The company's latest quarterly results paint a picture of operational volatility rather than sustainable growth. Whilst Q3 FY26 delivered record net profit of ₹20.70 crores, this stellar performance follows an erratic pattern that has characterised Quest Capital's earnings trajectory. The capital markets firm, which changed its name from BNK Capital Markets Limited in March 2022, operates in a highly competitive industry where consistency matters as much as absolute performance.
Despite the impressive quarterly numbers, the stock continues to languish in bearish territory, trading 37.13% below its 52-week high of ₹425.90 reached in mid-2025. The market's scepticism appears justified when examining the company's fundamental quality metrics, which reveal a business struggling to generate sustainable returns for shareholders.
Financial Performance: Outstanding Quarter Amid Erratic Trajectory
Quest Capital Markets' Q3 FY26 performance represents a dramatic improvement from recent quarters, though the sustainability of these results remains questionable. The company has not disclosed detailed quarterly financials for the recent period in the provided data, but the financial trend analysis indicates an "outstanding" classification for the quarter ending December 2025, with net profit at its highest level of ₹20.70 crores.
Examining the historical quarterly data available through December 2020 reveals the company's characteristic volatility. In Q3 FY21 (Dec'20), Quest Capital reported net sales of ₹6.33 crores with a consolidated net profit of ₹1.55 crores. This represented a sharp 67.91% quarter-on-quarter decline from Q2 FY21's ₹4.83 crores, yet showed 66.67% year-on-year growth. The operating margin excluding other income stood at 15.8%, down dramatically from the previous quarter's 38.85%.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Cons. Net Profit (₹ Cr) | YoY Growth | PAT Margin |
|---|---|---|---|---|---|
| Dec'20 | 6.33 | -51.97% | 1.55 | +66.67% | 11.06% |
| Sep'20 | 13.18 | +137.48% | 4.83 | -560.00% | 34.37% |
| Jun'20 | 5.55 | -44.89% | 1.42 | -229.09% | 20.18% |
| Mar'20 | 10.07 | +339.74% | 7.72 | N/A | 77.86% |
| Dec'19 | 2.29 | +26.52% | 0.93 | N/A | 40.61% |
| Sep'19 | 1.81 | -58.68% | -1.05 | N/A | -6.63% |
The annual financial picture for FY2020 showed net sales of ₹18.00 crores with profit after tax of ₹8.00 crores, yielding a PAT margin of 44.4%. However, this represented only modest 5.9% year-on-year revenue growth, and subsequent years have seen the company struggle to maintain momentum. The five-year sales CAGR stands at a concerning -3.36%, indicating a business in contraction rather than expansion.
Volatility Alert: Quest Capital's quarterly performance exhibits extreme swings, with QoQ growth rates ranging from -81.61% to +240.14% in recent quarters. This operational instability makes earnings forecasting exceptionally difficult and raises questions about the sustainability of any single quarter's strong performance.
Profitability Paradox: Weak Returns Despite Positive Margins
The most glaring weakness in Quest Capital's investment case lies in its abysmal return on equity, which averaged just 1.88% over the assessment period. This metric, which measures how effectively the company generates profits from shareholder capital, ranks among the poorest in the capital markets sector and signals fundamental inefficiency in capital deployment.
For context, a healthy ROE typically exceeds 15% for financial services firms, with industry leaders often achieving 20-30%. Quest Capital's 1.88% ROE means that for every ₹100 of shareholder equity, the company generates less than ₹2 in annual profit—a return that barely exceeds risk-free government securities and falls woefully short of compensating investors for equity risk.
The latest ROE figure of 1.54% shows marginal deterioration from the average, suggesting the problem persists rather than improves. This weakness exists despite the company maintaining a debt-free balance sheet with net debt to equity of 0.0, which should theoretically enable higher returns on equity capital. The company's return on capital employed (ROCE) of 2.00% similarly underperforms, indicating that management struggles to generate adequate returns regardless of capital structure.
Capital Efficiency Crisis
Quest Capital's book value per share stands at ₹228.44, yet the company generates minimal returns on this substantial equity base. With shareholder funds of ₹228.44 crores as of March 2020 and average annual profits in the single-digit crores range, the company essentially locks up significant capital whilst delivering negligible returns to shareholders. This represents a fundamental failure in capital allocation that no amount of quarterly volatility can obscure.
Balance Sheet: Asset-Heavy Structure Without Corresponding Returns
Quest Capital's balance sheet as of March 2020 reveals an unusual structure for a capital markets firm, with total shareholder funds of ₹228.44 crores comprising ₹10.00 crores in share capital and ₹218.44 crores in reserves and surplus. The company maintains a completely debt-free capital structure, which whilst reducing financial risk, has not translated into superior returns.
The asset composition raises questions about operational efficiency. Investments stood at ₹173.57 crores as of March 2020, representing 76% of shareholder funds. Current assets totalled ₹20.79 crores, whilst fixed assets contributed just ₹0.83 crores. This asset-heavy, operations-light structure suggests the company functions more as an investment holding vehicle than an active capital markets intermediary.
The reserves and surplus declined dramatically from ₹441.24 crores in March 2019 to ₹218.44 crores in March 2020—a reduction of over ₹220 crores that warrants scrutiny. This substantial erosion of shareholder equity, even as the company reported positive profits, suggests either significant dividend distributions, write-offs, or accounting adjustments that merit careful examination by prospective investors.
Peer Comparison: Underperformance Across Key Metrics
When benchmarked against capital markets peers, Quest Capital's structural weaknesses become even more apparent. The company's ROE of 1.88% pales in comparison to industry counterparts, with Aditya Birla Money achieving 30.72% and Emkay Global Financial Services delivering 12.34%. Even smaller peers like Pune e Stock Broking manage 10.55% ROE—more than five times Quest Capital's return.
| Company | P/E (TTM) | P/BV | ROE | Div Yield | Debt/Equity |
|---|---|---|---|---|---|
| Quest Capital | 13.60x | 0.21x | 1.88% | 0.93% | 0.00 |
| Aditya Birla Money | 14.96x | 2.88x | 30.72% | N/A | 6.58 |
| Emkay Global Fin. | 36.56x | 2.19x | 12.34% | 1.55% | 0.27 |
| Pune e Stock | 23.76x | 2.78x | 10.55% | N/A | 0.00 |
| Shardul Securities | N/A (Loss Making) | 0.36x | 8.63% | N/A | 0.25 |
The market's assessment of this underperformance manifests in Quest Capital's rock-bottom price-to-book ratio of 0.21x, the lowest among comparable peers. Whilst this might appear to represent value, the discount reflects justified scepticism about the company's ability to generate adequate returns. Peers with superior ROE command P/BV multiples ranging from 2.19x to 2.88x, appropriately rewarding their capital efficiency.
Quest Capital's P/E ratio of 13.60x appears reasonable in isolation but becomes less compelling when considering the quality of earnings and return profile. The company trades at a significant discount to the capital markets industry average P/E of 23x, but this discount exists for good reason—the market refuses to pay premium multiples for substandard returns.
Valuation Analysis: Value Trap Masquerading as Opportunity
At the current price of ₹267.75, Quest Capital Markets trades at what appears to be an attractive valuation on traditional metrics. The proprietary valuation grade of "Attractive" and the rock-bottom P/BV of 0.21x might tempt value investors seeking deeply discounted stocks. However, this represents a classic value trap scenario where low multiples reflect fundamental business problems rather than genuine opportunity.
The stock's 52-week performance tells a cautionary tale. After reaching ₹425.90 in mid-2025, the shares have collapsed 37.13% to current levels, underperforming the Sensex by nearly 40 percentage points over the past year. The valuation grade history shows frequent oscillation between "Fair," "Attractive," and "Very Attractive" ratings, suggesting the stock perpetually trades at discounts that never materialise into shareholder value.
Valuation Dashboard
P/E Ratio: 13.60x (vs Industry 23x)
P/BV Ratio: 0.21x (Deep discount to book)
Dividend Yield: 0.93% (Latest dividend ₹2.50/share)
EV/EBITDA: 10.32x
Mojo Score: 43/100 (SELL category)
The company's dividend yield of 0.93%, based on a ₹2.50 per share payout in June 2025, provides minimal income compensation for the capital risk. More concerning, the dividend payout ratio data is unavailable, raising questions about sustainability and the company's cash generation relative to reported profits.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Quest Capital's shareholding structure reveals a promoter-dominated company with minimal institutional validation. Promoter holding has remained rock-solid at 75.00% across the past five quarters through December 2025, with no change in stake. The promoter group comprises Lebnitze Real Estates Private Limited (71.25%) and Spotboy Tracom Private Limited (3.75%), with notably no pledging of shares—a positive sign of promoter confidence.
| Quarter | Promoter | FII | MF | Insurance | Other DII | Public |
|---|---|---|---|---|---|---|
| Dec'25 | 75.00% | 5.48% | 0.00% | 0.00% | 0.00% | 19.52% |
| Sep'25 | 75.00% | 5.48% | 0.00% | 0.00% | 0.00% | 19.52% |
| Jun'25 | 75.00% | 5.48% | 0.00% | 0.00% | 0.00% | 19.52% |
| Mar'25 | 75.00% | 2.91% | 0.00% | 0.00% | 0.00% | 22.09% |
| Dec'24 | 75.00% | 2.91% | 0.00% | 0.00% | 0.00% | 22.09% |
However, the institutional investor profile raises red flags. Foreign institutional investors hold just 5.48%, having increased their stake by 2.57 percentage points in June 2025 from 2.91%. More tellingly, mutual funds, insurance companies, and other domestic institutional investors maintain exactly zero exposure to the stock. This complete absence of domestic institutional interest speaks volumes about professional investors' assessment of the company's quality and prospects.
The total institutional holding of 5.48% ranks among the lowest in the sector and reflects the market's scepticism toward the business model and management's capital allocation track record. Retail and non-institutional investors hold 19.52%, down from 22.09% in early 2025, suggesting even individual investors are gradually reducing exposure.
Stock Performance: Persistent Underperformance Across Timeframes
Quest Capital's stock price performance reveals a pattern of consistent value destruction across most meaningful timeframes. The shares have declined 29.52% over the past year, underperforming the Sensex's 10.41% gain by a staggering 39.93 percentage points. This alpha of -39.93% represents one of the worst relative performances in the capital markets sector.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +3.22% | +0.50% | +2.72% |
| 1 Month | -6.12% | +0.79% | -6.91% |
| 3 Months | -20.09% | +0.43% | -20.52% |
| 6 Months | -20.58% | +4.50% | -25.08% |
| YTD | -10.35% | -1.16% | -9.19% |
| 1 Year | -29.52% | +10.41% | -39.93% |
| 2 Years | -20.64% | +17.65% | -38.29% |
| 3 Years | +46.07% | +38.81% | +7.26% |
| 5 Years | +142.09% | +63.46% | +78.63% |
The recent deterioration has been particularly severe, with the stock losing 20.09% over three months and 20.58% over six months, whilst the broader market remained relatively stable. Year-to-date performance shows a 10.35% decline, underperforming the Sensex by 9.19 percentage points even during a period of market weakness.
Longer-term returns paint a more mixed picture. The three-year return of 46.07% marginally outperforms the Sensex's 38.81%, whilst the five-year gain of 142.09% substantially exceeds the benchmark's 63.46% advance. However, these longer-term figures likely reflect recovery from depressed levels rather than sustainable value creation, and recent trends suggest the gains are rapidly eroding.
High Risk, Low Return Profile: Quest Capital exhibits a risk-adjusted return of -0.78 over the past year with volatility of 38.06%—more than three times the Sensex's 11.52% volatility. The stock's beta of 1.50 indicates 50% higher volatility than the market, yet this elevated risk has delivered negative returns. This high beta, low return combination represents one of the worst risk-reward profiles available to investors.
Technical Analysis: Entrenched Bearish Trend
From a technical perspective, Quest Capital remains firmly in bearish territory, with the trend having turned decisively negative on November 21, 2025, at ₹316.90. The stock currently trades at ₹267.75, representing a 15.5% decline from the trend reversal point and confirming the bearish momentum.
All key technical indicators flash warning signals. The MACD shows bearish readings on both weekly and monthly timeframes, whilst Bollinger Bands indicate mildly bearish conditions. The KST (Know Sure Thing) momentum indicator similarly points to bearish sentiment across timeframes. Only the Dow Theory shows a mildly bullish signal on the weekly chart, providing scant comfort against the preponderance of negative indicators.
The stock trades below all major moving averages, including the 5-day (₹262.19), 20-day (₹266.88), 50-day (₹286.11), 100-day (₹307.78), and 200-day (₹340.38) levels. This complete breakdown of moving average support indicates deeply entrenched negative momentum with no technical floor in sight. The immediate support at ₹252.75 (52-week low) appears vulnerable, whilst resistance begins at the 20-day moving average around ₹267 and extends to the 200-day moving average at ₹340.38.
Investment Thesis: Structural Flaws Outweigh Tactical Opportunities
Quest Capital Markets presents a conflicted investment case where superficially attractive valuation metrics collide with fundamental business weaknesses. The company's Mojo score of 43/100 places it firmly in "SELL" territory, reflecting the algorithm's assessment that negative factors substantially outweigh positives.
The four-pillar Mojo analysis reveals the core dilemma. Near-term drivers show mixed signals, with an "outstanding" quarterly financial trend offset by bearish technical indicators. Quality assessment rates the company as "below average," reflecting the abysmal 1.88% ROE and weak long-term financial performance. Valuation appears "very attractive" at 0.21x book value, but this discount exists for valid reasons. The overall assessment: mixed signals that tilt decisively negative when weighted appropriately.
Key Strengths & Risk Factors
KEY STRENGTHS
- Debt-Free Balance Sheet: Zero leverage provides financial flexibility and eliminates refinancing risk
- Stable Promoter Holding: Consistent 75% stake with no pledging demonstrates long-term commitment
- Attractive Valuation Multiples: P/BV of 0.21x and P/E of 13.60x offer statistical cheapness
- Recent Quarterly Momentum: Q3 FY26 classified as "outstanding" with record profit levels
- Dividend Distribution: Recent ₹2.50 per share payout shows willingness to return capital
KEY CONCERNS
- Abysmal Return on Equity: 1.88% ROE indicates fundamental capital allocation failure
- Negative Revenue Growth: Five-year sales CAGR of -3.36% signals business contraction
- Extreme Earnings Volatility: QoQ growth swings from -81% to +240% make forecasting impossible
- Zero Institutional Interest: Complete absence of MF, insurance, and DII holdings raises quality concerns
- Persistent Stock Underperformance: -39.93% alpha over one year with 38% volatility
- Below Average Quality Grade: Long-term financial performance fails to meet minimum standards
- Bearish Technical Setup: Trading below all moving averages with negative momentum indicators
Outlook: What Lies Ahead
POSITIVE CATALYSTS
- Sustained improvement in ROE above 10% for multiple quarters
- Consistent revenue growth exceeding 15% annually
- Entry of institutional investors (MFs or FIIs) validating the business model
- Reduction in earnings volatility demonstrating operational stability
- Strategic initiatives to improve capital efficiency and returns
RED FLAGS TO MONITOR
- Further deterioration in ROE below 1.5%
- Continued negative revenue growth or business contraction
- Break below ₹252.75 support triggering fresh selling
- Reduction in promoter stake or emergence of pledging
- Dividend cuts signalling cash flow pressures
- Increased institutional selling or further FII exits
The fundamental challenge facing Quest Capital Markets centres on its inability to generate adequate returns on shareholder capital despite operating in a potentially lucrative capital markets industry. Until management demonstrates sustained improvement in ROE, revenue growth, and earnings consistency, the stock remains a speculative bet rather than a sound investment. The recent quarterly strength, whilst encouraging, represents a single data point in a pattern of volatility rather than evidence of structural improvement.
The Verdict: Value Trap Masquerading as Opportunity
Score: 43/100
For Fresh Investors: Avoid initiating positions. The combination of weak ROE (1.88%), negative five-year revenue growth (-3.36%), and persistent stock underperformance (-29.52% over one year) creates an unfavourable risk-reward equation. The apparently attractive P/BV of 0.21x represents a value trap rather than genuine opportunity, as the market correctly discounts the company's inability to generate adequate returns. The complete absence of institutional investor interest serves as a powerful validation signal that professional investors see limited merit in the business.
For Existing Holders: Consider reducing positions on any technical bounce toward the ₹285-₹290 range (50-day moving average). The bearish technical setup, combined with fundamental weaknesses, suggests limited upside potential and continued downside risk. Whilst the recent quarterly performance provides a tactical exit opportunity, the structural issues—particularly the abysmal ROE and erratic earnings—remain unresolved. Only investors with very high risk tolerance and long investment horizons should consider holding, and even then, position sizing should be minimal.
Fair Value Estimate: ₹240-₹260 (10% downside from current levels). The stock trades close to fair value when accounting for its weak return profile and business quality. Any significant rally would create attractive exit opportunities rather than buying opportunities.
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 does not guarantee future results, and all investments carry risk of loss.
