Informed Technologies India Q2 FY26: Profitability Surge Masks Underlying Revenue Challenges

The stock has faced significant selling pressure, declining 6.59% on November 17, 2025, to close at ₹78.00, reflecting broader investor concerns about the company's fundamental performance. The share price has tumbled 39.75% year-to-date and remains 44.29% below its 52-week high of ₹140.00, underscoring persistent weakness in market sentiment.

The most striking aspect of the Q2 FY26 results is the extraordinary dependence on non-operating income, which stood at ₹1.20 crores—exceeding the company's net sales of ₹0.38 crores by more than three times. This structural imbalance raises fundamental questions about the sustainability of reported profitability and the company's core business viability.

Financial Performance: Revenue Erosion Amid Profitability Illusion

Informed Technologies India's Q2 FY26 financial performance presents a paradox: surging quarterly profits masking severe revenue deterioration. Net sales of ₹0.38 crores in Q2 FY26 represent a modest 5.56% sequential improvement from ₹0.36 crores in Q1 FY26, but the year-on-year decline of 42.42% from ₹0.66 crores in Q2 FY25 reveals a business in structural decline. For the first half of FY26 (H1 FY26), total revenue stands at just ₹0.74 crores, compared to ₹1.26 crores in H1 FY25—a 41.27% year-on-year contraction.

The company's operating performance remains deeply troubling. Operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) stood at negative ₹0.26 crores in Q2 FY26, translating to an operating margin of negative 68.42%. Whilst this represents an improvement from the negative 116.67% margin in Q1 FY26, the company continues to generate substantial operating losses. Employee costs of ₹0.35 crores in Q2 FY26 alone consume 92.11% of total revenue, leaving virtually no room for other operational expenses or profitability from core business activities.

The reported net profit of ₹0.94 crores in Q2 FY26 derives almost entirely from other income of ₹1.20 crores, which constitutes 121.21% of profit before tax. This extraordinary reliance on non-operating income—likely comprising investment income, dividends, or asset monetisation—fundamentally undermines the quality of reported earnings. The company's profit before tax stood at ₹0.99 crores in Q2 FY26, but when stripped of other income, the core business generated an operating loss before interest and depreciation of ₹0.26 crores.

Operational Challenges: A Business Struggling for Relevance

The operational metrics paint a picture of a company struggling to maintain relevance in its core commercial services business. Net sales have declined consistently on a year-on-year basis across recent quarters: down 42.42% in Q2 FY26, down 40.00% in Q1 FY26, and down 36.00% in Q4 FY25. This persistent revenue erosion suggests fundamental challenges in the company's business model, client relationships, or competitive positioning.

Employee costs remain stubbornly high relative to revenue generation. In Q2 FY26, employee expenses of ₹0.35 crores consumed 92.11% of net sales, leaving minimal headroom for other operational costs. This cost structure is untenable for a services business and indicates either overstaffing relative to business volumes or an inability to scale operations efficiently. The company's five-year sales growth of negative 0.93% and five-year EBIT growth of negative 4.33% confirm this is not a temporary cyclical challenge but a structural deterioration.

Return on equity (ROE) averaged 10.59% over recent periods, which whilst positive, remains below industry standards for commercial services firms. More concerning is the latest ROE of just 0.96%, indicating virtually no returns being generated on shareholder capital in the most recent period. Return on capital employed (ROCE) averaged negative 14.75%, with the latest reading at negative 18.32%, confirming that the company destroys value rather than creating it from its core operations.

The Other Income Conundrum: Sustainability in Question

The dramatic volatility in other income raises serious sustainability concerns. In Q2 FY26, other income surged to ₹1.20 crores from ₹0.70 crores in Q1 FY26, representing a 71.43% quarter-on-quarter increase. However, year-on-year, other income declined 34.07% from ₹1.82 crores in Q2 FY25. This volatility suggests the income may derive from one-time asset sales, investment gains, or other non-recurring sources rather than predictable investment income.

Looking at the annual trend, other income contributed ₹3.00 crores in FY25, which exactly offset the operating loss of ₹1.00 crores (excluding other income) and resulted in net profit of ₹1.00 crore. This pattern has persisted for years: in FY24, other income of ₹3.00 crores converted an operating loss into a ₹2.00 crore net profit. The company appears to be a quasi-investment vehicle masquerading as an operating business.

Peer Comparison: Trailing Industry Performance

When benchmarked against peers in the commercial services and supplies sector, Informed Technologies India's operational weaknesses become even more apparent. The company's ROE of 10.59% compares unfavourably to Walchand People's 11.68%, though it exceeds We Win Ltd's 8.38% and Artefact Projects' 8.26%. However, the company's valuation metrics appear disconnected from operational reality.

Informed Technologies trades at a staggering P/E ratio of 154.85x, more than five times the peer average of approximately 23x (excluding outliers). This valuation premium is entirely unjustified given the company's negative revenue growth, operating losses, and dependence on non-operating income. The price-to-book ratio of 1.48x appears reasonable on the surface but fails to account for the deteriorating quality of earnings and eroding operational capabilities.

Valuation Analysis: Elevated Multiples Defy Fundamental Reality

The company's valuation metrics suggest significant overvaluation relative to operational performance. At a current price of ₹78.00, the stock trades at 154.85 times trailing twelve-month earnings—an astronomical multiple that typically requires exceptional growth prospects or superior profitability. Informed Technologies offers neither. The negative five-year sales growth of 0.93% and negative five-year EBIT growth of 4.33% indicate a business in decline rather than expansion.

The price-to-book ratio of 1.48x implies the market values the company's assets at a 48% premium to book value. However, the book value per share of ₹49.86 includes investments and current assets that may not be readily monetisable at book value. Given the negative operating margins and declining revenue, the franchise value of the operating business is questionable at best.

Enterprise value metrics paint an even more concerning picture. The EV/EBITDA ratio of negative 14.51x and EV/EBIT of negative 11.35x result from negative operating earnings. The EV/Sales ratio of 12.70x means investors are paying ₹12.70 for every rupee of annual revenue—an extraordinarily high multiple for a business generating operating losses. For context, high-growth technology companies with strong unit economics typically trade at 5-10x sales.

Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest

The shareholding pattern reveals a highly concentrated ownership structure with minimal institutional participation. Promoter holding has remained rock-solid at 74.99% across the last five quarters through September 2025, indicating unwavering promoter commitment but also limited liquidity for public shareholders. The promoter group, led by Zeppelin Investment Private Limited (64.24%) and members of the Khandelwal family, shows no signs of dilution or exit.

The complete absence of foreign institutional investor (FII) and mutual fund participation speaks volumes about institutional assessment of the company's prospects. Total institutional holdings stand at a mere 8.68%, comprising entirely of insurance company holdings of 8.67%. This lack of institutional interest reflects concerns about liquidity, governance, business sustainability, and growth prospects. Insurance holdings have declined marginally from 8.89% in September 2024 to 8.67% in September 2025, suggesting even the limited institutional holders are gradually reducing exposure.

Stock Performance: Severe Underperformance Across Timeframes

The stock's price performance has been dismal across most relevant timeframes, significantly underperforming both the broader market and its sector. Over the past year, the stock has declined 30.36% whilst the Sensex gained 9.50%, resulting in negative alpha of 39.86 percentage points. The year-to-date decline of 39.75% against the Sensex's 8.72% gain translates to underperformance of 48.47 percentage points.

The stock has also massively underperformed its commercial services and supplies sector, which delivered 15.26% returns over the past year whilst Informed Technologies declined 30.36%—an underperformance of 45.62 percentage points. This sector-relative weakness indicates company-specific challenges rather than broader industry headwinds.

Technical indicators provide little solace. The stock trades below all key moving averages: 5-day MA at ₹81.36, 20-day MA at ₹82.63, 50-day MA at ₹78.65, 100-day MA at ₹76.76, and 200-day MA at ₹76.19. The overall technical trend is classified as "Mildly Bullish," but this appears to be a temporary bounce within a longer-term downtrend. The stock's high beta of 1.50 indicates significantly higher volatility than the market, with annualised volatility of 74.75%—more than six times the Sensex volatility of 12.26%. This extreme volatility combined with negative returns creates a toxic risk-return profile.

Investment Thesis: Multiple Red Flags Trump Limited Positives

The investment thesis for Informed Technologies India is overwhelmingly negative, with fundamental weaknesses far outweighing any potential positives. The company's proprietary Mojo Score of 24/100 places it firmly in "STRONG SELL" territory (scores 0-30), with the advisory explicitly recommending exit for existing holders and avoidance for fresh investors.

The four-pillar Mojo assessment reveals weakness across all dimensions. The near-term drivers show "MIXED" signals: whilst technicals are "Mildly Bullish," the quarterly financial trend is "NEGATIVE." Quality assessment is "BELOW AVERAGE," reflecting weak long-term financial performance, negative sales growth, and operating losses. Valuation is categorised as "RISKY," indicating significant overvaluation relative to fundamentals. The overall assessment is "MIXED," but this understates the severity of operational challenges.

Outlook: What to Watch for Potential Turnaround

For Informed Technologies India to reverse its deteriorating trajectory, several critical improvements would need to materialise. However, the probability of meaningful turnaround appears low given the persistent nature of challenges.