The Ahmedabad-based NBFC, with a market capitalisation of ₹462.00 crores, has witnessed extraordinary revenue growth yet faces critical questions about earnings quality and operational sustainability. The company's PAT margin compressed dramatically to 0.39% in Q2 FY26 from 30.13% in the corresponding quarter last year, reflecting fundamental challenges in converting top-line expansion into bottom-line profitability.
The stock has underperformed significantly, trading 72.78% below its 52-week high of ₹47.80 and delivering negative returns across most timeframes. With institutional holding at 14.75% and a below-average quality grade, investor confidence appears shaken by the company's inability to maintain profitability momentum.
Financial Performance: Revenue Surge Masks Profitability Collapse
Last Mile Enterprises posted net sales of ₹785.64 crores in Q2 FY26, representing an extraordinary 2378.36% year-on-year surge and a 94.20% increase over the previous four-quarter average. However, this revenue explosion has not translated into sustainable profitability, with consolidated net profit declining to ₹2.48 crores from ₹9.55 crores in Q2 FY25.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 785.64 | -36.66% | 2.48 | -46.78% | 0.39% |
| Jun'25 | 1,240.31 | +352.09% | 4.66 | -4.90% | 0.55% |
| Mar'25 | 274.35 | +283.38% | 4.90 | -36.28% | 2.03% |
| Dec'24 | 71.56 | +125.74% | 7.69 | -19.48% | 12.10% |
| Sep'24 | 31.70 | +320.42% | 9.55 | -261.05% | 30.13% |
| Jun'24 | 7.54 | -94.24% | -5.93 | -259.41% | -77.32% |
The quarterly trend reveals extreme volatility in both revenue and profitability metrics. Operating profit margin (excluding other income) stood at a meagre 0.42% in Q2 FY26, down from 24.51% in the year-ago quarter, indicating severe pressure on core business profitability. The company's gross profit margin similarly contracted to 0.58% from 34.54% year-on-year.
On a half-yearly basis for H1 FY26, the company reported consolidated net profit of ₹7.14 crores, representing 97.24% growth compared to the previous period. However, this positive development is overshadowed by the sequential deterioration witnessed in Q2 FY26, with profit declining 46.78% from the preceding quarter's ₹4.66 crores.
The quality of earnings raises red flags, with other income constituting 51.47% of profit before tax in Q2 FY26. This heavy reliance on non-operating income suggests that core business operations are struggling to generate sustainable profits. Operating cash flow turned significantly negative at ₹-196.99 crores for FY25, the lowest in the company's recent history, further highlighting liquidity and operational challenges.
Operational Challenges: Weak ROE and Capital Efficiency Concerns
Last Mile Enterprises demonstrates weak capital efficiency, with a return on equity (ROE) of just 4.28%, significantly below industry standards and peer averages. This low ROE indicates that the company is generating minimal returns relative to shareholder capital deployed, raising fundamental questions about business model sustainability and management's ability to create value.
⚠️ Critical Operational Concerns
Weak Capital Efficiency: ROE of 4.28% reflects poor utilisation of shareholder funds, with the company generating less than ₹5 of profit for every ₹100 of equity capital. This significantly trails peer averages and suggests structural challenges in the business model.
Cash Flow Distress: Operating cash flow of ₹-196.99 crores in FY25 indicates that the company is consuming cash rather than generating it from core operations, raising sustainability concerns.
Earnings Quality Issues: With other income representing over 51% of profit before tax, the company's reported earnings are heavily dependent on non-core activities rather than sustainable business operations.
The company's balance sheet shows shareholder funds of ₹378.83 crores as of March 2025, up substantially from ₹96.98 crores in the previous year, primarily driven by capital infusion (equity capital increased from ₹16.89 crores to ₹35.07 crores) and reserves growth. However, this capital expansion has not translated into proportionate profitability improvement, with the latest quarterly profit at its lowest level.
Long-term debt stood at ₹20.70 crores, resulting in a conservative debt-to-equity ratio of 0.08, which represents a positive aspect of the company's financial structure. Current assets of ₹373.32 crores provide adequate liquidity coverage against current liabilities of ₹106.18 crores, though the negative operating cash flow raises questions about working capital management efficiency.
The company's investments surged to ₹108.19 crores in FY25 from just ₹8.31 crores in FY24, suggesting a strategic shift in asset allocation. However, with core business profitability under pressure, the rationale and returns from these investments warrant close scrutiny.
Industry Context: NBFC Sector Outperforms, Last Mile Lags
The broader NBFC sector delivered robust returns of 24.40% over the past year, highlighting the challenging environment Last Mile Enterprises faces in comparison. The company's 68.57% decline over the same period represents a stark 92.97 percentage point underperformance versus its sector peers, indicating company-specific challenges rather than industry-wide headwinds.
The NBFC sector has benefited from strong credit demand, improving asset quality metrics, and favourable regulatory developments. However, Last Mile Enterprises has failed to capitalise on these tailwinds, with its business model and operational execution lagging significantly behind industry standards.
Sector Performance Gap
Last Mile Enterprises' 68.57% decline over the past year contrasts sharply with the NBFC sector's 24.40% gain, representing a massive 92.97 percentage point underperformance. This divergence suggests deep-seated operational challenges specific to the company rather than industry-wide pressures.
Peer Comparison: Valuation Discount Reflects Quality Concerns
A comparison with NBFC sector peers reveals Last Mile Enterprises trading at significant valuation discounts, reflecting market concerns about earnings quality and business sustainability. The company's ROE of 4.28% trails substantially behind peers, justifying the lower valuation multiples.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Last Mile Enter. | 23.14 | 1.21 | 4.28 | 0.15 | 0.08 |
| India Finsec | 43.34 | 4.85 | 11.33 | 0.00 | 1.74 |
| Unifinz Capital | 9.58 | 4.40 | 20.12 | 0.07 | 1.13 |
| Naperol Invest. | 52.21 | 0.43 | 1.15 | 1.03 | 0.00 |
| UVS Hospitality | 33.79 | 2.86 | 8.47 | 0.00 | 0.02 |
Last Mile Enterprises trades at a P/E ratio of 23.14x, below the peer average of approximately 53x, and a price-to-book ratio of 1.21x versus the peer average of around 3.10x. While these valuation discounts might appear attractive on the surface, they are justified by the company's significantly weaker ROE performance and deteriorating profitability trends.
The company's minimal dividend yield of 0.15% provides little income support to shareholders, particularly concerning given the capital appreciation challenges. With a market capitalisation of ₹462.00 crores, Last Mile Enterprises ranks sixth among its peer group, reflecting its micro-cap status and limited institutional interest.
Valuation Analysis: Attractive Multiples, But Quality Concerns Persist
Despite the company's operational challenges, Last Mile Enterprises carries a "Very Attractive" valuation grade based on current multiples. The stock trades at a P/E ratio of 23.14x, below both historical levels and peer averages, whilst the price-to-book ratio of 1.21x suggests the market is ascribing limited premium to the company's net assets.
The PEG ratio of 0.11x appears exceptionally attractive, suggesting the stock is undervalued relative to its growth trajectory. However, this metric must be interpreted cautiously given the extreme volatility in earnings and questions about sustainability of the recent revenue expansion.
The valuation grade has fluctuated between "Attractive" and "Very Attractive" over recent months, most recently upgrading to "Very Attractive" on October 27, 2025. However, attractive valuation alone does not justify investment when fundamental quality concerns persist. The market's valuation discount appears rational given the company's weak ROE, negative cash flows, and deteriorating profitability trends.
Shareholding Pattern: Promoter Stability Amidst Institutional Caution
The shareholding pattern reveals a relatively stable promoter base holding 25.16% as of November 2025, with marginal changes over recent quarters. Foreign institutional investor (FII) holding stands at 14.75%, representing the primary institutional interest in the stock, whilst mutual fund and insurance company participation remains absent.
| Quarter | Promoter % | FII % | MF % | Insurance % | Non-Inst % |
|---|---|---|---|---|---|
| Nov'25 | 25.16 | 14.75 | 0.00 | 0.00 | 60.09 |
| Sep'25 | 25.33 | 14.68 | 0.00 | 0.00 | 59.99 |
| Jun'25 | 25.16 | 0.00 | 0.00 | 0.00 | 60.09 |
| Mar'25 | 27.03 | 13.40 | 0.00 | 0.00 | 59.57 |
| Dec'24 | 27.03 | 12.25 | 0.00 | 0.00 | 60.72 |
Promoter holding decreased from 27.03% in March 2025 to 25.16% currently, a reduction of 1.87 percentage points, whilst FII holding increased marginally from 12.25% in December 2024 to 14.75% currently. The absence of mutual fund participation is notable, as these sophisticated institutional investors typically conduct rigorous due diligence before investing.
Non-institutional shareholders constitute 60.09% of the equity base, representing primarily retail and high-net-worth individuals. The promoter group is led by Siddharth Hans (9.37%) and Rishi Hiten Parikh (8.17%), with no pledging of promoter shares reported, which provides some comfort regarding financial stability at the promoter level.
Stock Performance: Severe Underperformance Across Timeframes
Last Mile Enterprises has delivered deeply disappointing returns across virtually all timeframes, with the stock declining 68.57% over the past year whilst the Sensex gained 9.48%, resulting in a negative alpha of 78.05 percentage points. The year-to-date performance shows a 62.51% decline, significantly underperforming the Sensex's 8.36% gain.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +0.15% | +0.96% | -0.81% |
| 1 Month | -3.84% | +0.86% | -4.70% |
| 3 Month | +7.25% | +4.18% | +3.07% |
| 6 Month | -35.01% | +2.85% | -37.86% |
| YTD | -62.51% | +8.36% | -70.87% |
| 1 Year | -68.57% | +9.48% | -78.05% |
| 2 Years | -39.21% | +28.69% | -67.90% |
| 3 Years | +34.68% | +37.31% | -2.63% |
The stock currently trades at ₹13.01, down 72.78% from its 52-week high of ₹47.80 reached earlier in the year. From a technical perspective, the stock remains in a "Mildly Bearish" trend, trading below all key moving averages including the 5-day (₹13.35), 20-day (₹13.58), 50-day (₹13.83), 100-day (₹15.19), and 200-day (₹19.63) moving averages.
The stock's beta of 1.50 indicates high volatility, with movements typically 50% more volatile than the broader market. The risk-adjusted return of -1.12 over the past year, combined with volatility of 60.96%, places the stock firmly in the "High Risk Low Return" category, an unfavourable combination for investors.
Longer-term performance shows more mixed results, with the stock delivering 924.41% returns over four years and 418.33% over five years, suggesting historical periods of strong performance. However, the recent deterioration in fundamentals and stock price performance raises questions about sustainability of past gains.
Investment Thesis: Valuation Discount Insufficient to Offset Quality Concerns
The investment thesis for Last Mile Enterprises presents a challenging picture. Whilst the company carries attractive valuation multiples and demonstrates impressive long-term sales growth of 177.50%, fundamental quality concerns and deteriorating near-term trends overshadow these positives.
The company's proprietary Mojo score of 34 out of 100 results in a "SELL" rating, reflecting the preponderance of negative factors. The score incorporates the attractive valuation but is heavily penalised by below-average quality metrics, bearish technical trends, and significant market underperformance.
"Whilst Last Mile Enterprises trades at seemingly attractive multiples, the company's weak ROE of 4.28%, negative operating cash flows, and deteriorating profitability trends suggest fundamental challenges that valuation discounts alone cannot overcome."
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Valuation Discount: Stock trades at P/E of 23.14x and P/BV of 1.21x, below peer averages and historical levels
- Revenue Growth: Impressive long-term sales CAGR of 177.50% demonstrates strong top-line expansion capability
- Conservative Leverage: Debt-to-equity ratio of 0.08 provides financial flexibility and low default risk
- Stable Promoters: Promoter holding of 25.16% with no pledging indicates management commitment
- Liquidity Position: Current assets of ₹373.32 crores provide adequate coverage of current liabilities
⚠ KEY CONCERNS
- Weak ROE: Return on equity of 4.28% significantly below industry standards, indicating poor capital efficiency
- Margin Collapse: PAT margin compressed from 30.13% to 0.39% year-on-year, raising sustainability concerns
- Negative Cash Flows: Operating cash flow of ₹-196.99 crores indicates cash consumption rather than generation
- Earnings Quality: Other income constitutes 51.47% of PBT, suggesting heavy reliance on non-core activities
- Severe Underperformance: Stock down 68.57% over past year, underperforming sector by 92.97 percentage points
- No Institutional Support: Zero mutual fund or insurance company participation reflects quality concerns
- High Volatility: Beta of 1.50 and 60.96% volatility indicate elevated risk profile
Outlook: What Lies Ahead
POSITIVE CATALYSTS
- 📈 Margin Recovery: Sustained improvement in operating margins above 5% would signal business model stabilisation
- 💰 Cash Flow Turnaround: Positive operating cash flow generation for two consecutive quarters
- 🎯 ROE Improvement: Return on equity expanding towards 10%+ levels, closer to peer averages
- 🏢 Institutional Interest: Entry of mutual funds or quality FIIs would validate investment thesis
- 📊 Earnings Quality: Reduction in other income dependency below 25% of PBT
RED FLAGS TO MONITOR
- ⚠️ Further Margin Compression: PAT margins declining below 0.30% would indicate deepening profitability crisis
- 💸 Cash Burn Acceleration: Continued negative operating cash flows exceeding ₹200 crores annually
- 📉 Promoter Stake Reduction: Promoter holding declining below 20% without clear rationale
- 🔴 Revenue Volatility: Quarter-on-quarter revenue swings exceeding 40% suggesting unstable business
- ⚡ Institutional Exit: FII holding declining below 10% would signal waning confidence
The company's ability to navigate these challenges will determine whether the current valuation discount represents an opportunity or a value trap. Management's commentary on business model sustainability, margin improvement plans, and cash flow generation strategies will be critical factors to monitor in upcoming quarters.
The Verdict: Valuation Trap Despite Attractive Multiples
Score: 34/100
For Fresh Investors: Avoid initiating positions. Despite attractive valuation multiples, the company's weak ROE of 4.28%, collapsing margins, negative operating cash flows, and severe market underperformance indicate fundamental challenges that outweigh valuation appeal. The absence of mutual fund participation and deteriorating profitability trends suggest significant execution risks.
For Existing Holders: Consider reducing exposure on any technical bounce. The 74.03% year-on-year profit decline, margin compression from 30.13% to 0.39%, and negative operating cash flow of ₹-196.99 crores raise serious sustainability concerns. The stock's 68.57% decline over the past year reflects justified market concerns about business quality.
Fair Value Estimate: ₹10.50 (19.30% downside from current price of ₹13.01). The fair value reflects the company's below-average quality grade, weak capital efficiency metrics, and deteriorating profitability trends, despite seemingly attractive current multiples.
Rationale: Last Mile Enterprises presents a classic value trap scenario where low valuation multiples mask fundamental quality concerns. The company's ROE of 4.28% significantly trails peer averages, whilst the collapse in margins from 30% to under 0.5% raises questions about business model sustainability. Negative operating cash flows and heavy reliance on other income (51.47% of PBT) further undermine the investment case. Until the company demonstrates consistent margin improvement, positive cash generation, and ROE expansion towards industry norms, the valuation discount appears justified rather than opportunistic.
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.
