N K Industries Q3 FY26: Losses Deepen Amid Revenue Collapse

The quarter's performance represents a continuation of the company's troubling trajectory, with revenue declining 24.02% sequentially from ₹3.58 crores in Q2 FY26 and 29.53% year-on-year from ₹3.86 crores in Q3 FY25. More alarmingly, the company has turned operationally loss-making, with operating profit (PBDIT excluding other income) at negative ₹0.09 crores versus a positive ₹0.18 crores in the year-ago quarter. This marks a complete erosion of operational profitability that had briefly emerged in Q2 FY25.

The company's balance sheet reveals severe structural distress, with shareholder funds standing at negative ₹348.11 crores as of March 2025, translating to a book value per share of negative ₹843.55. This negative net worth position, combined with consistently loss-making operations, raises serious questions about the company's long-term viability and ability to generate shareholder value.

Financial Performance: Deterioration Across All Metrics

The third quarter of FY2026 witnessed a comprehensive breakdown in N K Industries' financial performance. Net sales of ₹2.72 crores represented not only a sharp 24.02% sequential decline from Q2 FY26's ₹3.58 crores but also a severe 29.53% year-on-year contraction from ₹3.86 crores in Q3 FY25. This revenue erosion has persisted throughout FY2026, with the company unable to reverse declining top-line trends.

Operating profitability has completely evaporated, with the company posting an operating loss (PBDIT excluding other income) of ₹0.09 crores in Q3 FY26, translating to a negative operating margin of 3.47%. This compares unfavourably to a positive operating profit of ₹0.18 crores and a margin of 4.81% in Q3 FY25. The deterioration signals fundamental challenges in the company's ability to manage its cost structure relative to declining revenues.

Employee costs remained relatively stable at ₹0.73 crores in Q3 FY26, matching the year-ago quarter, but this represented a disproportionately high 26.84% of revenues compared to 18.91% in Q3 FY25. The fixed nature of these costs, combined with revenue decline, has created severe operating leverage working against the company.

Depreciation charges of ₹0.63 crores in Q3 FY26, whilst lower than the ₹0.68 crores in Q3 FY25, continued to weigh heavily on profitability, representing 23.16% of revenues. For a company generating minimal sales, these fixed charges create an insurmountable burden on the path to profitability.

Operational Crisis: Negative Net Worth and Capital Erosion

N K Industries faces a severe operational and capital structure crisis that extends far beyond quarterly performance volatility. The company's balance sheet as of March 2025 revealed shareholder funds of negative ₹348.11 crores, representing a deterioration from negative ₹344.10 crores in March 2024. With equity capital of ₹6.01 crores, the accumulated losses in reserves and surplus have ballooned to negative ₹354.12 crores.

This negative net worth position creates a mathematically impossible situation for traditional valuation metrics. The company's book value per share stands at negative ₹843.55, whilst the stock trades at ₹66.40, resulting in a price-to-book ratio of negative 0.11x. This disconnect highlights that the market is essentially valuing the company's fixed assets and potential turnaround prospects rather than any sustainable earnings power or book value.

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 expenditure to maintain or expand capacity. Current assets of ₹26.94 crores marginally exceeded current liabilities of ₹3.65 crores, providing some working capital cushion, but the overall capital structure remains deeply stressed.

On a positive note, the company operates with zero long-term debt and minimal interest costs (just ₹0.04 crores in Q2 FY26), suggesting that the operational losses are not compounded by financial leverage. However, this also means the company has limited access to external financing given its negative net worth, constraining its ability to invest in turnaround initiatives.

Industry Context: Underperformance in Edible Oil Sector

The edible oil sector, particularly the castor oil segment where N K Industries operates, has faced its own set of challenges including volatile raw material prices, competition from imports, and fluctuating demand from end-user industries. However, N K Industries' performance stands out as particularly weak even within this challenging context.

Over the past year, the broader edible oil sector delivered returns of 73.84%, whilst N K Industries managed just 3.72%, underperforming the sector by a massive 70.12 percentage points. This stark underperformance suggests company-specific operational issues rather than sector-wide headwinds.

The company's five-year sales growth of negative 5.13% and five-year EBIT growth of just 0.20% highlight chronic revenue challenges and an inability to scale operations profitably. This contrasts with more successful peers in the edible oil space who have managed to navigate commodity cycles and grow their businesses sustainably.

The peer comparison reveals N K Industries' outlier status. Whilst comparable companies like Rajgor Castor trade at reasonable valuations with positive book values and dividend yields, N K Industries remains loss-making with a negative book value. The company's inability to generate profits stands in stark contrast to peers who have demonstrated consistent profitability despite operating in the same challenging environment.

Valuation Analysis: Risky Assessment Reflects Fundamental Weakness

N K Industries' valuation metrics paint a picture of extreme risk and fundamental weakness. The company's P/E ratio is not applicable given its loss-making status, whilst the price-to-book ratio of negative 0.11x reflects the negative net worth position. The stock's current market capitalisation of ₹39.91 crores essentially values the company's fixed asset base at a deep discount, with investors speculating on potential asset monetisation or turnaround prospects.

The company's valuation grade has been classified as "RISKY" since April 2023, with multiple oscillations between "Risky" and "Does Not Qualify" categories over the years. This volatile grading history reflects the company's inability to establish consistent operational performance or meet basic quality thresholds for investment consideration.

Enterprise value metrics further underscore the distress, with EV/EBITDA at negative 10.95x and EV/EBIT at negative 6.37x due to negative operating profits. The EV/Sales ratio of 2.33x might appear reasonable in isolation, but when combined with deeply negative profitability metrics, it highlights that investors are paying approximately 2.3 times sales for a loss-making operation with deteriorating fundamentals.

Shareholding: Stable Promoter Base, Zero Institutional Interest

The shareholding pattern of N K Industries has remained remarkably stable over the past five quarters, with promoter holding locked at 73.27% and showing no sequential changes. The promoter group, led by Aashita Nileshbhai Patel (21.20%), Smrutiben Nimish Patel (19.16%), and NKPL Realty LLP (14.92%), maintains a dominant position, suggesting continued commitment despite the operational challenges.

However, the complete absence of institutional interest tells a concerning story. Foreign Institutional Investors (FII), Mutual Funds, and Insurance companies hold zero stake in the company. Other Domestic Institutional Investors (DII) hold a minuscule 0.02%, which has remained unchanged across quarters. This institutional vacuum reflects the company's failure to meet basic quality and governance standards that would attract professional investors.

The non-institutional holding of 26.70% has also remained static, suggesting limited trading activity and poor liquidity. The absence of any meaningful changes in shareholding pattern across quarters indicates that the stock is largely ignored by the broader investment community, trading primarily among retail investors and speculators.

On a marginally positive note, there is zero promoter pledging, indicating that promoters have not leveraged their holdings for external financing. Given the company's negative net worth and operational losses, the absence of pledging at least removes one potential red flag from an otherwise deeply concerning picture.

Stock Performance: High Volatility, Underperformance Against Benchmarks

N K Industries' stock performance has been characterised by extreme volatility and significant underperformance against broader market benchmarks over most meaningful timeframes. Trading at ₹66.40 as of February 05, 2026, the stock has delivered a one-year return of just 3.72%, substantially lagging the Sensex's 6.51% return during the same period, resulting in negative alpha of 2.79 percentage points.

Over shorter timeframes, the stock has exhibited wild swings. The one-week return of 6.38% and one-day gain of 2.99% suggest speculative trading activity rather than fundamental-driven price discovery. However, the one-month return of negative 1.56% and three-month return of negative 0.55% indicate that any short-term rallies have failed to sustain, with the stock consistently giving back gains.

Interestingly, longer-term returns paint a dramatically different picture. The three-year return of 77.07% and five-year return of 273.03% significantly outpaced the Sensex, generating positive alpha of 40.05% and 208.70% respectively. However, this historical outperformance reflects a recovery from extremely depressed levels rather than sustainable value creation. The stock's base effect from trading at severely distressed valuations years ago creates misleading long-term return figures that do not reflect current operational reality.

The stock's risk profile is categorised as "HIGH RISK MEDIUM RETURN" with a beta of 1.50, indicating 50% higher volatility than the broader market. The stock's one-year volatility of 48.13% compared to Sensex volatility of 11.52% underscores the speculative nature of trading in this micro-cap, illiquid stock. The Sharpe ratio, whilst technically positive, offers little comfort given the underlying fundamental deterioration.

Technical indicators present a mixed picture. The stock currently trades above its 5-day (₹75.57), 20-day (₹70.88), 50-day (₹70.24), and 100-day (₹69.97) moving averages, suggesting short-term momentum. However, the overall technical trend is classified as "MILDLY BEARISH" as of February 04, 2026, having recently changed from "Mildly Bullish." This trend reversal, combined with fundamental weakness, suggests limited upside potential and heightened downside risk.

Investment Thesis: Multiple Red Flags Across All Parameters

The investment thesis for N K Industries is severely compromised across all critical parameters. The company's Mojo Score of just 17 out of 100 places it firmly in "STRONG SELL" territory, with the rating unchanged since October 2025. This dismal score reflects fundamental weaknesses across valuation, quality, financial trends, and technical indicators.

The quality assessment grades the company as "BELOW AVERAGE," reflecting long-term financial underperformance. With five-year sales growth of negative 5.13%, five-year EBIT growth of just 0.20%, average ROCE of 0.81%, and average ROE of 0.00%, the company has demonstrated virtually no ability to generate sustainable returns on capital. The negative net worth position further disqualifies the company from meeting basic quality standards.

The financial trend for the most recent quarter (Q3 FY26) is classified as "FLAT," which represents a diplomatic characterisation of deeply negative results. The company's debtors turnover ratio on a half-yearly basis stood at a concerning 0.67 times, indicating working capital inefficiencies and potential collection challenges.

The valuation grade of "RISKY" appropriately captures the speculative nature of the investment. With negative earnings, negative book value, and deteriorating operational metrics, traditional valuation frameworks break down entirely. Investors are essentially speculating on asset values or potential restructuring scenarios rather than investing based on earnings power or growth prospects.

Key Strengths & Risk Factors

Outlook: Critical Monitoring Points