With a market capitalisation of ₹1,101.81 crores, Electrotherm (India) faces mounting challenges as operational inefficiencies and margin pressures overshadow its established presence across 71 countries. The company's sharp reversal from profitability to losses marks a concerning inflection point, particularly as operating profit excluding other income turned negative at ₹-12.13 crores—the lowest level in recent quarters. The stock has declined 21.26% over the past year, significantly underperforming the Sensex's 4.58% gain, whilst trading below all key moving averages.
The company's transformation from a ₹27.69 crores profit in Q1 FY26 to a ₹21.68 crores loss in Q2 FY26 represents a dramatic deterioration in operational performance. Revenue remained relatively flat at ₹814.26 crores, declining marginally by 2.37% quarter-on-quarter, but the collapse in profitability metrics signals deeper structural issues. The PAT margin contracted sharply to -2.66% from 3.32% in the previous quarter, whilst the operating margin excluding other income plunged into negative territory at -1.49%.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 814.26 | -2.37% | -21.62 | -177.91% | -1.49% |
| Jun'25 | 834.05 | -28.17% | 27.75 | -85.04% | 6.21% |
| Mar'25 | 1,161.08 | +7.39% | 185.50 | +109.98% | 5.55% |
| Dec'24 | 1,081.23 | +32.88% | 88.34 | +48.55% | 9.94% |
| Sep'24 | 813.68 | -23.19% | 59.47 | -45.36% | 8.27% |
| Jun'24 | 1,059.38 | -12.99% | 108.84 | +4.62% | 12.48% |
| Mar'24 | 1,217.57 | — | 104.03 | — | 10.75% |
Financial Performance: A Quarter of Deterioration
The Q2 FY26 results reveal a company grappling with severe operational headwinds. Net sales of ₹814.26 crores represented a marginal 2.37% quarter-on-quarter decline, but more concerningly, the year-on-year growth stood at a mere 0.07%—essentially flat compared to the corresponding quarter last year. This revenue stagnation, combined with deteriorating cost management, pushed the company into losses.
Operating profit before depreciation, interest, and tax (excluding other income) turned sharply negative at ₹-12.13 crores, marking the lowest level in recent quarters and a dramatic reversal from ₹51.76 crores in Q1 FY26. The operating margin excluding other income collapsed to -1.49% from 6.21% in the previous quarter, indicating severe margin compression. Gross profit margin similarly deteriorated to -2.21% from 5.32%, suggesting pricing pressures and elevated input costs.
Employee costs rose to ₹58.11 crores from ₹50.89 crores quarter-on-quarter, representing a 14.19% increase that outpaced the marginal revenue decline. Interest expenses decreased slightly to ₹7.18 crores from ₹8.19 crores, whilst depreciation remained relatively stable at ₹10.53 crores. The company recorded a tax reversal of ₹6.81 crores due to losses, compared to a tax outgo of ₹6.07 crores in Q1 FY26.
On a half-yearly basis for H1 FY26, the company reported net sales of ₹1,648.31 crores, with consolidated net profit of ₹6.13 crores—a stark contrast to the robust profitability witnessed in the second half of FY25. The sequential deterioration from Q1 to Q2 suggests mounting operational challenges rather than seasonal variations.
Balance Sheet Concerns: Negative Shareholder Funds
Electrotherm (India)'s balance sheet presents a concerning picture with negative shareholder funds of ₹158.78 crores as of March 2025, improved from ₹781.12 crores negative in March 2024 due to strong FY25 profitability. However, the company carries a substantial debt burden with long-term debt standing at ₹1,283.07 crores, though this represents a reduction from ₹1,736.45 crores in the previous year. The company's book value per share remains deeply negative at ₹-124.63, reflecting accumulated losses over the years.
Current liabilities stood at ₹1,692.23 crores as of March 2025, including trade payables of ₹458.97 crores. Fixed assets of ₹596.90 crores and current assets of ₹1,117.62 crores provide some operational stability, but the negative equity base raises fundamental questions about financial sustainability. The debt-to-EBITDA ratio averaged a concerning 12.81 times over recent years, indicating elevated leverage relative to cash generation capacity.
Critical Alert: Negative Book Value
With shareholder funds at ₹-158.78 crores and book value per share at ₹-124.63, Electrotherm (India) operates with a negative equity base. This represents accumulated losses exceeding share capital and reserves, significantly constraining financial flexibility and raising concerns about long-term sustainability. The company's ability to service its ₹1,283.07 crores long-term debt becomes questionable in the absence of consistent profitability.
Operational Challenges: Margin Compression and Cost Pressures
The dramatic swing from profitability to losses in Q2 FY26 stems primarily from severe margin compression. The operating margin excluding other income at -1.49% represents the lowest level in recent quarters, suggesting the company is operating below breakeven on core operations. This margin deterioration appears driven by a combination of pricing pressures in competitive markets and elevated operational costs.
Employee costs increased 14.19% quarter-on-quarter to ₹58.11 crores, outpacing the marginal revenue decline. This suggests either expansion in headcount or wage inflation that the company has been unable to offset through improved productivity or pricing power. The gross profit margin turning negative at -2.21% indicates that even before accounting for operating expenses, the company is selling products below their direct cost of production.
Other income remained modest at ₹1.35 crores in Q2 FY26, providing minimal support to overall profitability. The company's profit before tax of ₹-28.49 crores (excluding other income: ₹-29.84 crores) marks the lowest level in recent quarters, underscoring the severity of operational challenges. The quarterly trend shows extreme volatility, with profitability swinging from ₹185.50 crores in Q4 FY25 to losses in Q2 FY26.
Industry Context: Steel Sector Headwinds
Operating in the iron and steel products industry, Electrotherm (India) faces sector-wide challenges including volatile raw material costs, intense competition, and cyclical demand patterns. The company's diversified presence across steel melting equipment, TMT bars, ductile iron pipes, and battery-operated electric vehicles provides some insulation, but also exposes it to multiple end-market risks.
The broader iron and steel products sector has underperformed significantly, with the sector returning -27.89% over the past year. Electrotherm (India)'s -21.26% decline, whilst still negative, represents relative outperformance of 6.63 percentage points versus the sector. However, this provides little consolation given the absolute erosion in shareholder value and the company's operational struggles.
The company's global footprint across 71 countries positions it well for export opportunities, but also exposes it to currency fluctuations and geopolitical risks. The domestic steel sector has faced margin pressures from elevated coking coal prices and subdued realisations, challenges that appear to have intensified for Electrotherm (India) in Q2 FY26.
| Company | P/E (TTM) | P/BV | Return on Equity | Debt to Equity |
|---|---|---|---|---|
| Electrotherm (India) | 4.94 | -7.50 | 0.00% | -7.65 |
| MSP Steel & Power | NA (Loss Making) | 1.81 | 1.58% | 0.25 |
| Rama Steel Tubes | 82.37 | 4.91 | 12.37% | 0.23 |
| Manaksia Coated | 39.93 | 0.45 | 5.56% | 0.04 |
| Bharat Wire | 19.00 | 1.82 | 7.74% | 0.15 |
| Hariom Pipe | 19.35 | 2.29 | 17.02% | 2.29 |
Compared to peers, Electrotherm (India) trades at a depressed P/E ratio of 4.94x versus the peer average of approximately 40x (excluding loss-making companies). However, the negative book value of -7.50x makes traditional valuation metrics less meaningful. The company's return on equity stands at 0.00%, significantly below the peer average of approximately 9%, highlighting weak capital efficiency and profitability.
Valuation Analysis: Risky Territory
At the current price of ₹864.65, Electrotherm (India) carries a market capitalisation of ₹1,101.81 crores. The stock trades at a P/E (TTM) of 4.94x, appearing optically cheap, but this valuation multiple must be viewed in context of the negative book value and deteriorating earnings trajectory. The price-to-book value of -7.50x reflects the company's negative equity base, rendering traditional book value comparisons meaningless.
The company's EV/EBITDA multiple of 8.27x and EV/EBIT of 9.75x appear reasonable on surface, but the recent quarter's operating losses raise questions about the sustainability of historical EBITDA levels. With an EV/Sales ratio of 0.62x, the market is pricing in significant execution risks and margin concerns. The stock has declined 40.57% from its 52-week high of ₹1,455.00, whilst trading 28.97% above its 52-week low of ₹670.45.
The proprietary Mojo score of 14 out of 100 places Electrotherm (India) firmly in "STRONG SELL" territory, reflecting concerns across multiple parameters including negative financial trend, risky valuation due to negative book value, and technical weakness. The valuation grade has consistently remained "RISKY" since April 2023, underscoring persistent fundamental challenges.
Shareholding Pattern: Minimal Institutional Interest
The shareholding pattern reveals minimal institutional interest in Electrotherm (India), with total institutional holdings at just 6.04% as of September 2025. Foreign institutional investors hold 5.07%, up marginally from 4.61% in June 2025, whilst mutual fund holdings remain negligible at 0.08%. Insurance companies have no exposure to the stock, and other domestic institutional investors hold just 0.89%.
Promoter holding stands at a concerningly low 7.87%, having remained stable over recent quarters. This minimal promoter stake raises governance concerns and questions about promoter confidence in the company's prospects. Non-institutional investors, comprising retail and other investors, hold a dominant 64.06% stake. The low institutional and promoter holdings suggest limited confidence from sophisticated investors.
| Quarter | Promoter | FII | Mutual Funds | Other DII | Non-Institutional |
|---|---|---|---|---|---|
| Sep'25 | 7.87% | 5.07% | 0.08% | 0.89% | 64.06% |
| Jun'25 | 7.87% | 4.61% | 0.08% | 0.93% | 64.48% |
| Mar'25 | 7.87% | 4.55% | 0.08% | 0.31% | 65.16% |
| Dec'24 | 7.87% | 4.61% | 0.08% | 0.00% | 65.41% |
The marginal increase in FII holdings from 4.61% to 5.07% in the September quarter provides limited comfort, as the absolute level remains very low. The stable mutual fund and insurance holdings (at negligible levels) suggest institutional investors are avoiding the stock due to fundamental concerns. The 7.87% promoter pledging adds another layer of risk, indicating promoters have encumbered their already minimal stake.
Stock Performance: Severe Underperformance
Electrotherm (India)'s stock has experienced severe volatility and underperformance across most timeframes. Over the past year, the stock declined 21.26%, significantly underperforming the Sensex's 4.58% gain by 25.84 percentage points. The year-to-date performance stands at -29.96%, lagging the Sensex by 36.35 percentage points. Recent momentum has been particularly weak, with the stock down 16.37% over the past week and 25.34% over the past month.
The stock's technical picture appears concerning, with the price trading below all key moving averages—5-day MA (₹988.17), 20-day MA (₹1,032.80), 50-day MA (₹1,010.60), 100-day MA (₹1,011.12), and 200-day MA (₹970.17). The technical trend has shifted to "SIDEWAYS" as of November 10, 2025, down from "Mildly Bullish" previously, reflecting weakening momentum. MACD shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate bearish conditions.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -16.37% | -0.39% | -15.98% |
| 1 Month | -25.34% | +0.77% | -26.11% |
| 3 Months | +8.44% | +3.14% | +5.30% |
| 6 Months | -19.08% | +4.63% | -23.71% |
| YTD | -29.96% | +6.39% | -36.35% |
| 1 Year | -21.26% | +4.58% | -25.84% |
| 2 Years | +527.70% | +28.09% | +499.61% |
| 3 Years | +1,069.24% | +34.53% | +1,034.71% |
Interestingly, longer-term returns paint a dramatically different picture, with the stock delivering exceptional gains of 527.70% over two years and 1,069.24% over three years, vastly outperforming the Sensex. This suggests the stock experienced a significant rally from depressed levels, but has since given back substantial gains. The high beta of 1.50 indicates the stock is significantly more volatile than the broader market, amplifying both gains and losses.
The risk-adjusted return of -0.39 over the past year, combined with high volatility of 54.47%, places the stock in the "HIGH RISK LOW RETURN" category. The immediate support level sits at ₹670.45 (52-week low), whilst resistance emerges at ₹1,032.80 (20-day MA area). The stock's distance of 40.57% below its 52-week high of ₹1,455.00 reflects the severity of the recent correction.
Investment Thesis: Multiple Red Flags
The investment case for Electrotherm (India) faces significant headwinds across multiple parameters. The Mojo 4 Dots Analysis reveals concerning signals: financial trend has turned negative following Q2 FY26's loss-making quarter, technicals show a sideways trend with bearish undertones, quality grade remains below average, and valuation is classified as risky due to the negative book value. This combination of factors suggests limited near-term catalysts for recovery.
The company's quality grade of "BELOW AVERAGE" reflects weak long-term financial performance metrics. Whilst the average ROCE of 38.86% appears strong, this is overshadowed by the negative book value, zero return on equity, and high debt-to-EBITDA ratio of 12.81 times. The 5-year sales growth of 8.70% and EBIT growth of 33.78% provide some positive context, but recent quarterly performance raises questions about sustainability.
Mojo Parameters Dashboard
Overall Score: 14/100 (STRONG SELL)
Valuation: RISKY (Negative Book Value)
Quality Grade: BELOW AVERAGE
Financial Trend: NEGATIVE (Q2 FY26 Losses)
Technical Trend: SIDEWAYS (Bearish Undertones)
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Global Presence: Operations across 71 countries provide geographic diversification and export opportunities
- Diversified Portfolio: Presence across steel melting equipment, TMT bars, DI pipes, and electric vehicles reduces single-segment risk
- Strong Historical ROCE: Average ROCE of 38.86% demonstrates efficient capital deployment in normal conditions
- Established Brand: Known brand in steel melting equipment and battery-operated electric vehicles
- Low P/E Valuation: Trading at 4.94x P/E appears optically cheap versus industry average of 33x
KEY CONCERNS ⚠
- Negative Book Value: Shareholder funds at ₹-158.78 crores indicate accumulated losses exceeding equity capital
- Q2 FY26 Losses: Sharp reversal to ₹-21.62 crores loss from ₹27.75 crores profit in Q1 FY26
- Negative Operating Margins: Operating margin at -1.49% suggests selling below cost
- High Debt Burden: Long-term debt of ₹1,283.07 crores with debt-to-EBITDA of 12.81x
- Low Promoter Holding: Just 7.87% promoter stake raises governance concerns
- Minimal Institutional Interest: Total institutional holdings at only 6.04%
- High Volatility: Beta of 1.50 and 54.47% volatility amplify downside risks
Outlook: Critical Monitoring Points
The outlook for Electrotherm (India) hinges critically on the company's ability to restore operational profitability in coming quarters. The sharp deterioration in Q2 FY26 represents either a temporary aberration or the beginning of a sustained downturn. Investors should closely monitor whether Q3 FY26 results show margin recovery and return to profitability, or whether the negative trend persists.
POSITIVE CATALYSTS 📈
- Swift return to profitability in Q3 FY26
- Margin expansion above 5% levels
- Successful debt reduction programme
- Increased promoter stake or institutional buying
- Large order wins in electric vehicle segment
RED FLAGS 🚩
- Continued losses in Q3 FY26 or beyond
- Further margin compression below -1.49%
- Inability to service debt obligations
- Further decline in promoter holding
- Working capital deterioration
- Breach of debt covenants
The company's negative book value and high debt burden leave little room for error. Any further deterioration in operating performance could trigger debt servicing concerns and potential covenant breaches. The minimal promoter holding of 7.87% and low institutional interest suggest limited support during periods of stress. Technical indicators remain weak, with the stock trading below all key moving averages and showing bearish momentum on multiple timeframes.
"With negative book value, mounting losses, and minimal institutional support, Electrotherm (India) faces an uphill battle to restore investor confidence and operational stability."
For the company to stage a meaningful recovery, it must demonstrate consistent quarter-on-quarter margin improvement, successful debt reduction, and restoration of positive shareholder equity. The diversified business model provides some resilience, but execution challenges appear significant. The stock's high volatility and weak technical structure suggest further downside risks in the near term, particularly if Q3 FY26 results disappoint.
The Verdict: High-Risk Turnaround Play with Limited Visibility
Score: 14/100
For Fresh Investors: Avoid initiating positions. The combination of negative book value, recent losses, high debt burden, and minimal promoter holding creates a high-risk profile with limited near-term catalysts. The sharp Q2 FY26 deterioration raises serious questions about operational sustainability and management execution capability.
For Existing Holders: Consider exiting on any relief rallies. The fundamental deterioration in Q2 FY26, combined with negative book value and weak institutional interest, suggests limited downside protection. Only investors with very high risk tolerance and long investment horizons should consider holding, and even then, position sizing should be minimal.
Fair Value Estimate: ₹650-700 (25% downside risk from current levels), based on stressed scenario analysis assuming continued margin pressures and potential debt servicing concerns.
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. The information presented is based on publicly available data and analysis as of the publication date and may not reflect subsequent developments.
