The stock has struggled significantly over the past year, plunging 32.43% whilst the Sensex gained 7.07%—a staggering underperformance of 39.50 percentage points. Currently trading at ₹244.85, the shares remain 33.64% below their 52-week high of ₹368.95, reflecting investor concerns about the company's ability to reignite meaningful growth in a competitive consumer electricals market.
The December quarter results present a mixed picture. Whilst sequential profit recovery is welcome after two consecutive quarters of decline, the company's year-on-year performance across most metrics remains lacklustre. Revenue growth of 7.30% year-on-year appears reasonable on the surface, but it masks deeper operational challenges that have compressed profitability and raised questions about the sustainability of the company's competitive positioning.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 1,898.30 | -0.90% | 98.31 | +38.13% | 5.32% |
| Sep'25 | 1,915.57 | -4.14% | 71.17 | -41.80% | 3.94% |
| Jun'25 | 1,998.38 | -3.02% | 122.29 | -27.84% | 6.20% |
| Mar'25 | 2,060.64 | +16.47% | 169.48 | +54.30% | 8.33% |
| Dec'24 | 1,769.21 | -6.69% | 109.84 | -12.06% | 6.33% |
| Sep'24 | 1,896.15 | -11.30% | 124.90 | -17.68% | 6.75% |
| Jun'24 | 2,137.69 | — | 151.72 | — | 7.13% |
Financial Performance: Sequential Recovery, Structural Concerns Persist
Crompton Greaves' Q3 FY26 financial performance demonstrates a tale of two narratives. On a sequential basis, the quarter delivered encouraging improvements—net profit surged 38.13% from ₹71.17 crores to ₹98.31 crores, recovering from the dismal Q2 performance. Operating margins expanded 202 basis points to 10.29%, and PAT margins improved 138 basis points to 5.32%, suggesting better cost management and operational leverage.
However, the year-on-year comparison reveals persistent challenges. Net sales grew a modest 7.30% to ₹1,898.30 crores in Q3 FY26 compared to ₹1,769.21 crores in Q3 FY25, but net profit declined 10.50% from ₹109.84 crores. This profit contraction despite revenue growth points to margin pressures and elevated costs that have eroded profitability. Operating margins contracted 34 basis points year-on-year, whilst PAT margins compressed 101 basis points, reflecting the difficult operating environment.
The nine-month performance for FY26 (April-December 2025) further underscores these challenges. Total revenue for the period stood at ₹5,812.25 crores compared to ₹5,803.05 crores in the corresponding period of FY25—essentially flat growth of just 0.16%. Consolidated net profit for the nine months declined 19.40% to ₹291.77 crores from ₹362.46 crores, a worrying trend that suggests the company is struggling to maintain profitability momentum.
The quality of earnings remains a concern. Other income in Q3 FY26 stood at ₹12.77 crores, down from ₹11.60 crores in Q3 FY25, suggesting the company is not relying excessively on non-operating income. However, the declining profit before tax excluding other income—which fell 5.40% compared to the previous four-quarter average—indicates core operational profitability is under pressure.
Operational Challenges: Margin Compression and Growth Stagnation
The operational performance of Crompton Greaves reveals deeper structural issues beyond cyclical headwinds. The company's return on equity (ROE) stands at 20.34% on average, which whilst respectable, has declined from historical levels. The latest ROE of 14.35% reflects weakening capital efficiency, a concerning trend for a company operating in the capital-light consumer electricals space.
Return on capital employed (ROCE) tells a similar story. The average ROCE of 30.98% is impressive and demonstrates the company's historical ability to generate strong returns on invested capital. However, the latest ROCE of 21.31% marks a significant decline, suggesting either deteriorating operational efficiency or increased capital intensity without commensurate returns.
Margin Dynamics: A Worrying Trajectory
Operating margins have been on a declining trajectory throughout FY26. The 10.29% operating margin in Q3 FY26, whilst improved sequentially, remains below the 10.63% achieved in Q3 FY25 and significantly below the 12.83% margin in Q4 FY25. This persistent margin pressure suggests the company is struggling to pass on cost increases to consumers or facing intensified competition that limits pricing power.
PAT margins have compressed even more sharply, falling to 5.32% in Q3 FY26 from 6.33% in Q3 FY25 and 8.33% in Q4 FY25. This 101 basis point year-on-year contraction and 301 basis point decline from the March quarter highlights the severity of the profitability challenge.
The balance sheet remains healthy, with the company maintaining a net cash position. Long-term debt was completely eliminated by March 2025, down from ₹298.97 crores in March 2024, reflecting prudent financial management. The company's average net debt-to-equity ratio of -0.11 indicates it operates with net cash, providing financial flexibility. However, this strong balance sheet has not translated into improved operational performance, raising questions about capital allocation efficiency.
Employee costs rose to ₹170.01 crores in Q3 FY26 from ₹149.72 crores in Q3 FY25, a 13.56% increase that outpaced revenue growth of 7.30%. This suggests either strategic investments in talent or wage inflation pressures that are compressing margins. The company's ability to improve operating leverage will be critical for margin recovery.
Industry Context: Navigating a Competitive Consumer Landscape
Crompton Greaves operates in the highly competitive electronics and appliances sector, where companies face intense competition, evolving consumer preferences, and pressure on margins. The broader industry has experienced mixed performance, with some players reporting robust growth whilst others struggle with demand headwinds and input cost pressures.
The company's five-year sales growth of 13.95% demonstrates reasonable top-line expansion over the longer term. However, the five-year EBIT growth of just 3.50% reveals the profitability challenge—revenues have grown but operating profits have barely kept pace, indicating persistent margin compression over the medium term. This disconnect between sales and profit growth is particularly concerning and suggests structural issues in the business model or competitive positioning.
The consumer electricals market in India has seen increased competition from both established players and new entrants, particularly in categories like fans, lighting, and small appliances where Crompton operates. The shift towards online channels has intensified price competition, whilst rising raw material costs have squeezed margins. Companies that can differentiate through brand strength, innovation, and distribution reach are better positioned to navigate these challenges.
Competitive Positioning: Premium Brand Facing Growth Headwinds
Crompton has traditionally positioned itself as a premium brand in the consumer electricals space, competing on quality and innovation rather than price. However, the current financial performance suggests this positioning may be under pressure. The company's inability to sustain margin levels whilst growing revenue indicates either pricing pressure from competition or challenges in maintaining the premium positioning across product categories.
| Company | P/E Ratio (TTM) | P/BV Ratio | ROE (%) | Dividend Yield |
|---|---|---|---|---|
| Crompton Greaves | 32.08x | 4.61x | 20.34% | 1.23% |
| Dixon Technologies | 50.55x | 17.18x | 24.09% | 0.07% |
| Voltas | 91.42x | 7.46x | 8.54% | 0.49% |
| Blue Star | 71.87x | 12.39x | 17.93% | 0.48% |
| Amber Enterprises | 104.77x | 6.40x | 7.52% | — |
| PG Electroplast | 60.32x | 5.76x | 12.18% | 0.04% |
Peer Comparison: Attractive Valuation, But Justified by Performance
When compared to industry peers, Crompton Greaves trades at a significant valuation discount, which at first glance appears attractive. The company's P/E ratio of 32.08x is substantially lower than the peer average of approximately 76x, with competitors like Amber Enterprises (104.77x), Voltas (91.42x), and Blue Star (71.87x) commanding much higher multiples.
Similarly, Crompton's price-to-book ratio of 4.61x is considerably below the peer average of around 9.8x, with Dixon Technologies trading at 17.18x and Blue Star at 12.39x. This valuation gap suggests the market is pricing in significantly lower growth expectations for Crompton compared to its peers.
However, this discount appears justified when examining operational metrics. Crompton's ROE of 20.34%, whilst respectable, is not significantly superior to peers. Dixon Technologies achieves 24.09% ROE, and Blue Star delivers 17.93%, suggesting Crompton's capital efficiency is not exceptional enough to warrant a premium valuation. More concerning is the declining trajectory of these returns, with the latest ROE of 14.35% falling below several peers.
The company does offer a relatively attractive dividend yield of 1.23% compared to most peers, with a consistent dividend payout ratio of 43.86%. This shareholder-friendly policy provides some downside protection, but it's insufficient to offset concerns about growth and profitability trends.
Valuation Analysis: Attractive Entry Point or Value Trap?
Crompton Greaves' current valuation presents a classic value investing dilemma. At ₹244.85, the stock trades at a P/E ratio of 32.08x, significantly below the industry average of 52x. The price-to-book ratio of 4.61x also represents a discount to historical levels and peer valuations. The company's proprietary valuation grade has improved to "Attractive" from "Fair" as of June 2025, suggesting the recent price decline has brought the stock into value territory.
However, investors must distinguish between "cheap" and "value". The valuation discount reflects genuine concerns about the company's growth trajectory and margin sustainability. With five-year EBIT growth of just 3.50% and current quarter profits declining year-on-year despite revenue growth, the market's cautious stance appears rational.
The EV/EBITDA multiple of 19.02x and EV/EBIT of 23.79x are reasonable but not compelling given the growth challenges. For the valuation to appear genuinely attractive, the company needs to demonstrate sustained margin recovery and accelerated revenue growth. Until these operational improvements materialise, the stock may remain range-bound or face further downside if profitability continues to deteriorate.
The stock's technical position reinforces the cautious outlook. Trading in a bearish trend since July 2025 and positioned below all major moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), the technical indicators suggest limited near-term upside momentum. The stock is down 33.64% from its 52-week high of ₹368.95, with immediate resistance at ₹237.55 (20-day moving average) and major resistance at ₹269.04 (100-day moving average).
Shareholding Pattern: Institutional Confidence Shifting
The shareholding pattern reveals interesting institutional dynamics that warrant attention. Crompton Greaves has no promoter holding, operating as a professionally managed company, which provides governance benefits but also means there's no promoter skin in the game to anchor investor confidence during challenging periods.
| Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 0.00% | 0.00% | 0.00% | — |
| FII | 20.55% | 25.56% | 29.20% | -5.01% |
| Mutual Funds | 54.58% | 50.81% | 48.79% | +3.77% |
| Insurance | 9.84% | 8.71% | 8.40% | +1.13% |
| Other DII | 1.33% | 1.73% | 1.74% | -0.40% |
| Non-Institutional | 13.70% | 13.19% | 11.87% | +0.51% |
The most significant trend is the steady exodus of foreign institutional investors (FIIs). FII holdings have declined from 34.42% in December 2024 to just 20.55% in December 2025—a dramatic reduction of 13.87 percentage points over four quarters. The latest quarter saw a 5.01 percentage point decline, suggesting foreign investors are losing confidence in the company's near-term prospects.
Conversely, domestic mutual funds have increased their stake substantially, rising from 43.90% in December 2024 to 54.58% in December 2025. The 3.77 percentage point increase in Q3 FY26 indicates domestic institutional investors are accumulating shares, possibly viewing the valuation correction as an opportunity. With 39 mutual fund schemes holding the stock, the domestic institutional base remains solid.
Insurance companies have also marginally increased their holdings to 9.84%, up 1.13 percentage points quarter-on-quarter, suggesting some institutional confidence. However, the overall institutional holding of 86.30%, whilst high, masks the divergence between domestic accumulation and foreign selling—a pattern that often signals uncertainty about near-term performance.
Stock Performance: Severe Underperformance Across All Timeframes
Crompton Greaves' stock performance has been dismal across virtually all timeframes, significantly underperforming both the broader market and its sectoral peers. The one-year return of -32.43% compares unfavourably to the Sensex gain of 7.07%, resulting in negative alpha of 39.50 percentage points—a severe underperformance that reflects deep-seated investor concerns.
| Period | Crompton Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +10.54% | +1.59% | +8.95% |
| 1 Month | -5.79% | -1.74% | -4.05% |
| 3 Months | -12.07% | +0.32% | -12.39% |
| 6 Months | -23.26% | +3.77% | -27.03% |
| YTD | -3.01% | -1.92% | -1.09% |
| 1 Year | -32.43% | +7.07% | -39.50% |
| 2 Years | -15.14% | +15.78% | -30.92% |
| 3 Years | -22.64% | +38.13% | -60.77% |
The medium-term picture is equally concerning. Over three years, the stock has declined 22.64% whilst the Sensex surged 38.13%, resulting in negative alpha of 60.77 percentage points. The two-year return of -15.14% against the Sensex's 15.78% gain highlights the persistent nature of the underperformance—this is not a temporary blip but a sustained period of value destruction.
Even more troubling, the stock has underperformed its own sector. The electronics and appliances sector declined 22.68% over the past year, but Crompton's 32.43% fall means it underperformed its sector by 9.75 percentage points, suggesting company-specific issues beyond broader industry headwinds.
The only bright spot is the recent one-week performance, with the stock gaining 10.54% compared to the Sensex's 1.59% rise, delivering positive alpha of 8.95%. This bounce likely reflects technical oversold conditions and possibly some optimism around the sequential profit recovery in Q3 results. However, this short-term gain does little to offset the longer-term wealth destruction.
The stock's risk-adjusted returns paint an even grimmer picture. With a volatility of 24.44% (more than double the Sensex's 11.53%) and negative absolute returns, the risk-adjusted return of -1.33 places the stock in the "Medium Risk Low Return" category—the worst possible combination for investors. The high beta of 1.35 means the stock amplifies market movements, providing no downside protection during market corrections.
Investment Thesis: Quality Company, Troubled Times
Crompton Greaves presents a complex investment proposition. The company retains several fundamental strengths—a debt-free balance sheet, strong brand recognition in consumer electricals, reasonable ROE of 20.34% (though declining), and solid institutional backing from domestic mutual funds. The quality grade of "Good" reflects these underlying strengths and the company's historical track record of consistent performance.
However, current operational performance raises serious concerns. The financial trend is classified as "Flat" with key negative triggers including declining profit before tax (down 5.40% versus the previous four-quarter average) and PAT falling 7.20% compared to recent quarters. The five-year EBIT growth of just 3.50% suggests structural challenges in driving profitable growth, not merely cyclical headwinds.
The technical picture is unambiguously negative. The stock remains in a bearish trend, trading below all major moving averages, with multiple technical indicators flashing bearish signals. The MACD, KST, and Dow Theory all point to continued weakness, whilst the stock's position 33.64% below its 52-week high suggests limited near-term upside momentum.
The proprietary Mojo Score of 44/100 places the stock firmly in "SELL" territory (score range 30-50), reflecting the combination of attractive valuation offset by poor operational trends and negative technical momentum. This score represents a downgrade from the previous "HOLD" rating, indicating deteriorating fundamentals.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Debt-Free Balance Sheet: Zero long-term debt and net cash position provide financial flexibility and stability
- Strong Brand Recognition: Established presence in consumer electricals with trusted brand equity across fans, lighting, and appliances
- Attractive Valuation: P/E of 32x significantly below industry average of 52x and peer multiples
- Consistent Dividend Payer: 1.23% yield with 43.86% payout ratio demonstrates shareholder-friendly capital allocation
- High Institutional Holding: 86.30% institutional ownership with domestic mutual funds increasing stakes
- Reasonable ROE: Average ROE of 20.34% demonstrates historically strong capital efficiency
- Zero Promoter Pledging: No governance concerns related to pledged shares
KEY CONCERNS ⚠
- Persistent Margin Compression: PAT margins declined 101 bps YoY to 5.32%, indicating sustained profitability pressure
- Weak Profit Growth: Five-year EBIT growth of just 3.50% despite 13.95% sales growth reveals structural margin challenges
- Declining Returns: ROE fell to 14.35% and ROCE to 21.31%, both significantly below historical averages
- FII Exodus: Foreign institutional holdings declined 13.87 percentage points over four quarters, signalling confidence issues
- Severe Stock Underperformance: One-year return of -32.43% vs Sensex +7.07%, with negative alpha across all timeframes
- Bearish Technical Trend: Stock below all major moving averages with multiple bearish technical indicators
- Flat Financial Trend: Recent quarter results classified as "Flat" with key profit metrics declining vs recent averages
Outlook: What to Watch
POSITIVE CATALYSTS 📈
- Sustained Margin Recovery: Ability to maintain Q3's 10.29% operating margin or expand further in coming quarters
- Revenue Acceleration: Quarterly revenue growth exceeding 10% YoY consistently would signal market share gains
- New Product Innovation: Successful launches in high-margin categories driving mix improvement
- Market Share Gains: Evidence of outperforming industry growth rates in key product segments
- Technical Breakout: Sustained move above 200-day MA (₹303.55) would signal trend reversal
RED FLAGS 🚩
- Further Margin Erosion: Operating margins falling below 10% would indicate worsening competitive dynamics
- Continued Profit Decline: Another quarter of YoY profit contraction would confirm structural challenges
- Accelerated FII Selling: Further reduction in foreign institutional holdings below 15% would signal deeper concerns
- Technical Breakdown: Breach of 52-week low of ₹217.50 would trigger additional selling pressure
- Weak Festive Season: Poor Q4 FY26 performance (typically strongest quarter) would be highly concerning
The next two quarters will be critical for Crompton Greaves. The January-March period (Q4 FY26) typically represents the strongest quarter for consumer electricals due to festive and summer season demand. The company's ability to deliver strong sequential and year-on-year growth in Q4 will determine whether Q3's profit recovery marks the beginning of a genuine turnaround or merely a temporary respite in a longer-term decline.
Investors should closely monitor margin trends. If the company can sustain operating margins above 10.50% and expand PAT margins toward 6.50-7.00%, it would indicate successful cost management and pricing power. Conversely, any further margin compression would raise serious questions about the business model's sustainability in the current competitive environment.
The Verdict: Wait for Clearer Turnaround Evidence
Score: 44/100
For Fresh Investors: Avoid initiating positions at current levels. Whilst the valuation appears attractive on paper, the operational challenges, declining profitability trends, and bearish technical momentum suggest better entry opportunities may emerge. Wait for at least two consecutive quarters of margin expansion and YoY profit growth before considering entry.
For Existing Holders: Consider reducing positions on any technical bounce toward ₹260-270 levels. The company's fundamental strengths (debt-free balance sheet, brand equity) provide some downside protection, but the persistent growth and margin challenges warrant a cautious stance. Those with long investment horizons and high risk tolerance may hold with strict monitoring of quarterly results.
Fair Value Estimate: ₹220-240 range (limited downside of 0-10%, but also limited near-term upside). A genuine turnaround could support targets of ₹280-300, but this requires sustained operational improvement that is not yet evident.
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.
