The December quarter results reflect a company grappling with the inherent volatility of plantation economics. Whilst topline growth remained subdued at ₹141.09 crores—a marginal 4.98% sequential increase—the bottom line benefited from improved operational efficiency and lower employee costs. Yet the company's reliance on other income, which constituted a substantial 48.56% of profit before tax, raises questions about the sustainability of core operations.
Trading at ₹159.00 per share as of February 9, 2026, Harrisons Malayalam has witnessed a brutal correction from its 52-week high of ₹265.00, representing a 40.00% decline. The stock currently hovers precariously close to its 52-week low of ₹156.00, with technical indicators firmly entrenched in bearish territory. The company's proprietary Mojo Score stands at a concerning 26 out of 100, firmly in "Strong Sell" territory—a rating that has persisted since September 2025.
Financial Performance: Sequential Recovery Amid YoY Decline
Harrisons Malayalam's Q3 FY26 financial performance presents a tale of two narratives. On a quarter-on-quarter basis, the company demonstrated encouraging momentum with net sales advancing 4.98% to ₹141.09 crores from ₹134.40 crores in Q2 FY26. Net profit witnessed a more robust 19.00% sequential expansion to ₹7.64 crores, suggesting improved operational execution during the quarter.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 141.09 | +4.98% | 7.64 | +19.00% | 5.41% |
| Sep'25 | 134.40 | +15.40% | 6.42 | +7.72% | 4.78% |
| Jun'25 | 116.46 | -14.81% | 5.96 | +14.84% | 5.12% |
| Mar'25 | 136.71 | -3.89% | 5.19 | -53.66% | 3.80% |
| Dec'24 | 142.25 | +3.61% | 11.20 | +172.51% | 7.87% |
| Sep'24 | 137.30 | +40.59% | 4.11 | -173.26% | 2.99% |
| Jun'24 | 97.66 | — | -5.61 | — | -5.74% |
However, the year-on-year comparison paints a considerably less optimistic picture. Net sales declined marginally by 0.82% from ₹142.25 crores in Q3 FY25, whilst net profit plummeted 31.79% from ₹11.20 crores—a stark deterioration that reflects the challenging operating environment for plantation companies. Operating margins excluding other income compressed to 6.21% in Q3 FY26 from 9.73% in the corresponding quarter last year, indicating pricing pressures and cost inflation.
The company's profit before tax of ₹7.64 crores in Q3 FY26 included other income of ₹3.71 crores—representing 48.56% of PBT. This heavy dependence on non-operating income to bolster profitability is a red flag, suggesting that core plantation operations are struggling to generate adequate returns. Operating profit before depreciation, interest, and tax (excluding other income) stood at just ₹8.76 crores, barely sufficient to cover interest costs of ₹3.03 crores and depreciation of ₹1.81 crores.
For the nine-month period (April-December 2025), Harrisons Malayalam reported cumulative net profit of ₹20.02 crores on sales of ₹391.95 crores. Whilst this represents the highest nine-month PAT in recent quarters according to the company's financial trend analysis, the year-on-year comparison reveals significant profit erosion. The company's inability to maintain the robust profitability witnessed in FY25's first half underscores the structural challenges plaguing the plantation business.
Operational Challenges: Weak Returns and Elevated Leverage
Beneath the surface-level profit recovery lies a troubling operational reality. Harrisons Malayalam's return on capital employed (ROCE) averaged just 10.74% over recent years—a figure that barely exceeds the company's cost of capital and reflects the capital-intensive, low-return nature of plantation operations. The latest ROCE of 7.40% is particularly concerning, indicating deteriorating capital efficiency.
⚠️ Critical Operational Concerns
Weak Interest Coverage: EBIT to interest ratio averaged just 1.98x over recent years, indicating minimal cushion for debt servicing. This leaves the company vulnerable to any operational setbacks or commodity price weakness.
High Debt Burden: Debt to EBITDA ratio of 4.59x significantly exceeds prudent levels for a cyclical, low-margin business. Long-term debt stood at ₹66.53 crores as of March 2025, up from ₹57.64 crores the previous year.
Zero Tax Payments: The company has reported zero tax expense across all recent quarters and years, suggesting accumulated losses or tax benefits that mask underlying profitability challenges.
The company's return on equity (ROE) of 15.67% appears superficially healthy, but this metric must be contextualised against the zero tax rate and elevated leverage. With net debt to equity averaging 0.68, the company's equity returns are being artificially enhanced through financial leverage rather than operational excellence. This creates a precarious situation where any deterioration in operating performance could rapidly erode equity value.
Employee costs—a significant expense for labour-intensive plantation operations—totalled ₹45.93 crores in Q3 FY26, representing 32.56% of net sales. Whilst this declined from ₹48.89 crores in Q3 FY25, the company faces ongoing pressure from wage inflation and labour shortages endemic to the plantation sector. The company's balance sheet reveals shareholder funds of ₹154.13 crores supporting fixed assets of ₹293.57 crores, indicating substantial capital employed relative to the profit-generating capacity.
The Other Income Conundrum: Masking Core Weakness
One of the most concerning aspects of Harrisons Malayalam's financial profile is its pronounced reliance on other income to achieve profitability. In Q3 FY26, other income of ₹3.71 crores constituted 48.56% of profit before tax—meaning that nearly half the company's pre-tax profit originated from non-operating sources rather than core plantation activities.
This pattern is not isolated to a single quarter. In Q2 FY26, other income surged to ₹11.75 crores, actually exceeding the operating profit excluding other income which stood at a negative ₹0.68 crores. Without this non-operating income boost, the company would have reported a loss for that quarter. Such dependence on other income—which can include one-time gains, investment income, or asset sales—raises serious questions about the sustainability of reported profitability.
Other Income Analysis: A Sustainability Concern
For a plantation company, consistent reliance on other income to achieve profitability indicates that core tea and rubber operations are generating inadequate returns. Investors should scrutinise the composition of other income to assess whether it represents recurring investment income or one-time gains that cannot be sustained. The company's financial trend analysis specifically flags that "non-operating income is 48.56% of profit before tax"—a clear warning signal about earnings quality.
The plantation business is inherently cyclical, subject to commodity price fluctuations, weather patterns, and global demand dynamics. Companies in this sector should ideally demonstrate robust operating profitability that can withstand these cycles. Harrisons Malayalam's operating margin (excluding other income) of just 6.21% in Q3 FY26—down from 9.73% a year earlier—suggests the company is struggling with this fundamental requirement.
Industry Context: Plantation Sector Headwinds
Harrisons Malayalam operates in the challenging plantation sector, primarily focused on tea and rubber cultivation across estates in Kerala and Tamil Nadu. The plantation industry faces multiple structural headwinds that have compressed profitability across the sector in recent years.
Tea prices have remained under pressure due to oversupply in global markets and changing consumer preferences towards specialty and premium teas. Indian tea exports face stiff competition from producers in Kenya, Sri Lanka, and Vietnam who benefit from lower production costs. Domestic consumption growth has also moderated, limiting pricing power for plantation companies.
The rubber segment faces its own set of challenges. Natural rubber prices are highly volatile, influenced by global automotive demand, synthetic rubber competition, and production levels in major producing countries like Thailand and Indonesia. Indian rubber producers also contend with rising labour costs and ageing plantations that require significant capital investment for replanting.
| Company | Market Cap (₹ Cr) | P/E Ratio | P/BV Ratio | ROE (%) | Debt/Equity |
|---|---|---|---|---|---|
| Harri. Malayalam | 301.00 | 10.20 | 1.78 | 15.67 | 0.68 |
| True Colors | — | 19.27 | 2.37 | 0.00 | 0.00 |
| HRS Aluglaze | — | 79.75 | 20.40 | 0.00 | 0.00 |
| Rubfila Intl. | — | 12.60 | 1.31 | 13.03 | -0.13 |
| L. T. Elevator | — | 39.86 | 3.86 | 0.00 | 0.00 |
| Cryogenic OGS | — | 40.39 | 4.92 | 0.00 | -0.38 |
Within the broader Industrial Products peer group, Harrisons Malayalam stands out for its relatively attractive valuation metrics—trading at a P/E ratio of 10.20x compared to peer averages exceeding 30x, and a P/BV ratio of 1.78x versus peer averages above 6x. However, this valuation discount reflects market scepticism about the company's growth prospects and operational challenges rather than representing a value opportunity. The company's superior ROE of 15.67% compared to most peers must be viewed in context of the zero tax rate and elevated leverage that artificially enhance this metric.
Valuation Analysis: Discount Reflects Fundamental Concerns
At the current market price of ₹159.00 per share, Harrisons Malayalam trades at a trailing P/E ratio of 10.20x—a substantial discount to the Industrial Products sector average of 65x. The price-to-book ratio of 1.78x appears reasonable given the book value per share of ₹83.52, though investors should note that book value is heavily weighted towards fixed assets (plantations and infrastructure) whose market realisable value may differ from accounting values.
The company's valuation has been downgraded from "Expensive" to "Fair" as of June 2025, reflecting the significant price correction over the past year. The EV/EBITDA multiple of 14.51x and EV/Sales ratio of 0.77x suggest the market is pricing in limited growth expectations and ongoing profitability challenges. The PEG ratio of 0.01x appears anomalously low, but this metric loses relevance when earnings growth is negative or highly volatile—as is the case with Harrisons Malayalam.
Investors should approach this apparent valuation discount with caution. The low multiples reflect genuine concerns about earnings sustainability, capital efficiency, and sector headwinds rather than representing a compelling value opportunity. The company's proprietary Mojo Score of 26 out of 100 places it firmly in "Strong Sell" territory, with the assessment noting "weak long-term fundamental strength" and "operating losses" as key concerns limiting the score.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Harrisons Malayalam's shareholding structure reveals a stable promoter base but conspicuously minimal institutional participation—a telling indicator of limited investor confidence in the company's prospects.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 54.12% | 54.12% | 54.12% | 54.12% | 0.00% |
| FII | 0.00% | 0.00% | 0.00% | 0.16% | 0.00% |
| Mutual Funds | 0.04% | 0.04% | 0.04% | 0.04% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.01% | 0.01% | 0.01% | 0.01% | 0.00% |
| Non-Institutional | 45.83% | 45.83% | 45.83% | 45.67% | 0.00% |
Promoter holding has remained rock-solid at 54.12% over the past five quarters, with the RPG Group entities—including Rainbow Investments Ltd. (24.96%) and Vayu Udaan Aircraft LLP (20.56%)—forming the core of promoter ownership. Positively, there is zero promoter pledging, indicating no financial stress at the promoter level.
However, institutional holdings paint a concerning picture. Foreign institutional investors (FIIs) exited completely by June 2025, reducing their stake from 0.16% to zero. Mutual fund holdings remain negligible at 0.04%, with just one fund maintaining a position. Insurance companies and other domestic institutional investors (DIIs) hold virtually no stake. Combined institutional holdings total a mere 0.05%—an extraordinarily low figure that signals professional investors see limited value or growth potential in the stock.
The absence of institutional interest is particularly telling given that institutions typically conduct rigorous fundamental analysis before investing. Their collective decision to avoid or exit Harrisons Malayalam suggests concerns about the company's operational performance, sector outlook, or governance that outweigh any apparent valuation appeal. The 45.83% non-institutional shareholding represents primarily retail and non-professional investors.
Stock Performance: Severe Underperformance Across Timeframes
Harrisons Malayalam's stock price performance has been dismal across virtually all meaningful timeframes, significantly underperforming both benchmark indices and sector peers. The stock currently trades at ₹159.00, down 35.10% over the past year compared to the Sensex's 7.97% gain—representing a staggering negative alpha of 43.07 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -0.63% | +2.94% | -3.57% |
| 1 Month | -2.87% | +0.59% | -3.46% |
| 3 Months | -16.21% | +1.02% | -17.23% |
| 6 Months | -26.83% | +5.27% | -32.10% |
| YTD 2026 | -5.39% | -1.36% | -4.03% |
| 1 Year | -35.10% | +7.97% | -43.07% |
| 2 Years | -6.77% | +17.42% | -24.19% |
| 3 Years | +17.52% | +38.25% | -20.73% |
The underperformance has accelerated in recent months, with the stock declining 16.21% over three months and 26.83% over six months—periods during which the Sensex posted modest gains. The stock has also dramatically underperformed its Industrial Products sector, which delivered 15.41% returns over the past year—a 50.51 percentage point gap that highlights company-specific challenges beyond broader sector dynamics.
From a technical perspective, the situation appears equally dire. The stock trades below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating sustained selling pressure and lack of buyer interest. The overall technical trend is classified as "Bearish" as of February 9, 2026, with multiple indicators including MACD, Bollinger Bands, and KST all flashing bearish signals.
The stock's beta of 1.50 indicates it is significantly more volatile than the broader market—a "high beta" classification that magnifies both upward and downward movements. However, this volatility has worked entirely against investors recently, with the risk-adjusted return standing at -1.01 over the past year. The stock falls into the "High Risk Low Return" category—the worst possible quadrant for investors, combining elevated volatility (34.73%) with negative absolute returns.
Investment Thesis: Multiple Red Flags Outweigh Valuation Appeal
Harrisons Malayalam's investment proposition is severely compromised by a confluence of negative factors that far outweigh any superficial valuation appeal. The company's proprietary Mojo assessment reveals concerning weaknesses across all four key parameters.
The "Below Average" quality grade reflects the company's weak long-term financial performance, characterised by declining EBIT growth (-5.20% over five years), weak interest coverage (1.98x), and high debt burden (4.59x debt-to-EBITDA). The average ROCE of just 10.74% indicates the company generates barely adequate returns on the substantial capital employed in plantation assets.
Whilst the short-term financial trend is classified as "Positive" based on Q3 FY26's sequential improvement, this must be heavily qualified. The year-on-year profit decline of 31.79% and heavy reliance on other income (48.56% of PBT) suggest this positive trend is fragile and potentially unsustainable. The technical trend remains firmly "Bearish" with the stock below all moving averages and multiple indicators signalling continued weakness.
Key Strengths & Risk Factors
Key Strengths
- Established Brand Heritage: Part of the respected RPG Group with decades of plantation expertise and established market presence in tea and rubber segments.
- Asset Base: Owns substantial plantation assets across Kerala and Tamil Nadu with fixed assets of ₹293.57 crores, providing tangible backing for equity value.
- Stable Promoter Commitment: Consistent 54.12% promoter holding with zero pledging indicates long-term commitment and absence of financial stress at promoter level.
- Sequential Profit Recovery: Q3 FY26 demonstrated 19.00% QoQ profit growth, suggesting potential for operational improvement if sustained.
- Valuation Discount: Trading at P/E of 10.20x and P/BV of 1.78x—significant discount to sector averages, potentially limiting downside if fundamentals stabilise.
- Positive Cash Generation: Generated ₹23.00 crores from operations in FY25, demonstrating ability to convert profits to cash despite challenges.
Key Concerns
- Profit Erosion: Net profit declined 31.79% YoY in Q3 FY26 despite sequential recovery, with PAT margins compressing from 7.87% to 5.41% year-on-year.
- Other Income Dependency: 48.56% of Q3 FY26 PBT came from other income rather than core operations, raising serious sustainability concerns about reported profitability.
- Weak Returns: ROCE of 7.40% (latest) and average of 10.74% indicates poor capital efficiency, barely covering cost of capital despite leverage.
- High Leverage: Debt-to-EBITDA of 4.59x and weak interest coverage of 1.98x create financial vulnerability, particularly concerning given cyclical nature of plantation business.
- Zero Institutional Interest: Combined institutional holdings of just 0.05% with FII complete exit signals professional investors see limited value or growth potential.
- Severe Stock Underperformance: Down 35.10% over past year with negative alpha of 43.07% vs Sensex, trading in bearish technical trend below all moving averages.
- Sector Headwinds: Plantation industry faces structural challenges including commodity price volatility, labour cost inflation, and intense global competition.
Outlook: What to Watch
Positive Catalysts
- Sustained Margin Recovery: If operating margins (ex-OI) can recover towards 9-10% levels seen in Q3 FY25, profitability would improve materially.
- Reduction in Other Income Reliance: Demonstration that core operations can generate adequate profits without depending on non-operating income.
- Debt Reduction: Any meaningful deleveraging that brings debt-to-EBITDA below 3.5x and improves interest coverage above 2.5x.
- Commodity Price Recovery: Improvement in tea and rubber prices globally that enhances realisation and profitability.
- Institutional Interest: Any meaningful accumulation by mutual funds or FIIs would signal improved confidence and provide price support.
Red Flags to Monitor
- Further YoY Profit Declines: If Q4 FY26 shows continued YoY profit erosion, it would confirm deteriorating fundamentals rather than temporary weakness.
- Increasing Other Income Dependency: Any quarter where other income exceeds 50% of PBT would raise serious concerns about core business viability.
- Debt Increase: Any further rise in absolute debt levels or deterioration in debt ratios would pressure already weak interest coverage.
- Margin Compression: Operating margins falling below 5% would indicate severe pricing pressure or cost inflation that management cannot control.
- Technical Breakdown: Sustained trading below ₹156.00 (52-week low) would signal fresh selling pressure and potential for deeper correction.
- Promoter Pledging: Any pledging of promoter shares would be a major red flag given current operational challenges.
The Verdict: Structural Challenges Warrant Avoidance
Score: 26/100
For Fresh Investors: Avoid initiating any position. The combination of weak operational performance, elevated leverage, heavy reliance on other income, and complete absence of institutional interest creates an unfavourable risk-reward profile. The apparent valuation discount reflects genuine fundamental concerns rather than a value opportunity. The plantation sector faces structural headwinds that are unlikely to reverse in the near term.
For Existing Holders: Consider exiting positions on any technical bounce towards ₹165-170 levels. The 31.79% YoY profit decline, weak returns on capital (ROCE of 7.40%), and deteriorating margins suggest the operational challenges are worsening rather than improving. The stock's bearish technical setup and negative momentum across all timeframes indicate limited near-term recovery prospects. The risk of further downside exceeds any potential upside from current levels.
Fair Value Estimate: ₹140-145 (9-12% downside from current levels), reflecting persistent operational challenges, sector headwinds, and minimal institutional interest. The current price of ₹159.00 appears vulnerable to further correction if Q4 FY26 results disappoint or commodity prices weaken.
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.
