The stock has been under severe pressure, trading at ₹0.81 as of November 19, 2025, down 45.73% over the past year and 54.98% year-to-date, significantly underperforming both the Sensex and its sector peers. With an overall Mojo Score of just 17 out of 100 and a "STRONG SELL" rating, the company faces mounting challenges that warrant careful examination by investors.
The quarter's performance marks a stark reversal from the company's impressive showing in Q1 FY26, when Franklin Industries delivered net sales of ₹11.77 crores and net profit of ₹2.09 crores. This sequential collapse in both top-line and bottom-line metrics has raised red flags about the company's operational consistency and the quality of its previous growth phase.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 6.60 | -43.93% | 0.06 | -97.14% | 0.91% |
| Jun'25 | 11.77 | -87.12% | 2.09 | +160.23% | 17.76% |
| Mar'25 | 91.37 | +203.15% | -3.47 | -205.47% | -3.80% |
| Dec'24 | 30.14 | +11.18% | 3.29 | -17.54% | 10.92% |
| Sep'24 | 27.11 | +1.80% | 3.99 | -29.38% | 14.72% |
| Jun'24 | 26.63 | +47.45% | 5.65 | -0.18% | 21.22% |
| Mar'24 | 18.06 | — | 5.66 | — | 31.34% |
Financial Performance: A Troubling Deterioration
The financial results for Q2 FY26 reveal a company struggling to maintain momentum. Net sales of ₹6.60 crores represent not only a 43.93% quarter-on-quarter decline but also a 75.65% year-on-year contraction—a particularly concerning metric given that Q2 FY25 was itself not a strong quarter. The company's operating profit before depreciation, interest, and tax (excluding other income) turned negative at ₹-0.04 crores, yielding a negative operating margin of 0.61%, compared to a healthy 24.81% margin in the previous quarter.
Net profit collapsed to ₹0.06 crores from ₹2.09 crores in Q1 FY26, whilst the profit after tax margin compressed dramatically to 0.91% from 17.76%. This margin compression suggests that the company is facing significant operational pressures, whether from pricing challenges, cost inflation, or competitive dynamics in the contract farming sector.
On a half-yearly basis (H1 FY26), the company reported combined net sales of ₹18.37 crores with a net profit of ₹2.15 crores, yielding a PAT margin of 11.70%. Whilst these H1 figures appear reasonable in isolation, they mask the severe deterioration that occurred in the second quarter. The quality of earnings appears questionable, with the company's financial trend officially classified as "NEGATIVE" as of September 2025.
Critical Concern: Operating Loss Territory
Franklin Industries posted an operating loss (before other income) in Q2 FY26, with PBDIT excluding other income at ₹-0.04 crores. This represents a 99.29% decline from the previous quarter and marks a concerning inflection point for a company that had previously demonstrated operating profitability. The return on capital employed (ROCE) for H1 FY26 stands at just 3.38%—the lowest on record—indicating severely diminished capital efficiency.
Operational Challenges: Volatility and Inconsistency
The contract farming services sector typically experiences some degree of seasonality, but Franklin Industries' revenue pattern suggests volatility beyond normal seasonal fluctuations. The company's quarterly revenue has swung wildly—from ₹18.06 crores in Mar'24 to ₹91.37 crores in Mar'25 (a 405.92% surge), only to collapse to ₹6.60 crores in Sep'25. This extreme volatility raises questions about the predictability and sustainability of the business model.
From a profitability perspective, the company has demonstrated inconsistency across multiple metrics. The average return on equity (ROE) over recent periods stands at 22.21%, which appears healthy on the surface. However, the latest ROE has deteriorated to just 1.72%, highlighting the recent performance collapse. Similarly, the average ROCE of 27.38% contrasts sharply with the current ROCE of 3.30%, underscoring the magnitude of the operational decline.
The balance sheet reveals a company with minimal debt—long-term debt stands at zero, which is a positive from a leverage perspective. Shareholder funds increased substantially to ₹64.51 crores in FY25 from ₹14.53 crores in FY24, primarily due to a significant increase in share capital from ₹3.62 crores to ₹28.92 crores, suggesting equity dilution. Current assets of ₹71.59 crores far exceed current liabilities of ₹6.90 crores, providing adequate short-term liquidity.
Cash Flow Concerns
Franklin Industries reported a negative operating cash flow of ₹-38.76 crores for FY25—the lowest on record—driven by a substantial ₹-49.00 crores change in working capital. This suggests the company is tying up significant capital in operations, potentially in inventory or receivables, which could strain liquidity if the revenue decline continues. The negative operating cash flow despite reported profitability raises questions about the quality and sustainability of earnings.
Industry Context: Contract Farming Under Pressure
The contract farming and agricultural services sector in India faces multiple structural challenges, including weather dependency, commodity price volatility, regulatory uncertainties, and farmer relationship management complexities. Franklin Industries operates in this challenging environment, where revenue visibility can be limited and margins are often under pressure from both input costs and output pricing dynamics.
The company's dramatic revenue fluctuations suggest it may be dependent on a limited number of large contracts or clients, creating concentration risk. The sharp decline in Q2 FY26 revenue could indicate the loss of a major contract, completion of a large project without adequate replacement business, or seasonal factors that management has not adequately communicated to investors.
Within the broader trading and distributors sector, Franklin Industries faces competition from both established players and new entrants. The company's market capitalisation of ₹63.00 crores places it firmly in the micro-cap category, which typically means limited resources for business development, technology investment, and market expansion compared to larger competitors.
Peer Comparison: Valuation and Performance Metrics
Comparing Franklin Industries with its peers in the trading and distributors sector reveals a mixed picture. The company's price-to-earnings ratio of 32.88x appears moderate relative to peers like Roni Households (103.72x), Danube Industries (42.34x), and Sharika Enterprises (216.81x). However, this seemingly reasonable valuation must be viewed in the context of the company's deteriorating financial performance and negative earnings trajectory.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Franklin Indust. | 32.88 | 0.56 | 22.21% | 0.00 | NA |
| Roni Households | 103.72 | 4.11 | 3.14% | 0.22 | NA |
| Danube Industrie | 42.34 | 1.75 | 5.61% | 0.44 | NA |
| Dhanlaxmi Cotex | 81.40 | 0.83 | 3.81% | 0.00 | NA |
| Lykis | 15.75 | 1.80 | 22.04% | 0.97 | NA |
| Sharika Enterpr. | 216.81 | 3.27 | 4.14% | 0.86 | NA |
Franklin Industries' price-to-book value of 0.56x is the lowest in the peer group (alongside Dhanlaxmi Cotex at 0.83x), suggesting the market is sceptical about the company's ability to generate returns on its book value. The historical average ROE of 22.21% compares favourably with most peers, but as noted earlier, the current ROE has deteriorated significantly. The company's zero debt-to-equity ratio is a strength shared with Dhanlaxmi Cotex, whilst other peers carry varying levels of leverage.
Notably, none of the peer companies offer dividend yields, suggesting this sector is either in a growth/reinvestment phase or facing profitability challenges that preclude dividend distributions. Franklin Industries' lack of dividend payments aligns with peer behaviour but offers no income support for shareholders enduring the current price decline.
Valuation Analysis: Attractive Price, Questionable Value
Franklin Industries' overall valuation assessment stands at "ATTRACTIVE" as of November 19, 2025, having transitioned through multiple grade changes over the past year. The stock trades at a P/E ratio of 32.88x, below the industry P/E of 42x, and at a significant discount to book value (P/BV of 0.56x). The enterprise value to EBITDA multiple of 16.93x and EV to sales of 0.46x suggest the market is pricing in limited growth expectations.
However, valuation attractiveness based on historical metrics can be misleading when a company's fundamentals are deteriorating. The 64.78% decline from the 52-week high of ₹2.30 to the current price of ₹0.81 reflects investor concerns about the sustainability of the business model. The stock trades just 15.71% above its 52-week low of ₹0.70, suggesting limited downside cushion if operational challenges persist.
The company's valuation grade history shows volatility, with multiple transitions between "Attractive" and "Very Attractive" over the past year. This instability in valuation assessment reflects the underlying business volatility and the market's struggle to establish a fair value for the company given its inconsistent performance.
Shareholding Pattern: Lack of Institutional Confidence
The shareholding pattern of Franklin Industries reveals a concerning absence of institutional interest, which typically serves as a quality signal for investors. As of September 2025, the company has zero promoter holding, zero FII participation, zero mutual fund investment, and zero insurance company holdings. The only institutional presence comes from other domestic institutional investors (DIIs), who hold a mere 0.03% stake as of September 2025, down from 0.08% in the previous quarter.
| Shareholder Type | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 0.00% | 0.00% | 0.00% | — |
| FII | 0.00% | 0.00% | 0.00% | — |
| Mutual Funds | 0.00% | 0.00% | 0.00% | — |
| Insurance | 0.00% | 0.00% | 0.00% | — |
| Other DII | 0.03% | 0.08% | 0.08% | -0.05% |
| Non-Institutional | 99.97% | 99.92% | 99.92% | +0.05% |
The 99.97% non-institutional holding suggests the stock is predominantly held by retail investors, which can contribute to higher volatility and lower liquidity. The absence of promoter holding is particularly unusual for an Indian listed company and may reflect the company's history as Murad Properties & Projects Limited before its name change to Franklin Industries Limited in April 2017. The recent reduction in DII holdings, though minimal in absolute terms, signals continued institutional disinterest even at depressed valuations.
Stock Performance: Severe Underperformance Across Timeframes
Franklin Industries' stock performance has been dismal across most relevant timeframes, with the company significantly underperforming both the Sensex benchmark and its sector peers. Over the past year, the stock has declined 45.73% compared to the Sensex's gain of 9.43%, resulting in a negative alpha of 55.16 percentage points. The year-to-date performance shows a 54.98% decline against the Sensex's 8.65% gain, widening the underperformance gap to 63.63 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 3 Months | -19.00% | +3.98% | -22.98% |
| 6 Months | -42.79% | +3.46% | -46.25% |
| YTD | -54.98% | +8.65% | -63.63% |
| 1 Year | -45.73% | +9.43% | -55.16% |
| 2 Years | -50.25% | +29.03% | -79.28% |
| 3 Years | +52.97% | +37.68% | +15.29% |
The three-month and six-month returns of -19.00% and -42.79% respectively demonstrate accelerating negative momentum. Compared to its sector, Franklin Industries has underperformed by 45.42 percentage points over the past year, with the Trading & Distributors sector posting a modest -0.31% return. The only bright spot in the performance data is the three-year return of +52.97%, which outperformed the Sensex by 15.29 percentage points, suggesting the company had a strong run in earlier years that has now reversed.
From a technical perspective, the stock is currently in a "MILDLY BEARISH" trend as of November 18, 2025, having transitioned from "Bearish" the previous day. The stock trades below all key moving averages—5-day, 20-day, 50-day, and 100-day—indicating persistent selling pressure. The high beta of 1.50 suggests the stock is significantly more volatile than the market, amplifying both gains and losses. With a risk-adjusted return of -0.65 and volatility of 70.28%, the stock falls into the "HIGH RISK LOW RETURN" category—an unattractive risk-reward profile for most investors.
Investment Thesis: Multiple Red Flags Outweigh Positives
The investment thesis for Franklin Industries faces significant headwinds across multiple dimensions. The company's Mojo 4 Dots analysis reveals concerning signals: near-term drivers are "NEGATIVE" with both quarterly financial trend and technicals pointing downward; quality is assessed as "BELOW AVERAGE"; valuation is "FAIR" but only in the context of deteriorating fundamentals; and the overall assessment is "CAUTIOUS" with mixed signals across parameters.
The company's quality grade was downgraded from "Average" to "Below Average" in August 2025, reflecting the deterioration in long-term financial performance. Whilst the five-year sales growth of 57.55% and EBIT growth of 37.70% appear impressive, these historical metrics are increasingly disconnected from current operational reality. The average ROCE of 27.38% and average ROE of 22.21% similarly mask the recent collapse in these metrics to 3.30% and 1.72% respectively.
"The dramatic swing from ₹91.37 crores in quarterly revenue to ₹6.60 crores within two quarters suggests fundamental business model challenges that go beyond normal seasonality."
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Zero Debt Position: No long-term debt provides financial flexibility and reduces bankruptcy risk
- Strong Liquidity: Current assets of ₹71.59 crores far exceed current liabilities of ₹6.90 crores
- No Promoter Pledging: Zero pledged shares eliminate concerns about forced selling or margin calls
- Historical Growth: Five-year sales CAGR of 57.55% demonstrates past ability to scale operations
- Attractive Valuation Multiples: P/E of 32.88x and P/BV of 0.56x below industry averages
⚠ KEY CONCERNS
- Revenue Collapse: Q2 FY26 sales down 75.65% YoY and 43.93% QoQ to just ₹6.60 crores
- Profitability Evaporation: Net profit of ₹0.06 crores represents 98.50% YoY decline
- Operating Losses: Negative operating margin of -0.61% in Q2 FY26 signals core business stress
- Negative Cash Flow: Operating cash flow of ₹-38.76 crores in FY25 raises sustainability questions
- Zero Institutional Interest: Complete absence of FII, MF, and insurance participation
- Extreme Volatility: Revenue swings from ₹18 crores to ₹91 crores to ₹6 crores suggest unpredictable business
- Deteriorating Returns: ROCE collapsed from 27.38% average to 3.30% current; ROE from 22.21% to 1.72%
Outlook: Critical Monitoring Points Ahead
The forward outlook for Franklin Industries hinges on management's ability to stabilise revenues and restore operational profitability. Investors should closely monitor several critical factors that will determine whether the company can reverse its current trajectory or faces continued deterioration.
Positive Catalysts to Watch
- Sequential revenue recovery in Q3 FY26 above ₹15 crores
- Return to positive operating margins above 10%
- New contract wins or client announcements
- Improvement in working capital cycle and cash flow generation
- Any institutional investor interest or stake building
Red Flags to Monitor
- Further sequential revenue decline in Q3 FY26
- Continuation of operating losses for another quarter
- Further deterioration in ROCE and ROE metrics
- Continued negative operating cash flows
- Any additional equity dilution without clear business rationale
- Technical breakdown below ₹0.70 support level
The company's ability to provide credible guidance on the reasons for Q2 FY26's collapse and a clear path to recovery will be crucial for investor confidence. Without transparency on whether the revenue decline stems from contract losses, seasonal factors, or structural business challenges, the market will likely continue to discount the stock heavily.
The Verdict: Avoid Until Stability Returns
Score: 17/100
For Fresh Investors: Avoid initiation at current levels. The combination of collapsing revenues, negative operating margins, extreme business volatility, and complete absence of institutional confidence creates an unacceptable risk profile. Wait for at least two consecutive quarters of stabilised revenues above ₹20 crores and positive operating margins before considering entry.
For Existing Holders: Consider exiting positions on any technical bounce towards ₹0.90-₹1.00 levels. The fundamental deterioration is severe, and the lack of institutional support suggests limited near-term recovery prospects. The stock's high beta and volatility mean further downside to ₹0.60-₹0.65 is possible if operational challenges persist. Only long-term holders with high risk tolerance should consider holding through this period of uncertainty.
Fair Value Estimate: ₹0.65 (19.75% downside risk from current levels), based on deteriorating fundamentals and absence of near-term positive catalysts. Any valuation above ₹0.80 appears optimistic given current operational performance.
Franklin Industries' dramatic fall from grace—with revenues collapsing from ₹91 crores to ₹6 crores in two quarters—represents a cautionary tale about the risks of investing in micro-cap companies with volatile business models and no institutional oversight. Until the company demonstrates sustained operational stability, prudent investors should remain on the sidelines.
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. The author and publisher are not responsible for any investment losses incurred by readers acting on the information presented in this article.
