Mufin Green Finance Q3 FY26: Strong Growth Momentum Continues, But Valuation Concerns Persist

The Rajasthan-based NBFC, which operates in the investment and credit space, has demonstrated remarkable consistency in its growth trajectory. Net sales for Q3 FY26 reached ₹55.92 crores, marking a sequential increase of 4.56% from Q2 FY26's ₹53.48 crores and a year-on-year expansion of 15.13% from ₹48.57 crores in Q3 FY25. The company's ability to maintain double-digit growth whilst improving operational efficiency has positioned it as an interesting player in the micro-cap NBFC segment, albeit at a valuation that demands scrutiny.

The quarter witnessed significant margin expansion, with the operating profit margin (excluding other income) surging to a record 74.41%, compared to 65.53% in Q2 FY26 and 65.67% in the year-ago quarter. This impressive improvement reflects the company's enhanced operational leverage and effective cost management strategies, particularly noteworthy given the challenging macroeconomic environment facing the NBFC sector.

Financial Performance: Robust Top-Line with Margin Excellence

Mufin Green's financial performance in Q3 FY26 showcases a compelling narrative of accelerating profitability. The consolidated net profit of ₹7.01 crores represents the highest quarterly profit in the company's recent history, surpassing the previous peak of ₹5.85 crores in December 2024. On a sequential basis, profit grew 21.91% from Q2 FY26's ₹5.75 crores, whilst the year-on-year comparison reveals a 19.83% expansion from ₹5.85 crores in Q3 FY25.

The revenue trajectory demonstrates consistent momentum, with net sales climbing from ₹36.98 crores in June 2024 to ₹55.92 crores in December 2025, representing a cumulative growth of 51.22% over five quarters. This expansion has been accompanied by improving margin quality, with the PAT margin strengthening to 12.66% in Q3 FY26 from 10.61% in Q2 FY26, though it remains below the 16.50% achieved in FY24.

Interest costs, a critical metric for NBFCs, rose to ₹31.14 crores in Q3 FY26 from ₹26.38 crores in Q2 FY26, reflecting a 18.04% sequential increase. This escalation aligns with the company's expanding loan book but warrants monitoring given the impact on net interest margins. The gross profit margin stood at 18.20% in Q3 FY26, marginally improving from 15.80% in Q2 FY26, indicating the company's ability to manage its cost of funds effectively despite rising interest expenses.

Operational Dynamics: Margin Excellence Amid Leverage Concerns

Mufin Green's operational performance reveals a nuanced picture of strength tempered by structural challenges. The company's return on equity of 5.88% positions it modestly above several peers but remains below the threshold typically associated with high-quality financial services companies. This metric, which measures how efficiently the company generates profits from shareholder capital, suggests room for improvement in capital deployment efficiency.

The balance sheet structure presents a mixed narrative. Shareholder funds stood at ₹269.57 crores as of March 2025, with current liabilities of ₹771.95 crores, resulting in a debt-to-equity ratio of 2.72 times. This elevated leverage, whilst not uncommon in the NBFC sector, represents one of the highest levels amongst the company's peer group and has been flagged as a key negative factor in the company's short-term financial trend assessment.

Employee costs have shown disciplined management, declining from ₹6.74 crores in Q1 FY26 to ₹5.97 crores in Q3 FY26, representing a 11.42% reduction. This cost optimisation has contributed meaningfully to the margin expansion witnessed during the quarter. However, investors should monitor whether this efficiency reflects genuine operational improvements or potentially concerning staff attrition in a competitive talent market.

The operating profit before depreciation, interest, and tax (PBDIT) excluding other income reached a record ₹41.20 crores in Q3 FY26, representing a 19.29% sequential increase from ₹34.54 crores in Q2 FY26. This metric, which strips out non-core income and financial costs, provides the clearest view of the company's core operational strength and validates management's claims of improving business fundamentals.

Asset Quality and Financial Health: Navigating Growth with Caution

For NBFCs, asset quality represents the cornerstone of sustainable profitability. Whilst Mufin Green has not disclosed detailed non-performing asset (NPA) metrics in the available quarterly data, the company's consistent profitability and improving margins suggest adequate provisioning and credit discipline. The absence of significant loan loss provisions in recent quarters indicates that the loan book quality has remained stable, though investors should seek more granular disclosure on this critical parameter.

The company's cash flow profile reveals the capital-intensive nature of its business model. For FY25, cash flow from operations stood at negative ₹152 crores, reflecting the deployment of capital into loan disbursements. This was funded through cash flow from financing activities of ₹66 crores and investing activities of ₹90 crores. The closing cash position of ₹91 crores as of March 2025 provides a modest liquidity buffer, though the negative operating cash flow underscores the importance of continued access to funding markets.

Investments declined from ₹4.79 crores in March 2024 to ₹1.72 crores in March 2025, suggesting the company has redeployed capital from liquid investments into higher-yielding loan assets. This strategic shift aligns with the company's growth ambitions but reduces balance sheet flexibility. Current assets stood at ₹184.90 crores as of March 2025, down from ₹284.68 crores a year earlier, reflecting the capital deployment into the loan book.

Industry Leadership: How Mufin Green Compares to Peers

Mufin Green's peer comparison reveals a striking valuation anomaly. At 107.53 times trailing earnings, the company trades at a significant premium to the NBFC sector average of approximately 23 times. This valuation multiple is more than five times that of SG Finserve (20.94x) and substantially higher than Ugro Capital (16.86x), despite those companies demonstrating superior return on equity metrics.

The price-to-book value ratio of 6.32 times further underscores the premium valuation, dwarfing the peer average of approximately 0.93 times. This suggests that investors are pricing in substantial future growth expectations, which the company must deliver to justify current market levels. The ROE of 5.88%, whilst respectable, trails SG Finserve's 9.46% and PTC India Financial's 6.63%, raising questions about whether the valuation premium is warranted based on current fundamentals.

Interestingly, Mufin Green's debt-to-equity ratio of 2.72 times positions it between SG Finserve's more conservative 1.72 times and Ugro Capital's aggressive 3.28 times. This suggests the company is pursuing growth through leverage, a strategy that can amplify returns during favourable credit cycles but also magnifies risks during periods of stress.

Valuation Analysis: Premium Pricing Demands Exceptional Execution

The valuation landscape for Mufin Green presents perhaps the most significant challenge for prospective investors. At a P/E ratio of 108 times trailing earnings, the company trades at nearly five times the industry average of 23 times, placing it in the "very expensive" category according to proprietary valuation assessments. This premium has persisted despite multiple valuation grade changes, oscillating between "expensive" and "very expensive" throughout 2025.

The enterprise value to EBITDA multiple of 21.85 times and EV to sales ratio of 13.61 times further corroborate the premium valuation. For context, these multiples typically imply expectations of sustained high growth rates and superior return on capital, neither of which Mufin Green currently demonstrates at levels that would traditionally justify such pricing. The company's 5-year sales CAGR of 67.24% and EBIT CAGR of 93.93% are impressive, but these historical growth rates may prove difficult to sustain as the company scales.

The stock's current price of ₹115.95 sits 8.09% below its 52-week high of ₹126.15 but remains a remarkable 82.14% above its 52-week low of ₹63.66. This wide trading range reflects the market's uncertainty about the company's intrinsic value and the appropriate multiple to assign to its earnings. The absence of dividend yield further reduces the margin of safety for investors, as total returns are entirely dependent on capital appreciation.

Shareholding Pattern: Institutional Confidence Remains Tepid

The shareholding pattern for Mufin Green reveals a concerning lack of institutional conviction. Promoter holding stands at 54.11% as of December 2025, experiencing a marginal decline of 0.09 percentage points from the previous quarter. The absence of promoter pledging is a positive indicator of financial stability at the promoter level, with Hindon Mercantile Limited holding the dominant 50.94% stake.

More troubling is the institutional participation profile. Foreign institutional investor (FII) holding remains minuscule at 1.07%, spread across just eight FII entities, whilst mutual fund holding is completely absent. This lack of institutional interest is particularly noteworthy given the company's strong operational performance and suggests that sophisticated investors harbour concerns about valuation, liquidity, or business sustainability.

The most significant movement in Q3 FY26 was the 3.51 percentage point decline in other domestic institutional investor (DII) holdings, from 11.90% to 8.39%. This reduction was offset by a 3.37 percentage point increase in non-institutional holdings, suggesting potential distribution from informed institutional investors to retail participants. Such patterns often precede periods of increased volatility and warrant caution.

Stock Performance: Exceptional Long-Term Returns Mask Recent Volatility

Mufin Green's stock performance presents a tale of two narratives. Over the long term, the stock has delivered exceptional returns, with a staggering 2,716.54% gain over five years, massively outperforming the Sensex's 60.30% return during the same period. This translates to an alpha of 2,656.24 percentage points, placing it amongst the top performers in the micro-cap NBFC space. The three-year return of 165.33% and one-year return of 44.11% further demonstrate the stock's ability to generate substantial wealth for early investors.

However, recent performance reveals increasing volatility and profit-booking pressure. The stock has declined 2.15% over the past month, underperforming the Sensex's 1.20% decline. Year-to-date returns stand at a modest 0.43%, significantly lagging the stock's historical momentum. The current price of ₹115.95 represents an 8.09% decline from the 52-week high of ₹126.15, suggesting that the stock may be entering a consolidation phase after its remarkable multi-year rally.

The stock's volatility of 51.19% over the past year classifies it as a "high risk, high return" investment, with a beta of 1.01 indicating that it generally moves in line with the broader market. The risk-adjusted return of 0.86 compares favourably to the Sensex's 0.74, suggesting that the stock has compensated investors adequately for the elevated volatility, though this metric should be viewed in the context of the company's micro-cap status and limited liquidity.

Technical Analysis: Bullish Trend Faces Resistance

From a technical perspective, Mufin Green's chart presents a mixed picture. The stock is currently in a "bullish" trend as of February 12, 2026, having transitioned from "mildly bullish" the previous day. However, the stock trades below all major moving averages, including the 5-day (₹117.46), 20-day (₹114.67), 50-day (₹114.50), 100-day (₹108.08), and 200-day (₹95.52) moving averages, suggesting that despite the bullish classification, momentum indicators remain cautious.

Weekly technical indicators show a mixed signal profile, with MACD displaying a "mildly bearish" reading whilst RSI and Bollinger Bands flash "bullish" signals. The monthly timeframe presents more conviction, with MACD, Bollinger Bands, and on-balance volume (OBV) all indicating bullish momentum. The KST indicator remains "mildly bearish" on both weekly and monthly timeframes, suggesting underlying momentum concerns.

Delivery volumes have shown interesting patterns, with the most recent session recording 46.97% delivery volume, significantly higher than the 5-day average of 37.31% and the trailing one-month average of 37.21%. This increase in delivery-based buying suggests genuine investor accumulation rather than speculative trading, though the one-month delivery change of 4.90% indicates this trend is nascent rather than established.

Investment Thesis: Quality Concerns Temper Growth Story

Mufin Green's investment thesis rests on a foundation of strong operational execution offset by significant valuation and quality concerns. The company's "average" quality grade reflects its impressive long-term growth trajectory (67.24% sales CAGR, 93.93% EBIT CAGR) but is constrained by a modest ROE of 5.88%, high leverage (debt-to-equity of 2.72), and minimal institutional participation (9.46% total institutional holdings).

The financial trend remains "positive," supported by record-high quarterly metrics including net sales of ₹55.92 crores, operating profit of ₹41.20 crores, and PAT of ₹7.01 crores. The operating margin expansion to 74.41% demonstrates genuine operational leverage and pricing power. However, the elevated debt-to-equity ratio at its highest half-yearly level tempers enthusiasm and raises questions about financial flexibility during adverse scenarios.

The proprietary Mojo Score of 64 out of 100 places the stock firmly in "HOLD" territory, upgraded from "SELL" in September 2025. This score reflects the tension between improving fundamentals and stretched valuation, suggesting that whilst the business trajectory is positive, the risk-reward at current prices favours caution rather than aggressive accumulation.

Key Strengths & Risk Factors

Outlook: What Lies Ahead

Looking ahead, Mufin Green's trajectory will be determined by its ability to translate operational excellence into sustainable shareholder value creation. The company must demonstrate that its current growth rates are not merely cyclical tailwinds but rather structural advantages that can be maintained as it scales. Management's focus should centre on improving return on equity through better capital allocation, reducing leverage to enhance financial resilience, and attracting institutional investors through enhanced disclosure and corporate governance practices.

The NBFC sector faces headwinds from potential regulatory tightening, rising funding costs, and increased competition from traditional banks expanding into retail lending. Mufin Green's ability to navigate these challenges whilst maintaining its margin profile will be critical. The company's micro-cap status provides growth runway but also amplifies liquidity and volatility risks that investors must carefully weigh.