Nagarjuna Fertilizers Q2 FY26: Deep Distress as Operations Collapse and Losses Mount

The Hyderabad-based company, formerly known as Kakinada Fertilizers Limited, has been in terminal decline since its operational collapse in FY24. Q2 FY26 results reveal an entity barely clinging to existence, with sales evaporating to a negligible ₹0.01 crores compared to ₹0.93 crores in Q2 FY24—a staggering 98.92% year-on-year contraction. Sequential performance was equally dismal, with revenues essentially flat from Q1 FY26's ₹0.00 crores. The company is effectively non-operational, maintaining only skeletal administrative functions whilst bleeding cash and accumulating losses.

For the half-year period H1 FY26, cumulative losses reached ₹11.28 crores on revenues of just ₹0.01 crores, highlighting the complete absence of meaningful business activity. Employee costs of ₹3.89 crores for H1 FY26 and interest expenses of ₹2.87 crores continue to drain the company despite negligible operations. The operating profit margin (excluding other income) stood at an incomprehensible negative 34,300% in Q2 FY26, a meaningless metric given the absence of sales.

Financial Performance: A Company in Liquidation Mode

Nagarjuna Fertilizers' Q2 FY26 financial performance can only be described as catastrophic. With net sales of ₹0.01 crores, the company generated virtually no revenue, marking a 98.92% year-on-year decline from the already minuscule ₹0.93 crores reported in Q2 FY24. The sequential comparison is equally dire, with revenues flat from Q1 FY26's ₹0.00 crores. This represents the continuation of an operational collapse that began in FY24 when annual sales plummeted 85.2% to ₹703.00 crores from ₹4,765.00 crores in FY23.

The company's loss-making trajectory intensified in Q2 FY26, with a net loss of ₹5.02 crores compared to ₹14.95 crores in Q2 FY24—a 66.42% year-on-year reduction in losses, though this improvement is purely due to reduced scale rather than operational recovery. Quarter-on-quarter, losses worsened by 19.81% from ₹6.26 crores in Q1 FY26. Operating profit before depreciation, interest, and tax (excluding other income) stood at negative ₹3.43 crores in Q2 FY26, with the company burning cash to maintain minimal operations.

Employee costs remained elevated at ₹1.63 crores in Q2 FY26 despite the absence of operations, down from ₹4.92 crores in Q2 FY24 but still representing a significant cash drain. Interest expenses surged 137.31% year-on-year to ₹1.59 crores, reflecting the company's mounting debt burden even as operations ceased. The quality of earnings is non-existent, with the company generating no meaningful revenue and relying entirely on asset liquidation and debt restructuring to survive. Tax credits of nil in Q2 FY26 indicate the company has exhausted all carry-forward losses or tax benefits.

Balance Sheet Deterioration: Insolvency Confirmed

Nagarjuna Fertilizers' balance sheet as of March 2025 confirms the company's state of technical insolvency. Shareholder funds turned deeply negative at ₹-926.29 crores, driven by accumulated reserves and surplus of ₹-986.10 crores against share capital of ₹59.81 crores. This represents a dramatic improvement from the ₹-3,352.10 crores negative equity in March 2024, primarily due to a one-time extraordinary gain of ₹2,608.60 crores in other income during Q2 FY24—likely from debt restructuring, asset sales, or legal settlements.

The company's asset base has been virtually liquidated. Fixed assets stood at zero as of March 2025, down from ₹669.92 crores in March 2024 and ₹1,352.56 crores in March 2023, indicating systematic asset disposals or complete write-offs. Current assets of ₹465.44 crores in March 2025 (down from ₹697.05 crores in March 2024) represent the only remaining value, though these are likely illiquid or distressed assets. Total current liabilities of ₹1,326.40 crores as of March 2025 include trade payables of ₹1,290.87 crores, representing unpaid supplier obligations that the company cannot service.

Long-term debt has been eliminated, standing at zero as of March 2025 compared to ₹12.13 crores in March 2023, suggesting either debt conversion to equity, write-offs, or restructuring. However, the company continues to incur interest expenses of ₹1.59 crores in Q2 FY26, indicating short-term borrowings or legacy obligations. The cash flow statement for FY25 shows a net cash inflow of ₹1,468.00 crores, driven entirely by investing activities (₹2,240.00 crores inflow), confirming large-scale asset liquidation. Closing cash improved to ₹76.00 crores in March 2025 from negative ₹1,391.00 crores in March 2024, though this is rapidly depleting given quarterly losses.

Industry Context: Fertiliser Sector Thrives Whilst Nagarjuna Collapses

The broader Indian fertiliser sector has delivered robust performance in recent years, with the sector index returning 15.18% over the past year—a stark contrast to Nagarjuna Fertilizers' 48.99% decline. Government support through nutrient-based subsidies, rising agricultural activity, and favourable monsoons have created a supportive operating environment for fertiliser manufacturers. However, Nagarjuna has been unable to capitalise on these tailwinds, having ceased operations entirely due to financial distress, regulatory challenges, and inability to service debt obligations.

The company's operational shutdown contrasts sharply with peers who have maintained stable production and profitability. Whilst competitors benefit from government subsidy mechanisms and stable demand from the agricultural sector, Nagarjuna's manufacturing facilities remain idle, with fixed assets written down to zero. The company's inability to restart operations despite favourable industry conditions underscores deep-rooted structural and financial challenges that extend beyond cyclical factors.

Peer Comparison: Nagarjuna's Collapse Stands Alone

Comparing Nagarjuna Fertilizers to industry peers reveals the company's singular distress. Whilst peers maintain positive profitability metrics and reasonable valuations, Nagarjuna operates in a different universe entirely—one of insolvency and operational shutdown.

Peers trade at P/E multiples between 12.14x and 19.44x, reflecting profitable operations and stable earnings. Nagarjuna, in contrast, is loss-making with no P/E ratio applicable. Return on equity for peers ranges from 8.33% to 12.17%, whilst Nagarjuna's ROE is meaningless given negative book value. The Price-to-Book ratio of negative 0.31x for Nagarjuna reflects the market's assessment that even at ₹4.80 per share, the stock trades above its negative book value of ₹-15.49 per share—a paradoxical situation indicating the market prices in some residual liquidation value.

Debt-to-equity ratios for peers remain manageable between 0.02x and 0.23x, whilst Nagarjuna's metric is incalculable due to negative equity. With a market capitalisation of just ₹287.07 crores, Nagarjuna ranks amongst the smallest players in the sector, reflecting its distressed status. The company's 48.99% stock decline over the past year compares to the sector's 15.18% gain, resulting in a massive 64.17 percentage point underperformance.

Valuation Analysis: Worthless Equity in Insolvent Entity

Traditional valuation metrics are meaningless for Nagarjuna Fertilizers given its state of insolvency and operational shutdown. The P/E ratio is not applicable as the company is loss-making with no earnings. The Price-to-Book ratio of negative 0.31x indicates the stock trades at ₹4.80 against a book value per share of negative ₹15.49—a situation where equity has negative value but the stock maintains a positive price, likely reflecting speculative interest or hopes of debt restructuring benefits.

Enterprise value metrics paint an equally dire picture. EV/EBITDA and EV/EBIT both stand at negative 8.50x, whilst EV/Sales registers at negative 1.37x. These negative multiples reflect the company's negative enterprise value, where total liabilities exceed assets even after accounting for market capitalisation. The EV/Capital Employed ratio of negative 0.24x confirms capital has been completely destroyed.

The stock's 52-week range of ₹4.10 to ₹10.45 shows extreme volatility, with the current price of ₹4.80 sitting 54.07% below the 52-week high but 17.07% above the 52-week low. This volatility reflects speculative trading rather than fundamental value discovery. With no dividends paid and dividend yield at nil, investors receive no return on capital. The valuation assessment of "RISKY" is a dramatic understatement—the equity is essentially worthless in an entity with negative book value exceeding ₹900 crores.

Shareholding Pattern: Promoters Maintain Stake Despite Collapse

The shareholding pattern reveals an interesting dynamic where promoters have marginally increased their stake even as the company collapses. Promoter holding stood at 37.58% in September 2025, up from 34.68% in September 2024, with sequential increases of 17 basis points from June 2025 and 271 basis points from March 2025. This increase likely reflects debt-to-equity conversions or preferential allotments rather than fresh capital infusion, given the company's distressed state.

Institutional interest has completely evaporated. Foreign Institutional Investors (FII) reduced their holding to 0.00% in September 2025 from 0.02% in June 2025, exiting entirely. Mutual fund holding remains at 0.00%, whilst insurance companies hold nothing. Other Domestic Institutional Investors (DII) maintain a token 0.02% stake, down from 0.06% in June 2025. This complete absence of institutional participation reflects the stock's uninvestable status for serious investors.

Non-institutional holdings (retail and others) stood at 48.21% in September 2025, up marginally from 47.91% in June 2025. This retail-heavy shareholding structure, combined with zero institutional presence, indicates the stock is held primarily by trapped retail investors and speculators. Promoter pledging data is unavailable, though given the company's distressed state, any promoter shares are likely pledged or encumbered.

Stock Performance: Unrelenting Decline Across All Timeframes

Nagarjuna Fertilizers' stock performance has been catastrophic across all timeframes, with negative returns in every period measured. The stock closed at ₹4.80 on November 19, 2025, down 1.03% on the day and trading below all key moving averages—5-day (₹4.89), 20-day (₹4.93), 50-day (₹5.10), 100-day (₹5.47), and 200-day (₹5.67)—indicating sustained bearish momentum.

The one-year return of negative 48.99% compares to the Sensex's positive 9.50% gain, resulting in alpha of negative 58.49 percentage points. Year-to-date, the stock has plummeted 48.83% whilst the Sensex gained 8.71%, underperforming by 57.54 percentage points. Over three months, the decline accelerated to 19.19% against the Sensex's 4.04% gain. Even short-term performance remains negative, with one-week and one-month returns of negative 2.04% and negative 2.44% respectively.

Longer-term performance is equally dire. Over three years, the stock declined 40.00% whilst the Sensex rallied 37.76%, resulting in 77.76 percentage points of underperformance. The five-year return of negative 8.05% compares to the Sensex's 94.83% gain, underperforming by a staggering 102.88 percentage points. Risk-adjusted returns are deeply negative, with a one-year risk-adjusted return of negative 1.05 and volatility of 46.51%—nearly four times the Sensex's 12.25% volatility. The stock's beta of 1.50 indicates high sensitivity to market movements, though in this case, it amplifies losses rather than gains.

Key Strengths & Risk Factors

Outlook: Liquidation or Restructuring the Only Paths Forward

Nagarjuna Fertilizers faces an existential crisis with no clear path to operational recovery. The company's complete shutdown of manufacturing activities, liquidation of fixed assets, and mounting losses leave only two potential outcomes: formal liquidation proceedings or a comprehensive debt-equity restructuring scheme. The one-time gain of ₹2,608.60 crores in Q2 FY24 and subsequent asset sales generating ₹2,240.00 crores suggest the company is already in de facto liquidation mode, systematically disposing of assets to satisfy creditors.

For equity investors, the outlook is unequivocally negative. With negative book value of ₹15.49 per share and the stock trading at ₹4.80, even the current price implies value that doesn't exist on the balance sheet. In any liquidation scenario, equity holders stand last in the creditor hierarchy, receiving nothing until all liabilities (including ₹1,290.87 crores in trade payables) are satisfied. Given negative net worth of ₹926.29 crores, equity holders will receive zero in liquidation.