The company, which operates with a market capitalisation of merely ₹40.00 crores, finds itself in an increasingly precarious financial position. With a negative book value per share of ₹843.55 and shareholder funds standing at negative ₹348.11 crores as of March 2025, N K Industries exemplifies a textbook case of balance sheet erosion. The stock currently trades at ₹66.10, down 0.15% on November 11, 2025, and remains 25.95% below its 52-week high of ₹89.26.
Financial Performance: A Spiral of Deterioration
In Q2 FY26, N K Industries reported net sales of ₹3.58 crores, marking a 10.50% decline year-on-year from ₹4.00 crores in Q2 FY25. The sequential performance proved equally concerning, with revenues falling 8.67% quarter-on-quarter from ₹3.92 crores in Q1 FY26. This consistent revenue contraction underscores fundamental demand challenges facing the company's castor oil business.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 3.58 | -8.67% | -2.03 | -37.50% | -59.01% |
| Jun'25 | 3.92 | -14.41% | -0.69 | -6.08% | -18.25% |
| Mar'25 | 4.58 | +18.65% | -2.66 | -48.13% | -62.15% |
| Dec'24 | 3.86 | -3.50% | -0.43 | 4.81% | -11.50% |
| Sep'24 | 4.00 | -8.68% | -0.55 | 0.0% | -14.07% |
| Jun'24 | 4.38 | -26.51% | 0.09 | 19.71% | 2.14% |
| Mar'24 | 5.96 | — | 0.84 | 30.07% | 14.69% |
The margin collapse represents the most alarming aspect of Q2 FY26 results. Operating profit before depreciation, interest, and tax (excluding other income) plummeted to negative ₹1.29 crores, translating to an operating margin of negative 37.50%—a catastrophic deterioration from breakeven (0.0%) in the year-ago quarter. The PAT margin cratered to negative 59.01%, compared to negative 14.07% in Q2 FY25, indicating that the company is burning cash at an accelerating rate on every rupee of sales.
Employee costs remained stable at ₹0.85 crores in Q2 FY26, unchanged from Q1 FY26 but up from ₹0.77 crores in Q2 FY25. However, with revenues declining, employee costs as a percentage of sales surged to 23.74%, eroding profitability further. Depreciation stood at ₹0.63 crores for the quarter, whilst minimal interest expenses of ₹0.04 crores indicate low leverage—one of the few positives in an otherwise dismal financial picture.
Operational Crisis: Negative Equity and Eroding Capital Base
N K Industries operates with a severely compromised balance sheet that raises fundamental questions about its long-term viability. As of March 2025, the company reported shareholder funds of negative ₹348.11 crores, comprising share capital of ₹6.01 crores offset by accumulated reserves and surplus of negative ₹354.12 crores. This represents a complete erosion of equity capital, with cumulative losses far exceeding the original capital invested by shareholders.
Critical Balance Sheet Alert
Negative Net Worth: With shareholder funds at negative ₹348.11 crores and book value per share at negative ₹843.55, N K Industries has completely eroded its equity base. The company operates with fixed assets of ₹197.35 crores against current liabilities of ₹3.65 crores, but the massive accumulated losses render traditional solvency metrics meaningless. Operating cash flow turned sharply negative at ₹3.02 crores in FY25, the lowest in recent years, indicating deteriorating cash generation capability.
The company's fixed assets stood at ₹197.35 crores as of March 2025, down from ₹199.97 crores in March 2024, reflecting ongoing depreciation without corresponding capital investment. Current assets of ₹26.94 crores provide minimal liquidity cushion against current liabilities of ₹3.65 crores. Trade payables declined to ₹1.04 crores from ₹1.59 crores, potentially indicating supplier caution or reduced business activity.
Return on equity (ROE) calculations become meaningless when equity is negative, but the company's average ROE over recent years stood at 0.0%, reflecting persistent unprofitability. Return on capital employed (ROCE) averaged a meagre 0.79%, indicating that the company generates virtually no returns on the capital deployed in its business. The latest ROCE figure shows "Negative Capital Employed," underscoring the severity of the capital structure distress.
Industry Context: Underperforming the Edible Oil Sector
The edible oil sector, particularly the castor oil segment, has witnessed varied fortunes across participants. Whilst the broader Edible Oil sector delivered a robust 165.93% return over the past year, N K Industries managed only 27.63%—an underperformance of 138.30 percentage points. This stark divergence highlights company-specific operational challenges rather than sector-wide headwinds.
N K Industries, incorporated in 1987 and converted to a public limited company in 1992, manufactures castor oil and derivatives including hydrogenated castor oil (HCO) and 12-hydroxystearic acid (12HSA). Recognised as a Government Export House, the company doubled its refining capacities and added derivative manufacturing facilities funded by a public issue in August 1994. However, three decades later, the company struggles with a mere ₹3.58 crores in quarterly revenue—a scale that raises questions about operational viability in an increasingly competitive market.
Scale Disadvantage
With quarterly revenues of just ₹3.58 crores (approximately ₹14-15 crores annualised), N K Industries operates at a micro scale in the edible oil industry. This limited scale restricts procurement advantages, manufacturing efficiencies, and market reach. The company's 5-year sales growth stands at negative 4.88%, indicating a sustained inability to expand operations or capture market share in a growing sector.
Peer Comparison: Valuation Disconnect from Fundamentals
Comparing N K Industries to its edible oil peers reveals the extent of its operational underperformance and the market's scepticism about its prospects.
| Company | P/E (TTM) | Price to Book | Dividend Yield | Market Cap (₹ Cr) |
|---|---|---|---|---|
| N K Industries | NA (Loss Making) | -0.11x | NA | 40.00 |
| Rajgor Castor | 6.58x | 0.71x | 0.40% | — |
| Solvex Edibles | 14.56x | — | NA | — |
| Vandan Foods | 5.08x | — | NA | — |
| Poona Dal & Oil | 31.50x | — | NA | — |
N K Industries' negative price-to-book ratio of -0.11x reflects its negative net worth, placing it in a unique category amongst peers who operate with positive equity bases. The absence of a meaningful P/E ratio (due to sustained losses) and zero dividend yield further underscore the company's distressed financial position. Rajgor Castor, a direct peer in the castor oil segment, trades at 6.58 times earnings with a positive book value of 0.71x, demonstrating the operational and financial viability that N K Industries conspicuously lacks.
Valuation Analysis: Risky Classification Justified
N K Industries carries a "RISKY" valuation grade, a designation entirely justified by its fundamental metrics. With a negative book value, the traditional price-to-book ratio of -0.11x becomes a mathematical curiosity rather than a valuation tool. The EV/EBITDA multiple of -18.32x and EV/EBIT of -8.39x reflect negative earnings, rendering these metrics meaningless for comparative valuation purposes.
The stock currently trades at ₹66.10, down 25.95% from its 52-week high of ₹89.26 but still 40.40% above its 52-week low of ₹47.08. This trading range reflects ongoing speculation and volatility typical of micro-cap stocks with distressed fundamentals. The company's Mojo Score stands at a dismal 9 out of 100, with a "STRONG SELL" rating that accurately captures the investment risk profile.
The valuation grade history shows the stock has oscillated between "Risky" and "Does Not Qualify" classifications since 2018, never achieving a stable investment-grade rating. The most recent change to "Risky" occurred on April 25, 2023, and has persisted since, reflecting the market's consistent assessment of elevated risk.
Shareholding Pattern: Stable Promoter Base Amidst Distress
The shareholding pattern reveals a stable promoter holding of 73.27% across the last five quarters, with no sequential changes. This unwavering promoter stake suggests either strong conviction in a turnaround strategy or, more cynically, limited liquidity and exit options for controlling shareholders.
| Quarter | Promoter % | QoQ Change | FII % | Mutual Fund % | Other DII % | Non-Institutional % |
|---|---|---|---|---|---|---|
| Sep'25 | 73.27% | 0.00% | 0.00% | 0.00% | 0.02% | 26.70% |
| Jun'25 | 73.27% | 0.00% | 0.00% | 0.00% | 0.02% | 26.70% |
| Mar'25 | 73.27% | 0.00% | 0.00% | 0.00% | 0.02% | 26.70% |
| Dec'24 | 73.27% | 0.00% | 0.00% | 0.00% | 0.02% | 26.70% |
| Sep'24 | 73.27% | — | 0.00% | 0.00% | 0.02% | 26.70% |
Notably, institutional participation remains virtually non-existent. Foreign institutional investors (FIIs) hold 0.00%, mutual funds hold 0.00%, and other domestic institutional investors (DIIs) hold a negligible 0.02%. The absence of institutional interest speaks volumes about professional investors' assessment of the company's prospects. With zero mutual funds and zero FIIs participating, N K Industries lacks the institutional validation that typically accompanies investable opportunities.
The non-institutional shareholding of 26.70% represents retail and other non-institutional investors, many of whom may be trapped in legacy positions from the company's 1994 public issue. The promoter group comprises the Patel family, with Aashita Nileshbhai Patel (21.2%) and Sonalben Nimishbhai Patel (19.16%) being the largest individual holders, alongside entity holdings through NKPL Realty LLP (14.92%) and N. K. Proteins Private Limited (6.11%). Positively, there is no promoter pledging, indicating no immediate liquidity stress for controlling shareholders.
Stock Performance: High Volatility with Negative Momentum
N K Industries' stock performance over various timeframes reveals extreme volatility characteristic of micro-cap, distressed situations. Over the past year, the stock delivered a 27.63% return, significantly outperforming the Sensex's 4.71% gain with an alpha of 22.92 percentage points. However, this outperformance occurred from a deeply depressed base and amidst ongoing fundamental deterioration.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -1.00% | -0.27% | -0.73% |
| 1 Month | -6.28% | +0.89% | -7.17% |
| 3 Months | +12.80% | +3.27% | +9.53% |
| 6 Months | +4.64% | +4.76% | -0.12% |
| YTD | -13.17% | +6.52% | -19.69% |
| 1 Year | +27.63% | +4.71% | +22.92% |
| 3 Years | +81.10% | +34.70% | +46.40% |
| 5 Years | +282.08% | +90.94% | +191.14% |
Year-to-date performance tells a different story, with the stock down 13.17% versus the Sensex's 6.52% gain—an underperformance of 19.69 percentage points. Recent momentum has turned decisively negative, with the stock declining 6.28% over the past month whilst the Sensex gained 0.89%. The technical trend classification of "MILDLY BEARISH" since October 14, 2025, reflects deteriorating price action following the quarterly results.
The stock exhibits high volatility with a standard deviation of 54.06% over the past year, compared to the Sensex's 12.38%. This translates to a beta of 1.50, classifying N K Industries as a "High Beta Stock" that amplifies market movements. The risk-adjusted return of 0.51 over one year, whilst positive, pales in comparison to the elevated risk profile. The stock trades below all key moving averages—5-day (₹67.31), 20-day (₹70.90), 50-day (₹70.37), and 100-day (₹71.12)—indicating consistent selling pressure.
"With negative equity of ₹348 crores, quarterly losses widening to ₹2 crores, and operating margins at negative 37.5%, N K Industries represents a capital destruction story rather than an investment opportunity."
Investment Thesis: Multiple Red Flags Dominate
The investment thesis for N K Industries is overwhelmingly negative across all critical parameters. The company's Mojo Score of 9 out of 100 reflects the aggregation of multiple fundamental weaknesses:
The quality assessment categorises N K Industries as a "BELOW AVERAGE" quality company based on long-term financial performance. Key quality metrics paint a dire picture: 5-year sales growth of negative 4.88%, average ROCE of 0.79%, and average ROE of 0.0%. The company fails to meet basic quality thresholds across management risk, growth, and capital structure parameters.
The financial trend classification turned "NEGATIVE" in September 2025, driven by three critical factors: operating cash flow hitting a low of negative ₹3.02 crores annually, profit before tax (excluding other income) falling 69.0% versus the previous four-quarter average, and PAT declining 87.5% versus recent averages. These deteriorating trends indicate accelerating financial distress rather than stabilisation.
Key Strengths & Risk Factors
KEY STRENGTHS
- Zero Promoter Pledging: No shares pledged by promoters indicates no immediate liquidity stress for controlling shareholders
- Stable Promoter Holding: Consistent 73.27% promoter stake over five quarters suggests commitment to the business
- Low Leverage: Minimal debt with debt-to-equity effectively at zero reduces bankruptcy risk in the near term
- Long Operating History: Company incorporated in 1987 with established manufacturing facilities and Government Export House status
- Niche Product Focus: Specialisation in castor oil derivatives (HCO, 12HSA) serves specific industrial applications
KEY CONCERNS
- Negative Net Worth: Shareholder funds at negative ₹348.11 crores represent complete equity erosion
- Widening Losses: Q2 FY26 net loss of ₹2.03 crores up 269% YoY signals accelerating distress
- Collapsing Margins: Operating margin at negative 37.5% and PAT margin at negative 59% indicate severe operational inefficiency
- Revenue Decline: 5-year sales CAGR of negative 4.88% with Q2 FY26 revenues down 10.5% YoY
- Negative Cash Flow: Operating cash flow of negative ₹3.02 crores in FY25 at multi-year low
- Zero Institutional Interest: No FII or mutual fund holdings reflect professional investors' avoidance
- Micro Scale: Quarterly revenues of ₹3.58 crores lack economies of scale for competitiveness
Outlook: What to Monitor
🚨 CRITICAL RED FLAGS
- • Further Margin Deterioration: Operating margins below negative 40% would signal terminal distress
- • Accelerating Cash Burn: Quarterly cash flow from operations turning more negative
- • Promoter Stake Reduction: Any decline in 73.27% promoter holding would indicate loss of confidence
- • Working Capital Stress: Rising trade payables or creditor pressure indicating liquidity crisis
- • Revenue Below ₹3 Crores: Quarterly sales falling below ₹3 crores would threaten viability
✓ POTENTIAL TURNAROUND SIGNALS
- • Return to Positive Margins: Operating margin returning to positive territory for consecutive quarters
- • Revenue Stabilisation: Quarterly sales consistently above ₹4.5-5.0 crores
- • Cash Flow Improvement: Operating cash flow turning positive indicating sustainable operations
- • Debt Restructuring: Capital infusion or debt restructuring to repair balance sheet
- • Institutional Interest: Entry of quality institutional investors signalling improved prospects
The Verdict: Avoid This Value Trap
Score: 9/100
For Fresh Investors: Avoid entirely. With negative equity of ₹348 crores, widening quarterly losses, collapsing margins, and zero institutional participation, N K Industries represents a capital destruction story. The company lacks the scale, profitability, and balance sheet strength to compete effectively in the edible oil sector. The "RISKY" valuation grade and "BELOW AVERAGE" quality classification accurately reflect the elevated risk of permanent capital loss.
For Existing Holders: Exit on any price strength. The deteriorating financial trend, negative cash flows, and accelerating losses indicate worsening fundamentals rather than stabilisation. Whilst the stock has delivered volatile returns historically, the current trajectory points towards further value erosion. The absence of institutional buyers and professional investor interest should serve as a clear warning signal.
Fair Value Estimate: Not applicable. Traditional valuation frameworks break down when a company operates with negative equity and sustained losses. Any price represents speculation on a turnaround rather than valuation of sustainable cash flows.
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.
