The quarter's results underscore a company in severe distress. Net sales of ₹35.06 crores represented a 75.50% year-on-year collapse from ₹143.12 crores in Q2 FY25, whilst the sequential quarter-on-quarter comparison showed a 134.67% surge from Q1 FY26's ₹14.94 crores—offering little comfort given the depressed base. The company's inability to generate sustainable revenue streams has become the defining characteristic of its recent performance, raising fundamental questions about its business model viability in the evolving carbon credit market.
The loss-making trajectory extends beyond a single quarter aberration. For the half-year period H1 FY26, EKI Energy reported a consolidated net loss of ₹2.88 crores on revenues of ₹50.00 crores, compared to a profit of ₹5.33 crores on revenues of ₹321.33 crores in H1 FY25—a staggering 84.44% revenue decline accompanied by a swing into losses. The company's operating profit margin excluding other income stood at 5.13% in Q2 FY26, a marginal improvement from the disastrous -25.10% in Q1 FY26, but still dramatically lower than historical levels.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Net Profit (₹ Cr) | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 35.06 | +134.67% | -75.50% | -2.16 | 5.13% |
| Jun'25 | 14.94 | -15.02% | -91.62% | -0.72 | -25.10% |
| Mar'25 | 17.58 | -73.94% | -77.43% | -6.24 | -35.95% |
| Dec'24 | 67.46 | -52.86% | — | 2.35 | 7.53% |
| Sep'24 | 143.12 | -19.69% | — | 4.02 | 0.65% |
| Jun'24 | 178.21 | +128.83% | — | 1.31 | 0.20% |
| Mar'24 | 77.88 | — | — | -27.94 | -44.98% |
Financial Performance: A Structural Breakdown
The company's revenue collapse has been accompanied by persistent margin pressures and operational inefficiencies. In Q2 FY26, net sales of ₹35.06 crores generated an operating profit (excluding other income) of merely ₹1.80 crores, yielding a 5.13% margin. This represents a marked improvement from Q1 FY26's negative territory but remains far below the company's historical performance when it commanded double-digit operating margins during its peak years.
Employee costs, whilst declining in absolute terms to ₹4.03 crores in Q2 FY26 from ₹9.58 crores in Q2 FY25, now represent 11.50% of revenues compared to 6.69% a year ago—indicating severe operating deleverage. The company's ability to manage fixed costs in line with plummeting revenues has proven inadequate, with total expenditure structures remaining sticky despite the dramatic top-line contraction.
Other income of ₹3.99 crores in Q2 FY26 provided crucial support, preventing an even larger reported loss. However, reliance on non-operating income to mask operational weakness represents a red flag rather than a strength. The profit before tax stood at ₹0.24 crores, but after an inexplicably high tax charge of ₹3.11 crores (representing a 1,295.83% tax rate), the company reported a standalone net loss of ₹2.96 crores.
The Carbon Credit Conundrum: Business Model Under Siege
EKI Energy's core business of carbon credit development and supply has faced unprecedented headwinds. The company's revenue peaked at ₹1,800 crores in FY22, collapsed to ₹1,286 crores in FY23, and further deteriorated to ₹406 crores in FY25—a cumulative decline of 77.44% over three years. This dramatic contraction reflects fundamental challenges in the voluntary carbon credit market, including pricing volatility, regulatory uncertainties, and questions about credit quality and verification standards.
The company's return on equity has collapsed to -1.76% in the latest quarter from positive territory historically, whilst the average ROE over recent periods stands at a dismal 0.0%. Return on capital employed (ROCE) presents an equally concerning picture at -13.86% for the latest period, with an average of 2.15%—far below the cost of capital and indicative of value destruction rather than creation.
Critical Business Model Concerns
Revenue Sustainability Crisis: The 77.44% revenue collapse from FY22 to FY25 reflects fundamental challenges in the carbon credit market. With Q2 FY26 revenues of ₹35.06 crores annualising to approximately ₹140 crores, the company faces an existential challenge to rebuild its business model and revenue base.
Profitability Erosion: The swing from ₹383 crores profit in FY22 to losses in recent quarters, combined with negative ROE and ROCE, indicates severe operational challenges that extend beyond cyclical market conditions.
Balance Sheet Strength: The Silver Lining
Amidst the operational distress, EKI Energy maintains a relatively strong balance sheet. As of March 2025, the company held shareholder funds of ₹388.75 crores against minimal long-term debt of ₹1.00 crore, resulting in a debt-to-equity ratio of effectively zero. Current assets of ₹433.78 crores comfortably exceeded current liabilities of ₹43.53 crores, providing a current ratio of approximately 9.96x—indicating substantial liquidity cushion.
The company's net debt-to-equity ratio stands at -0.53, signifying it is a net cash company. Cash and cash equivalents stood at ₹71.00 crores as of March 2025, up from ₹43.00 crores a year earlier, reflecting positive cash generation despite operational losses. This financial flexibility provides runway to navigate the current crisis, though sustained losses will inevitably erode this buffer over time.
Fixed assets increased substantially to ₹88.82 crores in FY25 from ₹16.80 crores in FY24, suggesting capital investments that have yet to translate into revenue generation. The company's book value per share stands at ₹140.83, significantly above the current market price of ₹93.87, implying the stock trades at 0.67x price-to-book value.
| Balance Sheet Items | Mar'25 | Mar'24 | Mar'23 | Change (YoY) |
|---|---|---|---|---|
| Shareholder Funds | ₹388.75 Cr | ₹396.90 Cr | ₹523.11 Cr | -2.05% |
| Long-Term Debt | ₹1.00 Cr | ₹1.67 Cr | ₹22.49 Cr | -40.12% |
| Current Assets | ₹433.78 Cr | ₹362.31 Cr | ₹704.18 Cr | +19.73% |
| Current Liabilities | ₹43.53 Cr | ₹44.25 Cr | ₹127.84 Cr | -1.63% |
| Cash & Equivalents | ₹71.00 Cr | ₹43.00 Cr | ₹35.00 Cr | +65.12% |
Peer Comparison: Valuation Discount Reflects Fundamental Weakness
EKI Energy's valuation metrics reflect the market's severe concerns about its business prospects. The stock trades at a price-to-book ratio of 0.67x, substantially below peers in the commercial services sector. Whilst the company offers a dividend yield of 2.13%—higher than most peers—this appears unsustainable given the loss-making status and represents a payout ratio of -655.59%, indicating dividends paid from reserves rather than current earnings.
The company's return on equity of 0.0% (average) compares unfavourably to peers such as Monarch Surveys (36.29%), Onesource Industries (14.69%), and Ekansh Concepts (12.95%). This profitability gap justifies the valuation discount, as investors demand compensation for inferior returns and uncertain business prospects.
| Company | P/E (TTM) | P/BV | ROE | Dividend Yield | Debt/Equity |
|---|---|---|---|---|---|
| EKI Energy | NA (Loss Making) | 0.67x | 0.0% | 2.13% | -0.53 |
| Likhami Consulting | 1,124.18x | 9.33x | 0.0% | — | -0.01 |
| Ekansh Concepts | 185.76x | 5.93x | 12.95% | — | 0.62 |
| Monarch Surveys | 7.84x | 1.31x | 36.29% | — | 0.05 |
| AAA Technologies | 38.26x | 4.36x | 11.87% | 1.43% | -0.81 |
| Onesource Industries | 5.92x | 2.66x | 14.69% | — | -0.01 |
EKI Energy's market capitalisation of ₹271.00 crores positions it as the third-largest company in its peer group, though this ranking reflects dramatic value destruction from its peak. The company's enterprise value to sales ratio of 0.40x suggests the market values the business at less than half of annual revenues—a significant discount that implies scepticism about future profitability and cash generation.
Valuation Analysis: Deep Discount Reflects Existential Concerns
At the current price of ₹93.87, EKI Energy trades at a substantial discount to book value (0.67x P/BV), reflecting the market's assessment that the company's assets may not generate adequate returns. The negative enterprise value to EBITDA multiple of -17.03x and EV to EBIT of -2.18x underscore the loss-making status and negative sentiment surrounding the stock.
The company's valuation grade has deteriorated from "Very Attractive" in October 2023 to "Risky" currently, with the change occurring in November 2023 at ₹416.25—a price 343% above current levels. This dramatic re-rating reflects the market's recognition of fundamental deterioration in the business model and earnings power.
Valuation Dashboard
Price-to-Book Value: 0.67x (67% discount to book)
P/E Ratio (TTM): NA (Loss Making)
Dividend Yield: 2.13% (unsustainable given losses)
EV/Sales: 0.40x (deep discount to revenues)
52-Week Range: ₹82.45 - ₹255.50 (current: ₹93.87)
Distance from 52W High: -63.26%
The stock's 52-week range of ₹82.45 to ₹255.50 illustrates the dramatic volatility and downward trajectory. Currently trading just 13.85% above the 52-week low, the stock shows little technical support, with all major moving averages (5-day through 200-day) positioned above the current price—a bearish configuration indicating sustained selling pressure.
Shareholding Pattern: Promoter Stake Decline Raises Governance Questions
Promoter holding has declined progressively from 73.41% in September 2024 to 65.99% in September 2025, a reduction of 7.42 percentage points over four quarters. This steady reduction, whilst not dramatic, occurs during a period of severe operational distress and raises questions about promoter confidence in the turnaround prospects.
| Quarter | Promoter | QoQ Change | FII | MF | Insurance | Public |
|---|---|---|---|---|---|---|
| Sep'25 | 65.99% | -0.09% | 0.07% | 0.00% | 0.00% | 33.94% |
| Jun'25 | 66.08% | -0.01% | 0.07% | 0.00% | 0.00% | 33.85% |
| Mar'25 | 66.09% | -4.78% | 0.07% | 0.00% | 0.00% | 33.85% |
| Dec'24 | 70.87% | -2.54% | 0.07% | 0.00% | 0.00% | 29.06% |
| Sep'24 | 73.41% | — | 0.00% | 0.00% | 0.00% | 26.59% |
Institutional participation remains negligible, with FII holding at a mere 0.07%, zero mutual fund presence, and no insurance company holdings. This absence of quality institutional investors reflects the stock's micro-cap status, lack of liquidity, and fundamental concerns about business sustainability. The non-institutional holding of 33.94% has increased correspondingly, suggesting retail investor interest despite deteriorating fundamentals—a concerning dynamic that often precedes further value destruction.
Stock Performance: Catastrophic Value Destruction
EKI Energy's stock performance represents one of the most severe value destruction stories in recent Indian equity markets. The one-year return of -60.69% dramatically underperforms the Sensex's +7.73% gain, resulting in negative alpha of -68.42 percentage points. This underperformance accelerates over longer timeframes, with two-year returns of -77.42% (vs Sensex +15.24%), three-year returns of -92.64% (vs Sensex +35.77%), and four-year returns of -96.99% (vs Sensex +39.42%).
| Period | Stock Return | Sensex Return | Alpha | Sector Return |
|---|---|---|---|---|
| 1 Week | -3.95% | -1.29% | -2.66% | — |
| 1 Month | -2.62% | -3.81% | +1.19% | — |
| 3 Months | -11.86% | -2.51% | -9.35% | — |
| 6 Months | -25.79% | +0.15% | -25.94% | — |
| YTD | -5.71% | -3.42% | -2.29% | — |
| 1 Year | -60.69% | +7.73% | -68.42% | -6.20% |
| 2 Years | -77.42% | +15.24% | -92.66% | — |
| 3 Years | -92.64% | +35.77% | -128.41% | — |
The stock's volatility of 41.50% over the past year—nearly four times the Sensex's 11.25%—combined with negative returns produces a sharply negative risk-adjusted return of -1.46. The beta of 1.50 indicates the stock amplifies market movements by 50%, though in this case, the correlation has been predominantly negative, with the stock falling whilst markets rose.
Technical indicators uniformly signal distress. The stock trades below all major moving averages, with the 200-day moving average at ₹110.89 representing 18.11% above current levels. The bearish technical trend, which changed to "Bearish" on January 8, 2026, reflects sustained selling pressure with no signs of stabilisation or reversal.
Investment Thesis: Multiple Red Flags Dominate
EKI Energy's investment case has deteriorated across all critical parameters. The company's quality grade stands at "Below Average," reflecting weak long-term financial performance with an average ROE of 0.0% and declining revenue trajectory. The financial trend is classified as "Negative," with quarterly results showing persistent deterioration across revenue, profitability, and operational metrics.
The valuation, whilst appearing optically cheap at 0.67x book value, is classified as "Risky"—appropriately reflecting the uncertainty around the company's ability to generate future cash flows and returns. Technical indicators remain firmly "Bearish," with no signs of trend reversal or accumulation by informed investors.
Mojo Parameters Dashboard
Overall Score: 1/100 (Strong Sell)
Valuation: Risky (deep discount reflects fundamental concerns)
Quality Grade: Below Average (weak ROE, declining revenues)
Financial Trend: Negative (persistent deterioration)
Technical Trend: Bearish (below all moving averages)
"With a 77% revenue collapse since FY22, negative ROE, and persistent losses, EKI Energy faces an existential challenge to rebuild its business model in a volatile carbon credit market."
Key Strengths & Risk Factors
Key Strengths
- Strong Balance Sheet: Net debt-to-equity of -0.53 indicates substantial cash position (₹71 crores) providing financial flexibility during the crisis period.
- Zero Promoter Pledging: No pledged shares demonstrates promoter financial stability and reduces governance concerns related to margin calls or forced selling.
- Minimal Debt Burden: Long-term debt of only ₹1.00 crore eliminates interest payment pressures and provides operational flexibility for turnaround efforts.
- High Current Ratio: Current assets of ₹433.78 crores against current liabilities of ₹43.53 crores (9.96x ratio) ensures strong short-term liquidity.
- Book Value Cushion: Book value of ₹140.83 per share vs market price of ₹93.87 provides 50% downside protection based on net asset value.
Key Concerns
- Revenue Collapse: 75.50% YoY decline in Q2 FY26 revenues (₹35.06 crores vs ₹143.12 crores) reflects fundamental business model challenges in the carbon credit market.
- Persistent Losses: Consolidated net loss of ₹2.16 crores in Q2 FY26 continues the loss-making trajectory from recent quarters, with H1 FY26 losses at ₹2.88 crores.
- Negative Returns: ROE of -1.76% and ROCE of -13.86% indicate value destruction rather than creation, with average ROE at 0.0% over recent periods.
- Promoter Stake Reduction: Decline from 73.41% to 65.99% over four quarters during operational distress raises concerns about promoter confidence.
- Zero Institutional Interest: Absence of mutual fund holdings and minimal FII presence (0.07%) reflects lack of confidence from sophisticated investors.
- Catastrophic Stock Performance: One-year return of -60.69% with 41.50% volatility represents extreme value destruction and high risk profile.
- Deteriorating Quality Metrics: "Below Average" quality grade with negative financial trends across all key operational parameters.
Outlook: What Lies Ahead
Potential Positive Catalysts
- Carbon Market Recovery: Stabilisation in voluntary carbon credit markets could support revenue recovery from current depressed levels.
- Cost Restructuring: Significant reduction in employee costs (₹4.03 crores vs ₹9.58 crores YoY) may improve operating leverage if revenues stabilise.
- Balance Sheet Strength: ₹71 crores cash provides runway for business restructuring and potential strategic pivots without liquidity constraints.
- Valuation Floor: Trading at 0.67x book value may attract value investors if operational turnaround becomes visible.
Critical Red Flags
- Continued Revenue Decline: If Q3 FY26 revenues fail to show sequential improvement, the business model viability comes into question.
- Margin Compression: Operating margins remaining in low single digits or turning negative would signal structural profitability challenges.
- Further Promoter Reduction: Additional decline in promoter holding below 65% would raise serious governance and confidence concerns.
- Cash Burn Acceleration: Sustained quarterly losses eroding the ₹71 crore cash buffer would eliminate the key financial cushion.
- Technical Breakdown: Break below ₹82.45 (52-week low) would signal further downside with no visible support levels.
The coming quarters will be critical for EKI Energy. The company must demonstrate revenue stabilisation, return to profitability, and articulate a credible strategy for navigating the challenging carbon credit market environment. Without visible operational improvement, the current cash buffer will gradually erode, potentially forcing more drastic restructuring measures.
The Verdict: Avoid – Existential Business Model Challenges
Score: 1/100
For Fresh Investors: Avoid completely. The 77% revenue collapse since FY22, persistent losses, negative ROE of -1.76%, and deteriorating financial trends across all parameters indicate fundamental business model challenges. Whilst the balance sheet provides a cushion, operational distress shows no signs of stabilisation. The stock's 60.69% decline over the past year reflects justified concerns about viability.
For Existing Holders: Consider exiting positions to preserve capital. The investment case has deteriorated across quality, valuation, financial trends, and technicals. With the stock trading below all moving averages in a confirmed bearish trend and no institutional support, the risk-reward profile remains highly unfavourable. The 0.67x price-to-book ratio provides limited downside protection given the uncertainty around future earnings power.
Fair Value Estimate: Difficult to assess given loss-making status and business model uncertainty. Current book value of ₹140.83 per share provides a theoretical floor, but sustained losses will erode this over time. Until operational stabilisation becomes evident, the stock merits a "Strong Sell" rating with significant downside risk remaining.
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.
