This structural characteristic raises questions about the quality and sustainability of earnings, even as the company maintains a debt-free balance sheet with shareholder funds of ₹167.65 crores as of March 2025.

Financial Performance: Income Composition Raises Eyebrows

Chartered Capital's Q3 FY26 financial performance reveals a business model heavily dependent on non-operating income. Operating profit before depreciation, interest, and tax (PBDIT) excluding other income stood at ₹2.06 crores, marking an 80.70% sequential improvement from ₹1.14 crores in Q2 FY26. However, with net sales contributing virtually nothing to the top line, the company's ₹0.91 crores in other income during Q3 FY26 constituted 30.64% of total operating profit. This income likely derives from treasury operations, investments, or one-time gains rather than sustainable merchant banking fees.

The nine-month period ending December 2025 (9M FY26) saw cumulative net profit of ₹6.11 crores on minimal sales, compared to ₹4.01 crores during the same period last year—a 52.37% year-on-year increase. Employee costs remained controlled at ₹0.37 crores in Q3 FY26, though up 32.14% sequentially from ₹0.28 crores. The company's tax rate exhibited significant volatility, ranging from 8.89% in Q2 FY26 to 25.56% in Q1 FY26, before settling at 17.17% in the latest quarter. This inconsistency suggests irregular profit patterns and potential timing differences in income recognition.

On an annual basis, FY25 witnessed net sales of ₹9.00 crores—a 50.00% increase from ₹6.00 crores in FY24—with profit after tax of ₹5.00 crores remaining flat year-on-year. The company's five-year sales compound annual growth rate (CAGR) of 60.44% appears impressive on paper but stems from an extremely low base, limiting its practical significance. Operating margins excluding other income stood at 55.60% for FY25, down from 83.30% in FY24, indicating rising operational costs relative to core income.

Profitability Paradox: High Margins, Weak Capital Efficiency

Whilst Chartered Capital boasts astronomical reported margins—PAT margin of 24,600% in Q3 FY26 due to the negligible revenue base—the more meaningful metric of return on equity (ROE) paints a concerning picture. The company's average ROE over recent years stands at merely 1.54%, far below acceptable standards for financial services firms and indicative of extremely poor capital deployment. The latest ROE of 4.00% represents marginal improvement but remains woefully inadequate for a company sitting on shareholder funds exceeding ₹167 crores.

Return on capital employed (ROCE) stands at 3.62%, equally unimpressive and suggesting that the company struggles to generate meaningful returns from its asset base. The balance sheet as of March 2025 shows current assets of ₹160.76 crores against fixed assets of merely ₹0.14 crores, confirming the asset-light nature of operations. Current liabilities of ₹9.75 crores increased substantially from ₹4.08 crores in March 2024, though the company maintains zero long-term debt. This debt-free status, whilst positive from a risk perspective, also indicates conservative financial management that may be limiting growth opportunities.

The company's book value per share of ₹556.69 contrasts sharply with the current market price of ₹259.00, resulting in a price-to-book ratio of 0.49x. This significant discount to book value—the stock trades at roughly half its accounting worth—reflects market scepticism about the company's ability to generate adequate returns on its equity base. Investors appear unwilling to assign fair value to assets that consistently underperform from a profitability standpoint.

Cash Flow Dynamics: Negative Operating Flows Persist

Chartered Capital's cash flow statement for FY25 reveals structural issues that compound concerns about operational sustainability. Cash flow from operations stood at negative ₹13.00 crores, deteriorating from negative ₹7.00 crores in FY24. This persistent negative operating cash flow, despite reported accounting profits, suggests that earnings may not be translating into actual cash generation—a red flag for any financial services business. The negative ₹8.00 crores change in working capital during FY25, reversing from a positive ₹5.00 crores in FY24, indicates growing capital tied up in operations.

Offsetting the operating cash drain, the company generated ₹10.00 crores from investing activities in FY25, likely from liquidation of investments or maturity of financial instruments. However, this resulted in net cash outflow of ₹3.00 crores for the year, with closing cash position turning negative at ₹1.00 crores compared to positive ₹1.00 crores at the start of FY25. Whilst the absolute amounts remain small relative to the balance sheet size, the trend warrants monitoring as continued negative operating cash flows could eventually pressure liquidity despite the current strong balance sheet.

Industry Leadership: How Chartered Capital Compares to Peers

Within the non-banking financial company (NBFC) sector, Chartered Capital occupies a unique—and not particularly favourable—position. The company's market capitalisation of ₹82.00 crores ranks fifth amongst its immediate peer group, reflecting its micro-cap status. More tellingly, its ROE of 1.54% (average) lags substantially behind peers like Vibrant Global Capital (26.56% ROE) and even modest performers like Mukesh Babu Finance (2.78% ROE). This underperformance in capital efficiency explains the valuation discount, as investors rightfully demand lower multiples for lower-quality returns.

Chartered Capital's P/E ratio of 12.25x appears reasonable compared to the peer average of approximately 29x, but this reflects the quality differential rather than value. The company trades at a lower multiple precisely because it delivers inferior returns. Its price-to-book ratio of 0.49x, whilst the lowest in the peer set alongside Mukesh Babu Finance (0.26x), signals market recognition that book value overstates intrinsic worth when capital cannot be deployed productively. The company's minimal leverage (debt-to-equity of 0.02x) stands out positively but also suggests overly conservative capital structure that fails to enhance equity returns through judicious use of debt.

The broader NBFC sector delivered one-year returns of 23.77%, against which Chartered Capital's negative 3.74% return represents underperformance of 27.51 percentage points. This substantial lag reflects both operational challenges and market recognition of the company's structural limitations. Institutional holdings stand at 0.00%, with no foreign institutional investor (FII), mutual fund, or insurance company participation—a telling indicator that professional investors see limited merit in the investment case at current operational performance levels.

Valuation Analysis: Discount Justified by Weak Fundamentals

At the current price of ₹259.00, Chartered Capital trades at a P/E ratio of 12.25x based on trailing twelve-month earnings, compared to the broader NBFC industry average of 85x. Whilst this appears to present a significant valuation discount, the disparity reflects fundamental quality differences rather than mispricing. The company's P/BV ratio of 0.49x—implying the market values the business at roughly half its accounting book value—more accurately captures investor sentiment about the firm's ability to generate returns on its capital base.

The stock's valuation grade currently stands at "Fair," having fluctuated between "Fair" and "Expensive" over recent months. This assessment appears generous given the operational metrics. With an ROE of 4.00% (latest) and minimal revenue generation from core operations, the intrinsic value of the business arguably falls below book value, justifying the current discount. The PEG ratio of 1.25x suggests the stock isn't dramatically overvalued relative to growth, but this metric loses relevance when the underlying earnings quality remains questionable.

The stock reached a 52-week high of ₹439.00 before correcting 41.00% to current levels, whilst trading 29.47% above its 52-week low of ₹200.05. This volatility, combined with high beta of 1.50, makes the stock unsuitable for conservative investors. The three-year return of 91.85% and five-year return of 317.74% demonstrate historical outperformance, but these gains primarily reflect recovery from extremely depressed levels rather than operational excellence. Recent performance has deteriorated markedly, with the stock declining 3.74% over the past year whilst the Sensex gained 8.77%—an alpha of negative 12.51 percentage points.

Shareholding Pattern: Stable but Uninspiring Ownership

Chartered Capital's shareholding structure has remained remarkably stable over recent quarters, with promoter holding steady at 74.37% across the past five quarters through December 2025. Key promoters Mohib Nomanbhai Khericha (70.09%) and Sofia Mohib Khericha (4.28%) maintain dominant control with zero pledging of shares—a positive indicator of promoter confidence and financial stability. The remaining 25.63% is held by non-institutional investors, with no participation from FIIs, mutual funds, insurance companies, or other domestic institutional investors (DIIs).

The complete absence of institutional investors represents a significant red flag. Professional fund managers, who conduct rigorous due diligence before deployment, have consistently avoided the stock despite its apparent valuation discount. This institutional vacuum suggests that sophisticated investors identify fundamental issues—likely the poor capital efficiency and questionable earnings sustainability—that outweigh any superficial valuation appeal. The stable shareholding pattern, whilst indicating promoter commitment, also reflects limited liquidity and market interest. With negligible trading volumes (just 8 shares traded on the reference date), the stock lacks the liquidity necessary for institutional participation even if fundamentals were to improve.

Stock Performance: Long-Term Gains Mask Recent Weakness

Chartered Capital's stock performance presents a tale of two periods: exceptional long-term returns contrasted against recent underperformance. Over five years, the stock delivered returns of 317.74%, vastly outperforming the Sensex's 60.67% gain by 257.07 percentage points. The ten-year return of 563.25% versus the Sensex's 260.29% further underscores historical outperformance. However, these impressive figures largely reflect recovery from extremely depressed valuations during earlier periods of operational dormancy rather than sustained business excellence.

Recent performance has deteriorated markedly. The stock declined 20.06% over the past three months, underperforming the Sensex by 18.09 percentage points during a period when the broader market fell just 1.97%. The one-year return of negative 3.74% against the Sensex's positive 8.77% represents underperformance of 12.51 percentage points. This recent weakness coincides with growing market awareness of the company's operational limitations and poor capital efficiency metrics. The stock's high volatility of 70.27% and beta of 1.50 make it significantly riskier than the market, with the Sharpe ratio turning negative—classifying it as a "high risk, low return" investment at current levels.

Technical indicators paint a bearish picture. The stock currently trades below all major moving averages—5-day (₹263.30), 20-day (₹257.62), 50-day (₹282.44), 100-day (₹293.64), and 200-day (₹271.35)—indicating sustained downward momentum. The technical trend classification of "mildly bearish" reflects selling pressure, with indicators like MACD showing bearish signals on weekly timeframes. Support lies at the 52-week low of ₹200.05, whilst resistance clusters around the 20-day moving average at ₹257.62 and extends to the 200-day moving average at ₹271.35. The dramatic decline from the 52-week high of ₹439.00 represents a 41.00% correction, suggesting that earlier optimism about the company's prospects has given way to more realistic valuations.

Investment Thesis: Mojo Score Reflects Mixed Signals

Chartered Capital's overall Mojo score of 37 out of 100 places it firmly in "SELL" territory, with the proprietary rating system recommending investors "consider selling" and "look for exit opportunities." This score, whilst having improved from a previous "Strong Sell" rating of 31, reflects persistent fundamental weaknesses that outweigh any superficial valuation appeal. The rating breakdown reveals the core issues: whilst the company scores positively on valuation attractiveness and shows a positive quarterly financial trend, it fails on technical indicators (mildly bearish trend) and quality metrics (below average grade with weak ROE of 1.54%).

The company's quality grade of "below average" stems from its inability to convert substantial shareholder funds into meaningful returns. With an average ROE of 1.54% and latest ROE of 4.00%, the business destroys shareholder value relative to alternative investment opportunities. The five-year sales CAGR of 60.44%, whilst appearing impressive, starts from an extremely low base and hasn't translated into proportionate profit growth or improved capital efficiency. The absence of institutional holdings (0.00%) reinforces the quality concerns, as professional investors who conduct thorough due diligence have consistently avoided the stock.

The positive quarterly financial trend, based on Q3 FY26 profits reaching a quarterly high of ₹2.46 crores, provides the sole bright spot but must be viewed with scepticism given the earnings composition. With profits driven primarily by other income rather than core merchant banking operations, sustainability remains questionable. The mildly bearish technical trend, characterised by the stock trading below all major moving averages and showing negative momentum indicators, suggests market participants are voting with their feet despite the recent profit uptick.

Key Strengths & Risk Factors

Outlook: What to Watch

Forward Outlook: Limited Upside Despite Recent Profit Growth

Looking ahead, Chartered Capital faces a fundamental challenge: demonstrating that recent profit growth represents a sustainable trend rather than temporary fluctuations in other income. For the stock to merit a higher rating, the company must address its core deficiency—the inability to generate meaningful returns on its substantial capital base. With ₹167.65 crores in shareholder funds earning returns of just 4.00%, the opportunity cost for investors remains massive. Even at the current discounted valuation of 0.49x book value, the stock struggles to present a compelling case when compared to alternatives offering higher returns with similar or lower risk profiles.

The merchant banking industry in India faces structural headwinds from increased competition, regulatory scrutiny, and compressed fee structures. For a micro-cap player like Chartered Capital, carving out a sustainable niche requires either specialisation in high-value advisory services or scale advantages that the company currently lacks. The negligible core revenue generation suggests that the company has yet to establish a viable competitive position, with profits dependent on treasury operations rather than client-facing business activities. Until the company demonstrates consistent merchant banking income growth and improved capital efficiency, the investment case remains weak despite superficial valuation appeal.

Technical indicators suggest limited near-term upside, with the stock facing resistance at multiple moving averages. The 20-day moving average at ₹257.62 provides immediate resistance, followed by the 200-day moving average at ₹271.35 and the 50-day moving average at ₹282.44. Only a sustained move above ₹285-290 would signal trend reversal, requiring significant volume support that appears unlikely given the stock's minimal liquidity. Downside support at the 52-week low of ₹200.05 remains vulnerable if negative sentiment persists or if Q4 FY26 results disappoint.