The quarter-on-quarter decline comes after an exceptional Q1 FY26 performance, where revenues surged 89.03% and profits jumped 354.55% sequentially. The current quarter's results suggest normalisation of business activity following that extraordinary performance, though the company maintains positive momentum on a year-on-year basis. The stock has delivered remarkable long-term returns, surging 140.93% over the past year and an extraordinary 3,724.66% over five years, significantly outperforming the Sensex across all timeframes.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 13.18 | -33.47% | 1.29 | -42.41% | 9.79% |
| Jun'25 | 19.81 | +89.03% | 2.24 | -354.55% | 11.31% |
| Mar'25 | 10.48 | -21.85% | -0.88 | -193.62% | -8.40% |
| Dec'24 | 13.41 | +10.83% | 0.94 | -14.55% | 7.01% |
| Sep'24 | 12.10 | +30.39% | 1.10 | +46.67% | 9.09% |
| Jun'24 | 9.28 | -18.45% | 0.75 | +733.33% | 8.08% |
| Mar'24 | 11.38 | — | 0.09 | — | 0.79% |
Financial Performance: Sequential Contraction Masks Underlying Strength
In Q2 FY26, Nidhi Granites reported net sales of ₹13.18 crores, declining 33.47% quarter-on-quarter from the exceptional ₹19.81 crores recorded in Q1 FY26. However, the year-on-year comparison reveals a more favourable picture, with revenues growing 8.93% from ₹12.10 crores in Q2 FY25. The sequential decline appears to be a normalisation following Q1's extraordinary 89.03% surge, which had elevated the comparative base significantly.
Net profit for Q2 FY26 stood at ₹1.29 crores, down 42.41% from Q1 FY26's ₹2.24 crores but maintaining a healthy 17.27% year-on-year growth over Q2 FY25's ₹1.10 crores. The PAT margin compressed to 9.79% from 11.31% in the previous quarter, though it remains broadly in line with the company's historical performance range of 8-11%. On a half-yearly basis for H1 FY26, the company delivered net sales of ₹32.99 crores, representing robust growth of 54.30% compared to the corresponding period.
Operating profit excluding other income remained resilient at ₹2.06 crores with a margin of 15.63%, marginally down from 16.0% in Q1 FY26 but significantly improved from the 2.73% recorded in Q2 FY25. This margin stability demonstrates the company's ability to manage operational costs effectively despite revenue volatility. Employee costs increased to ₹0.99 crores from ₹0.80 crores quarter-on-quarter, whilst interest expenses remained minimal at ₹0.05 crores, reflecting the company's low leverage profile with a debt-to-equity ratio of just 0.01.
Profitability Dynamics: Tax Rate Normalisation Impacts Bottom Line
A notable feature of Q2 FY26 was the tax rate normalisation to 29.51% from 26.56% in the previous quarter, which contributed to the sharper decline in net profit relative to pre-tax profit. The effective tax rate has shown considerable variation across quarters, ranging from 3.30% in Mar'25 to 43.75% in Mar'24, suggesting timing differences in tax provisions and payments. The current quarter's tax rate of 29.51% aligns more closely with standard corporate tax rates, indicating a return to normalised tax treatment.
Margin Resilience Despite Revenue Volatility
Nidhi Granites has demonstrated impressive margin stability in Q2 FY26, maintaining operating margins above 15% despite a 33% sequential decline in revenues. This resilience reflects strong operational cost control and suggests the business model's ability to preserve profitability even during periods of revenue normalisation. The company's gross profit margin of 15.78% and PAT margin of 9.79% remain healthy by historical standards.
Balance Sheet Quality: Conservative Capital Structure
Nidhi Granites maintains a robust balance sheet with shareholder funds of ₹14.88 crores as of March 2025, comprising share capital of ₹8.00 crores and reserves of ₹6.88 crores. The company's conservative financial structure is evident from its minimal long-term debt of just ₹0.08 crores, resulting in an exceptionally low net debt-to-equity ratio of 0.01. This debt-light approach provides financial flexibility and reduces vulnerability to interest rate fluctuations.
Fixed assets stood at ₹4.84 crores as of March 2025, more than doubling from ₹2.24 crores in the previous year, indicating capital investments in business infrastructure. Current assets of ₹14.73 crores were partially offset by current liabilities of ₹6.78 crores, providing adequate working capital cushion. The company's book value per share of ₹18.59 contrasts sharply with the current market price of ₹426.45, resulting in a price-to-book ratio of 23.40x, suggesting significant market expectations embedded in the valuation.
Return on Equity: Strong Capital Efficiency
Nidhi Granites has delivered an average return on equity (ROE) of 19.34% over recent periods, demonstrating efficient utilisation of shareholder capital. The latest ROE of 12.84% remains healthy, though below the historical average, reflecting the impact of capital increases and recent quarter's profit moderation. Higher ROE indicates superior capital efficiency and wealth creation capability for shareholders.
The Valuation Conundrum: Premium Pricing Raises Concerns
Nidhi Granites trades at a price-to-earnings ratio of 96.97x based on trailing twelve-month earnings, representing a significant premium to the miscellaneous sector's average P/E of approximately 9x. This valuation multiple appears stretched given the company's modest absolute profit levels and recent sequential performance decline. The enterprise value-to-EBITDA multiple of 64.86x and EV-to-sales ratio of 6.12x further underscore the premium valuation territory.
The company's valuation grade has been classified as "Very Expensive" since October 2023, with the current price-to-book ratio of 23.40x significantly exceeding peer averages. Whilst the stock has delivered exceptional historical returns—surging 3,724.66% over five years and 140.93% over the past year—the current valuation leaves limited margin of safety and heightened sensitivity to any earnings disappointments. The PEG ratio of 1.93x suggests the growth rate does not fully justify the earnings multiple.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity |
|---|---|---|---|---|
| Nidhi Granites | 96.97 | 23.40 | 19.34 | 0.01 |
| Marble City | 48.92 | 6.21 | 2.23 | 1.63 |
| Infollion Research | 30.52 | — | — | — |
| Felix Industries | 41.57 | — | — | — |
| Gretex Industries | 189.95 | — | — | — |
Compared to peers in the miscellaneous sector, Nidhi Granites commands the highest ROE at 19.34% versus Marble City's 2.23%, justifying some valuation premium for superior capital efficiency. However, the P/E multiple of 96.97x significantly exceeds most peers, with only Gretex Industries trading at a higher multiple of 189.95x. The company's debt-free status (debt-to-equity of 0.01) provides a competitive advantage over Marble City's more leveraged balance sheet (debt-to-equity of 1.63).
Shareholding Pattern: Promoter Stake Reduction Raises Questions
A significant development in recent quarters has been the sharp reduction in promoter holding from 66.75% in March 2025 to 40.26% in June 2025, a decline of 26.49 percentage points. The promoter stake has remained stable at 40.26% in the subsequent quarter ending September 2025. This substantial dilution warrants attention, though the reasons for the reduction are not immediately apparent from the available data.
| Quarter | Promoter % | QoQ Change | Non-Institutional % | FII % | MF % |
|---|---|---|---|---|---|
| Sep'25 | 40.26% | 0.00% | 33.25% | 0.00% | 0.00% |
| Jun'25 | 40.26% | -26.49% | 33.25% | 0.00% | 0.00% |
| Mar'25 | 66.75% | 0.00% | 33.25% | 0.00% | 0.00% |
| Dec'24 | 66.75% | 0.00% | 33.25% | 0.00% | 0.00% |
| Sep'24 | 66.75% | — | 33.25% | 0.00% | 0.00% |
The shareholding structure reveals complete absence of institutional investors, with zero holdings from foreign institutional investors (FIIs), mutual funds, insurance companies, and other domestic institutional investors (DIIs). The non-institutional shareholding has remained stable at 33.25% across all reported quarters. The lack of institutional participation is notable for a company with a market capitalisation of ₹348 crores and may reflect concerns about liquidity, corporate governance, or business model clarity.
Stock Performance: Exceptional Returns Amidst High Volatility
Nidhi Granites has delivered extraordinary returns across multiple timeframes, significantly outperforming broader market indices. Over the past year, the stock has surged 140.93% compared to the Sensex's 9.48% gain, generating alpha of 131.45 percentage points. The three-year returns are even more remarkable at 1,145.11%, whilst the five-year return of 3,724.66% represents a 38-fold multiplication of investor capital.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.30% | 0.96% | -4.26% |
| 1 Month | 9.39% | 0.86% | +8.53% |
| 3 Months | 62.77% | 4.18% | +58.59% |
| 6 Months | 149.39% | 2.85% | +146.54% |
| YTD | 89.45% | 8.36% | +81.09% |
| 1 Year | 140.93% | 9.48% | +131.45% |
| 3 Years | 1,145.11% | 37.31% | +1,107.80% |
| 5 Years | 3,724.66% | 91.65% | +3,633.01% |
However, these exceptional returns come with elevated volatility. The stock exhibits a beta of 1.50, indicating it moves 50% more than the broader market in either direction. With an annual volatility of 47.86% compared to the Sensex's 12.26%, Nidhi Granites falls into the "high risk, high return" category. The risk-adjusted return of 2.94 over the past year, whilst positive, reflects the heightened volatility investors must endure to capture the outsized gains.
Recent price action shows the stock trading at ₹426.45, approximately 11.29% below its 52-week high of ₹480.75 but a remarkable 394.72% above its 52-week low of ₹86.20. The stock currently trades below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, suggesting near-term technical weakness despite the strong long-term uptrend. Daily trading volumes remain thin at just 12 shares on the most recent trading session, highlighting liquidity concerns.
Technical Outlook: Bullish Trend Amidst Near-Term Consolidation
From a technical perspective, Nidhi Granites maintains an overall "Bullish" trend classification, having transitioned to this status on July 18, 2025, from a "Mildly Bullish" designation. Weekly indicators show MACD and KST in bullish territory, whilst Bollinger Bands signal mildly bullish conditions. However, monthly indicators present a more mixed picture, with KST showing mildly bearish signals and Dow Theory indicating no clear trend.
The stock's position below multiple moving averages (5-day MA at ₹440.41, 20-day MA at ₹442.55) suggests near-term consolidation or correction following the extraordinary rally. Immediate support lies at the 52-week low of ₹86.20, whilst resistance is encountered at the 20-day moving average around ₹442.55. The technical setup indicates potential for continued volatility, with the stock needing to reclaim moving average levels to resume its upward trajectory convincingly.
"Nidhi Granites exemplifies the high-risk, high-reward dynamic of micro-cap investing—delivering exceptional long-term returns whilst demanding tolerance for significant volatility and valuation uncertainty."
Investment Thesis: Quality Fundamentals Meet Valuation Concerns
Nidhi Granites presents a complex investment proposition. The company's quality grade of "Good" reflects strong long-term financial performance, with sales growing at an annual rate of 175.82% over five years and operating profit expanding at 55.32%. The average ROE of 19.34% demonstrates superior capital efficiency, whilst the debt-free balance sheet provides financial stability and flexibility.
The financial trend for Q2 FY26 is classified as "Positive", supported by half-yearly net sales growth of 54.30% and profit before tax (excluding other income) growth of 134.70% compared to the previous four-quarter average. The half-yearly ROCE reached its highest level at 26.43%, indicating improving capital productivity. These fundamental strengths underpin the company's "Buy" rating with an overall score of 71 out of 100.
Key Strengths
- Exceptional Long-Term Growth: Sales CAGR of 175.82% over five years demonstrates robust business expansion and market opportunity capture.
- Superior Capital Efficiency: Average ROE of 19.34% significantly exceeds peer group averages, indicating effective shareholder capital utilisation.
- Debt-Free Balance Sheet: Net debt-to-equity ratio of 0.01 provides financial flexibility and eliminates interest burden on profitability.
- Margin Resilience: Operating margins above 15% in Q2 FY26 despite revenue decline demonstrate strong cost management capabilities.
- Strong Half-Yearly Performance: H1 FY26 sales growth of 54.30% indicates sustained business momentum on a cumulative basis.
- Technical Strength: Bullish technical trend with positive MACD and KST indicators supporting continued upward potential.
- Extraordinary Historical Returns: Five-year returns of 3,724.66% demonstrate exceptional wealth creation for long-term shareholders.
Key Concerns
- Very Expensive Valuation: P/E ratio of 96.97x and P/BV of 23.40x significantly exceed sector averages, leaving limited margin of safety.
- Sequential Performance Decline: Q2 FY26 revenues down 33.47% QoQ and profits down 42.41% QoQ raise concerns about business sustainability.
- Promoter Stake Reduction: Sharp 26.49 percentage point decline in promoter holding from 66.75% to 40.26% requires explanation and monitoring.
- Zero Institutional Participation: Complete absence of FII, mutual fund, and insurance holdings raises questions about institutional confidence.
- High Volatility: Beta of 1.50 and annual volatility of 47.86% indicate significant price fluctuation risk unsuitable for conservative investors.
- Liquidity Concerns: Minimal daily trading volumes (12 shares on recent day) create challenges for entry and exit at desired prices.
- Elevated Pledged Shares: Promoter pledging of 40.26% of total shareholding raises corporate governance concerns and financial stress signals.
Outlook: Monitoring Points for Investors
Positive Catalysts
- Revenue Stabilisation: Return to sequential growth in Q3 FY26 would confirm Q2's decline as temporary normalisation rather than trend reversal.
- Margin Expansion: Operating margins sustained above 15% or expanding further would demonstrate pricing power and operational efficiency.
- Institutional Entry: Participation from mutual funds or FIIs would validate investment thesis and improve liquidity profile.
- Promoter Clarity: Explanation for stake reduction and commitment to no further dilution would restore confidence in management alignment.
- Improved Liquidity: Increasing daily trading volumes would facilitate smoother entry and exit for investors.
Red Flags to Watch
- Continued Sequential Decline: Further revenue or profit declines in Q3 FY26 would signal structural business challenges rather than temporary volatility.
- Margin Compression: Operating margins falling below 10% would indicate pricing pressure or cost inflation concerns.
- Further Promoter Reduction: Additional stake sales by promoters would raise serious questions about long-term commitment and business prospects.
- Increased Pledge Levels: Rising promoter pledging beyond current 40.26% would heighten financial stress concerns and governance risks.
- Valuation Disconnect: Earnings growth failing to justify premium multiples could trigger sharp valuation correction.
The Verdict: Selective Buy for Risk-Tolerant Investors
Score: 71/100
For Fresh Investors: Nidhi Granites offers a compelling long-term growth story with exceptional historical returns and strong fundamental quality. However, the very expensive valuation, high volatility (beta 1.50), and liquidity constraints make this suitable only for risk-tolerant investors with long investment horizons. Consider building positions gradually during price corrections below ₹400 levels. The recent sequential performance decline and promoter stake reduction warrant careful monitoring before committing significant capital.
For Existing Holders: Continue holding given the positive long-term trajectory and quality fundamentals. The current "Buy" rating with a score of 71/100 supports retention, though the "Very Expensive" valuation grade suggests booking partial profits at current levels to lock in extraordinary gains. Maintain trailing stop-losses and monitor quarterly results closely for signs of sustained business momentum or deterioration. The 26.49 percentage point promoter stake reduction requires explanation—seek clarity before averaging up.
Fair Value Estimate: Given the P/E of 96.97x against sector average of 9x and considering the ROE of 19.34%, a fair P/E range of 25-30x appears reasonable, suggesting a fair value of ₹110-130 per share (approximately 70% downside from current levels). However, the company's exceptional growth trajectory and micro-cap premium could justify higher multiples. Current price of ₹426.45 embeds significant growth expectations that must be consistently delivered to avoid valuation compression.
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. Investing in micro-cap stocks involves substantial risk, including the potential loss of principal. The views expressed are based on available data and may change as new information emerges.
