New Light Industries Q3 FY26: Revenue Plunge Signals Deep Operational Distress

The deterioration in financial performance has been precipitous and broad-based. Net sales in Q3 FY26 stood at ₹1.39 crores, down 82.02% year-on-year from ₹7.73 crores in the corresponding quarter last year. This marks the continuation of a worrying trend, with nine-month FY2026 revenue at ₹5.86 crores declining 57.75% compared to the prior-year period. Operating margins compressed sharply to 2.16% in Q3 FY26 from 7.24% a year earlier, whilst profit after tax margins contracted to 1.44% from 7.12%, indicating severe pressure on both the top line and bottom line simultaneously.

Financial Performance: A Collapsing Revenue Base

The quarterly trend analysis reveals the magnitude of New Light Industries' operational crisis. After posting relatively robust revenue of ₹7.73 crores in Q3 FY25, the company experienced a dramatic sequential collapse beginning in Q4 FY25, when sales plunged 56.40% to ₹3.37 crores. The deterioration accelerated through FY2026, with Q1 FY26 revenue of ₹3.18 crores, Q2 FY26 at ₹1.29 crores, and Q3 FY26 further declining to ₹1.39 crores—a level representing just 18% of the revenue achieved in Q3 FY25.

Profitability metrics have deteriorated in lockstep with revenue contraction. Operating profit before depreciation, interest, and tax (PBDIT) excluding other income collapsed to ₹0.03 crores in Q3 FY26—the lowest quarterly level on record—from ₹0.56 crores in Q3 FY25. The company generated minimal other income of ₹0.00 crores in Q3 FY26, whilst depreciation remained stable at ₹0.01 crores. With negligible interest expenses, profit before tax stood at just ₹0.02 crores. Notably, the company paid zero tax in Q3 FY26, resulting in net profit matching pre-tax profit at ₹0.02 crores.

Operational Challenges: Weak Returns and Capital Inefficiency

Beyond the immediate quarterly distress, New Light Industries exhibits structural weaknesses in capital efficiency and profitability. The company's average return on equity (ROE) stands at just 3.38%, whilst the latest ROE of 7.35% remains well below industry benchmarks. Importantly, higher ROE values indicate better capital efficiency and profitability—New Light's single-digit ROE reflects poor returns generated on shareholder capital, a significant concern for potential investors. The average return on capital employed (ROCE) is deeply negative at -3.82%, though the latest ROCE has improved to 6.40%, suggesting some recent operational stabilisation that has yet to translate into sustained performance.

The balance sheet reveals both concerning trends and modest positives. Shareholder funds increased substantially to ₹14.39 crores in FY25 from ₹3.30 crores in FY24, primarily driven by a capital increase (share capital rose from ₹2.20 crores to ₹8.76 crores) and improved reserves (from -₹0.11 crores to ₹5.63 crores). Long-term debt remains minimal at ₹0.06 crores, whilst current liabilities declined sharply to ₹0.60 crores from ₹7.88 crores, largely due to reduced trade payables. However, current assets stood at ₹14.56 crores, suggesting reasonable liquidity on paper, though the quality and realisability of these assets remains questionable given the operational performance.

Industry Context: Trading Sector Headwinds

New Light Industries operates in the trading and distributors sector, a highly competitive and margin-sensitive industry where scale and operational efficiency are paramount. The company's dramatic revenue decline suggests it may be losing market share, facing client attrition, or experiencing disruption in its supply chains or distribution networks. The sector typically requires strong working capital management and consistent cash flow generation—areas where New Light is clearly struggling based on its deteriorating debtors turnover and cash position.

The company's historical performance shows volatility, with annual revenue swinging from ₹6.00 crores in FY22 and FY23 to ₹12.00 crores in FY24 and ₹17.00 crores in FY25, before collapsing in the current fiscal year. This erratic pattern raises questions about the sustainability and predictability of the business model. The five-year sales growth rate of 15.52% masks significant year-to-year fluctuations and does not reflect the current deterioration.

Peer Comparison: Relative Positioning in a Struggling Sector

New Light Industries' peer comparison reveals a sector characterised by weak profitability and challenging fundamentals. Whilst the company maintains a positive ROE of 3.38%—higher than most peers—this remains inadequate in absolute terms. The company's zero debt position is a relative strength, eliminating financial leverage risk, but this advantage is overshadowed by operational distress. The low P/E multiple of 11.60x reflects market scepticism rather than value, particularly given the collapsing earnings trajectory.

Valuation Analysis: Discount Reflects Deteriorating Fundamentals

At the current price of ₹1.45, New Light Industries trades at a P/E ratio of 11.60x trailing twelve-month earnings, significantly below the industry average of 22x. However, this apparent discount is deceptive, as the earnings base is rapidly eroding. The price-to-book ratio of 0.85x suggests the market values the company below its stated book value of ₹1.64 per share, reflecting concerns about asset quality and future earning power. The EV/EBITDA multiple of 12.52x and EV/Sales ratio of 0.80x appear reasonable on the surface but must be viewed in the context of sharply declining revenues and profitability.

The company's valuation grade of "Very Attractive" appears misleading when considered alongside the deteriorating operational performance. Whilst the stock has declined 81.62% from its 52-week high of ₹7.89, this correction reflects fundamental deterioration rather than creating a compelling entry point. The PEG ratio of 0.46x suggests growth at a reasonable price, but this metric loses relevance when growth has turned sharply negative.

Shareholding Pattern: Minimal Institutional Participation

The shareholding pattern reveals exceptionally low promoter holding of just 5.08%, which has remained static over the past five quarters. This minimal promoter stake raises governance concerns and questions about management's commitment to the business. More concerning is the complete absence of institutional investors—foreign institutional investors (FIIs), mutual funds, insurance companies, and other domestic institutional investors collectively hold 0.00% of the company. The remaining 94.92% is held by non-institutional investors, suggesting this is largely a retail-driven stock lacking professional investor validation.

Stock Performance: Severe Underperformance Across Timeframes

New Light Industries' stock performance reflects the underlying business deterioration. Whilst the stock has shown short-term strength with gains of 2.11% in the past day and 9.85% over the past week—outperforming the Sensex—these recent bounces occur from severely depressed levels. Over meaningful timeframes, the underperformance is stark: the stock has declined 21.62% over six months (vs Sensex +2.81%), lost 22.87% over two years (vs Sensex +15.72%), and fallen 28.04% over five years (vs Sensex +60.64%). The negative alpha of -88.68% over five years quantifies the massive value destruction relative to the broader market.

Technical indicators paint a cautious picture. The stock currently trades in a "Mildly Bearish" trend, having transitioned from "Bearish" on February 2, 2026. The stock trades below all major moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating persistent downward pressure. Immediate support lies at the 52-week low of ₹1.20, whilst resistance appears at the 20-day moving average of ₹1.34. The technical setup suggests any rallies are likely to face selling pressure at higher levels.

Investment Thesis: Multiple Red Flags Outweigh Valuation Appeal

The investment case for New Light Industries is severely compromised by multiple structural weaknesses. The company's proprietary Mojo score of 20 out of 100 places it firmly in "Strong Sell" territory, reflecting the confluence of negative factors. The quality assessment of "Below Average" highlights weak long-term financial performance, with an average ROCE of -3.82% and average ROE of just 3.38%—both well below acceptable thresholds for capital efficiency.

The financial trend is unambiguously "Negative," driven by collapsing nine-month revenue (down 57.75%), record-low cash positions, deteriorating debtors turnover, and compressed profitability metrics across the board. The technical trend remains "Mildly Bearish," with the stock trading below all significant moving averages and facing resistance at multiple levels. The combination of negative financial trends, bearish technicals, weak quality metrics, and deteriorating operational performance creates a highly unfavourable risk-reward profile.

Key Strengths & Risk Factors

Outlook: What to Watch

The forward outlook for New Light Industries remains highly uncertain and skewed to the downside. The company needs to demonstrate immediate revenue stabilisation and margin recovery to prevent further value erosion. Management commentary on the causes of the revenue collapse and specific turnaround plans will be critical. Investors should monitor quarterly results closely for any signs of operational stabilisation, whilst remaining cognisant that the current trajectory suggests continued distress in the near term.