Goa Carbon Q2 FY26: Steep Losses Mount as Operating Margins Collapse

The September quarter results reveal a company grappling with severe operational challenges across its three manufacturing facilities in Goa, Chhattisgarh, and Odisha. Net sales plummeted 48.61% quarter-on-quarter to ₹102.38 crores, the lowest quarterly figure in the trailing twelve-month period. Year-on-year comparison shows a 13.90% decline, signalling persistent weakness in the Calcined Petroleum Coke market.

What's particularly alarming is the deterioration in profitability metrics. The operating profit before depreciation, interest, tax, and other income turned deeply negative at ₹9.89 crores compared to ₹7.80 crores loss in Q1 FY2026. Operating margins contracted to negative 9.66%, the worst performance in recent quarters, down from negative 3.92% in the June quarter. The company's profit after tax margin collapsed to negative 20.91%, indicating mounting pressure on both the top line and cost structure.

Financial Performance: Revenue Collapse Drives Margin Erosion

The September quarter's financial performance reveals a company in distress. Net sales of ₹102.38 crores represent not just a sequential decline but the lowest quarterly revenue in over a year. The 48.61% quarter-on-quarter drop suggests either severe volume contraction or pricing pressure in the Calcined Petroleum Coke market, or potentially a combination of both factors affecting the company's three manufacturing facilities.

On a half-yearly basis for H1 FY2026, Goa Carbon generated revenues of ₹301.72 crores, showing 22.24% growth compared to the previous corresponding period. However, this growth masks the underlying deterioration, as the company transitioned from profitability in Q1 FY2025 to mounting losses in the current fiscal year. The operating profit before depreciation, interest, tax, and other income (excluding other income) stood at negative ₹9.89 crores in Q2 FY2026, compared to positive ₹6.68 crores in Q2 FY2025, representing a dramatic swing of over ₹16 crores.

Interest costs escalated to ₹6.04 crores in Q2 FY2026, the highest quarterly interest burden in the trailing period, up from ₹4.94 crores in Q1 FY2026. This 22.27% sequential increase in finance costs further pressured an already negative operating profit, pushing the loss before tax to ₹14.00 crores. Depreciation remained relatively stable at ₹0.83 crores, indicating no significant asset impairment or accelerated write-offs during the quarter.

The tax line item shows a credit of ₹7.41 crores, resulting in an effective tax rate of negative 52.93%. This anomalous tax benefit likely reflects deferred tax asset recognition or adjustments related to carry-forward losses. However, even after this substantial tax credit, the company posted a net loss of ₹21.41 crores, underscoring the severity of operational challenges. Employee costs remained relatively stable at ₹5.84 crores, suggesting the company has not yet resorted to significant workforce reductions.

Operational Distress: Negative Cash Generation and Rising Leverage

Goa Carbon's operational metrics paint a concerning picture of a business struggling with fundamental profitability challenges. The company's average return on equity (ROE) stands at 22.18% over the long term, but the latest quarterly ROE has collapsed to negative 15.15%, indicating a sharp reversal in capital efficiency. This dramatic swing from historical strength to current weakness suggests structural issues rather than temporary headwinds.

The company's average return on capital employed (ROCE) of 21.56% contrasts starkly with the latest ROCE of 14.58%, showing deteriorating returns on invested capital. The EBIT to interest coverage ratio averages just 2.25 times, indicating weak debt servicing capacity even before the current downturn. With interest costs now at their highest quarterly level of ₹6.04 crores and operating profit deeply negative, the company's ability to service its debt obligations appears increasingly strained.

The debt to EBITDA ratio averages 2.47 times, which would be manageable for a profitable business but becomes concerning when EBITDA itself turns negative. Net debt to equity stands at 0.67, indicating moderate leverage that could quickly become problematic if losses continue. The company's sales to capital employed ratio of 2.89 times suggests reasonable asset turnover, but this metric loses relevance when those sales generate negative operating margins.

Looking at the company's cash flow history, the March 2017 annual statement showed cash flow from operations of ₹15.00 crores with closing cash of ₹14.00 crores. However, historical patterns reveal volatility, with significant negative operating cash flows in some years. Given current operating losses, the company likely faces cash consumption in FY2026 unless there's a dramatic improvement in subsequent quarters.

Industry Context: Calcined Petroleum Coke Market Challenges

Goa Carbon operates in the minerals and mining sector, specifically in the niche Calcined Petroleum Coke (CPC) market. CPC is a critical raw material for the aluminium and steel industries, with demand closely tied to industrial production cycles. The company's three manufacturing facilities—in Goa, Bilaspur (Chhattisgarh), and Paradeep (Odisha)—position it to serve major industrial clusters, but this geographic diversification has not insulated the business from current market headwinds.

The sharp revenue decline suggests either weak end-user demand from aluminium smelters and steel producers, or intense pricing competition in the CPC market. Global aluminium prices and production volumes directly impact CPC demand, and any slowdown in the aluminium sector ripples through to companies like Goa Carbon. The negative operating margins indicate that raw material costs (primarily petroleum coke) may not have declined in line with selling prices, squeezing margins.

The company's 5-year sales growth of 11.71% appears respectable, but the 5-year EBIT growth of negative 166.15% reveals that this revenue growth came at the expense of profitability. This suggests either aggressive pricing to gain market share, rising input costs that couldn't be passed through, or operational inefficiencies at the expanded production facilities. The current quarter's results indicate these structural profitability challenges remain unresolved.

Peer Comparison: Valuation Discount Reflects Distress

Comparing Goa Carbon with peers in the minerals and mining sector reveals a company trading at a significant discount, though this reflects fundamental weakness rather than value opportunity. The company's loss-making status means its P/E ratio is not applicable, whilst profitable peers like Gravita India trade at 35.97 times earnings and MOIL at 26.60 times. This valuation gap underscores the market's concern about Goa Carbon's near-term prospects.

Goa Carbon's price-to-book value of 1.93 times appears reasonable compared to peers, but this metric becomes less meaningful when the company generates negative returns on equity. Gravita India's P/BV of 5.88 times reflects its superior profitability and growth, with ROE of 26.67% and net cash position (negative debt to equity of 0.30). In contrast, Goa Carbon's historical ROE of 22.18% has collapsed to negative 15.15% in the latest quarter, justifying its valuation discount.

Most concerning is the comparison of debt levels. Whilst peers like Gravita India and MOIL maintain net cash positions, Goa Carbon carries debt to equity of 0.67 with rising interest costs. Ashapura Minechem, the closest peer in terms of leverage at 0.84 debt to equity, trades at a P/E of 17.68 times because it remains profitable. The market clearly differentiates between leveraged but profitable companies and those generating operating losses.

Valuation Analysis: Risky Grade Reflects Fundamental Weakness

Goa Carbon's current valuation assessment of "RISKY" accurately reflects the company's deteriorating fundamentals and uncertain outlook. The stock's valuation grade has undergone multiple downgrades in recent months, transitioning from "Very Attractive" in January 2025 to the current "Risky" designation. This rapid deterioration in valuation assessment mirrors the collapse in operating performance and mounting losses.

The stock currently trades at ₹450.55, down 44.79% from its 52-week high of ₹816.00 reached earlier in the fiscal year. This sharp decline reflects investor recognition of the company's operational challenges. However, the stock remains 15.53% above its 52-week low of ₹390.00, suggesting some investors may be attempting to identify a bottom. The year-to-date decline of 34.27% significantly underperforms the Sensex's 8.78% gain, resulting in negative alpha of 43.05 percentage points.

The enterprise value to EBITDA ratio of negative 16.95 times reflects negative EBITDA generation, making traditional valuation multiples meaningless. The EV to sales ratio of 0.97 times appears low, but this metric ignores profitability entirely. For a company generating operating losses, even a sub-1x EV/Sales multiple may not represent value if the business cannot return to profitability.

The company paid a dividend of ₹10 per share with an ex-dividend date of September 3, 2024, representing a dividend payout ratio of 21.41%. However, given current losses, dividend sustainability appears questionable for FY2026. The historical dividend payout suggests the company prioritised shareholder returns during profitable periods, but current financial distress likely necessitates capital preservation over distributions.

Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest

Goa Carbon's shareholding pattern reveals a stable promoter base but virtually no institutional investor interest, which limits potential support during periods of distress. Promoter holding has remained constant at 59.72% across the last five quarters through September 2025, indicating the Dempo Group's continued commitment to the business despite operational challenges. The two key promoter entities—V S Dempo Holdings Private Limited (55.39%) and Shrinivas Vasudeva Dempo (4.33%)—have maintained their stakes without any pledging, which is a positive signal.

Foreign institutional investor (FII) holding declined from 0.10% in September 2024 to effectively zero by September 2025, with the marginal 0.01% in June 2025 fully exiting by the latest quarter. This complete absence of FII interest reflects the company's micro-cap status, operational challenges, and lack of liquidity. With just three FII holders and zero mutual fund presence, the stock lacks institutional sponsorship that could provide price support or facilitate capital raising.

The non-institutional shareholding of 40.26% consists primarily of retail investors and potentially some high-net-worth individuals. The marginal 0.01% increase in Q2 FY2026 suggests minimal buying interest even at lower price levels. Other domestic institutional investor (DII) holdings remain negligible at 0.02%, indicating that even domestic institutions avoid the stock despite its established promoter background.

The absence of promoter pledging is one of the few positive aspects of the shareholding pattern, as it indicates the Dempo family has not leveraged their stake for borrowing. However, the complete lack of institutional interest severely limits the company's options for raising equity capital if needed to address operational challenges or reduce debt. The shareholding structure essentially leaves the company dependent on internal cash generation and debt markets for funding.

Stock Performance: Severe Underperformance Across All Timeframes

Goa Carbon's stock performance reveals a company in sustained decline, with negative returns across virtually all meaningful timeframes. The stock has declined 34.70% over the past year, dramatically underperforming the Sensex's 5.76% gain by 40.46 percentage points. This underperformance extends across shorter timeframes as well, with the stock down 3.71% over three months whilst the Sensex gained 4.50%, resulting in negative alpha of 8.21 percentage points.

The technical picture reinforces the bearish fundamental outlook. The stock's current trend classification is "Mildly Bearish," having oscillated between bearish and mildly bearish throughout October 2025. The stock trades below all key moving averages—5-day (₹444.64), 20-day (₹443.22), 50-day (₹451.93), 100-day (₹467.57), and 200-day (₹484.84)—indicating sustained selling pressure and lack of technical support.

The stock's beta of 1.50 classifies it as a high-beta security, meaning it tends to amplify market movements. With volatility of 37.08% compared to the Sensex's 12.49%, Goa Carbon exhibits nearly three times the market's volatility. The risk-adjusted return of negative 0.94 over the past year, combined with negative Sharpe ratio, places the stock in the "HIGH RISK LOW RETURN" category—the worst possible combination for investors.

Delivery volume data shows a 488.91% spike versus the 5-day average on October 28, 2025, with 35,790 shares delivered representing 52.95% of total volume. However, this likely reflects distress selling rather than accumulation, given the stock's downward trajectory. The 1-month delivery change of 33.66% indicates increased delivery-based trading, but in a declining market, this often signals capitulation by long-term holders rather than fresh buying interest.

Investment Thesis: Fundamental Weakness Outweighs Valuation Discount

The investment case for Goa Carbon rests on a precarious foundation. Whilst the company benefits from an established promoter background in the Dempo Group and operates in the essential Calcined Petroleum Coke market, these positives are overwhelmed by severe operational challenges. The proprietary Mojo score of 23 out of 100 with a "STRONG SELL" rating reflects the confluence of negative factors: bearish technical trend, negative financial trend, risky valuation, and deteriorating quality metrics.

The company's quality assessment of "AVERAGE" masks recent deterioration. Whilst historical metrics show respectable average ROCE of 21.56% and ROE of 22.18%, the latest quarterly ROE of negative 15.15% reveals a business in distress. The 5-year EBIT growth of negative 166.15% indicates that revenue growth came at the expense of profitability—a pattern that has intensified in recent quarters with mounting operating losses.

The near-term drivers are unequivocally negative. The quarterly financial trend classification of "NEGATIVE" reflects the company's worst quarterly performance with net sales at the lowest level (₹102.38 crores) and interest costs at the highest level (₹6.04 crores) in the trailing period. The technical trend of "Mildly Bearish" provides no support, with the stock trading below all moving averages and exhibiting high volatility of 37.08%.

For the company to stage a meaningful recovery, it would need to address fundamental operational issues: either demand for Calcined Petroleum Coke must improve significantly, or the company must dramatically reduce its cost structure to restore positive operating margins. Neither appears imminent based on current quarterly trends. The absence of institutional investor interest and minimal analyst coverage suggests the market has largely given up on a near-term turnaround story.

Key Strengths & Risk Factors

Outlook: What Lies Ahead

The outlook for Goa Carbon remains challenging without clear catalysts for improvement. The company faces a critical juncture where it must either restore operational profitability quickly or risk further deterioration in its financial position. The mounting losses, combined with elevated interest costs and weak demand environment, create a precarious situation that requires urgent management action.

Investors should monitor the Q3 FY2026 results closely for any signs of stabilisation. Key metrics to watch include sequential revenue trends, operating margin trajectory, interest coverage ratios, and any management commentary on demand outlook. The company needs to demonstrate at minimum a return to positive operating margins before any investment consideration becomes viable. Until such evidence emerges, the risk-reward profile remains heavily skewed to the downside.