Forbes & Company Q3 FY26: Sharp Revenue Decline and Margin Compression Trigger Concerns

The quarter's results revealed troubling trends across key metrics: net sales contracted 55.75% year-on-year to just ₹17.80 crores—the lowest quarterly revenue in recent history—whilst operating margins excluding other income compressed to 16.97%, down from 23.61% in the year-ago quarter. The company's heavy reliance on non-operating income, which constituted 42.54% of profit before tax, raises questions about the sustainability and quality of earnings.

The results underscore a company in transition, struggling to maintain operational momentum despite its debt-free balance sheet and historically strong return on equity. With the stock trading at 8 times trailing twelve-month earnings and 2.29 times book value, investors are grappling with whether the current valuation adequately reflects the deteriorating fundamentals or presents an opportunity amid temporary headwinds.

Financial Performance: Revenue Collapse Overshadows Margin Resilience

Forbes & Company's Q3 FY26 performance revealed a company grappling with severe top-line pressures. Net sales of ₹17.80 crores represented not only a 55.75% year-on-year decline but also the lowest quarterly revenue figure in the available eight-quarter dataset. The sequential contraction of 4.81% from Q2 FY26's ₹18.70 crores extended the downward trajectory that began after an exceptional Q4 FY25, when the company posted ₹88.68 crores in sales—a figure that now appears increasingly anomalous.

The revenue collapse stands in stark contrast to the company's historical performance. In FY25, Forbes & Company had achieved annual sales of ₹199 crores, representing 60.5% growth over FY24. However, the nine-month FY26 performance (April-December 2025) shows sales of just ₹58.95 crores, suggesting the company is on track for a significant full-year revenue decline unless a dramatic recovery materialises in Q4.

Despite the revenue pressures, operating margins excluding other income held relatively steady at 16.97% in Q3 FY26, improving marginally from 15.35% in Q2 FY26. This resilience suggests some degree of cost discipline, though the absolute operating profit of ₹3.02 crores remains concerningly low. Employee costs of ₹5.11 crores in Q3 FY26 represented 28.7% of revenue—a proportion that would be unsustainable in a sustained low-revenue environment.

The quality of earnings presents a significant concern. Other income of ₹2.08 crores in Q3 FY26 constituted 42.54% of profit before tax, indicating the company's profitability is heavily dependent on non-operating sources. Whilst other income had spiked to ₹5.74 crores in Q2 FY26 and ₹4.92 crores in Q1 FY26, the sustained reliance on this line item across quarters raises questions about the sustainability of reported profits and the underlying health of core operations.

Operational Challenges: Negative Momentum Across Key Metrics

The company's operational performance has deteriorated markedly, with its financial trend classification downgraded to "Negative" as of December 2025. This represents a significant reversal from the "Outstanding" rating the company enjoyed in March 2025, reflecting the sharp erosion in quarterly performance metrics.

Return on equity, whilst still strong at 29.61% on a latest-year basis, has declined substantially from the exceptional average of 555.68% recorded over recent periods. This normalisation suggests the extraordinary returns were driven by one-off factors rather than sustainable operational excellence. Return on capital employed stands at 11.95% on a latest-year basis, with a five-year average of just 8.27%—a figure that barely exceeds the company's cost of capital and indicates weak capital efficiency over the longer term.

The balance sheet presents a mixed picture. On the positive side, Forbes & Company operates with minimal debt, boasting a net debt-to-equity ratio of -0.28, effectively making it a net cash company. Shareholder funds stood at ₹219.48 crores as of March 2025, up from ₹140.28 crores in March 2024, reflecting retained earnings and capital restructuring. However, fixed assets of just ₹2.76 crores as of March 2025 suggest limited tangible operational infrastructure, raising questions about the company's capacity for revenue generation.

Cash flow generation has been problematic. For FY25, the company reported negative operating cash flow of ₹11 crores, with adjustments of ₹106 crores (negative) suggesting significant non-cash items or one-off factors distorting reported profits. The company's closing cash position of ₹14 crores as of March 2025, down from ₹19 crores a year earlier, provides limited buffer for operational challenges or growth investments.

Industry Context: Underperforming a Struggling Sector

Forbes & Company operates in the Electronics & Appliances sector, which itself has faced headwinds. The broader industry delivered a negative 19.90% return over the past year, reflecting challenging demand conditions, supply chain disruptions, and margin pressures across consumer durables and industrial automation segments.

Remarkably, despite its operational struggles, Forbes & Company's stock has outperformed its sector by 35.68 percentage points over the past year, posting a 15.78% return versus the sector's 19.90% decline. This relative outperformance likely reflects the company's diversified business model spanning engineering, real estate, and chemical tankers, which provides some insulation from pure-play electronics sector challenges.

However, the company's long-term growth trajectory remains deeply concerning. Net sales have declined at a compound annual rate of 41.16% over the past five years, one of the most severe contractions in its peer group. This reflects not just cyclical pressures but potentially structural challenges in the company's business mix and competitive positioning. The transition away from its historical Forbes Gokak identity and portfolio rationalisation under Shapoorji Pallonji Group ownership may have contributed to this revenue erosion.

Peer Comparison: Valuation Discount Reflects Fundamental Weakness

Relative to its Electronics & Appliances peer group, Forbes & Company trades at a significant valuation discount on certain metrics whilst commanding a premium on others, reflecting the market's uncertainty about its prospects.

Forbes & Company's P/E ratio of 7.75 times appears attractive compared to profitable peers like Butterfly Gandhimathi (26.41x), Elin Electronics (19.31x), and Singer India (55.26x). However, this discount reflects the market's scepticism about earnings sustainability given the company's negative revenue growth, heavy reliance on other income, and deteriorating quarterly trends.

The company's return on equity of 555.68% (average) vastly exceeds peers, but this figure is distorted by the low equity base and one-off factors. On a latest-year basis, the more normalised ROE of 29.61% still surpasses most peers but is declining rapidly. The price-to-book ratio of 2.29 times sits below the peer average of approximately 4.2 times, suggesting the market assigns limited value to the company's asset base and future earnings potential.

Forbes & Company's debt-free status (net debt-to-equity of -0.28) represents a competitive advantage versus leveraged peers, providing financial flexibility and reducing solvency risk. However, this strength has not translated into operational performance or revenue growth, highlighting that capital structure alone cannot drive value creation without effective business execution.

Valuation Analysis: Fair Rating Masks Deteriorating Fundamentals

Forbes & Company currently carries a "Fair" valuation rating, having been downgraded from "Very Attractive" in October 2025. At the current price of ₹409, the stock trades at 8 times trailing twelve-month earnings, 2.29 times book value, and an EV/EBITDA multiple of 21.26 times.

The P/E ratio of 8 times appears optically cheap, particularly against the industry average of 30 times. However, this discount is justified by multiple factors: the company's negative five-year sales growth of 41.16% annually, deteriorating quarterly trends, heavy dependence on other income, and "Negative" financial trend classification. The earnings base itself is suspect, with sustainability concerns given the operational revenue collapse.

The EV/EBITDA multiple of 21.26 times appears expensive for a company with Forbes & Company's growth profile and operational challenges. This elevated multiple likely reflects the company's minimal debt and investment holdings of ₹185.56 crores as of March 2025, which constitute a significant portion of enterprise value. The PEG ratio of 0.03 is mathematically distorted by the company's negative long-term growth rate and provides little valuation insight.

The stock's 52-week range of ₹264.35 to ₹477 reflects significant volatility, with the current price of ₹409 sitting 14.26% below the high and 54.72% above the low. The recent 4.72% single-day decline following Q3 results suggests the market is reassessing the company's fair value in light of deteriorating fundamentals.

Shareholding: Stable Promoter Base Amid Institutional Absence

Forbes & Company's shareholding pattern reveals a concentrated ownership structure with minimal institutional participation, raising concerns about governance oversight and market liquidity.

Promoter holding has remained rock-solid at 73.85% across the last five quarters, with Shapoorji Pallonji And Company Private Limited holding 72.56% and Forbes Campbell Finance Limited holding 1.29%. This stability provides continuity but also concentrates decision-making power. Concerningly, a staggering 98.25% of promoter shares are pledged, representing an extreme level of encumbrance that raises red flags about the promoters' financial position and potential forced selling risk.

Foreign institutional investor holdings declined from 10.16% in December 2024 to 8.24% by March 2025, with no subsequent change through December 2025. This 1.92 percentage point reduction suggests FIIs exited positions during the March quarter, possibly anticipating the operational deterioration that has since materialised. The complete absence of mutual fund and insurance company holdings signals institutional investors see limited value or excessive risk in the stock.

Total institutional holdings stand at just 9.28%, well below typical levels for listed companies and indicating Forbes & Company operates largely outside institutional investor radar. Non-institutional holdings increased from 15.03% in December 2024 to 16.87% by December 2025, suggesting some retail accumulation, though this may reflect uninformed buying rather than conviction.

Stock Performance: Outperformance Driven by Low Base Effect

Forbes & Company's stock has delivered mixed returns across different timeframes, with recent strength offset by underlying volatility and technical deterioration.

The stock's spectacular five-year return of 883.52% vastly outpaces the Sensex's 77.74% gain, generating alpha of 805.78 percentage points. However, this extraordinary performance reflects recovery from an extremely depressed base during the COVID-19 period and the company's historical restructuring challenges. The stock's three-year return of 73.50% (alpha of 35.23%) remains strong but shows the outperformance is normalising.

More recent performance reveals concerning trends. The one-month surge of 29.84% (versus Sensex's -2.84%) appears disconnected from fundamentals, suggesting speculative activity or short covering. However, the subsequent one-week decline of 5.72% and six-month underperformance of 3.06% versus the Sensex indicate the rally lacks conviction. Year-to-date, the stock has gained 26.33%, but this must be viewed against the backdrop of deteriorating quarterly results.

The stock's beta of 1.50 indicates high volatility, with movements 50% more extreme than the broader market. Annual volatility of 45.04% places Forbes & Company in the "HIGH RISK MEDIUM RETURN" category, with a Sharpe ratio of just 0.35 over the past year—well below the Sensex's 0.64, indicating poor risk-adjusted returns.

Technical Analysis: Mildly Bearish Trend With Multiple Resistance Levels

Forbes & Company's technical picture has deteriorated, with the stock in a "Mildly Bearish" trend since January 19, 2026, when it was trading at ₹363.30. The current price of ₹409 sits below all major moving averages: the 5-day MA (₹434.06), 20-day MA (₹360.21), 50-day MA (₹341.75), 100-day MA (₹361.03), and 200-day MA (₹381.64).

This positioning below short-term moving averages whilst above longer-term averages creates a confused technical picture, with the 20-day and 100-day MAs forming immediate resistance zones. The 52-week high of ₹477 stands 16.6% above current levels, representing a significant resistance barrier, whilst the 52-week low of ₹264.35 provides support 35.4% below.

Technical indicators present mixed signals. The weekly MACD shows "Mildly Bullish" readings whilst the monthly MACD is "Bearish," suggesting short-term momentum is attempting to turn positive against a negative longer-term trend. RSI indicators are "Bearish" on weekly timeframes with no clear signal monthly, indicating the stock lacks strong directional momentum. Bollinger Bands show "Mildly Bullish" weekly but "Mildly Bearish" monthly, reflecting the stock's volatility and lack of clear trend.

Delivery volumes have increased significantly, with the trailing one-month average delivery volume up 118.01% versus the previous month, suggesting increased conviction among buyers. However, this must be weighed against the stock's recent price decline and deteriorating fundamentals.

Investment Thesis: Multiple Red Flags Outweigh Valuation Appeal

Forbes & Company's investment thesis has weakened considerably, reflected in its Mojo Score of just 28 out of 100 and "STRONG SELL" advisory rating. The company's quality grade has been downgraded to "Average" from "Good," whilst its financial trend is classified as "Negative" and technical trend as "Mildly Bearish."

The valuation, whilst appearing optically cheap at 8 times earnings, fails to compensate for the multiple structural and operational challenges. The company's five-year sales decline of 41.16% annually represents one of the worst growth profiles in the market, whilst the recent quarterly revenue collapse to ₹17.80 crores suggests no near-term recovery catalyst. The heavy reliance on other income (42.54% of PBT) undermines earnings quality and sustainability.

The company's strengths—including its debt-free balance sheet, strong ROE of 29.61%, and investment holdings of ₹185.56 crores—are insufficient to offset the operational deterioration. The 98.25% promoter pledge level represents a critical risk factor that could trigger forced selling or governance concerns.

Key Strengths & Risk Factors

Outlook: What Lies Ahead for Forbes & Company