Kridhan Infra Q2 FY26: Profit Plunges 79% Despite Revenue Recovery

The quarter's results highlight three critical concerns: deteriorating profitability despite operational revenue, continued absence of tax payments suggesting accumulated losses, and a deeply negative book value of ₹-29.88 per share that underscores the company's precarious financial position. With a proprietary Mojo score of just 12 out of 100 and a "Strong Sell" rating, Kridhan Infra faces mounting pressure to demonstrate sustainable operational improvement.

The construction and steel services sector has witnessed volatile demand patterns in recent quarters, with infrastructure spending showing uneven momentum across regions. Kridhan Infra's performance reflects these broader headwinds, compounded by company-specific challenges that have persisted since its operational difficulties began in FY22.

Financial Performance: Sharp Profit Contraction Overshadows Revenue

Kridhan Infra's Q2 FY26 financial performance presents a troubling picture of deteriorating profitability despite maintaining operational activity. Net sales of ₹1.25 crores in Q2 FY26 declined 18.83% sequentially from ₹1.54 crores in Q1 FY26, continuing the downward trajectory from ₹2.58 crores in Q4 FY25. The company had reported zero revenue in the three quarters from Q2 FY25 to Q4 FY24, making the recent quarters' revenue generation a tentative positive sign that has failed to translate into sustainable profitability.

The profit collapse from ₹1.23 crores in Q1 FY26 to ₹0.26 crores in Q2 FY26 represents a dramatic 78.86% quarter-on-quarter erosion. More concerning is the year-on-year comparison: Q2 FY26 profit of ₹0.26 crores stands 99.61% below the ₹67.29 crores reported in Q2 FY25, though that prior-year figure appears anomalous given the company's operational history. The profit before tax followed a similar pattern, declining from ₹1.23 crores in Q1 FY26 to ₹0.26 crores in Q2 FY26.

Operating profit (PBDIT) excluding other income stood at ₹0.84 crores in Q2 FY26, down from ₹0.91 crores in Q1 FY26. However, the operating margin improved to 67.20% from 59.09%, suggesting better cost control relative to revenue, though the absolute revenue decline limits the significance of this improvement. Interest costs remained elevated at ₹0.51 crores in Q2 FY26 compared to ₹0.54 crores in Q1 FY26, continuing to burden the bottom line.

A particularly concerning aspect is the complete absence of tax payments. The company reported zero tax expense in Q2 FY26, Q1 FY26, and Q4 FY25, indicating it continues to carry forward accumulated losses that offset current profits. This suggests years of underperformance that have created substantial tax shields, though it also highlights the company's historical inability to generate sustainable profitability.

Operational Challenges: Negative Book Value Signals Deep Distress

Kridhan Infra's operational difficulties extend far beyond quarterly fluctuations, rooted in a fundamentally impaired balance sheet. The company's book value per share stands at ₹-29.88, reflecting shareholder funds of ₹-283.17 crores as of March 2025. This deeply negative equity position results from accumulated reserves and surplus of ₹-302.13 crores, which have compounded over years of losses. The situation represents one of the most severe financial distress signals in corporate finance—a company whose liabilities exceed its assets by a substantial margin.

The return on equity (ROE) metric, whilst showing an average of 8.20% over recent periods, becomes meaningless in the context of negative book value. Traditional profitability metrics lose their interpretive power when the denominator (shareholder equity) is negative. The company's average return on capital employed (ROCE) of -0.97% further underscores the inability to generate adequate returns from deployed capital.

The balance sheet structure reveals the depth of the crisis. Current liabilities stood at ₹308.63 crores as of March 2025, whilst current assets totalled only ₹7.74 crores—a working capital deficit of over ₹300 crores. This massive imbalance suggests the company is operating with significant creditor forbearance, as normal commercial terms would make such a structure unsustainable. Trade payables of ₹2.91 crores represent a small portion of total current liabilities, with "other current liabilities" accounting for ₹280.24 crores, likely comprising deferred obligations and restructured debt.

Fixed assets declined from ₹17.12 crores in March 2024 to ₹16.80 crores in March 2025, reflecting depreciation of ₹0.07 crores per quarter with minimal capital expenditure. Investments remained flat at ₹1.75 crores. The company generated cash flow from operations of ₹5.00 crores in FY25, a positive development, though this appears driven by one-time adjustments rather than sustainable operational improvement. Closing cash stood at ₹3.00 crores as of March 2025, providing minimal liquidity buffer.

Industry Context: Construction Sector Volatility Amplifies Company Weakness

The construction and infrastructure sector in India has experienced uneven momentum through 2025, with government capital expenditure showing moderation in the first half of the fiscal year before anticipated pickup in the second half. Large infrastructure projects have continued, but smaller contractors and service providers like Kridhan Infra have faced intense competition and margin pressure. Steel prices, a key input cost, have remained volatile, creating additional operational challenges for companies without strong hedging capabilities or long-term contracts.

Kridhan Infra's positioning as an ISO 9001:2008 certified steel service provider should theoretically provide competitive advantages in quality assurance and client confidence. However, the company's operational scale—with quarterly revenues in the ₹1-2 crore range when active—places it at a significant disadvantage relative to larger, better-capitalised competitors who can offer more competitive pricing, better payment terms, and greater operational reliability.

The company's revenue history illustrates its struggles: from ₹27.00 crores in FY21, sales collapsed to zero in FY24 before recovering modestly to ₹2.00 crores in FY25. This pattern suggests intermittent project-based revenue rather than steady operational activity. The absence of revenue for three consecutive quarters (Q2 FY25 through Q4 FY24) followed by sporadic revenue in subsequent quarters indicates the company lacks a sustainable order book or recurring client relationships.

Peer Comparison: Valuation Premium Unjustified by Fundamentals

Comparing Kridhan Infra to its construction sector peers reveals a valuation paradox. Despite its operational challenges and negative book value, the company trades at a P/E ratio of 31.24x, above peers like PVV Infra Ltd. (12.00x) and Nacdac Infrastructure Ltd. (8.59x). This premium appears entirely unjustified by fundamentals, likely reflecting the stock's micro-cap status and thin trading volumes rather than genuine investor conviction.

The price-to-book value of -0.12x for Kridhan Infra reflects its negative shareholder equity, making traditional valuation comparisons meaningless. Peers with positive book values trade at P/BV ratios ranging from 0.48x to 1.52x, reflecting their healthier balance sheet positions. Kridhan Infra's ROE of 8.20%, whilst comparable to PVV Infra's 8.00%, is calculated on a negative equity base and thus lacks economic significance.

Nacdac Infrastructure stands out among peers with a 21.04% ROE and more reasonable 8.59x P/E ratio, demonstrating what sustainable profitability looks like in this sector. The debt-to-equity ratios for peers range from 0.01x to 0.40x, whilst Kridhan Infra's -0.08x figure reflects its negative equity rather than genuine financial strength. No peer in this group pays dividends, reflecting the sector's capital-intensive nature and need to retain earnings for growth.

Valuation Analysis: Price Disconnected from Fundamental Reality

At ₹3.71 per share with a market capitalisation of ₹34.00 crores, Kridhan Infra's valuation appears disconnected from its operational reality and balance sheet distress. The P/E ratio of 31.24x, calculated on trailing twelve-month earnings that include the anomalous ₹67.29 crores Q2 FY25 profit, provides a misleading picture of valuation. Stripping out that outlier, the company's normalised earnings would be minimal, pushing the true P/E ratio significantly higher.

The EV/EBITDA multiple of 13.94x and EV/Sales of 10.41x appear elevated for a company with Kridhan Infra's risk profile. The enterprise value calculation itself becomes problematic given the negative book value and unclear debt structure hidden within "other current liabilities." Traditional valuation frameworks assume going-concern status, which remains questionable for a company with such severe balance sheet impairment.

The stock's 52-week range of ₹3.08 to ₹8.72 illustrates extreme volatility, with the current price 57.45% below the high and just 20.45% above the low. This wide range reflects the speculative nature of trading in such distressed micro-cap stocks, where small order flows can create dramatic price movements unrelated to fundamental developments. The dividend yield is not applicable, as the company last paid a dividend of ₹0.20 per share in September 2018, before its financial difficulties intensified.

The valuation assessment of "Risky" assigned by rating agencies appropriately captures the fundamental concerns. With negative book value, inconsistent revenue generation, and no clear path to sustainable profitability, any positive valuation represents pure speculation on a miraculous turnaround rather than investment based on discounted cash flows or asset values.

Shareholding: Stable Promoter Base Amid Institutional Absence

Kridhan Infra's shareholding pattern reveals a stable promoter holding of 47.15% that has remained unchanged across the last five quarters through September 2025. The promoter group includes Anil Dhanpat Agrawal (27.71%), Kridhan Infrastructure Private Limited (12.01%), Kridhan Petrochemical Private Limited (7.39%), and Krishnadevi Agrawal (0.05%). Importantly, there is no promoter pledging, eliminating one potential risk factor in an otherwise concerning situation.

Foreign institutional investor (FII) holding declined sharply from 4.41% in March 2025 to 0.99% in June 2025, remaining at that reduced level through September 2025. This 3.42 percentage point exit by FIIs signals institutional recognition of the company's deteriorating prospects. The complete absence of mutual fund, insurance company, and other domestic institutional investor (DII) holdings further underscores the lack of institutional confidence. Total institutional holding stands at a mere 0.99%, effectively zero for practical purposes.

Non-institutional investors, comprising retail and high-net-worth individuals, hold 51.86% of shares as of September 2025, up from 48.44% in March 2025. This increase corresponds precisely with the FII exit, suggesting retail investors absorbed the institutional selling. This pattern typically indicates uninformed or speculative buying by retail participants attracted by low absolute share prices or momentum, rather than fundamental analysis supporting investment decisions.

The stable promoter holding at 47.15% with zero pledging provides a small positive signal—promoters are not abandoning the company or leveraging their holdings for personal liquidity. However, this must be weighed against their apparent inability or unwillingness to infuse fresh capital to address the negative net worth situation. The promoter stake has remained static, suggesting no open market purchases to demonstrate confidence in the company's prospects.

Stock Performance: Severe Underperformance Across All Timeframes

Kridhan Infra's stock performance has been dismal across virtually all timeframes, with the stock generating negative alpha relative to the Sensex benchmark in most periods. Year-to-date through November 18, 2025, the stock has declined 35.92% whilst the Sensex gained 8.36%, resulting in a negative alpha of 44.28 percentage points. This massive underperformance reflects the market's recognition of the company's fundamental deterioration.

The one-year return of -11.24% compares unfavourably to the Sensex's +9.48% gain and the construction sector's +1.30% return, resulting in 12.54 percentage point underperformance versus sector peers. The three-month return of -4.87% against the Sensex's +4.18% gain demonstrates continued weakness, whilst the six-month return of -0.27% shows marginal stability at depressed levels.

Interestingly, the two-year return of +39.47% outpaced the Sensex's +28.69% gain by 10.78 percentage points, representing the only period of sustained outperformance. This likely reflects a recovery from even more depressed levels in 2023 rather than genuine operational improvement. The five-year return of +50.81%, whilst positive in absolute terms, significantly underperformed the Sensex's +91.65% gain, indicating long-term value destruction relative to broader market opportunities.

Technical indicators paint a uniformly bearish picture. The stock currently trades below all key moving averages—5-day (₹3.62), 20-day (₹3.68), 50-day (₹3.83), 100-day (₹4.11), and 200-day (₹4.11)—indicating persistent downward momentum. The overall technical trend is classified as "Bearish" as of October 13, 2025, with weekly MACD, monthly MACD, and Bollinger Bands all flashing bearish signals. The stock's beta of 1.50 indicates it is 50% more volatile than the market, amplifying both upside and downside movements.

Investment Thesis: Multiple Red Flags Overwhelm Any Positives

The investment thesis for Kridhan Infra is overwhelmingly negative, with fundamental, technical, and valuation factors all pointing to significant downside risk. The company's Mojo score of 12 out of 100 places it firmly in "Strong Sell" territory, reflecting the confluence of critical concerns that make this an unsuitable investment for any risk profile.

The quality grade of "Below Average" reflects the company's poor long-term financial performance, characterised by negative 5-year sales growth of -12.63%, weak average ROCE of -0.97%, and minimal institutional holding of 0.99%. Whilst the company maintains zero promoter pledging and operates with minimal debt (average net debt to equity of -0.08), these positives are overwhelmed by the fundamental balance sheet impairment.

The financial trend is classified as "Flat" for Q2 FY26, an assessment that appears generous given the 78.86% quarter-on-quarter profit decline. The technical trend remains firmly "Bearish," with the stock trading below all major moving averages and multiple indicators flashing sell signals. The valuation grade of "Risky" appropriately captures the disconnect between price and fundamental value, with the negative book value making traditional valuation metrics meaningless.

Key Strengths & Risk Factors

Outlook: What Lies Ahead

The forward outlook for Kridhan Infra remains deeply concerning. Without a major capital infusion to address the negative net worth or a comprehensive debt restructuring to resolve the working capital crisis, the company faces existential challenges. The sporadic revenue generation and inconsistent profitability suggest the company is surviving on intermittent projects rather than operating as a sustainable business.

For any recovery scenario to materialise, Kridhan Infra would need to demonstrate at least four consecutive quarters of revenue above ₹5 crores with net profit margins exceeding 10%, whilst simultaneously resolving its balance sheet issues through debt conversion or fresh equity. The probability of this occurring appears minimal given the company's track record and current financial position.