Last Mile Enterprises Q3 FY26: Revenue Surge Masks Profit Collapse as Margins Evaporate

The micro-cap NBFC, trading at ₹6.47 per share on February 16, 2026 (up 2.54% on the day), has witnessed a catastrophic 77.78% decline over the past year, dramatically underperforming the broader NBFC sector's 26.59% gain by over 104 percentage points. The stock currently trades 77.11% below its 52-week high of ₹28.26, reflecting severe investor concern over deteriorating fundamentals despite aggressive revenue growth.

The quarter's results reveal a troubling disconnect: whilst net sales surged 424.06% year-on-year to ₹375.02 crores, profitability collapsed across all metrics. Operating profit margin (excluding other income) contracted to a mere 0.59% from 13.09% in the year-ago quarter, whilst PAT margin compressed to 0.69% from 12.10%. This dramatic margin erosion suggests the company is prioritising volume over value, raising questions about business model sustainability.

Financial Performance: A Tale of Vanishing Profitability

The Q3 FY26 quarter exposed fundamental weaknesses in Last Mile Enterprises' business model. Net sales of ₹375.02 crores, whilst representing extraordinary 424.06% year-on-year growth, actually declined 52.27% sequentially from Q2 FY26's ₹785.64 crores. This volatility in top-line performance raises concerns about revenue quality and sustainability.

More alarmingly, operating profit before depreciation, interest, tax and other income (PBDIT excl OI) stood at just ₹2.21 crores in Q3 FY26, yielding a paltry 0.59% margin compared to 13.09% in Q3 FY24. The year-on-year comparison reveals a business haemorrhaging profitability despite massive revenue expansion—a red flag for any financial services company.

On a half-yearly basis (H1 FY26), the company reported combined sales of ₹1,160.66 crores, growing at an astonishing 1,024.02%, yet this revenue surge has not translated into proportionate profit growth. The disconnect between revenue and profit trajectories suggests aggressive pricing, elevated operating costs, or deteriorating asset quality—none of which bode well for long-term sustainability.

Tax efficiency remained reasonable with an effective tax rate of 21.10% in Q3 FY26, though this provided little consolation given the weak pre-tax profit base. Employee costs remained controlled at ₹1.95 crores, but the minimal operating leverage achieved despite revenue growth underscores operational inefficiencies.

The Profitability Crisis: Structural Challenges Emerge

A deeper examination reveals troubling structural issues. Profit before tax less other income (PBT less OI) in Q3 FY26 stood at just ₹0.87 crores, down 75.50% from the previous four-quarter average. This metric strips away non-operating income to reveal core business profitability—and the picture is deeply concerning.

Other income contributed ₹2.40 crores in Q3 FY26, representing a staggering 73.39% of profit before tax. This heavy reliance on non-operating income to prop up headline profitability is a classic warning sign. For an NBFC, sustainable profits should primarily derive from core lending and financial services operations, not treasury income or one-off gains.

Return on equity (ROE) stands at a weak 5.13%, significantly below industry standards and peer averages. For context, healthy NBFCs typically generate ROE in the 12-18% range. Last Mile's sub-par ROE reflects both margin compression and inefficient capital deployment, suggesting the company is destroying rather than creating shareholder value at current profitability levels.

The balance sheet shows shareholder funds of ₹378.83 crores as of March 2025, with long-term debt of ₹20.70 crores, resulting in a debt-to-equity ratio of 0.11—remarkably low for an NBFC. However, this conservative leverage has not translated into superior returns, indicating fundamental operational challenges rather than balance sheet constraints.

Cash Flow Concerns: Negative Operating Cash Generation

The cash flow statement for FY25 reveals another troubling dimension. Despite reporting profit before tax of ₹23.00 crores, the company generated negative cash flow from operations of ₹196.00 crores. This massive outflow, driven by working capital changes of ₹207.00 crores, suggests aggressive business expansion that is consuming rather than generating cash.

For an NBFC, negative operating cash flow is particularly concerning as it indicates the company may be disbursing loans faster than it can recover them, or experiencing deteriorating collection efficiency. The company's closing cash position stood at just ₹1.00 crore as of March 2025, down from ₹3.00 crores the previous year, leaving minimal liquidity buffer.

Peer Comparison: Valuation Disconnect

Against industry peers, Last Mile Enterprises presents a mixed picture. The company trades at a P/E ratio of 11.34x, below the sector median but reflecting concerns about earnings sustainability. Its price-to-book value of 0.58x appears attractive on the surface, trading at a 42% discount to book value, but this discount likely reflects justified concerns about asset quality and earning power.

The company's ROE of 5.13% ranks amongst the weakest in its peer group, with only Alfred Herbert posting a lower figure at 1.59%. Better-managed peers like Trishakti Industries and Alacrity Securities generate ROE above 15%, nearly triple Last Mile's return. This performance gap explains why the market assigns Last Mile a significant valuation discount despite its low absolute multiples.

Last Mile's conservative debt-to-equity ratio of 0.11 is the lowest among peers, yet this financial conservatism has not translated into superior returns. The company appears to be underleveraged for an NBFC, suggesting either limited lending opportunities or management's reluctance to deploy capital aggressively—neither scenario is particularly encouraging.

Valuation Analysis: Attractive Multiples, Questionable Fundamentals

At the current price of ₹6.47, Last Mile Enterprises trades at seemingly attractive multiples: P/E of 11.34x, P/BV of 0.58x, and EV/EBITDA of 13.81x. The company's proprietary valuation assessment rates it as "Very Attractive," having oscillated between "Attractive" and "Very Attractive" grades since mid-October 2025.

However, these low multiples must be contextualised against deteriorating fundamentals. The stock has lost 77.78% over the past year, underperforming the NBFC sector by 104.37 percentage points. This massive underperformance suggests the market is pricing in significant concerns about business sustainability that aren't immediately apparent from static valuation ratios.

The stock's technical picture reinforces fundamental concerns. Trading in a confirmed bearish trend since December 2, 2025, Last Mile has broken below all major moving averages. The 200-day moving average stands at ₹14.36, more than double the current price, whilst immediate support at ₹6.00 (the 52-week low) offers minimal cushion.

Risk-adjusted returns paint a sobering picture: the stock's one-year risk-adjusted return stands at -1.31 with volatility of 59.15%, placing it firmly in the "High Risk, Low Return" category. The stock's beta of 1.03 indicates it moves roughly in line with the market, offering no defensive characteristics to offset its fundamental challenges.

Shareholding Pattern: Institutional Exodus Underway

The shareholding pattern reveals cautious institutional positioning. Promoter holding has declined marginally from 27.03% in March 2025 to 25.16% in December 2025, though it has stabilised over the most recent quarters. Foreign institutional investors hold 14.58%, down slightly from 14.75% the previous quarter, whilst mutual funds and insurance companies maintain zero exposure—a telling sign of institutional scepticism.

The complete absence of mutual fund and insurance company holdings is particularly noteworthy. These sophisticated institutional investors typically conduct thorough due diligence before deploying capital, and their zero exposure suggests fundamental concerns about the company's business model, governance, or growth prospects. The 13 FIIs holding stakes appear to be the primary institutional supporters, though even their aggregate holding has declined marginally.

Non-institutional investors hold 60.27% of shares, a relatively high proportion for a micro-cap company. This retail-heavy shareholder base can contribute to higher volatility and limited liquidity, as evidenced by the stock's 59.15% annual volatility—more than five times the Sensex's 11.53% volatility.

Stock Performance: Catastrophic Wealth Destruction

The stock's performance across timeframes tells a story of systematic wealth destruction. Over one year, Last Mile has declined 77.78% whilst the Sensex gained 9.66%, generating negative alpha of 87.44 percentage points. The three-month return of -51.57% and six-month return of -54.85% indicate accelerating downward momentum.

The longer-term picture shows some historical strength, with four-year and five-year returns of 238.74% and 183.77% respectively, suggesting the company did create value in earlier periods. However, the recent two-year decline of 88.12% has erased most of these gains, leaving investors who entered at elevated valuations facing devastating losses.

Sector comparison underscores the company's struggles: whilst the NBFC sector delivered 26.59% returns over one year, Last Mile underperformed by 104.37 percentage points. This massive underperformance relative to peers suggests company-specific issues rather than sector-wide headwinds.

Investment Thesis: Quality Concerns Trump Valuation Appeal

The company's overall quality assessment stands at "Below Average," downgraded from "Average" in November 2025. Whilst five-year sales growth of 177.50% appears impressive, this has not translated into sustainable profitability or shareholder returns. The average ROE of 5.13% places Last Mile firmly in the bottom quartile of financial services companies.

The financial trend assessment is unambiguously "Negative," with quarterly net sales falling 36.80% versus the previous four-quarter average, profit before tax less other income down 75.50%, and PAT at its lowest quarterly level. These deteriorating trends, combined with bearish technicals and below-average quality, create a toxic combination that overwhelms any valuation appeal.

The company's Mojo Score of 17 out of 100 places it firmly in "Strong Sell" territory, reflecting the confluence of negative factors: bearish technical trend, negative financial trend, and weak fundamental quality. The score has remained in Strong Sell territory since early August 2025, with only brief upgrades to "Sell" before reverting to Strong Sell.

Key Strengths & Risk Factors

Outlook: What Lies Ahead

The path forward for Last Mile Enterprises requires urgent management action on multiple fronts. The company must demonstrate it can generate sustainable profits from core operations rather than relying on other income. Operating margins need to recover to at least mid-single digits, whilst ROE must improve materially above 10% to justify even current depressed valuations.

Cash flow generation is critical—the company cannot continue consuming ₹196 crores in operating cash whilst reporting modest accounting profits. Investors should monitor quarterly cash flow statements closely for signs of improvement. Additionally, attracting institutional investors through improved governance and transparency would provide validation of the turnaround thesis.