The micro-cap entertainment company, formerly known as Millitoons Entertainment Limited, has been struggling to achieve consistent profitability despite its rich intellectual property resources and digital channel portfolio. The latest quarterly results underscore the mounting challenges facing the Hyderabad-based firm as it grapples with revenue volatility and operational inefficiencies.
Financial Performance: A Concerning Trajectory
Colorchips New Media's Q2 FY26 performance reveals a company caught in a persistent cycle of operational struggles. Net sales for the quarter stood at ₹1.42 crores, remaining flat year-on-year but declining 21.55% sequentially from Q1 FY26's ₹1.81 crores. This revenue volatility has been a recurring theme, with quarterly sales oscillating between ₹0.93 crores and ₹2.18 crores over the past seven quarters.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Net Sales | ₹1.42 Cr | ₹1.81 Cr | ₹1.42 Cr | -21.55% | 0.00% |
| Operating Profit | ₹0.63 Cr | ₹0.61 Cr | ₹0.92 Cr | +3.28% | -31.52% |
| Operating Margin | 44.37% | 33.70% | 82.14% | +10.67pp | -37.77pp |
| Consolidated PAT | ₹-0.19 Cr | ₹-0.18 Cr | ₹0.28 Cr | +5.56% | -167.86% |
The company's profitability metrics paint an even bleaker picture. Operating profit excluding other income declined 31.52% year-on-year to ₹0.63 crores in Q2 FY26, whilst operating margins contracted sharply from 82.14% in Q2 FY25 to 44.37% in the latest quarter. This margin compression reflects both revenue pressures and deteriorating operational efficiency.
Depreciation charges of ₹0.76 crores continue to weigh heavily on the bottom line, representing over 53% of net sales. This substantial non-cash expense, stemming from the company's fixed asset base of ₹30.15 crores, transforms operating profits into pre-tax losses. The company reported a pre-tax loss of ₹0.12 crores in Q2 FY26, compared to a profit of ₹0.28 crores in the corresponding quarter last year.
Critical Profitability Concerns
Key Issue: Colorchips New Media has reported losses in three of the last four quarters, with Q2 FY26 marking the continuation of negative earnings. The company's inability to generate consistent profits despite maintaining relatively healthy operating margins highlights fundamental challenges in its business model and cost structure.
Quarterly Trend Analysis: Persistent Volatility
Examining the company's performance over the past seven quarters reveals a pattern of extreme volatility that should concern any potential investor. Revenue has fluctuated wildly, ranging from a low of ₹0.93 crores in March 2023 to a peak of ₹2.18 crores in June 2022, with no discernible trend towards stabilisation.
| Quarter | Revenue (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|
| Sep'23 (Q2 FY24) | 1.42 | -21.55% | -0.19 | -8.45% |
| Jun'23 (Q1 FY24) | 1.81 | +94.62% | -0.18 | -8.84% |
| Mar'23 (Q4 FY23) | 0.93 | -41.14% | -1.26 | -201.08% |
| Dec'22 (Q3 FY23) | 1.58 | +11.27% | 0.03 | 1.90% |
| Sep'22 (Q2 FY23) | 1.42 | -34.86% | 0.28 | 25.00% |
| Jun'22 (Q1 FY23) | 2.18 | +98.18% | 1.08 | 49.54% |
| Mar'22 (Q4 FY22) | 1.10 | - | 0.35 | 31.82% |
The quarterly trend analysis reveals that June 2022 marked the company's last period of strong operational performance, with net sales of ₹2.18 crores and a consolidated net profit of ₹1.08 crores. Since then, the company has experienced a steady deterioration, with profitability turning negative in March 2023 and remaining in the red for the most recent two quarters.
Balance Sheet Quality: Minimal Debt but Eroding Equity
Whilst Colorchips New Media maintains a debt-free balance sheet—a positive attribute in the current environment—the company's shareholder funds have been steadily eroding. As of March 2023, total shareholder funds stood at ₹29.93 crores, marginally lower than the ₹30.42 crores recorded in March 2022. The company's book value per share of ₹17.60 exceeds the current market price of ₹14.70, suggesting the stock trades at a price-to-book ratio of 0.85x.
The company's fixed assets of ₹30.15 crores represent the bulk of its asset base, primarily comprising intellectual property and digital infrastructure. However, the heavy depreciation burden of approximately ₹3.00 crores annually raises questions about the productive utilisation of these assets. With net sales of just ₹6.00 crores for FY23, the company generates only ₹0.20 in revenue for every rupee of fixed assets—a concerningly low capital efficiency metric.
Capital Efficiency Concerns
The company's average sales to capital employed ratio of just 0.02x ranks amongst the weakest in the media and entertainment sector. This suggests that Colorchips New Media's substantial asset base is significantly underutilised, generating minimal revenue relative to the capital invested. The company's average return on capital employed (ROCE) of -3.60% and return on equity (ROE) of 1.45% further underscore the poor returns being generated for shareholders.
Industry Context: Struggling in a Challenging Sector
The media and entertainment sector has faced significant headwinds over the past year, with the industry benchmark declining 29.98% over the 12-month period. Colorchips New Media has marginally outperformed this dismal sector performance, declining 19.32% over the same timeframe—representing a relative outperformance of 10.66 percentage points.
However, this relative outperformance provides little comfort when examining absolute returns. The stock has plummeted 82.71% over the past three years, dramatically underperforming the Sensex's 37.22% gain by a staggering 119.93 percentage points. The company's current trading price of ₹14.70 sits just 4.93% above its 52-week low of ₹14.01, whilst remaining 55.17% below its 52-week high of ₹32.79.
Peer Comparison: Lagging on Key Metrics
When benchmarked against peers in the media and entertainment space, Colorchips New Media's financial metrics reveal its competitive disadvantages. The company's average ROE of 1.45% significantly trails the peer group average, whilst its price-to-book ratio of 0.85x suggests the market assigns minimal value to its asset base.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity |
|---|---|---|---|---|
| Colorchips New Media | NA (Loss Making) | 0.85x | 1.45% | -0.01 |
| Cyber Media Industries | 21.80x | -2.29x | 0.00% | -0.49 |
| Winpro Industries | 137.73x | 1.23x | 23.24% | 0.01 |
| TV Vision | NA (Loss Making) | -0.15x | 0.00% | -0.02 |
| Sharpline Broadcasting | 15.59x | 0.91x | 5.86% | -0.04 |
The peer comparison reveals that whilst Colorchips New Media maintains a debt-free status similar to most peers, its profitability metrics lag considerably. The company's ROE of 1.45% compares unfavourably to Winpro Industries' 23.24% and Sharpline Broadcasting's 5.86%. More concerning is the company's loss-making status, which prevents meaningful P/E ratio comparison and signals fundamental operational challenges.
Valuation Analysis: Risky Despite Low Absolute Price
At the current market price of ₹14.70, Colorchips New Media trades at a price-to-book ratio of 0.85x, suggesting a discount to its stated book value. However, this apparent discount should be viewed with extreme caution. The company's "Risky" valuation grade reflects the fundamental uncertainty surrounding its ability to generate sustainable profits and positive returns on equity.
The company's enterprise value to EBITDA multiple of 16.53x appears elevated for a loss-making micro-cap with inconsistent revenue generation. More tellingly, the negative EV/EBIT ratio of -13.68x underscores the company's inability to generate positive operating profits after accounting for depreciation. With a market capitalisation of just ₹26.00 crores and no institutional investor interest, the stock faces severe liquidity constraints and heightened volatility.
"At 0.85x book value, Colorchips New Media may appear inexpensive, but the discount reflects genuine concerns about asset quality, profitability sustainability, and the company's ability to generate acceptable returns on invested capital."
Shareholding Pattern: Stable but Concerning Institutional Absence
The company's shareholding structure has remained remarkably stable over the past five quarters, with promoter holding steady at 65.29% as of September 2025. Promoters R S Sudhish (40.35%) and Susira Holdings Private Limited (24.94%) maintain controlling stakes with no pledging—a positive sign of promoter confidence.
| Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|
| Promoter | 65.29% | 65.29% | 65.26% | 65.26% | 65.19% |
| FII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Non-Institutional | 34.71% | 34.71% | 34.74% | 34.74% | 34.81% |
However, the complete absence of institutional investors—foreign institutional investors, mutual funds, insurance companies, and other domestic institutional investors all hold 0.00%—raises significant red flags. This institutional void suggests that sophisticated investors have either never participated or have completely exited their positions, likely due to concerns about the company's financial performance, liquidity, and governance.
Stock Performance: Severe Underperformance Across All Timeframes
The stock's price performance has been disastrous across virtually all meaningful timeframes. Over the past year, Colorchips New Media has declined 19.32% whilst the Sensex advanced 9.00%, resulting in a negative alpha of 28.32 percentage points. The underperformance becomes even more pronounced over longer periods.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -1.41% | 1.62% | -3.03% |
| 1 Month | -2.00% | 3.09% | -5.09% |
| 3 Months | -8.30% | 4.92% | -13.22% |
| 6 Months | -30.43% | 3.97% | -34.40% |
| Year-to-Date | -44.38% | 8.22% | -52.60% |
| 1 Year | -19.32% | 9.00% | -28.32% |
| 3 Years | -82.71% | 37.22% | -119.93% |
The stock's high beta of 1.50 indicates it exhibits 50% more volatility than the broader market, amplifying both gains and losses. With a volatility of 49.13%—four times higher than the Sensex's 12.26%—the stock carries substantial risk. The negative risk-adjusted return of -0.39 over the past year confirms that investors have been penalised rather than rewarded for bearing this elevated risk.
Technical Analysis: Mildly Bearish with Limited Support
From a technical perspective, Colorchips New Media exhibits a "Mildly Bearish" trend that turned on November 3, 2025 at ₹14.82. The stock trades below all its major moving averages, including the 5-day (₹15.06), 20-day (₹14.90), 50-day (₹15.22), 100-day (₹15.73), and 200-day (₹19.85) moving averages—a clear indication of sustained downward momentum.
The immediate support level sits at ₹14.01, representing the 52-week low and just 4.69% below current levels. A breach of this support could trigger further selling pressure. On the upside, the stock faces immediate resistance at the 20-day moving average of ₹14.90, with major resistance at ₹15.73 (100-day MA) and strong resistance at ₹19.85 (200-day MA). The technical setup offers minimal upside potential with significant downside risk.
Investment Thesis: Multiple Red Flags Dominate
The investment case for Colorchips New Media is severely compromised by multiple fundamental and technical weaknesses. The company's Mojo score of just 17 out of 100 reflects a "Strong Sell" rating, driven by persistent operational losses, deteriorating financial trends, bearish technical indicators, and risky valuation metrics.
✓ Limited Strengths
- Debt-Free Balance Sheet: Zero long-term debt provides financial flexibility and eliminates interest burden
- No Promoter Pledging: Promoters holding 65.29% with zero pledging demonstrates confidence
- Intellectual Property Assets: Company owns digital channels and rich IPR resources
- Relative Sector Outperformance: 1-year decline of 19.32% vs sector decline of 29.98%
- Trading Below Book Value: P/BV of 0.85x offers potential value if operations improve
⚠ Critical Concerns
- Persistent Losses: Company loss-making in 3 of last 4 quarters with no clear path to profitability
- Negative ROE: Latest ROE of -5.41% indicates value destruction for shareholders
- Extreme Revenue Volatility: Quarterly sales fluctuating wildly between ₹0.93 Cr and ₹2.18 Cr
- Poor Capital Efficiency: Sales to capital employed of just 0.02x shows massive underutilisation
- Zero Institutional Interest: Complete absence of FII, MF, and insurance holdings
- Severe Stock Underperformance: Down 82.71% over 3 years vs Sensex up 37.22%
- High Volatility: Beta of 1.50 and volatility of 49.13% creates excessive risk
- Weak Technical Setup: Trading below all moving averages near 52-week low
Outlook: What to Watch
Positive Catalysts (Low Probability)
- Sustained revenue growth above ₹2 crores per quarter for three consecutive quarters
- Achievement of positive quarterly net profit margins above 10%
- Successful monetisation of IPR assets leading to improved capital efficiency
- Entry of institutional investors signalling confidence in turnaround
- ROE improvement to positive territory above 10%
Red Flags (High Probability)
- Continued quarterly losses extending beyond Q3 FY26
- Revenue declining below ₹1 crore in any quarter
- Stock breaking below 52-week low of ₹14.01
- Further erosion of shareholder funds below ₹28 crores
- Absence of institutional participation continuing
The Verdict: Avoid This High-Risk, Loss-Making Micro-Cap
Score: 17/100
For Fresh Investors: Avoid entirely. The company's persistent losses, extreme revenue volatility, negative returns on equity, and complete absence of institutional interest create an unacceptable risk-reward profile. The stock's 82.71% decline over three years and trading near 52-week lows reflect genuine fundamental concerns rather than temporary setbacks.
For Existing Holders: Consider exiting positions at current levels or any technical bounce towards ₹15.50-₹16.00. The deteriorating financial trend, mildly bearish technical setup, and lack of visible catalysts for turnaround suggest further downside risk. The company requires multiple quarters of consistent profitability and revenue stability before reconsidering investment merit.
Fair Value Estimate: ₹10.00-₹12.00 (32%-18% downside from current price), reflecting negative earnings, poor capital efficiency, and elevated risk profile.
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. Investing in micro-cap stocks carries substantial risk of capital loss.
