NDA Securities Q2 FY26: Sharp Profit Decline Raises Sustainability Concerns

The September 2025 quarter represents a significant deterioration for the Delhi-based financial services firm, which has struggled to maintain consistent profitability amid challenging market conditions. With revenue declining 14.38% quarter-on-quarter to ₹1.25 crores and operating margins turning deeply negative at -23.2%, the company faces mounting pressure to restore operational efficiency and revenue momentum.

The stock, trading at ₹36.50, has witnessed substantial erosion in shareholder value over the past year, declining 17.98% compared to the Sensex's 9.48% gain during the same period. Currently positioned 44.69% below its 52-week high of ₹65.99, NDA Securities finds itself in a precarious position, with all major moving averages signalling bearish trends and technical indicators pointing to continued weakness.

Financial Performance: Profitability Crisis Deepens

The Q2 FY26 results reveal a company in financial distress, with virtually every metric trending in the wrong direction. Revenue declined 14.38% sequentially from ₹1.46 crores in Q1 FY26 to ₹1.25 crores in Q2 FY26, whilst also falling 40.76% year-on-year from ₹2.11 crores in Q2 FY25. This represents the lowest quarterly revenue figure since June 2024, signalling deteriorating business momentum across the company's distribution and advisory operations.

The operating performance deteriorated even more dramatically. Operating profit before depreciation, interest, and tax (PBDIT) excluding other income plunged to a loss of ₹0.29 crores in Q2 FY26 from a profit of ₹0.21 crores in the previous quarter. This resulted in an operating margin of -23.2%, a stark contrast to the 14.38% margin achieved just one quarter earlier and the 39.53% margin recorded in March 2025. The company's inability to control costs relative to declining revenues has created a severe profitability crisis.

Employee costs remained relatively stable at ₹0.57 crores, but with revenues collapsing, this translated into employee expenses consuming 45.6% of total revenue compared to just 34.9% in Q1 FY26. The company's cost structure appears inflexible, unable to adjust quickly to revenue fluctuations—a significant concern for a micro-cap financial services firm operating in a competitive environment.

The profit before tax stood at a loss of ₹0.39 crores, with the tax credit of ₹0.03 crores providing minimal relief. The final net loss of ₹0.36 crores represents a dramatic 427.27% deterioration quarter-on-quarter and a 202.86% decline year-on-year. The PAT margin of -28.8% underscores the severity of the operational challenges facing the company.

Balance Sheet Quality: Leverage Remains Controlled

Despite the operational struggles, NDA Securities maintains a relatively clean balance sheet with minimal leverage. As of March 2025, the company had zero long-term debt, with shareholder funds totalling ₹12.41 crores comprising equity capital of ₹5.95 crores and reserves of ₹6.47 crores. The debt-to-equity ratio of 0.04 positions the company favourably compared to industry peers, providing some financial flexibility to navigate the current challenges.

However, the balance sheet reveals concerning trends in working capital management. Current liabilities declined from ₹12.11 crores in March 2024 to ₹8.03 crores in March 2025, primarily driven by a reduction in trade payables from ₹8.79 crores to ₹5.42 crores. Whilst this reduction in payables might appear positive, it could also signal reduced business activity and strained vendor relationships.

Current assets stood at ₹17.04 crores as of March 2025, down from ₹19.75 crores a year earlier. The company's book value per share of ₹21.53 provides some downside protection, with the current market price of ₹36.50 trading at 1.83 times book value. The return on equity of 8.58% remains modest but positive on an average basis, though recent quarterly losses will pressure this metric going forward.

Industry Context: NBFC Sector Outperformance Highlights Relative Weakness

The broader Non-Banking Financial Company sector has delivered robust performance over the past year, with the NBFC index returning 24.40%. This makes NDA Securities' 17.98% decline over the same period particularly concerning, representing an underperformance of 42.38 percentage points relative to sector peers. This substantial gap suggests company-specific challenges rather than industry-wide headwinds.

The financial services distribution business has faced headwinds from increased competition, regulatory changes, and evolving investor preferences towards direct investment platforms. However, well-managed NBFCs have successfully navigated these challenges through diversification, technology adoption, and enhanced service offerings. NDA Securities' struggles appear more acute than industry trends would suggest, pointing to execution issues and potentially structural challenges in the business model.

Peer Comparison: Valuation Appears Reasonable Despite Challenges

Compared to micro-cap NBFC peers, NDA Securities trades at a P/E ratio of 28.40x, broadly in line with similar-sized competitors like Swarna Securities (28.68x) and Shree Securities (32.65x). However, the company's P/E multiple appears elevated given recent quarterly losses and deteriorating fundamentals. The price-to-book ratio of 1.83x sits in the middle of the peer range, suggesting the market has partially priced in the operational challenges.

NDA Securities' average return on equity of 8.58% compares favourably to some peers like Step Two Corp. (2.94%) and Cubical Financial (2.94%), but lags JMJ Fintech's superior 11.50% ROE. The company's debt-free status (debt-to-equity of 0.04) provides a competitive advantage in terms of financial flexibility, though this hasn't translated into superior operational performance or shareholder returns.

The company's market capitalisation of ₹23.00 crores makes it the largest amongst the peer group, though this should be viewed in context of the micro-cap nature of the entire sector. The lack of dividend yield across most peers, including NDA Securities, reflects the capital-intensive nature of growth in financial services distribution and the sector's focus on reinvestment over shareholder payouts.

Valuation Analysis: Attractive Grade Masks Fundamental Weakness

NDA Securities currently carries an "Attractive" valuation grade, having transitioned to this rating on August 18, 2025. The stock trades at a P/E ratio of 28.40x based on trailing twelve months earnings, modestly above the NBFC industry average of 24x. However, this valuation metric may be misleading given the recent quarterly loss and deteriorating earnings trajectory. The P/E multiple is likely to expand significantly if losses continue or profitability remains depressed.

The price-to-book ratio of 1.83x provides some perspective on asset backing, with the stock trading at a moderate premium to book value of ₹21.53 per share. The EV/EBITDA multiple of 15.12x and EV/Sales ratio of 2.42x appear reasonable on a historical basis, though these metrics lose relevance when operating profitability turns negative as witnessed in Q2 FY26.

The stock has witnessed extreme volatility over the past year, trading between a 52-week low of ₹25.70 and a high of ₹65.99. The current price of ₹36.50 sits 44.69% below the peak and 42.02% above the trough, suggesting the market remains uncertain about the company's near-term prospects. The "Attractive" valuation grade reflects relative cheapness compared to historical levels, but investors must weigh this against deteriorating fundamentals and uncertain earnings visibility.

Shareholding Pattern: Promoter Stake Increases Amid Declining Performance

The shareholding pattern reveals interesting dynamics, with promoter holding increasing from 48.57% in March 2025 to 58.82% in June 2025, a substantial 10.25 percentage point increase. This stake has remained stable at 58.82% through September 2025. The promoter group, led by Ram Gopal Jindal (48.56%) and Gaurav Jindal (10.26%), controls nearly 59% of the company, demonstrating strong insider ownership and alignment with minority shareholders.

The increase in promoter holding coincided with a corresponding decline in non-institutional shareholding from 51.43% to 41.18%. Notably, the company has zero institutional participation, with no holdings from foreign institutional investors, mutual funds, insurance companies, or other domestic institutional investors. This complete absence of institutional interest represents a significant red flag, suggesting professional investors remain unconvinced about the company's prospects.

The lack of institutional ownership limits liquidity and market depth, contributing to the stock's high volatility (81.84% over the past year). Positively, there is no promoter pledging, indicating the promoter group's confidence in the business and their unwillingness to leverage their holdings. However, the promoter stake increase during a period of deteriorating performance raises questions about whether this represents opportunistic buying or an attempt to support the share price.

Stock Performance: Severe Underperformance Across Timeframes

NDA Securities has delivered disappointing returns across virtually all timeframes, with particularly acute underperformance in recent months. The stock declined 4.45% on the latest trading day, falling to ₹36.50 from ₹38.20. Over the past week, the stock has lost 1.27% compared to the Sensex's 0.96% gain, generating negative alpha of 2.23 percentage points.

The deterioration accelerates over longer periods, with the stock declining 20.82% over three months whilst the Sensex gained 4.18%, producing negative alpha of 25.00 percentage points. The six-month performance is particularly alarming, with the stock plunging 41.13% compared to the Sensex's 2.85% gain—a staggering underperformance of 43.98 percentage points. This severe decline coincides with the deteriorating quarterly results and operational challenges.

On a year-to-date basis, the stock has managed a 12.24% gain, marginally outperforming the Sensex's 8.36% return with positive alpha of 3.88 percentage points. However, this masks the sharp decline from peaks earlier in the year. Over one year, the stock has lost 17.98% whilst the Sensex gained 9.48%, generating negative alpha of 27.46 percentage points.

Interestingly, longer-term returns paint a more favourable picture, with the stock delivering 86.99% returns over two years (vs Sensex's 28.69%) and 166.42% over three years (vs Sensex's 37.31%). However, these historical gains provide little comfort given the recent sharp reversal and deteriorating fundamentals. The stock's high beta of 1.50 indicates it is significantly more volatile than the market, amplifying both gains and losses.

Technical Analysis: All Indicators Flash Red

The technical picture for NDA Securities is uniformly negative, with the stock in a confirmed bearish trend since October 20, 2025. The stock trades below all key moving averages, including the 5-day (₹37.72), 20-day (₹37.54), 50-day (₹39.78), 100-day (₹43.17), and 200-day (₹42.20) moving averages. This complete breakdown of technical support levels suggests strong selling pressure and lack of buying interest.

Multiple technical indicators confirm the bearish outlook. The MACD shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate bearish momentum across both periods. The KST indicator registers bearish on weekly charts and mildly bearish on monthly charts. Only the Dow Theory shows a mildly bullish signal on weekly charts, though this appears to be a lagging indicator given the overall negative sentiment.

The immediate support level sits at the 52-week low of ₹25.70, representing a potential 29.6% decline from current levels if selling pressure intensifies. The nearest resistance stands at ₹37.54 (20-day moving average), followed by stronger resistance at ₹42.20 (200-day moving average) and ₹43.17 (100-day moving average). The 52-week high of ₹65.99 appears distant, requiring an 80.8% rally from current levels.

Investment Thesis: Quality and Momentum Concerns Dominate

NDA Securities presents a challenging investment proposition, with negative signals dominating across multiple parameters. The company carries a "Below Average" quality grade, reflecting weak long-term financial performance characterised by modest 5-year sales growth of 4.12%, average ROE of 8.58%, and complete absence of institutional holdings. The financial trend is classified as "Flat" for Q2 FY26, though this understates the severity of the operational deterioration.

The technical trend remains firmly bearish, with the stock trading below all moving averages and multiple indicators signalling continued weakness. The valuation, whilst appearing "Attractive" in relative terms, reflects the market's deep concerns about earnings sustainability and business model viability. The proprietary Mojo Score of 23 out of 100 places the stock firmly in "Strong Sell" territory, reflecting the confluence of negative factors.

The investment case is further weakened by the stock's classification as "High Risk Low Return," with negative risk-adjusted returns of -0.22 over the past year and extreme volatility of 81.84%. The high beta of 1.50 means the stock will likely amplify any market weakness, whilst providing limited upside participation during market rallies given the operational headwinds.

Outlook: Critical Juncture Demands Operational Turnaround

NDA Securities stands at a critical juncture, with the Q2 FY26 results highlighting severe operational challenges that threaten the company's near-term viability. The path forward requires immediate action to stabilise revenues, restore operating margins, and rebuild investor confidence. The company must demonstrate in Q3 FY26 that the recent quarter was an aberration rather than the beginning of a structural decline.

The coming quarters will be decisive for NDA Securities. Investors should closely monitor Q3 FY26 results for signs of stabilisation, particularly in revenue trends and operating margins. The company's ability to control costs, rebuild its distribution franchise, and restore profitability will determine whether the current valuation represents a genuine opportunity or a value trap.