The results present a mixed picture: whilst revenue growth remains robust at 30.71% year-on-year, reaching ₹3,482.00 crores in Q2 FY26, profitability has come under pressure from margin compression. The company's PAT margin contracted to 12.41% in Q2 FY26 from 15.74% in Q1 FY26, reflecting the challenging operating environment in the edible oil and FMCG sector.
Following the quarterly announcement, the stock has demonstrated resilience, trading at ₹739.35 as of November 14, 2025, up 2.41% from the previous close. The company maintains its position above all key moving averages, including the 200-day moving average of ₹695.98, signalling sustained investor confidence despite near-term earnings pressure.
Financial Performance: Revenue Surge Masks Margin Erosion
Marico's Q2 FY26 results reveal a tale of two narratives. On the topline, the company delivered impressive growth with net sales surging 30.71% year-on-year to ₹3,482.00 crores, marking the highest quarterly revenue in the company's recent history. Quarter-on-quarter growth stood at a healthy 6.84%, demonstrating sustained momentum in consumer demand for the company's portfolio of personal care and food products.
| Metric | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 3,482.00 | 3,259.00 | 2,730.00 | 2,794.00 | 2,664.00 |
| QoQ Growth | +6.84% | +19.38% | -2.29% | +4.88% | +0.79% |
| YoY Growth | +30.71% | +23.31% | +19.84% | — | — |
| Net Profit (₹ Cr) | 420.00 | 504.00 | 343.00 | 399.00 | 423.00 |
| QoQ Growth | -16.67% | +46.94% | -14.04% | -5.67% | -8.84% |
| Operating Margin (Excl OI) | 16.08% | 20.10% | 16.78% | 19.08% | 19.59% |
| PAT Margin | 12.41% | 15.74% | 12.64% | 14.53% | 16.25% |
However, the bottom line tells a more sobering story. Consolidated net profit declined 16.67% quarter-on-quarter to ₹420.00 crores in Q2 FY26 from ₹504.00 crores in Q1 FY26, with year-on-year performance showing a marginal 0.71% contraction. The primary culprit: significant margin compression across all profitability metrics. Operating margin (excluding other income) contracted sharply to 16.08% from 20.10% in the previous quarter, representing a 402 basis point sequential decline. Year-on-year, the margin erosion was even more pronounced at 351 basis points.
PAT margin followed a similar trajectory, declining to 12.41% in Q2 FY26 from 15.74% in Q1 FY26 and 16.25% in Q2 FY25. This 333 basis point quarter-on-quarter and 384 basis point year-on-year contraction reflects the twin pressures of rising input costs and intensified competitive dynamics in the FMCG sector. Employee costs remained relatively stable at ₹218.00 crores, marginally lower than the previous quarter's ₹220.00 crores, suggesting the margin pressure stems primarily from raw material inflation and promotional expenses rather than workforce expansion.
Margin Dynamics: The Profitability Challenge
The 402 basis point sequential decline in operating margin (excluding other income) from 20.10% to 16.08% represents one of the sharpest quarterly contractions in recent years. This compression suggests that Marico's pricing power may be facing constraints in the current environment, with the company potentially absorbing input cost inflation rather than passing it through to consumers. For a business that has historically maintained operating margins above 19%, this development warrants close monitoring.
Operational Excellence: Capital Efficiency Remains World-Class
Despite near-term profitability pressures, Marico's operational fundamentals remain exceptionally strong. The company's average return on equity (ROE) of 37.29% places it in the elite category of Indian consumer goods companies, demonstrating superior capital efficiency and management quality. This high ROE reflects Marico's ability to generate substantial returns for shareholders whilst maintaining a debt-free balance sheet with negative net debt to equity of -0.40.
The company's return on capital employed (ROCE) is even more impressive at 61.31% on average, with the latest figure reaching 82.50%. Such elevated ROCE levels indicate that Marico deploys capital with exceptional efficiency, generating significant operating profits relative to the capital invested in the business. This metric is particularly noteworthy given the capital-intensive nature of manufacturing and distribution in the FMCG sector.
Marico's balance sheet strength provides a crucial buffer during challenging periods. As of March 2025, the company held shareholder funds of ₹3,975.00 crores with virtually no long-term debt, positioning it as a net cash company. Current assets of ₹5,083.00 crores comfortably exceed current liabilities of ₹2,461.00 crores, providing ample working capital cushion. Fixed assets stood at ₹2,513.00 crores, reflecting ongoing investments in manufacturing capacity and brand building.
Monitoring Point: Whilst Marico's capital efficiency metrics remain exceptional, the recent margin compression suggests the company may be prioritising volume growth and market share over near-term profitability. The sustainability of this strategy will depend on the company's ability to restore margins through pricing actions or cost optimisation once competitive intensity moderates.
Industry Context: Navigating FMCG Headwinds
Marico operates in the highly competitive Indian FMCG sector, where consumer sentiment, raw material prices, and competitive intensity significantly influence performance. The edible oil segment, which forms a substantial part of Marico's portfolio through brands like Saffola, has experienced particular volatility in recent quarters due to fluctuating commodity prices and changing consumer preferences towards health-conscious products.
The company's 5-year sales growth of 10.10% and EBIT growth of 8.25% reflect a mature business facing moderate growth constraints. Whilst these growth rates are respectable for a company of Marico's size and scale, they fall short of the double-digit growth expectations that often characterise high-growth FMCG players. This growth trajectory has implications for valuation, particularly given the company's premium trading multiples.
| Year | Net Sales (₹ Cr) | YoY Growth | PAT (₹ Cr) | PAT Margin | Operating Margin (Excl OI) |
|---|---|---|---|---|---|
| Mar'25 | 10,831.00 | +12.20% | 1,658.00 | 15.30% | 19.70% |
| Mar'24 | 9,653.00 | -1.10% | 1,502.00 | 15.60% | 21.00% |
| Mar'23 | 9,764.00 | +2.60% | 1,322.00 | 13.50% | 18.50% |
| Mar'22 | 9,512.00 | +18.20% | 1,255.00 | 13.20% | 17.70% |
| Mar'21 | 8,048.00 | +10.00% | 1,201.00 | 14.90% | 19.80% |
The historical financial performance reveals cyclicality in Marico's business, with FY24 witnessing a revenue contraction of 1.10% before rebounding strongly in FY25 with 12.20% growth. Operating margins have fluctuated between 17.70% and 21.00% over the past five years, with the current trajectory suggesting pressure towards the lower end of this range.
Peer Comparison: Premium Valuation Reflects Quality, But Stretched on Growth
Marico's market positioning relative to peers in the edible oil sector reveals why the stock commands a significant valuation premium. With an average ROE of 37.29%, Marico substantially outperforms the peer group average of approximately 10%, justifying a higher price-to-book multiple. The company's operational efficiency, brand strength, and consistent dividend payments support this premium positioning.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Debt/Equity |
|---|---|---|---|---|---|
| Marico | 57.50 | 24.14 | 37.29 | 1.42 | -0.40 |
| Patanjali Foods | 44.86 | 5.28 | 11.67 | 0.41 | 0.08 |
| AWL Agri Business | 32.92 | 3.78 | 8.39 | — | -0.07 |
| Gokul Agro | 19.71 | 4.77 | 21.94 | — | 0.02 |
| CIAN Agro | 41.15 | 1.95 | 2.64 | — | 0.66 |
| Sundrop Brands | 76.92 | 2.01 | 3.11 | — | -0.01 |
However, Marico's P/E ratio of 57.50x appears stretched when considered against its growth profile. The company's PEG ratio of 5.95 suggests that investors are paying nearly 6 times the annual earnings growth rate, significantly above the ideal threshold of 1.0-1.5. This valuation premium leaves limited margin of safety, particularly if growth continues to moderate or margins face sustained pressure.
Marico's price-to-book value of 24.14x, whilst justified by its superior ROE, is approximately 6-7 times higher than most peers. This valuation gap reflects not just operational excellence but also the market's confidence in Marico's brand equity, distribution reach, and management quality. The company's dividend yield of 1.42% is the highest among peers, reflecting a generous payout ratio of 83.15%.
Valuation Analysis: Premium Pricing Leaves Little Room for Error
At the current market price of ₹739.35, Marico trades at a P/E ratio of 57.50x trailing twelve-month earnings, representing a premium to the industry P/E of 54x. Whilst this premium is justified by the company's superior return ratios and quality credentials, the valuation leaves little room for disappointment. The stock's valuation grade has been classified as "Very Expensive" since October 2025, reflecting extended multiples across parameters.
The EV/EBITDA multiple of 43.53x and EV/EBIT of 47.52x place Marico amongst the most expensive consumer goods stocks in India. These multiples reflect the market's expectation of sustained earnings quality and growth, but also suggest limited upside potential from current levels. The PEG ratio of 5.95 is particularly concerning, as it indicates investors are paying nearly six times the company's long-term growth rate for each unit of earnings.
Historical context is important: Marico has traded at premium valuations for extended periods, reflecting its status as a quality compounder. However, the current valuation appears stretched even by Marico's own historical standards, particularly given the recent margin pressures and moderate growth outlook. The stock trades just 2.90% below its 52-week high of ₹761.45, suggesting limited near-term upside potential.
"At 57.5x earnings and a PEG ratio of 5.95, Marico's valuation reflects exceptional quality but offers minimal margin of safety for investors entering at current levels."
Shareholding Pattern: Institutional Confidence Building Gradually
Marico's shareholding pattern reveals interesting shifts in institutional positioning over recent quarters. Promoter holding remains minimal at 2.03% as of September 2025, unchanged from June 2025 but significantly higher than the 0.13% held in March 2025. This increase reflects a strategic decision by the promoter group to maintain a token holding whilst allowing broad-based public ownership.
| Quarter | Promoter | FII | Mutual Funds | Insurance | Other DII |
|---|---|---|---|---|---|
| Sep'25 | 2.03% | 24.21% | 8.39% | 3.01% | 0.58% |
| Change | — | +0.59% | +0.67% | -1.33% | -0.07% |
| Jun'25 | 2.03% | 23.62% | 7.72% | 4.34% | 0.65% |
| Change | +1.90% | +1.54% | +0.26% | -1.48% | -0.28% |
| Mar'25 | 0.13% | 22.08% | 7.46% | 5.82% | 0.93% |
Foreign institutional investors have been steadily increasing their stake, rising from 22.08% in March 2025 to 24.21% in September 2025, representing a cumulative increase of 213 basis points. This sustained FII buying suggests global investors continue to view Marico as an attractive proxy for India's consumption growth story despite near-term challenges.
Mutual fund holdings have also trended upward, increasing from 7.46% in March 2025 to 8.39% in September 2025. The sequential increase of 67 basis points in Q2 FY26 indicates domestic institutional investors are adding positions, likely viewing the recent price consolidation as an opportunity. However, insurance company holdings have declined sharply from 5.82% in March 2025 to 3.01% in September 2025, suggesting some profit-booking by this investor category.
Stock Performance: Consistent Outperformance Despite Recent Volatility
Marico's stock has delivered impressive returns across multiple timeframes, significantly outperforming the Sensex benchmark. Over the past year, the stock has gained 24.53% compared to the Sensex's 9.00% return, generating alpha of 15.53 percentage points. This outperformance extends across longer periods, with 3-year returns of 48.00% versus the Sensex's 37.22%, and 5-year returns of 99.42% versus 93.78%.
| Period | Marico Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +3.97% | +1.62% | +2.35% |
| 1 Month | +4.41% | +3.09% | +1.32% |
| 3 Months | +3.96% | +4.92% | -0.96% |
| 6 Months | +2.28% | +3.97% | -1.69% |
| YTD | +15.35% | +8.22% | +7.13% |
| 1 Year | +24.53% | +9.00% | +15.53% |
| 3 Years | +48.00% | +37.22% | +10.78% |
| 5 Years | +99.42% | +93.78% | +5.64% |
However, near-term performance has been more muted, with 3-month and 6-month returns underperforming the Sensex by 96 and 169 basis points respectively. This recent underperformance coincides with the margin pressure evident in Q2 FY26 results, suggesting the market has been pricing in operational challenges. The stock's volatility of 20.82% over the past year is higher than the Sensex's 12.26%, reflecting the company's beta of 1.20, which classifies it as a high-beta stock more sensitive to market movements.
From a technical perspective, Marico's trend is classified as "Mildly Bullish" as of September 16, 2025, having moderated from the previous "Bullish" trend. The stock trades above all key moving averages—5-day (₹722.72), 20-day (₹722.53), 50-day (₹719.50), 100-day (₹719.34), and 200-day (₹695.98)—providing technical support. However, the stock faces immediate resistance near the 20-day moving average area, with major resistance at the 52-week high of ₹761.45.
Investment Thesis: Quality Franchise, But Valuation Demands Patience
Marico's investment case rests on four key pillars: valuation (Very Expensive), quality (Good), financial trend (Flat), and technical trend (Mildly Bullish). The company's overall Mojo score of 58 out of 100 reflects this mixed picture, placing it firmly in "HOLD" territory for both fresh investors and existing shareholders.
The quality credentials are undeniable: average ROE of 37.29%, ROCE of 61.31%, negligible debt (net debt-to-equity of -0.40), strong interest coverage (35.89x), and consistent dividend payments. The company has demonstrated resilience across economic cycles, maintaining profitability even during challenging periods. Institutional holdings of 36.20% reflect confidence in management and business quality.
However, the valuation presents a significant hurdle. At 57.50x earnings and 24.14x book value, Marico trades at the upper end of its historical valuation range. The PEG ratio of 5.95 suggests investors are paying a steep premium for growth that has averaged 10.10% for sales and 8.25% for EBIT over the past five years. The recent margin compression adds to valuation concerns, as any further deterioration in profitability could lead to multiple derating.
✅ KEY STRENGTHS
- Exceptional Capital Efficiency: ROE of 37.29% and ROCE of 61.31% place Marico in the top quartile of Indian consumer goods companies
- Zero Debt Balance Sheet: Net debt-to-equity of -0.40 provides financial flexibility and safety
- Strong Brand Portfolio: Market-leading positions in coconut oil (Parachute), edible oils (Saffola), and hair care (Livon)
- Consistent Dividend Payer: Dividend yield of 1.42% with payout ratio of 83.15%
- Robust Revenue Growth: 30.71% YoY growth in Q2 FY26 demonstrates strong consumer demand
- High Institutional Confidence: 36.20% institutional holdings with increasing FII and MF participation
- Superior Return Profile: 24.53% one-year return, outperforming Sensex by 15.53 percentage points
⚠️ KEY CONCERNS
- Severe Margin Compression: Operating margin declined 402 bps QoQ to 16.08%, lowest in recent quarters
- Stretched Valuation: P/E of 57.50x and PEG ratio of 5.95 leave minimal margin of safety
- Moderate Growth Profile: 5-year sales CAGR of 10.10% and EBIT CAGR of 8.25% are respectable but not exceptional
- Declining Profitability: Net profit down 16.67% QoQ and 0.71% YoY in Q2 FY26
- Sector Headwinds: Edible oil sector facing commodity price volatility and intense competition
- High Valuation Grade: Classified as "Very Expensive" since October 2025
- Insurance Holdings Declining: Insurance company stake reduced from 5.82% to 3.01% over two quarters
Outlook: What to Watch in Coming Quarters
The trajectory of Marico's stock over the next 6-12 months will largely depend on the company's ability to address margin pressures whilst sustaining volume growth. Investors should closely monitor several key indicators that will determine whether the current "Flat" financial trend can inflect positively or deteriorate further.
📈 POSITIVE CATALYSTS
- Margin Recovery: Any improvement in operating margins back towards the 19-20% range would be viewed positively
- Pricing Power Demonstration: Successful price increases without volume impact would validate brand strength
- Rural Demand Recovery: Improvement in rural consumption could drive volume growth
- New Product Launches: Innovation in premium segments could expand margins and growth
- Market Share Gains: Continued gains in core categories would justify premium valuation
🚨 RED FLAGS
- Further Margin Erosion: Operating margins falling below 15% would be concerning
- Volume Growth Slowdown: Inability to sustain volume momentum despite pricing actions
- Competitive Intensity: Increased promotional spending by competitors forcing margin sacrifice
- Raw Material Inflation: Sustained commodity price increases without pricing flexibility
- Multiple Derating: P/E compression if growth continues to disappoint
The company's management commentary on pricing strategy, cost management initiatives, and demand trends will be critical in shaping investor sentiment. Any indication that margins have bottomed and are set to recover could provide the catalyst for renewed upside. Conversely, sustained margin pressure combined with slowing volume growth could lead to valuation derating from current elevated levels.
The Verdict: Quality Franchise, But Wait for Better Entry Point
Mojo Score: 58/100
For Fresh Investors: Not recommended for fresh purchases at current valuations. Marico is undoubtedly a quality franchise with exceptional return ratios, strong brands, and a debt-free balance sheet. However, at 57.5x earnings with a PEG ratio of 5.95, the stock offers minimal margin of safety. The recent margin compression and flat financial trend add to concerns. Investors should wait for either a meaningful correction (15-20% from current levels) or clear evidence of margin recovery before initiating positions. A more attractive entry point would be around ₹625-650, which would bring the P/E closer to 48-50x and provide better risk-reward.
For Existing Holders: Continue to hold but avoid adding at current levels. The long-term investment thesis remains intact given Marico's quality credentials, market leadership, and financial strength. However, near-term returns may be muted given valuation constraints and operational challenges. Existing investors who have enjoyed the 24.53% one-year return should maintain positions but book partial profits if the stock approaches ₹760-770 levels. Use any significant weakness towards ₹680-700 as an opportunity to average up positions.
Fair Value Estimate: ₹680 (8.00% downside from current levels of ₹739.35)
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. Past performance is not indicative of future results. Stock prices can be volatile and may decline significantly, resulting in loss of capital. The author and publisher are not registered investment advisors and do not provide personalised investment advice.
