The quarter's performance reveals a troubling paradox: whilst the company achieved impressive topline growth, operational losses excluding other income widened to ₹3.93 crores from ₹1.91 crores in Q3 FY25, with operating margin deteriorating to -24.30%. The company's heavy reliance on other income (₹6.70 crores) to offset operational deficiencies remains a critical red flag for fundamental investors.
The December 2025 quarter results underscore Gujarat Apollo's ongoing struggle to translate revenue growth into sustainable profitability. Sequential performance showed marginal improvement with net profit declining 73.08% quarter-on-quarter from ₹2.34 crores in Q2 FY26, whilst net sales increased 25.45% QoQ. However, the company's core operational metrics remain deeply concerning, with operating profit before depreciation, interest, and tax (excluding other income) remaining firmly in negative territory at ₹3.93 crores.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | YoY Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 16.17 | +25.45% | 0.63 | -72.96% | 1.36% |
| Sep'25 | 12.89 | +16.34% | 2.34 | -51.15% | 14.66% |
| Jun'25 | 11.08 | -34.63% | 1.15 | -71.11% | 11.64% |
| Mar'25 | 16.95 | +172.07% | -8.76 | — | -56.22% |
| Dec'24 | 6.23 | -36.62% | 2.33 | — | 36.76% |
| Sep'24 | 9.83 | +15.24% | 4.79 | — | 45.57% |
| Jun'24 | 8.53 | — | 3.98 | — | 49.59% |
Financial Performance: Revenue Growth Masking Operational Distress
Gujarat Apollo Industries' Q3 FY26 financial performance presents a stark dichotomy between topline expansion and bottom-line deterioration. Net sales of ₹16.17 crores represented a remarkable 159.55% year-on-year surge from ₹6.23 crores in Q3 FY25, driven by increased activity in the industrial manufacturing segment. On a sequential basis, revenue climbed 25.45% from ₹12.89 crores in Q2 FY26, suggesting improving order book execution.
However, beneath the revenue growth lies a troubling operational reality. The company's operating profit before depreciation, interest, and tax (excluding other income) stood at ₹3.93 crores negative in Q3 FY26, significantly worse than the ₹1.91 crores loss recorded in Q3 FY25. This translated to an operating margin (excluding other income) of -24.30%, compared to -30.66% in the year-ago quarter. Whilst the margin deterioration moderated, the absolute magnitude of operational losses remains a critical concern.
Employee costs increased to ₹2.62 crores in Q3 FY26 from ₹1.85 crores in Q3 FY25, reflecting a 41.62% year-on-year rise. This increase, whilst partially justified by revenue growth, contributed to the operational margin pressure. The company's gross profit margin for the quarter stood at 10.39%, a dramatic collapse from 56.98% in Q3 FY25, indicating severe pricing pressure or unfavourable product mix shifts.
Interest expenses rose to ₹1.09 crores in Q3 FY26, up from ₹1.01 crores in Q3 FY25, reflecting increased borrowing costs. Depreciation remained relatively stable at ₹1.41 crores. The company's profit before tax stood at ₹0.27 crores, down sharply from ₹2.39 crores in the year-ago quarter. Tax expenses of ₹0.05 crores resulted in a net profit after tax of ₹0.22 crores on a standalone basis, with consolidated net profit at ₹0.63 crores after accounting for subsidiary contributions.
Critical Operational Concern
Other Income Dependency: The company generated other income of ₹6.70 crores in Q3 FY26, which represents 2,481.48% of profit before tax. This extreme reliance on non-operating income to offset operational losses raises serious questions about the sustainability of the business model. Without other income, the company would have reported a substantial operating loss, highlighting the absence of core business profitability.
Profitability Crisis: Margins Under Severe Pressure
Gujarat Apollo's profitability metrics paint a concerning picture of a company struggling with fundamental operational efficiency. The PAT margin collapsed to 1.36% in Q3 FY26 from 36.76% in Q3 FY25, representing one of the sharpest margin compressions in recent quarters. This 35.40 percentage point deterioration reflects not just volume pressures but fundamental challenges in cost management and pricing power.
The company's return on equity (ROE) averaged a meagre 1.67% over recent periods, with the latest quarter showing a negative ROE of -0.60%. This indicates extremely poor capital efficiency, with shareholder funds of ₹490.77 crores generating minimal returns. For context, even conservative fixed deposit rates would deliver superior returns, raising questions about capital allocation and management effectiveness.
Return on capital employed (ROCE) presents an equally troubling picture at -2.45% on average and -3.88% for the latest period. This negative ROCE indicates the company is destroying value rather than creating it, with the capital deployed in the business generating returns below the cost of capital. The five-year EBIT growth of -155.20% further underscores the deteriorating operational performance trajectory.
Balance Sheet Quality Assessment
Gujarat Apollo maintains a relatively conservative balance sheet with shareholder funds of ₹490.77 crores as of March 2025. Long-term debt stood at ₹9.78 crores, resulting in a debt-to-equity ratio of 0.09—indicating low financial leverage. The company holds investments of ₹60.49 crores and current assets of ₹215.02 crores, providing reasonable liquidity. However, the inability to generate adequate returns on this capital base remains the primary concern. Fixed assets increased to ₹127.98 crores from ₹107.95 crores, suggesting ongoing capital expenditure, but the returns from these investments remain questionable given persistently negative operating margins.
Cash Flow Dynamics: Operating Cash Generation Concerns
The company's cash flow statement for FY25 reveals significant operational challenges. Cash flow from operations turned negative at ₹15.00 crores, a sharp reversal from the positive ₹7.00 crores generated in FY24. This deterioration stemmed from adjustments of ₹17.00 crores and working capital changes of ₹2.00 crores, indicating operational inefficiencies and potential working capital management issues.
Cash flow from investing activities stood at ₹13.00 crores negative in FY25, reflecting capital expenditure and investment activities. The company generated ₹28.00 crores from financing activities, primarily through increased borrowings, to bridge the operational cash flow deficit. This reliance on external financing to fund operations raises sustainability concerns, particularly given the company's inability to generate consistent operational cash flows.
Peer Comparison: Lagging Industry Standards
When benchmarked against industrial manufacturing peers, Gujarat Apollo's performance metrics reveal significant underperformance across key parameters. The company's ROE of 1.67% trails substantially behind competitors such as Integra Engineering (21.20%), Axtel Industries (19.61%), and International Conveyors (16.47%). Even Airfloa Rail, with an ROE of 11.56%, demonstrates markedly superior capital efficiency.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Guj Apollo Inds | NA (Loss Making) | 1.07 | 1.67 | 0.45 | 0.09 |
| Airfloa Rail | 26.85 | 3.27 | 11.56 | — | 0.00 |
| Axtel Industries | 25.57 | 5.08 | 19.61 | 2.81 | -0.80 |
| Integra Engineering | 34.04 | 5.28 | 21.20 | — | 0.29 |
| Artson | NA (Loss Making) | 108.39 | 118.83 | — | 9.48 |
| Intl. Conveyors | 7.34 | 1.27 | 16.47 | 0.96 | -0.40 |
Gujarat Apollo's P/E ratio is not applicable due to loss-making status on a trailing twelve-month basis, whilst most profitable peers trade at P/E multiples between 7.34x and 34.04x. The company's price-to-book value of 1.07x appears reasonable compared to peers averaging significantly higher multiples, but this modest valuation reflects fundamental concerns rather than value opportunity. The market is pricing in the operational challenges and poor return profile, with the low P/BV serving as a warning signal rather than an attraction.
The company's dividend yield of 0.45% based on a ₹2 per share dividend remains modest, with a payout ratio of 20.84%. This conservative payout policy reflects management's awareness of operational challenges and the need to conserve cash for business requirements.
Valuation Analysis: Risk Premium Justified
Gujarat Apollo's current valuation metrics reflect the market's assessment of significant operational risks and uncertain earnings visibility. Trading at ₹379.80 as of February 16, 2026, the stock has declined 6.63% following the Q3 results announcement, with the market cap standing at ₹506.00 crores. The company's valuation grade of "RISKY" accurately captures the fundamental challenges facing the business.
The stock trades at a price-to-book value of 1.07x, marginally above its book value of ₹408.67 per share. Whilst this might appear attractive on surface, the modest premium reflects the market's scepticism about the company's ability to generate adequate returns on its asset base. With negative ROCE and minimal ROE, the book value itself may not represent true economic value.
The enterprise value-to-sales ratio of 12.08x appears elevated for a loss-making industrial manufacturing company, particularly given the sector's typically lower valuation multiples. The negative EV/EBITDA of -37.61x and EV/EBIT of -27.35x reflect the operational losses, rendering these metrics less meaningful for comparative analysis. The company's EV to capital employed ratio of 1.06x suggests the market values the business at approximately its capital base, offering no premium for future earnings potential.
Shareholding Pattern: Promoter Stake Reduction Raises Questions
Gujarat Apollo's shareholding pattern reveals notable changes in recent quarters, with promoter holding declining from 51.99% in June 2025 to 47.30% by December 2025. This 4.69 percentage point reduction occurred in the September 2025 quarter, representing a significant stake dilution that warrants attention from minority shareholders. The promoter group, led by Asit Anilkumar Patel HUF (17.35%) and Anand A Patel (8.16%), maintains majority control but the recent reduction raises questions about promoter confidence.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 47.30% | 51.99% | 51.99% | -4.69% |
| FII Holding | 0.05% | 0.00% | 0.14% | +0.05% |
| Mutual Fund Holding | 0.00% | 0.00% | 0.00% | — |
| Non-Institutional | 52.65% | 48.01% | 47.87% | +4.64% |
Institutional participation remains minimal, with FII holding at a negligible 0.05%, mutual funds completely absent, and no insurance company holdings. This lack of institutional interest reflects the company's micro-cap status, operational challenges, and limited liquidity. The non-institutional shareholding increased to 52.65% in December 2025, primarily absorbing the promoter stake reduction, suggesting retail investor participation but limited quality institutional support.
Positively, there is no promoter pledging, indicating the promoter group maintains unencumbered ownership of their shares. However, the recent stake reduction, combined with operational underperformance, may signal caution among controlling shareholders about near-term business prospects.
Stock Performance: Underperformance Across Timeframes
Gujarat Apollo's stock performance reveals significant volatility and recent underperformance relative to broader market indices. Trading at ₹379.80 as of February 16, 2026, the stock has declined 6.63% on the day of result announcement, reflecting negative investor sentiment following the Q3 FY26 numbers. The stock currently trades below all major moving averages—5-day (₹406.34), 20-day (₹397.59), 50-day (₹409.29), 100-day (₹435.05), and 200-day (₹423.90)—indicating a clearly established downtrend.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -5.85% | -0.94% | -4.91% |
| 1 Month | -7.48% | -0.35% | -7.13% |
| 3 Month | -17.43% | -1.52% | -15.91% |
| 6 Month | -22.20% | +3.32% | -25.52% |
| YTD | -9.17% | -2.28% | -6.89% |
| 1 Year | +20.40% | +9.66% | +10.74% |
| 3 Years | +99.00% | +35.81% | +63.19% |
| 5 Years | +77.48% | +59.83% | +17.65% |
Short-term performance has been particularly weak, with the stock declining 5.85% over one week, 7.48% over one month, and 17.43% over three months, significantly underperforming the Sensex across these periods. The six-month return of -22.20% against Sensex's +3.32% gain represents a massive negative alpha of -25.52%, indicating severe relative underperformance during the recent operational deterioration.
Longer-term performance presents a more nuanced picture. The one-year return of 20.40% outperformed the Sensex's 9.66% gain by 10.74 percentage points, whilst the three-year return of 99.00% substantially exceeded the Sensex's 35.81% gain. However, this historical outperformance appears increasingly disconnected from current operational realities, with recent quarters showing deteriorating fundamentals that may not support previous valuation levels.
The stock's beta of 1.50 indicates high volatility relative to the market, with volatility at 51.55% compared to Sensex's 11.53%. This elevated volatility, combined with recent negative returns, places Gujarat Apollo in the "HIGH RISK HIGH RETURN" category, though recent performance suggests the risk component has materialised without commensurate returns.
Technical Analysis: Bearish Trend Firmly Established
Technical indicators paint a decisively bearish picture for Gujarat Apollo Industries. The stock's overall technical trend turned "MILDLY BEARISH" on February 1, 2026, at ₹391, following a period of mildly bullish sentiment. Multiple technical indicators confirm this negative momentum, with MACD showing bearish signals on both weekly and monthly timeframes, and Bollinger Bands indicating mildly bearish conditions on the weekly chart.
The stock's position below all key moving averages—trading at ₹379.80 versus the 200-day MA of ₹423.90—signals sustained selling pressure and lack of buying interest. Immediate support lies at the 52-week low of ₹246.15, whilst resistance is expected at the 20-day MA of ₹397.59, followed by stronger resistance at the 100-day MA of ₹435.05. The 52-week high of ₹555.00 appears distant, with the current price 31.57% below that peak.
Delivery volumes show concerning trends, with one-month delivery percentage declining marginally by 0.08%. Recent delivery volume of 1.15 thousand shares represents just 38.08% of total volume, significantly below the five-day average of 63.59%, suggesting increased speculative activity and weakening conviction among buyers.
Investment Thesis: Quality Concerns Outweigh Growth Potential
Gujarat Apollo's investment thesis faces fundamental challenges that overshadow any near-term revenue growth potential. The company's quality grade of "BELOW AVERAGE" reflects weak long-term financial performance, with average ROCE of -2.45% and average ROE of 1.67% indicating persistent value destruction. The five-year EBIT growth of -155.20% underscores deteriorating operational performance despite modest sales growth of 13.81% over the same period.
The company's short-term financial trend assessment of "FLAT" in December 2025 indicates no meaningful improvement trajectory despite revenue growth. Critical negative factors include profit before tax less other income declining 57.60%, PAT falling 73.00%, and non-operating income comprising an unsustainable 2,481.48% of profit before tax. This extreme reliance on other income to mask operational losses represents a fundamental business model weakness that cannot persist indefinitely.
The proprietary Mojo score of 17 out of 100, resulting in a "STRONG SELL" advisory, reflects the confluence of weak quality metrics, flat financial trends, bearish technical indicators, and risky valuation. The score places Gujarat Apollo firmly in the "avoid" category for most investors, with the recommendation to "strongly consider selling" for existing holders.
Key Strengths & Risk Factors
KEY STRENGTHS
- Revenue Growth Momentum: Net sales surged 159.55% YoY in Q3 FY26, indicating improved order book execution and market traction
- Conservative Leverage: Debt-to-equity ratio of 0.09 provides financial flexibility and low solvency risk
- No Promoter Pledging: Zero pledged shares indicates promoter confidence and eliminates forced selling risk
- Established Presence: Nearly four-decade operating history since 1986 incorporation provides industry relationships
- Asset Base: Fixed assets of ₹127.98 crores and investments of ₹60.49 crores provide tangible value
KEY CONCERNS
- Persistent Operating Losses: Operating margin (excl OI) of -24.30% indicates fundamental business model challenges
- Other Income Dependency: Reliance on ₹6.70 crores other income (2,481% of PBT) to offset operational losses is unsustainable
- Margin Collapse: PAT margin crashed from 36.76% to 1.36% YoY, gross margin from 56.98% to 10.39%
- Negative Returns: ROE of 1.67% and ROCE of -2.45% indicate value destruction rather than creation
- Promoter Stake Reduction: 4.69 percentage point decline in promoter holding raises confidence questions
- Zero Institutional Interest: Absence of mutual fund and minimal FII holding reflects quality concerns
- Negative Cash Flows: Operating cash flow of ₹15.00 crores negative in FY25 indicates operational stress
Outlook: Critical Monitoring Points
POSITIVE CATALYSTS
- Sustained revenue growth translating to positive operating margins
- Gross margin recovery above 30% indicating pricing power restoration
- Operating cash flow turning positive for two consecutive quarters
- Other income declining as percentage of PBT below 50%
- ROE improving above 10% on sustainable basis
RED FLAGS TO WATCH
- Further deterioration in operating margins below -30%
- Additional promoter stake reduction in upcoming quarters
- Increase in debt levels without corresponding operational improvement
- Continued dependence on other income exceeding 100% of PBT
- Negative operating cash flows persisting beyond FY26
- PAT margins remaining below 5% for multiple quarters
The path forward for Gujarat Apollo Industries requires fundamental operational restructuring to address core business profitability. Investors should closely monitor Q4 FY26 results for evidence of margin stabilisation and reduced other income dependency. The company must demonstrate its ability to generate sustainable operating profits without relying on non-core income sources. Until such evidence emerges, the investment case remains weak, with operational risks outweighing any potential upside from revenue growth.
The Verdict: Operational Distress Warrants Exit
Score: 17/100
For Fresh Investors: Avoid initiating positions. The company's persistent operating losses, extreme reliance on other income, collapsing margins, and negative returns on capital indicate fundamental business model challenges. The "RISKY" valuation grade and "BELOW AVERAGE" quality assessment reflect these concerns. Wait for sustained evidence of operational turnaround with at least two consecutive quarters of positive operating margins before considering entry.
For Existing Holders: Consider exiting positions on any price strength. The 72.96% YoY decline in net profit despite 159.55% revenue growth highlights the severity of operational inefficiencies. With operating margins of -24.30%, ROE of 1.67%, and other income comprising 2,481% of PBT, the business model appears unsustainable. The recent promoter stake reduction and bearish technical trend add to exit rationale. Book losses if necessary to redeploy capital into higher-quality opportunities.
Fair Value Estimate: ₹280-300 (26-29% downside from current levels), based on 0.70-0.75x P/BV multiple reflecting below-average quality and negative returns profile
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 does not guarantee future results. Stock investments carry inherent risks including potential loss of principal.
