The stock has collapsed 76.46% over the past year, trading at ₹17.95 as of January 28, 2026, significantly underperforming the Sensex's 8.49% gain by a massive 84.95 percentage points. The company's technical indicators remain firmly bearish, with the stock trading below all key moving averages and showing no signs of stabilisation. With a proprietary Mojo Score of just 17 out of 100 and a "Strong Sell" rating, Nettlinx represents one of the most distressed situations in the telecom services sector.
Financial Performance: A Catastrophic Deterioration
Nettlinx's Q2 FY26 results reveal a company in severe financial distress across every meaningful metric. Net sales declined 26.58% year-on-year to ₹5.33 crores, whilst also showing a sequential increase of 10.58% from Q1 FY26's ₹4.82 crores. However, this modest quarter-on-quarter improvement in revenue provides little comfort given the catastrophic collapse in profitability. The operating profit margin (excluding other income) turned deeply negative at -3.75% in Q2 FY26, a dramatic reversal from the 21.76% margin achieved in the same quarter last year.
The profit before tax plummeted to a loss of ₹5.29 crores in Q2 FY26 from a profit of ₹1.08 crores in Q2 FY25, representing a complete evaporation of profitability. The PAT margin collapsed to an unprecedented -99.06% from a positive 7.85% in the year-ago quarter. On a half-yearly basis for H1 FY26, the company reported a consolidated net loss of ₹5.76 crores compared to a profit of ₹1.70 crores in H1 FY25, reflecting a catastrophic 438.82% decline in profitability.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 (Q2) | 5.33 | +10.58% | -5.28 | +1,000.00% | -99.06% |
| Jun'25 (Q1) | 4.82 | -52.23% | -0.48 | +220.00% | -9.96% |
| Mar'25 (Q4) | 10.09 | +12.61% | -0.15 | -102.24% | -1.49% |
| Dec'24 (Q3) | 8.96 | +23.42% | 6.71 | +1,056.90% | 74.89% |
| Sep'24 (Q2) | 7.26 | +0.69% | 0.58 | -48.21% | 7.85% |
| Jun'24 (Q1) | 7.21 | -39.26% | 1.12 | -67.72% | 15.53% |
| Mar'24 (Q4) | 11.87 | — | 3.47 | — | 29.32% |
The quality of earnings has deteriorated sharply, with employee costs rising to ₹1.95 crores in Q2 FY26 from ₹1.45 crores in Q2 FY25, representing a 34.48% increase even as revenues contracted. Interest expenses remained elevated at ₹0.27 crores, whilst depreciation stood at ₹0.23 crores. The operating profit before depreciation, interest, and tax (excluding other income) turned negative at ₹0.20 crores, highlighting fundamental operational challenges beyond financial engineering.
Critical Alert: Operational Losses Accelerating
The company's operating profit margin (excluding other income) has collapsed from +21.76% in Q2 FY25 to -3.75% in Q2 FY26, indicating severe operational stress. With gross profit margins at -94.93% and PAT margins at -99.06%, the company is burning cash at an alarming rate. The absence of meaningful other income in Q2 FY26 (just ₹0.01 crores vs ₹0.05 crores in Q2 FY25) further exposes the underlying operational weakness.
Operational Challenges: Weak Capital Efficiency and Declining Returns
Nettlinx's operational metrics paint a picture of a company struggling with fundamental business model challenges. The average return on equity (ROE) over the past five years stands at a weak 7.16%, significantly below industry standards and indicating poor capital efficiency. Whilst the latest ROE improved to 9.11%, this remains insufficient for a company in a competitive telecom services environment. The average return on capital employed (ROCE) of 8.18% further underscores the company's inability to generate adequate returns on invested capital.
The company's balance sheet reveals concerning trends. Shareholder funds increased to ₹62.41 crores as of March 2025 from ₹50.43 crores in March 2024, primarily driven by a capital infusion (share capital doubled from ₹11.76 crores to ₹24.18 crores). However, reserves and surplus grew modestly to ₹38.23 crores from ₹26.26 crores, reflecting the limited profit retention given the recent losses. Long-term debt declined to ₹0.26 crores from ₹0.61 crores, providing some relief on the leverage front, though current liabilities surged to ₹29.43 crores from ₹21.02 crores.
Capital Efficiency Concerns
The company's average sales to capital employed ratio of just 0.55 times indicates significant underutilisation of assets. Fixed assets increased substantially to ₹20.11 crores in March 2025 from ₹9.96 crores in March 2024, suggesting recent capital expenditure that has yet to translate into revenue growth. With current assets at ₹41.28 crores and current liabilities at ₹29.43 crores, the working capital position remains adequate, but the negative operating cash flow trend raises sustainability concerns.
The company's five-year sales growth stands at a negative 8.90%, whilst EBIT growth over the same period declined 6.51%, highlighting a multi-year deterioration in business fundamentals. The average EBIT to interest coverage ratio of 3.98 times, whilst technically adequate, has likely weakened significantly given recent losses. The debt to EBITDA ratio of 4.38 times (on average) suggests elevated leverage relative to cash generation capability, particularly concerning given the recent negative EBITDA quarters.
Industry Context: Structural Headwinds in Telecom Services
The Indian telecom services sector has witnessed intense consolidation and pricing pressure over the past several years, creating a challenging environment for smaller players like Nettlinx. The company operates in a highly competitive landscape dominated by well-capitalised incumbents with superior scale advantages. Nettlinx's micro-cap status (₹43.00 crores market capitalisation) limits its ability to invest in technology upgrades and compete effectively for large contracts.
The broader telecom services sector delivered a negative 10.98% return over the past year, reflecting industry-wide challenges. However, Nettlinx's 76.46% decline significantly underperformed the sector by 65.48 percentage points, indicating company-specific issues beyond macro headwinds. The company's institutional holding stands at a negligible 0.01%, reflecting minimal confidence from sophisticated investors. The absence of any FII, mutual fund, or insurance company holdings further underscores the lack of institutional support.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Nettlinx | 8.15 | 0.74 | 7.16 | 0.19 | — |
| M T N L | NA (Loss Making) | -0.07 | 0.00 | -1.18 | — |
| STL Networks | 32.41 | 0.87 | 109.08 | 0.00 | — |
| Reliance Communi | NA (Loss Making) | -0.00 | 0.00 | -0.48 | — |
| GTL | NA (Loss Making) | -0.02 | 0.00 | -0.89 | — |
| Steelman Telecom | NA (Loss Making) | 2.29 | 0.00 | 2.26 | — |
Nettlinx's peer comparison reveals a sector plagued by distress, with multiple companies reporting losses and negative book values. Whilst Nettlinx's P/E ratio of 8.15 times appears attractive on the surface, this valuation reflects the market's deep scepticism about earnings sustainability given recent losses. The company's ROE of 7.16% lags significantly behind STL Networks' exceptional 109.08%, highlighting Nettlinx's inferior competitive positioning. The price-to-book ratio of 0.74 times suggests the market values the company below its stated net asset value, implying concerns about asset quality or future earnings power.
Valuation Analysis: Attractive Multiples Mask Fundamental Weakness
Despite the operational distress, Nettlinx's valuation metrics appear superficially attractive. The stock trades at a P/E ratio of 8.15 times (based on trailing twelve months), significantly below the industry average of 27 times. However, this low multiple reflects the market's expectation of continued losses rather than a genuine value opportunity. The price-to-book ratio of 0.74 times suggests the stock trades at a 26% discount to book value, typically a sign of deep value. Yet, in Nettlinx's case, this discount likely reflects concerns about asset realisability and future profitability.
The EV/EBITDA multiple of 18.70 times appears elevated, particularly concerning given the negative EBITDA in recent quarters. The EV/Sales ratio of 1.88 times suggests the market still assigns some value to the revenue stream, though this may prove optimistic if losses continue. The company's valuation grade has oscillated between "Very Attractive" and "Expensive" over recent months, reflecting high volatility and market uncertainty about the company's prospects.
The stock's 52-week range of ₹16.00 to ₹100.00 illustrates extreme volatility, with the current price of ₹17.95 sitting just 12.19% above the 52-week low and a staggering 82.05% below the 52-week high. This dramatic decline from peak levels reflects the market's growing recognition of the company's deteriorating fundamentals. The absence of any dividend yield further limits the stock's appeal to income-focused investors.
Shareholding Pattern: Stable Promoter Base Amidst Retail Exodus
Nettlinx's shareholding pattern reveals a stable promoter base holding 50.41% as of December 2025, unchanged from the previous quarter. The promoter holding had increased to 50.41% in June 2025 from 47.92% in March 2025, suggesting promoter confidence or potential support during the distressed period. Key promoters include Dr Manohar Lokareddy (32.42%), Rohith Loka Reddy (7.12%), and Saranya Loka Reddy (5.33%).
| Quarter | Promoter % | QoQ Change | FII % | MF % | DII % | Public % |
|---|---|---|---|---|---|---|
| Dec'25 | 50.41 | 0.00 | 0.00 | 0.00 | 0.01 | 49.59 |
| Sep'25 | 50.41 | 0.00 | 0.00 | 0.00 | 0.01 | 49.59 |
| Jun'25 | 50.41 | +2.49 | 0.00 | 0.00 | 0.01 | 49.59 |
| Mar'25 | 47.92 | -3.84 | 0.00 | 0.00 | 0.01 | 52.07 |
| Dec'24 | 51.76 | — | 0.00 | 0.00 | 0.77 | 47.46 |
The complete absence of FII and mutual fund holdings signals a lack of institutional confidence in the company's prospects. The other DII holdings collapsed from 0.77% in December 2024 to just 0.01% in subsequent quarters, representing a near-complete institutional exit. The non-institutional (primarily retail) shareholding of 49.59% has remained relatively stable, though the dramatic stock price decline suggests significant wealth destruction for this investor base.
The minimal pledged shares at 0.62% provides some comfort that promoters are not under immediate financial stress requiring share pledging. However, the absence of institutional support and the promoter's inability to attract sophisticated investors raises questions about the company's strategic direction and turnaround prospects.
Stock Performance: Severe Underperformance Across All Timeframes
Nettlinx's stock performance has been catastrophic across virtually every timeframe, with the stock delivering negative returns that significantly underperform both the broader market and its sector peers. Over the past year, the stock collapsed 76.46% compared to the Sensex's 8.49% gain, resulting in a negative alpha of 84.95 percentage points. The three-year performance shows a 65.04% decline versus the Sensex's 38.79% gain, whilst the five-year return stands at -45.85% against the Sensex's 75.67% advance.
| Period | Nettlinx Return | Sensex Return | Alpha | Sector Return |
|---|---|---|---|---|
| 1 Week | +2.22% | +0.53% | +1.69% | — |
| 1 Month | -2.45% | -3.17% | +0.72% | — |
| 3 Months | -19.33% | -2.70% | -16.63% | — |
| 6 Months | -27.24% | +1.80% | -29.04% | — |
| YTD | +2.16% | -3.37% | +5.53% | — |
| 1 Year | -76.46% | +8.49% | -84.95% | -10.98% |
| 2 Years | -80.26% | +16.47% | -96.73% | — |
| 3 Years | -65.04% | +38.79% | -103.83% | — |
| 5 Years | -45.85% | +75.67% | -121.52% | — |
The stock's risk-adjusted return over the past year stands at -1.35, with volatility of 56.84% classifying it as a "High Risk Low Return" investment. The stock's beta of 1.50 indicates it is 50% more volatile than the broader market, amplifying downside movements during market corrections. The stock currently trades below all key moving averages—5-day (₹17.80), 20-day (₹17.95), 50-day (₹18.79), 100-day (₹21.02), and 200-day (₹24.68)—confirming the entrenched bearish trend.
Technical indicators uniformly point to continued weakness. The MACD shows mildly bullish signals on the weekly chart but remains bearish on monthly timeframes. Bollinger Bands indicate mildly bearish momentum, whilst the KST oscillator remains bearish across both weekly and monthly periods. The stock entered its current bearish trend on November 4, 2025, at ₹22.80, and has since declined 21.49% to current levels.
Investment Thesis: Multiple Red Flags Outweigh Valuation Appeal
Nettlinx's investment thesis is severely compromised by a confluence of negative factors spanning operational performance, financial health, technical momentum, and quality metrics. The company's Mojo Score of 17 out of 100 places it firmly in "Strong Sell" territory, with the proprietary rating system identifying multiple structural concerns that outweigh any superficial valuation appeal.
The quality assessment classifies Nettlinx as a "Below Average" company based on long-term financial performance. The five-year sales growth of -8.90% and EBIT growth of -6.51% underscore multi-year business deterioration. The average ROCE of 8.18% and ROE of 7.16% reflect poor capital efficiency, whilst the average EBIT to interest coverage of 3.98 times provides minimal cushion during periods of operational stress. The debt to EBITDA ratio of 4.38 times appears elevated, particularly concerning given recent negative EBITDA quarters.
The financial trend analysis shows a "Negative" designation as of December 2025, with the latest six-month net sales declining 37.24% and PAT turning deeply negative. The debtors turnover ratio hit a concerning low of 1.28 times on a half-yearly basis, indicating potential working capital stress and collection challenges. The company's financial trend has oscillated between "Outstanding," "Positive," "Flat," and "Negative" over recent quarters, highlighting operational volatility and lack of consistent execution.
Key Strengths
- Low debt to equity ratio of 0.19 limits financial leverage risk
- Stable promoter holding at 50.41% demonstrates insider confidence
- Recent capital infusion (share capital doubled) provides liquidity buffer
- Superficially attractive valuation multiples (P/E 8.15x, P/BV 0.74x)
- Minimal pledged shares (0.62%) indicates promoter financial stability
Key Concerns
- Catastrophic Q2 FY26 loss of ₹5.28 crores vs profit of ₹0.58 crores YoY
- Operating margins turned deeply negative at -3.75% in Q2 FY26
- Revenue declining 26.58% YoY with no clear turnaround catalyst
- Complete absence of institutional investor support (0.01% holding)
- Weak ROE of 7.16% and ROCE of 8.18% indicate poor capital efficiency
- Stock down 76.46% over past year with bearish technical setup
- Negative financial trend with deteriorating working capital metrics
- Below average quality grade reflecting weak long-term fundamentals
Outlook: Critical Juncture Requires Decisive Action
Nettlinx stands at a critical juncture where the company must demonstrate tangible operational improvement to restore investor confidence. The path forward requires addressing the fundamental business model challenges that have led to the current crisis. Management must articulate a clear turnaround strategy encompassing cost rationalisation, revenue stabilisation, and margin recovery. Without decisive action, the company risks further deterioration and potential balance sheet stress.
Positive Catalysts to Watch
- Return to positive operating margins in upcoming quarters
- Revenue stabilisation and sequential growth momentum
- Cost optimisation initiatives showing tangible results
- Institutional investor interest emerging (FII/MF buying)
- Technical trend reversal above key moving averages
Red Flags to Monitor
- Further deterioration in Q3 FY26 results
- Continued negative operating cash flow
- Additional promoter stake reduction or pledging
- Working capital stress manifesting in liquidity issues
- Stock breaking below ₹16.00 (52-week low support)
- Further institutional investor exits
"With mounting losses, negative operating margins, and a bearish technical setup, Nettlinx represents a high-risk situation where the attractive valuation multiples mask fundamental operational distress requiring immediate management action."
The upcoming Q3 FY26 results will serve as a critical test of management's ability to stem the losses and stabilise operations. Investors should monitor whether the company can return to positive operating margins, demonstrate revenue growth, and improve working capital metrics. The absence of institutional support and the weak quality grade suggest a long road ahead before the company regains market confidence.
The Verdict: Exit Recommended for Risk-Averse Investors
Score: 17/100
For Fresh Investors: Avoid initiating positions until the company demonstrates sustained operational improvement with at least two consecutive quarters of profitability and positive operating margins. The current risk-reward profile is highly unfavourable.
For Existing Holders: Consider exiting positions to preserve capital. The combination of mounting losses, negative financial trends, bearish technicals, and absence of institutional support creates a high-risk environment. Any bounce towards ₹20-22 levels could be used as exit opportunities.
Rationale: Nettlinx's catastrophic Q2 FY26 results, characterised by a ₹5.28 crore loss and negative operating margins, combined with weak ROE (7.16%), deteriorating financial trends, and bearish technical setup, create an unfavourable investment profile. Whilst valuation multiples appear attractive superficially, they reflect justified concerns about earnings sustainability rather than genuine value. The complete absence of institutional support (0.01% holding) and below-average quality grade underscore structural challenges requiring significant time to address. The 76.46% stock price decline over the past year reflects the market's recognition of these fundamental weaknesses.
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. Past performance is not indicative of future results. The views expressed herein are subject to change without notice.
