The quarter's performance was driven by an extraordinary revenue recovery, with net sales reaching ₹59.51 crores—up 191.14% quarter-on-quarter and representing the highest quarterly sales figure in recent years. However, this dramatic improvement comes after a prolonged period of operational difficulties, and the sustainability of this turnaround remains uncertain given the company's history of erratic performance and weak fundamental metrics.
The December 2025 quarter marks a significant inflection point for Gravity (India), which has struggled with inconsistent operational performance over the past several years. The company's revenue trajectory has been highly volatile, with extended periods of minimal or zero sales followed by sudden bursts of activity. This latest quarter's performance suggests potential stabilisation in operations, though investors should note the company's limited track record of sustained profitability and the absence of institutional investor interest.
Quarterly Performance Trend: From Dormancy to Revival
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 59.51 | +191.14% | 4.50 | +210.34% | 7.56% |
| Sep'25 | 20.44 | +6493.55% | 1.45 | +2071.43% | 7.09% |
| Jun'25 | 0.31 | — | 0.07 | +123.33% | 22.58% |
| Mar'25 | 0.00 | — | -0.30 | -190.91% | — |
| Dec'24 | 0.00 | -100.00% | 0.33 | +123.88% | — |
| Sep'24 | 0.10 | -90.99% | -1.38 | -109.09% | — |
| Jun'24 | 1.11 | — | -0.66 | — | -59.46% |
The quarterly trend reveals a company that essentially remained dormant through much of FY25 before experiencing a sudden revival beginning in Q2 FY26. The dramatic sequential growth rates—whilst mathematically accurate—reflect the low base effect from near-zero operations in preceding quarters. The critical question for investors is whether this represents a genuine operational turnaround or a temporary spike in activity.
Financial Performance: Margin Stability Amidst Revenue Volatility
In Q3 FY26, Gravity (India) generated net sales of ₹59.51 crores, marking the highest quarterly revenue figure in the company's recent history. The sequential growth of 191.14% from Q2 FY26's ₹20.44 crores demonstrates accelerating momentum, though the absolute revenue base remains modest for a manufacturing operation. Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) reached ₹6.10 crores, yielding an operating margin of 10.25%—a marginal improvement from the 9.49% recorded in Q2 FY26.
The company's ability to maintain relatively stable margins despite the sharp revenue ramp-up suggests some operational efficiency, though the limited historical data makes trend assessment challenging. Employee costs remained minimal at ₹0.08 crores, indicating either a lean workforce or reliance on contract labour—both of which carry implications for scalability and operational risk.
Net profit for Q3 FY26 stood at ₹4.50 crores, translating to a PAT margin of 7.56%—reasonably healthy for a garment manufacturer. The tax rate of 25.21% indicates the company is now generating taxable profits after several quarters of losses or minimal earnings. Interest costs remained negligible at ₹0.04 crores, reflecting low debt levels, whilst depreciation of ₹0.05 crores suggests limited capital intensity in the current operational setup.
Earnings Quality Concerns
Whilst the quarter's profitability appears robust on the surface, investors should note the absence of consolidated financial data and the company's history of erratic performance. The sustainability of these margins and the nature of the revenue contracts driving this surge remain unclear. The minimal employee costs and low capital intensity raise questions about the business model's scalability and competitive positioning.
Balance Sheet: Weak Capital Structure Raises Sustainability Concerns
Gravity (India)'s balance sheet reveals significant structural weaknesses that temper optimism about the recent operational recovery. As of March 2024, shareholder funds stood at just ₹4.07 crores, having declined sharply from ₹10.23 crores in March 2023. This erosion reflects the ₹6.00 crores loss incurred in FY24, which pushed reserves and surplus into negative territory at -₹4.93 crores.
The company's leverage metrics are concerning, with an average net debt-to-equity ratio of 1.24 over recent years and average ROCE of -41.86%—indicating poor capital efficiency. Current assets of ₹3.08 crores as of March 2024 provide limited cushion against current liabilities, and the company's ability to fund working capital requirements for the recent revenue surge remains questionable given the weak equity base.
Fixed assets of ₹2.22 crores suggest minimal manufacturing infrastructure, raising questions about whether the company operates primarily as a trading entity or relies heavily on outsourced production. The absence of investments on the balance sheet and negligible cash balances indicate limited financial flexibility to weather operational setbacks or fund growth initiatives.
Capital Efficiency Warning
The company's average Return on Capital Employed (ROCE) of -41.86% over recent years ranks amongst the poorest in the garments sector. Even with the recent profitability improvement, the latest ROCE stands at -72.94%, indicating that capital deployment remains highly inefficient. The average ROE of just 0.27% (though latest quarter shows 75.24% due to the small equity base) underscores the challenge of generating sustainable returns on shareholder capital.
Industry Context: Struggling in a Challenging Sector
The garments and apparels sector in India has faced significant headwinds over the past year, with the sector index declining 3.79% whilst Gravity (India) delivered a 220.91% return—an outperformance of 224.70 percentage points. However, this exceptional stock performance reflects more the company's recovery from extreme lows rather than sector-leading fundamentals.
The Indian textile and garment industry continues to grapple with rising input costs, intense competition from imports, and working capital pressures. Gravity (India)'s sudden revenue surge stands in stark contrast to the sector's generally subdued performance, suggesting either company-specific contracts or a business model shift that requires further scrutiny.
The company's minimal institutional holdings (0.0%) and absence of mutual fund or FII interest reflect the market's scepticism about the sustainability of this turnaround. In a sector where established players trade at average P/E ratios around 52x, Gravity (India)'s valuation of just 7x appears to discount significant execution risk and fundamental weakness.
Peer Comparison: Valuation Discount Reflects Quality Concerns
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity |
|---|---|---|---|---|
| Gravity (India) | 6.59 | 4.96 | 0.27% | 1.24 |
| Suryavanshi Spinning | 29.06 | -1.11 | 0.0% | -1.68 |
| Sheshadri Industries | 2.16 | -0.97 | 0.0% | -2.12 |
| GTN Textiles | NA (Loss Making) | 1.53 | 0.0% | 2.72 |
| Pasari Spinning | 23.94 | 9.58 | 0.0% | 1.21 |
| Kush Industries | NA (Loss Making) | -1.39 | 0.0% | -1.18 |
Gravity (India) trades at a P/E ratio of 6.59x—significantly below peers like Suryavanshi Spinning (29.06x) and Pasari Spinning (23.94x). However, this apparent valuation discount reflects the company's weak quality metrics rather than an attractive entry point. With an average ROE of just 0.27% compared to peers, the low earnings multiple is justified by poor capital efficiency and uncertain earnings sustainability.
The company's price-to-book ratio of 4.96x appears elevated given the weak return profile, suggesting the market is pricing in expectations of sustained improvement that may not materialise. The debt-to-equity ratio of 1.24, whilst not the highest in the peer group, is concerning given the company's negative reserves and limited financial flexibility.
Valuation Analysis: Premium Pricing Despite Fundamental Weaknesses
At the current market price of ₹11.97, Gravity (India) trades at a P/E ratio of 6.59x based on trailing twelve-month earnings. Whilst this appears modest relative to the sector average P/E of 52x, the valuation must be assessed in the context of the company's poor quality metrics and uncertain earnings trajectory. The company's proprietary quality assessment grades it as "Below Average," with valuation parameters flagged as "Very Expensive" relative to historical norms.
The price-to-book ratio of 4.96x is particularly concerning given the weak shareholder equity base of just ₹4.07 crores and the company's history of value destruction. With average ROCE of -41.86% and average ROE of 0.27%, the market is effectively paying a significant premium for a business that has historically destroyed capital rather than created value.
The stock's 220.91% return over the past year reflects recovery from extreme lows (52-week low of ₹3.94) rather than fundamental value creation. Trading at ₹11.97 versus a 52-week high of ₹15.93, the stock has given back some gains but remains significantly elevated from its trough. The high volatility (57.08%) and beta of 1.50 indicate this is a high-risk, high-volatility micro-cap unsuitable for conservative investors.
Valuation Risk Alert
Despite the low P/E multiple, Gravity (India) trades at valuation levels that appear unjustified by fundamentals. The company's "Risky" valuation grade, combined with "Below Average" quality assessment, suggests the current price embeds optimistic assumptions about sustained operational improvement that may not materialise. The absence of dividend yield and minimal institutional interest further underscore the speculative nature of the investment case.
Shareholding Pattern: Promoter Exit Raises Red Flags
| Quarter | Promoter % | QoQ Change | FII % | MF % | Non-Institutional % |
|---|---|---|---|---|---|
| Dec'25 | 5.99% | 0.00% | 0.00% | 0.00% | 94.01% |
| Sep'25 | 5.99% | -3.91% | 0.00% | 0.00% | 94.01% |
| Jun'25 | 9.90% | -13.47% | 0.00% | 0.00% | 90.10% |
| Mar'25 | 23.37% | -0.84% | 0.00% | 0.00% | 76.63% |
| Dec'24 | 24.21% | — | 0.00% | 0.00% | 75.79% |
The shareholding pattern reveals a deeply concerning trend: promoter holding has collapsed from 24.21% in December 2024 to just 5.99% in December 2025—a reduction of 18.22 percentage points in just four quarters. The most dramatic decline occurred in Q1 FY26, when promoters reduced their stake by 13.47 percentage points, followed by another 3.91 percentage point reduction in Q2 FY26.
This aggressive promoter exit coincides precisely with the operational recovery, suggesting insiders may be using the improved sentiment to liquidate holdings rather than demonstrating confidence in the turnaround's sustainability. The current promoter holding of just 5.99%, held entirely by Varun Rasiklal Thakkar, represents minimal skin in the game and raises serious questions about management commitment to long-term value creation.
The complete absence of institutional investors—zero FII, mutual fund, insurance, or other DII holdings—further underscores the market's lack of conviction in the company's prospects. The 94.01% non-institutional holding indicates this is primarily a retail-driven stock subject to high volatility and potential manipulation risks typical of thinly traded micro-caps.
Stock Performance: Spectacular Returns Mask High Volatility
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | 5.00% | 0.50% | +4.50% |
| 1 Week | -0.25% | 2.85% | -3.10% |
| 1 Month | -8.83% | 0.50% | -9.33% |
| 3 Months | 68.83% | 0.94% | +67.89% |
| 6 Months | 94.95% | 5.18% | +89.77% |
| 1 Year | 220.91% | 7.88% | +213.03% |
| 3 Years | 196.29% | 38.14% | +158.15% |
| 5 Years | 703.36% | 63.65% | +639.71% |
Gravity (India)'s stock performance has been nothing short of extraordinary over the past year, delivering a 220.91% return against the Sensex's 7.88% gain—generating alpha of 213.03 percentage points. The five-year return of 703.36% appears spectacular, though this reflects recovery from extremely depressed levels rather than consistent value creation.
However, these impressive returns come with extreme volatility. The stock's annualised volatility of 57.08% is nearly five times the Sensex's 11.53%, and the beta of 1.50 indicates significantly higher systematic risk. The recent one-month decline of 8.83% demonstrates how quickly gains can evaporate in this highly speculative micro-cap.
The technical picture shows a bullish trend that emerged on 6th February 2026 at ₹11.34, with the stock currently trading at ₹11.97. All major technical indicators—MACD, Bollinger Bands, and KST—flash bullish signals on both weekly and monthly timeframes. However, the stock trades below its 20-day moving average of ₹12.46, suggesting some near-term resistance.
Investment Thesis: Speculative Turnaround with Limited Conviction
The investment case for Gravity (India) rests entirely on the assumption that the recent operational recovery represents a sustainable turnaround rather than a temporary spike. The company's proprietary Mojo score of 56/100 places it firmly in "HOLD" territory, with the system recommending against fresh purchases whilst suggesting existing holders can maintain positions.
The positive near-term drivers—improving quarterly financials and bullish technical indicators—are overshadowed by significant structural concerns: below-average quality metrics, very expensive valuation relative to historical norms, aggressive promoter exit, and complete absence of institutional interest. The company's weak capital structure, negative reserves, and history of value destruction create substantial downside risk if the current revenue momentum falters.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Revenue Recovery: Q3 FY26 sales of ₹59.51 crores represent the highest quarterly revenue in recent history, with strong sequential momentum.
- Margin Stability: Operating margins of 10.25% and PAT margins of 7.56% demonstrate reasonable profitability despite revenue volatility.
- Low Debt Burden: Minimal interest costs of ₹0.04 crores indicate low financial leverage and reduced solvency risk.
- Tax Normalisation: Tax rate of 25.21% indicates return to profitability and normalisation of tax obligations.
- Stock Momentum: One-year return of 220.91% with bullish technical indicators across multiple timeframes.
- No Pledging: Zero promoter pledging eliminates one source of financial distress risk.
- Sector Outperformance: Stock has outperformed the garments sector by 224.70 percentage points over the past year.
KEY CONCERNS âš
- Aggressive Promoter Exit: Promoter stake collapsed from 24.21% to 5.99% in four quarters during the recovery period—a major red flag.
- Weak Capital Efficiency: Average ROCE of -41.86% and average ROE of 0.27% indicate chronic value destruction.
- Eroded Equity Base: Shareholder funds of just ₹4.07 crores with negative reserves of -₹4.93 crores limit financial flexibility.
- Zero Institutional Interest: Complete absence of FII, mutual fund, or insurance holdings reflects lack of professional investor conviction.
- Sustainability Uncertainty: Revenue history shows extreme volatility with extended dormant periods, raising questions about current momentum.
- High Volatility: Annualised volatility of 57.08% and beta of 1.50 indicate extreme price risk unsuitable for conservative investors.
- Micro-Cap Risks: Market cap of just ₹10.78 crores creates liquidity constraints and potential manipulation risks.
Outlook: What to Watch
POSITIVE CATALYSTS
- Sustained revenue momentum above ₹50 crores per quarter for at least two more quarters
- Stabilisation or reversal of promoter stake reduction
- Entry of institutional investors or mutual funds indicating professional validation
- Improvement in ROCE above 10% demonstrating improved capital efficiency
- Rebuilding of reserves through retained earnings to strengthen equity base
RED FLAGS
- Sequential revenue decline in Q4 FY26 or Q1 FY27 indicating momentum loss
- Further reduction in promoter holding below 5%
- Margin compression below 7% PAT margin or 9% operating margin
- Return to loss-making or near-zero revenue levels seen in FY25
- Increased debt levels or deterioration in working capital position
The next two quarters will be critical in determining whether Gravity (India)'s recovery represents a genuine operational turnaround or merely a temporary spike. Investors should monitor revenue sustainability, promoter behaviour, and any signs of institutional interest as key indicators of the investment case's validity. Given the company's history of erratic performance and the concerning shareholding trends, scepticism is warranted despite the impressive recent numbers.
The Verdict: Speculative Hold with Significant Execution Risk
Score: 56/100
For Fresh Investors: Avoid initiating positions at current levels. The aggressive promoter exit during the recovery period, combined with weak fundamental metrics and complete absence of institutional interest, creates an unfavourable risk-reward profile. The "Very Expensive" valuation grade and "Below Average" quality assessment suggest the market has already priced in optimistic assumptions that may not materialise. Wait for sustained operational improvement over multiple quarters and evidence of promoter confidence before considering entry.
For Existing Holders: Maintain positions with tight stop-losses and close monitoring of quarterly results. The recent operational recovery provides justification for holding, but the sustainability remains highly uncertain. Consider partial profit booking if the stock approaches the 52-week high of ₹15.93, and exit completely if revenue momentum falters in upcoming quarters or promoters reduce their stake further. This remains a high-risk, speculative holding unsuitable for core portfolio allocation.
Fair Value Estimate: ₹8.50-10.00 (15-29% downside risk from current levels of ₹11.97)
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
âš ï¸ 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. Gravity (India) Ltd. is a highly speculative micro-cap stock with extreme volatility, weak fundamentals, and significant execution risk. Past performance is not indicative of future results, and investors may lose their entire investment.
