The complete absence of revenue generation in Q2 FY26 represents an alarming deterioration from already volatile operational patterns. This marks the second instance within the past year where Hemang Resources has reported zero sales, following a similar occurrence in Q3 FY25. The company's trading and distribution business model appears fundamentally broken, with no visible signs of operational recovery despite promoter holdings remaining stable at 63.65%.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | Operating Margin |
|---|---|---|---|---|
| Sep'25 | 0.00 | -100.00% | -0.22 | 0.0% |
| Jun'25 | 1.24 | -83.53% | 0.54 | -18.55% |
| Mar'25 | 7.53 | — | 0.77 | 8.23% |
| Dec'24 | 0.00 | -100.00% | 0.29 | 0.0% |
| Sep'24 | 0.96 | +209.68% | -0.32 | -34.38% |
| Jun'24 | 0.31 | -95.51% | -0.20 | -64.52% |
| Mar'24 | 6.91 | — | 12.35 | -0.87% |
Financial Performance: A Complete Operational Collapse
The Q2 FY26 results reveal a company in severe distress. With zero revenue generation, Hemang Resources recorded an operating loss (PBDIT excluding other income) of ₹0.24 crores, marginally worse than the ₹0.23 crores loss in Q1 FY26. The company's inability to generate any sales whilst maintaining employee costs of ₹0.08 crores demonstrates unsustainable cash burn. Other income of ₹0.02 crores provided minimal cushioning, resulting in a pre-tax loss of ₹0.22 crores and a matching net loss as no tax provisions were applicable.
On a year-on-year basis, the comparison is equally damning. Q2 FY26 sales of zero represent a 100.00% decline from ₹0.96 crores in Q2 FY25, when the company had at least maintained some operational activity. The sequential quarterly performance shows wild fluctuations between zero-revenue quarters and minimal trading activity, suggesting an absence of sustainable business operations or recurring revenue streams.
The half-yearly performance for H1 FY26 (April to September 2025) shows net sales of ₹1.24 crores with a net profit of ₹0.32 crores, entirely contributed by Q1 FY26's performance and other income. This compares unfavourably to H1 FY25, which recorded sales of ₹1.27 crores but a net loss of ₹0.52 crores. Whilst the company has marginally improved its half-yearly profitability through better cost management and other income, the underlying operational weakness remains stark.
Operational Challenges: A Business Model in Question
The company's return on equity (ROE) presents a paradoxical picture. Whilst the five-year average ROE stands at an impressive 30.04%, suggesting efficient capital utilisation historically, the latest ROE has collapsed to just 5.25%. This dramatic decline reflects the deteriorating operational performance and mounting losses in recent quarters. The company's return on capital employed (ROCE) paints an even bleaker picture at -0.19% for the latest period, down from a five-year average of -43.12%, indicating persistent value destruction.
The balance sheet, whilst not heavily leveraged, shows concerning trends. Total shareholder funds stood at ₹25.96 crores as of March 2025, with negligible long-term debt of ₹0.71 crores. However, current liabilities of ₹20.90 crores—primarily comprising trade payables of ₹19.64 crores—raise questions about working capital management and supplier relationships. The company's minimal fixed asset base of ₹0.02 crores and current assets of ₹48.68 crores suggest a trading model heavily dependent on inventory and receivables management.
The quality of earnings has been consistently poor, with the company demonstrating an inability to convert sales into sustainable profits. The annual performance for FY25 showed net sales of ₹8.00 crores, down 78.40% from ₹37.00 crores in FY24, with a break-even profit after tax. This followed a loss-making FY24 where the company posted a net loss of ₹1.00 crore on sales of ₹37.00 crores. The dramatic revenue volatility—ranging from ₹205.00 crores in FY23 to single-digit crores in subsequent years—suggests an unsustainable business model or one-off transactions rather than recurring operations.
Critical Operational Red Flags
Zero Revenue Generation: Q2 FY26 marks the second zero-sales quarter in the past year, indicating complete operational paralysis in the trading and distribution business.
Collapsing Returns: Latest ROE of 5.25% and ROCE of -0.19% demonstrate severe deterioration from historical averages, signalling value destruction for shareholders.
Volatile Revenue Pattern: Sales have fluctuated wildly from ₹205.00 crores (FY23) to ₹8.00 crores (FY25), raising questions about business sustainability and recurring revenue streams.
Industry Context: Underperforming a Struggling Sector
The trading and distribution sector has faced headwinds over the past year, with the sector index declining 13.62%. However, Hemang Resources' 36.17% decline significantly underperforms this benchmark by 22.55 percentage points, indicating company-specific issues beyond broader sectoral challenges. The micro-cap nature of the company, combined with minimal institutional participation and zero foreign or domestic institutional holdings, has resulted in limited liquidity and heightened volatility.
The company's financial trend classification of "Flat" for the December 2025 quarter—despite zero revenues—appears generous. The key negative factor identified by analysts is the debtors turnover ratio for the half-year at a concerningly low 0.33 times, suggesting severe collection issues or minimal credit sales activity. This metric, at its lowest recorded level, indicates either customer payment difficulties or an inability to execute sales transactions effectively.
| Company | Market Cap (₹ Cr) | P/E (TTM) | P/BV | ROE % | Debt/Equity |
|---|---|---|---|---|---|
| Hemang Resources | 20.00 | 14.35 | 0.75 | 30.04% | 0.03 |
| Neelkanth | — | 30.81 | 2.38 | 4.44% | 0.02 |
| Regent Enterprises | — | 8.00 | 0.49 | 4.65% | 0.04 |
| SRU Steels | — | 16.40 | 0.35 | 2.21% | -0.04 |
Relative to peers in the trading and distribution space, Hemang Resources shows a mixed picture. Its five-year average ROE of 30.04% significantly exceeds peer averages of around 3-4%, suggesting historical capital efficiency advantages. However, the current operational crisis calls into question whether this historical performance can be sustained. The company's P/E ratio of 14.35x appears reasonable compared to Neelkanth's 30.81x, but this metric becomes less meaningful given the company's inability to generate consistent earnings.
Valuation Analysis: Risky Territory Despite Low Multiples
Hemang Resources currently trades at a P/E ratio of 14.35x based on trailing twelve-month earnings, which appears superficially attractive compared to the industry average of 27x. However, this valuation metric is misleading given the company's erratic earnings pattern and recent operational collapse. The price-to-book ratio of 0.75x suggests the stock trades at a 25% discount to book value, potentially indicating either a value opportunity or the market's assessment that book value overstates the company's true worth.
The company's valuation grade has been classified as "Risky" since August 2023, following a series of downgrades from "Very Attractive" earlier that year. This deterioration in valuation assessment coincides with the company's operational struggles and mounting losses. The enterprise value-to-EBITDA multiple of -20.53x reflects negative EBITDA generation, rendering traditional valuation metrics largely meaningless in the current context.
The stock has declined 47.92% from its 52-week high of ₹28.80, currently trading just 9.89% above its 52-week low of ₹13.65. This proximity to multi-month lows, combined with bearish technical indicators across all timeframes, suggests limited near-term upside without a fundamental operational turnaround. The absence of dividend payments (last dividend of ₹0.50 per share paid in August 2014) eliminates any income component for investors.
Shareholding Pattern: Stable Promoter Holdings Amid Operational Turmoil
The shareholding pattern has remained remarkably stable over the past five quarters, with promoter holdings consistently at 63.65% and non-institutional investors holding the remaining 36.35%. This stability suggests promoter commitment to the company, though it has not translated into operational improvements. Notably, there is complete absence of institutional participation—zero holdings from foreign institutional investors, mutual funds, insurance companies, and other domestic institutional investors.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 |
|---|---|---|---|---|---|
| Promoters | 63.65% | 63.65% | 63.65% | 63.65% | 63.65% |
| FII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Non-Institutional | 36.35% | 36.35% | 36.35% | 36.35% | 36.35% |
The lack of institutional interest is particularly telling. With zero mutual fund, FII, or insurance company holdings, the stock lacks the credibility and liquidity that institutional participation typically provides. This absence reflects either the company's micro-cap status, its operational inconsistencies, or both. The positive aspect is zero promoter pledging, indicating promoters have not leveraged their holdings for external financing.
Stock Performance: Severe Underperformance Across All Timeframes
Hemang Resources' stock performance has been dismal across virtually all meaningful timeframes. The stock has declined 36.17% over the past year whilst the Sensex gained 9.85%, resulting in a negative alpha of 46.02 percentage points. This massive underperformance extends to the three-year horizon, where the stock has lost 77.46% compared to the Sensex's 37.89% gain, representing a staggering 115.35 percentage point underperformance.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -1.12% | +0.43% | -1.55% |
| 1 Month | +0.33% | -0.24% | +0.57% |
| 3 Months | -33.01% | -0.94% | -32.07% |
| 6 Months | -37.71% | +4.29% | -42.00% |
| 1 Year | -36.17% | +9.85% | -46.02% |
| 2 Years | -60.54% | +17.73% | -78.27% |
| 3 Years | -77.46% | +37.89% | -115.35% |
Technical indicators uniformly point to bearish sentiment. The stock trades below all key moving averages—5-day (₹15.17), 20-day (₹15.33), 50-day (₹16.59), 100-day (₹19.24), and 200-day (₹21.72)—indicating sustained downward pressure. The MACD shows bearish signals on both weekly and monthly timeframes, whilst RSI provides a solitary bullish signal on the weekly chart. The overall technical trend classification has deteriorated to "Bearish" as of February 12, 2026, from "Mildly Bearish" previously.
The stock's beta of 1.06 indicates higher volatility than the broader market, with annualised volatility of 68.54% placing it firmly in the "High Risk, Low Return" category. The negative risk-adjusted return of -0.53 over the past year, compared to the Sensex's positive 0.86, underscores the unfavourable risk-reward profile. Trading volumes remain thin at just 1,241 shares on the latest trading day, limiting liquidity and potentially exacerbating price swings.
Investment Thesis: Multiple Red Flags Overshadow Historical Strengths
The investment case for Hemang Resources is severely compromised by multiple fundamental weaknesses. The company's proprietary Mojo score stands at just 17 out of 100, firmly in "Strong Sell" territory. This assessment reflects the confluence of bearish technical trends, flat financial performance, weak long-term fundamental strength due to operating losses, and consistent underperformance against benchmarks over the past three years.
Key Strengths & Risk Factors
Key Strengths ✓
- Strong Historical ROE: Five-year average ROE of 30.04% demonstrates historical capital efficiency, significantly exceeding peer averages of 3-4%.
- Low Leverage: Minimal long-term debt of ₹0.71 crores and debt-to-equity ratio of 0.03 provides financial flexibility and reduces solvency risk.
- No Promoter Pledging: Zero pledged shares indicates promoter confidence and eliminates forced selling risk from margin calls.
- Stable Promoter Holdings: Consistent 63.65% promoter stake over five quarters suggests commitment despite operational challenges.
- Attractive Valuation Multiples: P/E of 14.35x and P/BV of 0.75x appear reasonable relative to historical and peer benchmarks, though operational concerns overshadow this.
Key Concerns ⚠
- Complete Revenue Collapse: Zero net sales in Q2 FY26 marks second such occurrence in past year, indicating fundamental business model breakdown.
- Operating Losses: Negative operating profit of ₹0.24 crores in Q2 FY26 with no revenue base demonstrates unsustainable cost structure.
- Collapsing Returns: Latest ROE of 5.25% and ROCE of -0.19% represent severe deterioration from five-year averages, signalling value destruction.
- Extreme Revenue Volatility: Sales fluctuating from ₹205.00 crores (FY23) to ₹8.00 crores (FY25) raises questions about business sustainability.
- Zero Institutional Interest: Complete absence of FII, mutual fund, and insurance holdings reflects lack of institutional confidence.
- Severe Stock Underperformance: 36.17% decline over past year and 77.46% over three years demonstrates consistent wealth destruction.
- Bearish Technical Setup: Stock trading below all moving averages with uniformly bearish indicators across timeframes signals continued downward pressure.
Outlook: What to Watch
Positive Catalysts
- Revenue Resumption: Any evidence of sales generation in Q3 FY26 would signal operational revival.
- Strategic Pivot: Management commentary on business model changes or new revenue streams.
- Cost Rationalisation: Significant reduction in fixed costs to match revenue reality.
- Asset Monetisation: Potential value unlocking through sale of investments or other assets.
Red Flags
- Continued Zero Revenue: Another quarter of no sales would confirm permanent business shutdown.
- Mounting Losses: Increasing operating losses without revenue growth would accelerate capital erosion.
- Working Capital Stress: Further deterioration in debtors turnover or payables management.
- Promoter Exit: Any reduction in 63.65% promoter stake would signal loss of confidence.
- Technical Breakdown: Breach of 52-week low at ₹13.65 would trigger further selling pressure.
The Verdict: Exit Recommended
Score: 17/100
For Fresh Investors: Avoid completely. The company's zero revenue generation in Q2 FY26, collapsing return metrics, and bearish technical setup present an unfavourable risk-reward profile with no visible near-term catalysts for recovery. The operational crisis appears structural rather than cyclical.
For Existing Holders: Exit positions at current levels or on any technical bounce. The company has demonstrated an inability to sustain trading operations, with wild revenue fluctuations and mounting losses indicating fundamental business model failure. The 77.46% three-year decline and complete absence of institutional interest underscore the severity of operational challenges.
Fair Value Estimate: ₹10.00 (33.33% downside from current ₹15.00), based on liquidation value of shareholder funds adjusted for operational risks and absence of sustainable earnings.
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.
