The December 2025 quarter marked a concerning reversal for Race Eco Chain, formerly known as Anisha Impex Ltd. While the company delivered an 11.39% year-on-year improvement in consolidated profit, the sequential deterioration signals mounting operational pressures. Net sales contracted to ₹131.12 crores in Q3 FY26 from ₹148.43 crores in Q2 FY26, marking an 11.66% quarter-on-quarter decline and representing the lowest quarterly revenue in the past three quarters.
The company's profit after tax margin compressed to 1.49% in Q3 FY26 from 2.00% in the previous quarter, reflecting deteriorating profitability despite marginal operating margin improvements. This disconnect between operating performance and bottom-line results highlights rising financial costs and tax inefficiencies that are eroding shareholder value.
Financial Performance: Sequential Weakness Masks YoY Growth
Race Eco Chain's Q3 FY26 performance presents a tale of two narratives. On a year-on-year basis, consolidated net profit improved 11.39% from ₹1.58 crores in Q3 FY25, whilst net sales declined 22.15% from ₹168.42 crores. However, the quarter-on-quarter trajectory reveals troubling momentum loss, with both revenue and profitability retreating from Q2 FY26 levels.
Operating profit excluding other income stood at ₹3.34 crores in Q3 FY26, down 8.99% from ₹3.67 crores in Q2 FY26, though operating margin improved marginally to 2.55% from 2.47%. This suggests some success in cost management, but not enough to offset volume declines. Other income contributed ₹0.46 crores, up from ₹0.38 crores quarter-on-quarter, providing modest support.
The company's cost structure reveals concerning trends. Interest expenses climbed to ₹2.06 crores in Q3 FY26 from ₹1.98 crores in Q2 FY26, reflecting a 4.04% sequential increase. On a nine-month basis, interest costs surged 26.25% to ₹4.04 crores, significantly outpacing revenue growth and squeezing profitability. The tax rate swung dramatically to 23.23% in Q3 FY26 from a negative 3.48% in Q2 FY26, further pressuring net profit.
| Metric (₹ Cr) | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 |
|---|---|---|---|---|---|
| Net Sales | 131.12 | 148.43 | 156.73 | 193.95 | 168.42 |
| QoQ Growth | -11.66% | -5.30% | -19.19% | +15.16% | +58.45% |
| Operating Profit (Excl OI) | 3.34 | 3.67 | 2.91 | 3.42 | 3.04 |
| Operating Margin % | 2.55% | 2.47% | 1.86% | 1.76% | 1.81% |
| Consolidated Net Profit | 1.76 | 2.80 | 0.35 | 1.48 | 1.58 |
| QoQ Growth | -37.14% | +700.00% | -76.35% | -6.33% | +116.44% |
| PAT Margin % | 1.49% | 2.00% | 0.26% | 0.82% | 1.05% |
For the nine-month period ending December 2025, Race Eco Chain posted net sales of ₹436.28 crores, representing 20.80% growth year-on-year. However, this growth trajectory appears to be decelerating, with quarterly revenues declining sequentially since the March 2025 peak of ₹193.95 crores. The company's inability to sustain revenue momentum raises questions about demand sustainability and competitive positioning.
Operational Challenges: Weak Returns on Capital
Race Eco Chain's operational efficiency metrics paint a concerning picture of capital productivity. The company's average return on equity stands at just 5.25%, significantly below the double-digit returns expected from well-managed businesses. This weak ROE indicates that the company is generating minimal returns for shareholders relative to the equity capital deployed.
⚠️ Capital Efficiency Concerns
Average ROE: 5.25% – Substantially below industry standards, indicating poor capital allocation and weak profitability relative to shareholder equity.
Average ROCE: 7.15% – Marginal returns on total capital employed, suggesting the business struggles to generate adequate profits from its asset base.
EBIT to Interest Coverage: 1.90x – Weak coverage ratio indicates limited buffer to service debt obligations, raising concerns about financial flexibility.
The company's return on capital employed averaged 7.15% over recent periods, though the latest half-year ROCE improved to 10.13%. Whilst this represents the highest level achieved, it remains modest and reflects the capital-intensive nature of the recycling and manufacturing business. The company's average EBIT to interest coverage of just 1.90 times indicates limited financial cushion, with operating profits barely covering interest expenses by a factor of two.
Balance sheet analysis reveals rapid expansion but mounting leverage. Shareholder funds surged to ₹71.57 crores in FY25 from ₹22.21 crores in FY24, driven by a preferential allotment that increased share capital to ₹17.26 crores and reserves to ₹37.11 crores. However, current liabilities nearly doubled to ₹104.17 crores from ₹55.36 crores, with trade payables jumping to ₹35.98 crores from ₹16.76 crores. This aggressive working capital expansion, coupled with negative operating cash flows of ₹42.00 crores in FY25, signals potential liquidity pressures.
The company's debt-to-EBITDA ratio averaged 6.49 times, indicating high leverage relative to operating cash generation. Net debt to equity averaged 0.84, representing moderate but rising leverage. With sales to capital employed averaging 5.16 times, the company demonstrates reasonable asset turnover, but this is insufficient to compensate for weak profitability margins.
Margin Dynamics: Cost Pressures Overwhelm Efficiency Gains
Race Eco Chain's margin profile reveals a business struggling to translate top-line growth into bottom-line profitability. Operating margins excluding other income improved sequentially to 2.55% in Q3 FY26 from 2.47% in Q2 FY26, but remain compressed compared to the 1.76% margin in March 2025. On an annual basis, operating margin reached 1.60% in FY25, up from 1.40% in FY24, suggesting gradual operational improvements.
Margin Compression Analysis
Whilst operating margins have stabilised around 2.5% in recent quarters, the company's PAT margin deteriorated sharply to 1.49% in Q3 FY26 from 2.00% in Q2 FY26. This 51-basis-point sequential decline reflects the impact of rising interest costs and normalised tax rates. The company's gross profit margin of 1.33% in Q3 FY26 remains wafer-thin, leaving minimal room to absorb input cost volatility or competitive pricing pressures.
Employee costs remained stable at ₹0.95 crores in Q3 FY26, representing less than 1% of revenues and suggesting a lean workforce structure. However, the company's EBIT to interest coverage deteriorated to 1.62 times in Q3 FY26, the lowest level in recent quarters, indicating that operating profits are increasingly stretched to service debt obligations.
The dramatic swing in tax rates across quarters—from negative 3.48% in Q2 FY26 to 23.23% in Q3 FY26 and an extraordinary 69.63% in Q1 FY26—introduces significant earnings volatility. This inconsistency complicates forecasting and suggests potential one-time adjustments or tax provisions that distort underlying profitability trends.
Peer Comparison: Underperforming on Key Metrics
Race Eco Chain's positioning within the Other Utilities sector reveals significant valuation and performance gaps relative to peers. The company trades at a P/E ratio of 33.71x, above the sector median but below the 43.71x commanded by Eco Recycling Ltd. However, this premium appears unjustified given Race Eco's inferior return on equity of just 5.25%, substantially below the peer average of approximately 12%.
| Company | P/E (TTM) | ROE % | Debt/Equity | Price/Book |
|---|---|---|---|---|
| Race Eco Chain | 33.71x | 5.25% | 0.84 | 2.87x |
| Antony Waste Handling | 23.93x | 13.30% | 0.54 | 2.09x |
| Eco Recycling | 43.71x | 22.57% | -0.14 | 7.59x |
| Concord Enviro | 13.97x | 9.47% | 0.12 | 1.43x |
| Denta Water | 11.15x | 15.16% | -0.14 | 1.67x |
Race Eco's price-to-book ratio of 2.87x sits in the middle of the peer range but appears elevated given its weak ROE. Eco Recycling commands a 7.59x P/BV multiple, justified by its superior 22.57% ROE, whilst Concord Enviro and Denta Water trade at more modest 1.43x and 1.67x multiples respectively. Race Eco's debt-to-equity ratio of 0.84 is higher than most peers, with only Antony Waste carrying comparable leverage at 0.54.
The company's market capitalisation of ₹194.14 crores ranks it sixth amongst the peer group, reflecting its micro-cap status. This limited scale may constrain access to capital, operational efficiencies, and competitive positioning relative to larger, better-capitalised peers.
Valuation Analysis: Premium Unjustified by Fundamentals
Race Eco Chain's valuation metrics suggest the stock is trading at levels inconsistent with its underlying financial performance and growth trajectory. At a P/E ratio of 33.71x, the company commands a 35% premium to the Other Utilities sector average P/E of 25x, despite delivering inferior returns on equity and capital employed.
The company's EV/EBITDA multiple of 20.75x appears elevated relative to its modest profitability and growth profile. With an EV/Sales ratio of 0.41x, the market is assigning reasonable value to the top line, but the translation to enterprise value relative to EBITDA suggests investors are pricing in optimistic margin expansion that has yet to materialise consistently.
One bright spot emerges in the PEG ratio of 0.11x, which suggests the stock may offer value relative to its growth rate. The company's five-year sales CAGR of 34.91% and EBIT CAGR of 71.41% indicate strong historical growth, though recent quarterly trends suggest this momentum is waning. The price-to-book ratio of 2.87x implies the market values the business at nearly three times its net asset value, a premium that appears generous given the weak 5.25% ROE.
The stock currently trades at ₹112.50, down 64.39% from its 52-week high of ₹315.90 and up 16.88% from its 52-week low of ₹96.25. This substantial correction from peak levels reflects deteriorating sentiment and fundamental concerns. The company's valuation grade has shifted from "Very Expensive" to "Expensive" as of June 2025, though it remains above fair value by most traditional metrics.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Race Eco Chain's shareholding structure reveals a stable promoter base but conspicuously low institutional participation, signalling limited conviction from sophisticated investors. Promoter holding has remained static at 44.79% across the past five quarters, with no sequential changes indicating neither accumulation nor distribution by the founding shareholders.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 44.79% | 44.79% | 44.79% | 44.79% | 0.00% |
| FII | 0.71% | 0.72% | 0.00% | 0.01% | -0.01% |
| Mutual Funds | 0.00% | 0.58% | 0.00% | 0.00% | -0.58% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.58% | 0.00% | 0.58% | 0.58% | +0.58% |
| Non-Institutional | 53.92% | 53.90% | 54.63% | 54.62% | +0.02% |
Foreign institutional investor holding stands at a negligible 0.71% as of December 2025, down marginally from 0.72% in September 2025. More concerning is the complete exit by mutual funds, which reduced their stake from 0.58% in September 2025 to zero in December 2025. This withdrawal of domestic institutional money suggests professional fund managers see limited upside potential or harbour concerns about the company's prospects.
Other domestic institutional investors increased their stake to 0.58% in Q3 FY26 from zero in Q2 FY26, providing modest support. However, total institutional holdings remain minuscule at just 1.29%, indicating the stock is largely held by retail and non-institutional investors. The absence of insurance company holdings and minimal mutual fund participation reflects the company's micro-cap status and limited liquidity.
Key promoters include Sangeeta Pareekh with 25.03%, BLP Equity Research Pvt Ltd with 15.70%, and Dinesh Pareekh with 4.06%. Positively, there is no promoter pledging, eliminating concerns about forced selling or governance issues related to pledged shares. The non-institutional shareholding of 53.92% suggests significant retail participation, which can contribute to higher volatility during periods of negative sentiment.
Stock Performance: Severe Underperformance Across All Timeframes
Race Eco Chain's stock performance has been dismal across virtually all timeframes, with the share price plummeting 59.89% over the past year whilst the Sensex gained 9.26%, resulting in a negative alpha of 69.15 percentage points. The stock's descent has accelerated in recent months, with six-month returns of negative 50.67% and three-month returns of negative 36.94%, both dramatically underperforming the broader market.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -1.75% | -1.30% | -0.45% |
| 1 Month | -9.86% | -0.71% | -9.15% |
| 3 Month | -36.94% | -1.88% | -35.06% |
| 6 Month | -50.67% | +2.95% | -53.62% |
| YTD | -20.75% | -2.64% | -18.11% |
| 1 Year | -59.89% | +9.26% | -69.15% |
| 2 Years | -68.45% | +14.56% | -83.01% |
| 3 Years | -43.75% | +35.31% | -79.06% |
The stock's risk-adjusted return profile is deeply concerning. With one-year volatility of 52.11%—more than four times the Sensex volatility of 11.53%—Race Eco Chain exhibits extreme price swings that amplify downside risk. The risk-adjusted return of negative 1.15 places the stock in the "HIGH RISK LOW RETURN" category, an unfavourable combination that typically warrants avoidance by prudent investors.
Technical indicators paint a uniformly bearish picture. The stock trades below all major moving averages, including the 5-day (₹124.96), 20-day (₹111.76), 50-day (₹131.54), 100-day (₹171.00), and 200-day (₹209.67) moving averages. The technical trend turned decisively bearish on February 9, 2026, at ₹114.50, and multiple indicators including MACD, KST, and OBV signal continued weakness on both weekly and monthly timeframes.
The stock has underperformed its sector by 48.98 percentage points over the past year, with Race Eco declining 59.89% whilst the Other Utilities sector fell a more modest 10.91%. This dramatic relative underperformance suggests company-specific challenges beyond broader sector headwinds. The beta of 1.04 indicates the stock moves roughly in line with the market, though recent performance suggests significantly higher downside sensitivity.
Investment Thesis: Weak Fundamentals Outweigh Valuation Appeal
Race Eco Chain's investment proposition is undermined by multiple structural weaknesses that overshadow any apparent valuation attractions. The company's Mojo score of 37 out of 100 reflects a "SELL" rating, driven by flat financial trends, bearish technical momentum, and average quality metrics that fail to justify the current valuation premium.
The company's quality assessment reveals a business with average long-term financial performance but significant near-term challenges. Whilst five-year sales growth of 34.91% and EBIT growth of 71.41% demonstrate historical expansion, recent quarterly trends show momentum stalling. The average ROCE of 7.15% and ROE of 5.25% indicate poor capital productivity, with returns barely exceeding the risk-free rate and well below the cost of equity.
Financial leverage metrics raise sustainability concerns. Average EBIT to interest coverage of just 1.90 times provides minimal cushion for debt servicing, whilst debt-to-EBITDA of 6.49 times indicates high leverage relative to cash generation. The company's negative operating cash flow of ₹42.00 crores in FY25, driven by a ₹51.00 crore increase in working capital, signals potential liquidity pressures that could constrain growth or necessitate additional capital raises.
Key Strengths & Risk Factors
✓ Key Strengths
- Strong Historical Growth: Five-year sales CAGR of 34.91% and EBIT CAGR of 71.41% demonstrate expansion capability
- Improving Operating Margins: Operating margin reached 2.55% in Q3 FY26, up from 1.76% in March 2025
- No Promoter Pledging: Zero pledged shares eliminates governance concerns related to forced selling
- Stable Promoter Holding: Consistent 44.79% promoter stake signals commitment and alignment
- Attractive Valuation Post-Correction: PEG ratio of 0.11x suggests value relative to growth rates
- Niche Market Position: Focus on plastic waste recycling aligns with environmental sustainability trends
⚠ Key Concerns
- Weak Capital Returns: ROE of 5.25% and ROCE of 7.15% indicate poor capital productivity and value creation
- Sequential Profit Decline: Consolidated net profit fell 37.14% QoQ despite marginal margin improvements
- Rising Financial Costs: Interest expenses up 26.25% in nine months, outpacing revenue growth significantly
- Negative Operating Cash Flow: ₹42.00 crore cash outflow in FY25 raises liquidity and sustainability concerns
- Minimal Institutional Interest: Total institutional holdings of just 1.29% signals lack of sophisticated investor confidence
- High Leverage: Debt-to-EBITDA of 6.49x and weak interest coverage of 1.90x constrain financial flexibility
- Extreme Volatility: 52.11% volatility creates high downside risk for investors
Outlook: What to Watch
Positive Catalysts
- Revenue Stabilisation: Sequential improvement in quarterly sales would signal demand recovery
- Margin Expansion: Sustained operating margins above 2.5% would improve profitability trajectory
- Working Capital Normalisation: Reduction in working capital intensity would improve cash generation
- Institutional Participation: Entry of mutual funds or FIIs would validate investment thesis
Red Flags
- Further Revenue Declines: Continued sequential sales contraction would confirm deteriorating demand
- Interest Coverage Deterioration: EBIT to interest falling below 1.5x would signal debt servicing stress
- Promoter Stake Reduction: Any decline in 44.79% promoter holding would raise confidence concerns
- Continued Institutional Exits: Further mutual fund or FII selling would pressure valuations
- Working Capital Blowout: Additional cash outflows would necessitate dilutive capital raises
The Verdict: Avoid Until Fundamentals Improve
Score: 37/100
For Fresh Investors: Avoid initiating positions. The combination of weak capital returns (ROE 5.25%), deteriorating sequential profitability, negative operating cash flows, and bearish technical momentum creates an unfavourable risk-reward profile. Whilst the stock has corrected 64% from peaks, the fundamental challenges justify caution until sustained improvement materialises.
For Existing Holders: Consider reducing exposure on any technical bounce. The flat financial trend, rising interest costs, and minimal institutional participation suggest limited near-term catalysts for revaluation. Holders should reassess their thesis and consider reallocating capital to higher-quality opportunities with stronger fundamentals.
Fair Value Estimate: ₹95-105 (0-7% downside from current ₹112.50), based on normalised earnings power, peer valuations, and quality discount for weak returns on capital.
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, and all investments carry risk of loss.
