National Oxygen Q3 FY26: Losses Deepen Amid Revenue Collapse

The stock, trading at ₹90.49 on the National Stock Exchange, has underperformed dramatically, posting a 26.43% decline over the past year against the Sensex's 7.18% gain. With negative book value, deteriorating margins, and a bearish technical trend, National Oxygen presents a cautionary tale of operational distress in the chemical products sector.

The Chennai-based manufacturer of industrial gases in liquid and gaseous forms has been operating plants in Pondicherry and Perundurai at full capacity, serving primarily government workshops, public sector units, space, and petrochemical clients. However, this operational base has proven insufficient to arrest the company's financial decline, which has accelerated dramatically over the past three quarters.

Financial Performance: A Downward Spiral

National Oxygen's Q3 FY26 results reveal a company in severe distress. Net sales of ₹5.04 crores marked the fourth consecutive quarter of sequential decline, falling 20.88% from Q2 FY26's ₹6.37 crores and representing a catastrophic 53.25% year-on-year contraction from Q3 FY25's ₹10.78 crores. This revenue erosion has been relentless—from ₹10.57 crores in Q2 FY25 to the current quarter's nadir—suggesting fundamental demand challenges rather than temporary disruptions.

The company's profitability metrics paint an equally grim picture. Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) stood at negative ₹0.74 crores in Q3 FY26, translating to an operating margin of negative 14.68%. Whilst this represents a marginal improvement from Q2 FY26's negative 6.91% margin, the absolute loss deepened quarter-on-quarter, reflecting the devastating impact of revenue collapse on fixed-cost absorption.

The anomalous Q2 FY26 profit of ₹7.04 crores appears to be an accounting aberration rather than genuine operational improvement, given the continuation of negative operating margins and declining revenues. The profit before tax for Q3 FY26 stood at negative ₹1.55 crores after accounting for interest costs of ₹0.36 crores and depreciation of ₹0.57 crores. Notably, the company has paid zero taxes for seven consecutive quarters, reflecting its loss-making status.

On a nine-month basis for FY26 (April to December 2025), National Oxygen has generated total revenues of ₹18.99 crores, representing a 40.50% decline from the comparable period in FY25. This sustained deterioration across multiple quarters eliminates any possibility of viewing the current weakness as temporary or cyclical.

Operational Challenges: When Full Capacity Isn't Enough

National Oxygen's management has consistently stated that plants at both Pondicherry and Perundurai operate at full capacity. However, this operational efficiency has proven meaningless in the face of collapsing demand and pricing pressures. The company's return on capital employed (ROCE) has plummeted to negative 30.52% in the latest period, down from an already anaemic 1.21% average, signalling severe capital destruction.

The balance sheet reveals the extent of the company's predicament. Shareholder funds turned negative at ₹8.01 crores as of March 2025, meaning the company's liabilities exceed its assets. This negative book value of ₹15.88 per share indicates that equity holders have lost their entire investment and the company operates on creditor forbearance. Long-term debt of ₹24.02 crores, combined with current liabilities of ₹13.43 crores, creates a total liability base of ₹37.45 crores against fixed assets of just ₹19.58 crores.

The company's working capital position has deteriorated sharply, with current assets of ₹8.95 crores barely covering two-thirds of current liabilities. Cash flow from operations has been negligible, standing at zero in FY25, whilst the company had no closing cash balance. This liquidity crisis explains the company's inability to invest in growth or modernisation—cash flow from investing activities was zero in FY25.

Industry Context: Underperforming a Weak Sector

The Other Chemical Products sector has itself been challenging, with the industry posting a negative 7.21% return over the past year. National Oxygen has managed to underperform even this weak benchmark, declining 26.43% and generating negative alpha of 19.22 percentage points versus its sector. This substantial underperformance suggests company-specific issues beyond broader industry headwinds.

The industrial gases business typically benefits from stable demand from manufacturing, space, and petrochemical sectors. National Oxygen's revenue collapse despite serving government and public sector clients—traditionally stable customer bases—raises questions about contract renewals, competitive losses, or pricing pressures. The company's five-year sales growth of negative 1.97% and five-year EBIT growth of negative 240.63% indicate structural decline rather than cyclical weakness.

National Oxygen's negative price-to-book value of 15.99 times reflects the market's recognition that the company's book value is negative. Unlike peers with positive returns on equity ranging from 2.77% to 34.55%, National Oxygen reports zero ROE due to negative shareholder funds. The company ranks last amongst its peer group with a market capitalisation of just ₹45.00 crores.

Shareholding Pattern: Promoter Stake Declining

Promoter holding in National Oxygen has declined from 71.29% in March 2025 to 70.16% in December 2025, representing a reduction of 1.13 percentage points over three quarters. Whilst this decrease is modest, any reduction in promoter stake during a period of severe financial distress raises concerns about promoter confidence. Non-institutional shareholding increased correspondingly from 28.71% to 29.84%.

The shareholding structure reveals complete absence of institutional investors—zero FII holdings, zero mutual fund holdings, zero insurance company holdings, and zero other DII holdings. This institutional vacuum indicates that sophisticated investors have avoided the stock entirely, likely due to its micro-cap status, negative book value, and poor financial performance. The lack of institutional interest also means minimal analyst coverage and liquidity constraints.

Stock Performance: Severe Underperformance Across All Timeframes

National Oxygen's stock has been in freefall, declining 26.43% over the past year whilst the Sensex gained 7.18%, resulting in negative alpha of 33.61 percentage points. The underperformance extends across virtually all timeframes: down 31.50% over six months (Sensex up 0.97%), down 14.47% over three months (Sensex down 2.53%), and down 31.65% over three years (Sensex up 38.27%).

The stock currently trades at ₹90.49, down 38.63% from its 52-week high of ₹147.45 but up 26.03% from its 52-week low of ₹71.80. This positioning near the lower end of its trading range reflects ongoing selling pressure. Technical indicators uniformly signal distress: the stock trades below all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), with the overall technical trend classified as bearish since November 26, 2025.

The stock's beta of 1.50 indicates high volatility relative to the broader market, whilst its 49.37% annualised volatility over the past year places it in the "high risk, low return" category. The risk-adjusted return of negative 0.54 compares unfavourably with the Sensex's positive 0.64, highlighting that investors have been punished with both high volatility and negative returns.

Investment Thesis: Multiple Red Flags

National Oxygen's investment thesis has completely deteriorated. The company's Mojo Score of 3 out of 100 places it firmly in "Strong Sell" territory, reflecting the convergence of negative factors across all key parameters. The quality grade of "Below Average" understates the severity of the situation—the company has negative shareholder funds, making traditional quality metrics largely irrelevant.

The valuation assessment of "Risky" is appropriate given the negative book value and loss-making status. Traditional valuation multiples become meaningless when a company has negative equity and negative earnings. The price-to-book value of negative 15.99 times simply reflects that the market capitalisation of ₹45.00 crores exists against negative shareholder funds of ₹8.01 crores.

From a financial trend perspective, the company's trajectory is unambiguously negative. The current quarter represents the lowest quarterly sales in recent history, whilst operating margins remain deeply negative. The technical trend is bearish, with the stock in a sustained downtrend since late 2025. The convergence of negative financial trends and bearish technicals creates a particularly unfavourable setup.

Outlook: What to Monitor

For existing shareholders trapped in this position, the outlook remains bleak. The company requires a fundamental restructuring of its capital base, potentially through debt forgiveness, fresh equity infusion, or asset sales. Without such intervention, the trajectory points towards continued value destruction.

The most likely scenario involves continued financial deterioration until creditors force a resolution. The company's ability to continue as a going concern depends entirely on creditor forbearance, given its negative net worth and inability to generate positive cash flows. Fresh investors should avoid this stock entirely, whilst existing holders face the difficult decision of whether to exit at current depressed levels or hold hoping for an unlikely turnaround.