NPR Finance Q2 FY26: Losses Deepen as Revenue Contracts Sharply

With a market capitalisation of just ₹19.00 crores and the stock trading at ₹30.93, NPR Finance continues to struggle with profitability and scale. The quarter's results underscore persistent weakness in the company's core lending operations, raising serious questions about the sustainability of its business model in an increasingly competitive NBFC landscape.

Financial Performance: Erratic Trajectory Continues

In Q2 FY26, NPR Finance's revenue stood at ₹1.46 crores, representing a sequential increase of 29.20% from Q1 FY26's ₹1.13 crores but a concerning year-on-year decline of 23.16% from ₹1.90 crores in Sep'24. This volatile revenue pattern has become characteristic of the company's operations, with quarterly sales swinging between ₹1.13 crores and ₹1.95 crores over the past seven quarters.

The company's profitability metrics paint an even grimmer picture. Operating profit before depreciation, interest, tax and other income (PBDIT excl OI) turned negative at ₹-0.01 crores in Q2 FY26, a dramatic reversal from the ₹0.15 crores recorded in Q1 FY26. This translated into an operating margin of -0.68%, down from 13.27% in the previous quarter. The margin compression reflects both revenue pressure and inflexible cost structures, with employee costs of ₹0.70 crores consuming nearly half of the quarter's revenue.

The bottom line deteriorated sharply, with net loss widening to ₹0.12 crores from a profit of ₹0.14 crores in Q1 FY26. Notably, the company recorded a tax expense of ₹0.07 crores despite posting a pre-tax loss of ₹0.04 crores, resulting in an anomalous effective tax rate of -175.00%. This suggests possible adjustments related to deferred tax assets or prior period items, adding another layer of complexity to the already challenging financial picture.

Capital Efficiency: Weak Returns Highlight Structural Issues

NPR Finance's return on equity (ROE) stands at a meagre 0.67% on a five-year average basis, significantly below acceptable standards for financial services companies. The latest annual ROE of 0.94% offers little improvement, indicating persistent inefficiency in deploying shareholder capital. For context, well-managed NBFCs typically generate ROE in excess of 15-20%, making NPR Finance's single-digit returns a glaring weakness.

The company's return on capital employed (ROCE) of 1.31% further underscores the challenge. With such anaemic returns, NPR Finance struggles to create meaningful value for shareholders or generate sufficient internal accruals to fund growth. The weak capital efficiency stems from a combination of low asset turnover, thin margins, and intermittent losses that erode the equity base over time.

On the balance sheet front, the company maintains a debt-free structure with zero long-term borrowings as of Mar'25. Whilst this eliminates financial leverage risk, it also limits the company's ability to scale its lending operations—a critical requirement for any NBFC seeking to achieve operational viability. Shareholder funds stood at ₹50.08 crores as of Mar'25, with reserves of ₹44.08 crores built up over years of operations. However, the modest scale of operations relative to the capital base further depresses return metrics.

Scale Challenges: Micro-Cap NBFC Struggles for Viability

Operating at the micro-cap end of the spectrum with a market capitalisation of merely ₹19.00 crores, NPR Finance faces fundamental challenges related to scale economics. The company's quarterly revenue averaging around ₹1.50 crores translates to an annualised run rate of approximately ₹6.00 crores—insufficient to support a meaningful lending franchise or absorb the fixed costs associated with regulatory compliance and operational infrastructure.

The annual financial statements reveal a concerning trend: revenue declined from ₹27.00 crores in FY20 to just ₹7.00 crores in FY25, representing an 81.48% cumulative decline over five years. This sustained revenue erosion reflects either a strategic shift towards a smaller, more focused business model or, more worryingly, an inability to compete effectively in the NBFC space. The five-year sales growth rate of -17.75% confirms the structural decline.

Employee costs of ₹2.00 crores annually (FY25) relative to revenue of ₹7.00 crores result in a cost-to-income ratio approaching 29%, before accounting for other operating expenses. This cost structure leaves little room for profitability, particularly given the company's limited ability to generate scale efficiencies. The absence of meaningful other income (negligible across quarters) further constrains earnings potential.

Peer Comparison: Underperforming Across Key Metrics

When benchmarked against peers in the NBFC space, NPR Finance's challenges become even more apparent. The company's ROE of 0.67% trails significantly behind most comparable entities, with only Bharat Bhushan and Supra Trends reporting similarly weak or zero returns. Shree Metalloys, by contrast, demonstrates what effective capital deployment looks like with an ROE of 7.57%, more than eleven times higher than NPR Finance.

From a valuation perspective, NPR Finance trades at a price-to-book ratio of 0.37x, reflecting the market's scepticism about the company's ability to generate adequate returns on its equity base. This significant discount to book value (63% below) indicates that investors ascribe little value to the company's future earnings potential. The P/E ratio of 39.42x, whilst seemingly elevated, must be interpreted cautiously given the minimal and volatile earnings base.

The peer comparison reveals that NPR Finance ranks at the bottom of its peer group in terms of profitability and operational efficiency. Whilst its debt-free balance sheet provides some comfort, this advantage is offset by the company's inability to leverage capital effectively to generate returns. The market capitalisation of ₹19.00 crores positions NPR Finance as the smallest player in this peer set, further limiting its competitive positioning.

Valuation Analysis: Discount Reflects Fundamental Weakness

NPR Finance's current valuation metrics paint a picture of a company trading at a significant discount due to persistent operational challenges. The price-to-book ratio of 0.37x implies that the market values the company's net assets at just 37% of their stated book value, a substantial haircut that reflects scepticism about future earnings generation and asset quality.

The P/E ratio of 39.42x, whilst appearing elevated, is somewhat misleading given the minimal and volatile earnings base. With quarterly profits swinging between losses and modest gains, the trailing twelve-month earnings provide an unstable foundation for valuation. The EV/EBITDA multiple of 18.69x and EV/Sales of 3.09x suggest the market is pricing in continued operational struggles rather than assigning any premium for growth or quality.

From a historical perspective, NPR Finance's valuation grade has fluctuated between "Expensive" and "Fair" over recent months, currently sitting at "Fair" as of November 3, 2025. However, this assessment must be contextualised against the company's weak fundamentals—a "fair" valuation for a structurally challenged business may still represent poor value for investors. The stock's 52-week range of ₹20.00 to ₹40.50 reflects significant volatility, with the current price of ₹30.93 positioned 23.63% below the high and 54.65% above the low.

Shareholding Pattern: Stable Promoter Base, Zero Institutional Interest

The shareholding structure of NPR Finance has remained remarkably static over the past five quarters, with promoter holding steady at 68.02% throughout. The Nand Lal Todi Group, through various entities including Rani Leasings And Finance Private Limited (22.09%) and individual family members, maintains firm control over the company. This stable promoter base provides governance continuity, though it has not translated into improved operational performance.

More concerning is the complete absence of institutional participation. Foreign institutional investors (FIIs), mutual funds, insurance companies, and other domestic institutional investors collectively hold 0.00% of the company's equity. This institutional vacuum speaks volumes about the investment community's assessment of NPR Finance's prospects—sophisticated investors have shown no interest in participating in the company's equity story.

The non-institutional shareholding of 31.98% comprises retail investors and non-institutional entities, a category that has also remained unchanged. The absence of any pledging by promoters provides some comfort regarding financial distress at the promoter level, but the overall shareholding pattern offers little in terms of positive catalysts or validation from informed investors.

Stock Performance: Underperformance Across Most Timeframes

NPR Finance's stock has delivered a mixed performance across various timeframes, with significant underperformance relative to broader market indices in most periods. Over the past year, the stock generated a marginal return of 0.72%, vastly underperforming the Sensex's 9.81% gain and resulting in negative alpha of -9.09%. This underperformance extends to the year-to-date period, where NPR Finance gained just 3.79% compared to the Sensex's 9.02% advance.

The shorter-term picture is similarly concerning. Over the past week, the stock declined 6.64% whilst the Sensex gained 0.85%, producing negative alpha of -7.49%. The one-month return of -1.43% against the Sensex's 1.47% gain further underscores the stock's relative weakness. However, the three-month and six-month periods show some relative strength, with returns of 14.34% and 15.63% respectively, outperforming the benchmark index.

The longer-term returns present a more favourable picture, with the stock delivering 103.75% over two years and 91.52% over three years, significantly outperforming the Sensex in both periods. However, these historical gains must be interpreted cautiously—they reflect recovery from extremely depressed levels rather than sustainable value creation. The stock's high beta of 1.50 indicates significantly higher volatility than the broader market, with volatility of 75.29% classifying it as a high-risk proposition.

From a technical perspective, the stock currently exhibits a "Mildly Bullish" trend as of November 18, 2025, though this follows a recent downgrade from "Bullish". The stock trades below all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), suggesting weak momentum. Technical indicators present mixed signals, with MACD showing "Mildly Bearish" on the weekly timeframe whilst Bollinger Bands indicate "Mildly Bullish" conditions.

Investment Thesis: Multiple Red Flags Limit Appeal

The investment case for NPR Finance faces significant headwinds across multiple dimensions. The company's quality grade of "Below Average" reflects weak long-term financial performance, with five-year sales growth of -17.75% and EBIT growth of -2.92% indicating structural decline rather than temporary setbacks. The average ROE of 0.67% ranks amongst the weakest in the NBFC space, highlighting severe capital inefficiency.

The financial trend classification of "Flat" for Q2 FY26 understates the severity of the quarter's performance, which saw the company slip back into losses after a brief return to profitability in Q1. The absence of consistent earnings generation, combined with erratic revenue patterns, makes it difficult to build conviction around any inflection point in the business trajectory.

From a valuation standpoint, whilst the stock trades at 0.37x book value—a significant discount—this reflects rational market pricing of a business with questionable earnings power. The "Fair" valuation grade must be contextualised: a fair price for a fundamentally weak business may still represent poor value. The overall advisory score of 41/100 with a "SELL" rating captures this reality, suggesting investors should consider exit opportunities.

Key Strengths & Risk Factors

Outlook: What to Watch

For NPR Finance to merit reconsideration, the company would need to demonstrate consistent profitability over multiple quarters, stabilise and grow its revenue base, and achieve meaningful improvement in return ratios. The absence of these developments would reinforce the current assessment that this micro-cap NBFC faces fundamental viability challenges in an increasingly competitive and scale-driven financial services landscape.