The quarter's headline numbers reveal a company grappling with operational inconsistency—net sales of ₹0.85 crores materialised after two consecutive quarters of zero revenue, whilst the profit surge was predominantly driven by other income of ₹0.27 crores rather than core business strength. The company's flat financial trend designation and 'Does Not Qualify' quality grade underscore deep-rooted concerns about business sustainability and long-term viability.
The company's erratic revenue pattern raises fundamental questions about business model viability. Raghunath International recorded net sales of ₹0.85 crores in Q2 FY26 after reporting zero sales in both Q1 FY26 and the preceding quarter. This sporadic revenue generation suggests either severe operational disruptions or an inconsistent business model lacking sustainable demand drivers. The five-year sales growth rate of negative 10.95% and five-year EBIT growth of negative 26.13% paint a picture of secular decline rather than temporary setbacks.
| Quarter | Net Sales (₹ Cr) | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|
| Sep'25 | 0.85 | 0.70 | 75.29% | 80.0% |
| Jun'25 | 0.00 | 0.11 | — | — |
| Mar'25 | 0.00 | 0.22 | — | — |
| Dec'24 | 0.28 | 0.21 | -39.29% | 57.14% |
| Sep'24 | 0.00 | 2.03 | — | — |
| Jun'24 | 0.00 | 0.10 | — | — |
| Mar'24 | 0.00 | 0.00 | — | — |
Financial Performance: Profit Surge Masks Revenue Fragility
Raghunath International's Q2 FY26 consolidated net profit of ₹0.70 crores represented a dramatic 536.36% quarter-on-quarter increase from ₹0.11 crores in Q1 FY26, yet this improvement was entirely attributable to the return of sporadic sales activity rather than operational excellence. The 65.52% year-on-year decline from ₹2.03 crores in Q2 FY25 reveals the underlying deterioration in business fundamentals. Notably, the exceptional Q2 FY25 profit was inflated by extraordinary other income of ₹2.86 crores, making year-on-year comparisons somewhat misleading.
The quarter's operating profit before depreciation, interest and tax (excluding other income) stood at ₹0.64 crores, generating an operating margin of 75.29% on the minuscule sales base. Whilst this margin appears impressive superficially, it reflects the company's minimal cost base during periods of near-dormant operations rather than genuine operational efficiency. Employee costs remained steady at ₹0.08 crores, indicating a skeletal workforce maintaining minimal operations.
Other income of ₹0.27 crores constituted 29.67% of total operating profit, highlighting the company's dependence on non-operating sources. The tax rate of 25.27% was relatively normal, resulting in net profit of ₹0.68 crores on a standalone basis. The PAT margin of 80.0% is arithmetically high but commercially meaningless given the erratic revenue base and heavy reliance on other income.
Operational Challenges: Inconsistent Business Model Raises Red Flags
The most alarming aspect of Raghunath International's operational profile is the chronic inconsistency of revenue generation. The company has recorded zero sales in five of the last seven quarters, with sporadic sales appearing only in Q2 FY26 (₹0.85 crores) and Q4 FY25 (₹0.28 crores). This pattern suggests fundamental structural issues—either severe supply chain disruptions, loss of distribution channels, regulatory challenges, or a business model that has become commercially unviable in its current form.
Return on equity of 7.30% for the latest period, whilst positive, remains well below acceptable standards for FMCG companies and reflects the company's inability to generate consistent returns on shareholder capital. The average ROE of 0.0% over recent years underscores the depth of profitability challenges. Similarly, return on capital employed of 1.37% (latest) and negative 0.23% on average basis indicates extremely poor capital productivity and value destruction over time.
The balance sheet reveals a company with shareholder funds of ₹16.17 crores as of March 2025, comprising share capital of ₹5.00 crores and reserves of ₹11.17 crores. Positively, the company operates with zero long-term debt and minimal current liabilities of ₹1.11 crores, resulting in a net cash position. However, fixed assets have remained static at approximately ₹0.06 crores, indicating no capital investment or capacity expansion. Investments stood at ₹5.07 crores, suggesting the company is primarily functioning as a holding entity rather than an active manufacturing business.
Critical Operational Concerns
Revenue Inconsistency: Zero sales recorded in five of the last seven quarters, indicating severe business model challenges or operational disruptions that management has failed to address.
Capital Efficiency: Latest ROCE of just 1.37% and average ROE of 0.0% demonstrate chronic inability to generate acceptable returns on deployed capital.
Business Viability: Five-year sales decline of 10.95% and EBIT decline of 26.13% suggest secular deterioration rather than cyclical weakness.
Quality Assessment: Below Average Across All Parameters
Raghunath International's quality assessment reveals a company that fundamentally 'Does Not Qualify' as a quality investment based on long-term financial performance. The company scores 'Below Average' across management quality, growth prospects, and capital structure metrics. The five-year sales growth of negative 10.95% and EBIT growth of negative 26.13% demonstrate secular decline rather than temporary setbacks.
On the positive side, the company maintains zero debt and no promoter pledging, eliminating financial leverage risks. However, these strengths are overshadowed by the absence of institutional holdings (0.0%), which signals complete lack of confidence from sophisticated investors. The dividend payout ratio of 0.0% reflects management's inability or unwillingness to return capital to shareholders despite having net cash on the balance sheet.
The company's tax ratio of 22.83% is reasonable, but this metric is largely irrelevant given the sporadic profitability. Average debt to EBITDA shows 'Negative Net Debt', which would typically be positive, but in this context merely reflects a company with cash but no sustainable business operations generating EBITDA consistently.
Peer Comparison: Underperforming on Critical Metrics
Within the micro-cap FMCG peer group, Raghunath International's positioning reveals significant underperformance on key quality and valuation metrics. The company's ROE of 0.0% (average basis) compares unfavourably to peers such as Naturo Indiabulls (6.58%) and Photoquip India (0.84%). The price-to-book ratio of 0.38x suggests the market ascribes minimal value to the company's assets, reflecting scepticism about future earnings potential.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity |
|---|---|---|---|---|
| Raghunath Intl. | 5.24 | 0.38 | 0.0% | -0.01 |
| Photoquip India | 17.55 | 1.16 | 0.84% | 1.02 |
| Super Bakers | 20.60 | 1.77 | 0.0% | -0.79 |
| Uniroyal Marine | 10.99 | 8.68 | 0.0% | 12.94 |
| Naturo Indiabull | NA (Loss Making) | 0.19 | 6.58% | 0.31 |
The P/E ratio of 5.24x appears superficially attractive compared to peers trading at 17.55x to 20.60x, but this discount reflects justified concerns about earnings quality and sustainability rather than a genuine value opportunity. The market capitalisation of just ₹6.00 crores positions Raghunath International at the bottom of the peer group, reflecting its status as a distressed micro-cap with limited institutional interest.
Valuation Analysis: Low Multiples Reflect Fundamental Concerns
Raghunath International's valuation metrics superficially suggest deep value, but a closer examination reveals these low multiples are justified by fundamental business challenges. The P/E ratio of 5.24x and price-to-book value of 0.38x appear attractive in isolation, but the company's 'Risky' valuation grade and history of grade changes from 'Very Expensive' to 'Does Not Qualify' to 'Risky' highlight the market's ongoing reassessment of the company's worth.
The stock trades at ₹13.00, representing a 35.90% decline from its 52-week high of ₹20.28 but still 20.37% above the 52-week low of ₹10.80. With a book value per share of ₹32.35, the current price implies the market values the company at just 40% of its stated book value—a massive discount that reflects scepticism about asset realisability and future earnings generation.
Enterprise value metrics provide limited insight given the erratic revenue base. EV/EBITDA of 6.29x and EV/Sales of 5.57x are calculated on sporadic financial data and therefore lack meaningful comparative value. The PEG ratio is not available, appropriately reflecting the company's negative growth trajectory that makes growth-adjusted valuation metrics irrelevant.
Shareholding Pattern: Stable but Lacking Institutional Validation
The shareholding pattern of Raghunath International has remained completely static over the past five quarters, with promoter holding steady at 41.21% and non-institutional investors holding the remaining 58.79%. The absence of any sequential changes suggests a completely illiquid stock with minimal trading activity and no interest from new investors.
| Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 41.21% | 41.21% | 41.21% | 41.21% | 0.00% |
| FII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Non-Institutional | 58.79% | 58.79% | 58.79% | 58.79% | 0.00% |
Most significantly, the complete absence of foreign institutional investors (0.00%), mutual funds (0.00%), insurance companies (0.00%), and other domestic institutional investors (0.00%) represents a resounding vote of no confidence from sophisticated market participants. This institutional vacuum indicates that professional investors have thoroughly evaluated and rejected this stock, likely due to concerns about business viability, governance, or growth prospects.
Positively, there is no promoter pledging, eliminating one potential source of governance risk. However, the promoter holding of 41.21% is relatively modest for a micro-cap company, potentially limiting management's alignment with minority shareholders. The fragmented non-institutional holding of 58.79% suggests a retail-dominated shareholder base with limited ability to influence corporate governance or strategic direction.
Stock Performance: Severe Underperformance Across All Timeframes
Raghunath International's stock performance reveals severe underperformance across most relevant timeframes, with the stock generating negative alpha against the Sensex benchmark. Year-to-date, the stock has declined 26.93% compared to the Sensex's 8.10% gain, resulting in negative alpha of 35.03 percentage points. The one-year return of 2.04% marginally trails the Sensex return of 7.36%, delivering negative alpha of 5.32 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 4.59% | 1.21% | +3.38% |
| 1 Month | -3.70% | 2.38% | -6.08% |
| 3 Months | -9.53% | 5.27% | -14.80% |
| 6 Months | -3.70% | 2.47% | -6.17% |
| YTD | -26.93% | 8.10% | -35.03% |
| 1 Year | 2.04% | 7.36% | -5.32% |
| 3 Years | -5.93% | 36.69% | -42.62% |
| 5 Years | 563.27% | 94.82% | +468.45% |
The medium-term picture is equally concerning, with three-month returns of negative 9.53% against the Sensex's 5.27% gain (alpha of negative 14.80%) and three-year returns of negative 5.93% versus the Sensex's 36.69% gain (alpha of negative 42.62%). The only bright spot appears in the five-year and ten-year returns of 563.27% and 504.65% respectively, but these historical gains likely reflect recovery from extremely depressed levels and provide no indication of future prospects given the current business trajectory.
The stock's risk-adjusted return of 0.03 over the past year, compared to the Sensex's 0.60, highlights the unfavourable risk-reward profile. With volatility of 75.74% versus the Sensex's 12.36%, the stock exhibits extreme price fluctuations without commensurate returns—a classic 'high risk, low return' profile. The beta of 1.50 indicates the stock is 50% more volatile than the broader market, amplifying downside risk during market corrections.
Technical Analysis: Confirmed Bearish Trend with Multiple Resistance Levels
From a technical perspective, Raghunath International is firmly entrenched in a bearish trend that commenced on October 17, 2025, at ₹12.12. The stock currently trades at ₹13.00, marginally above the trend initiation level but facing multiple layers of resistance. All key moving averages—5-day (₹12.59), 20-day (₹12.84), 50-day (₹13.22), 100-day (₹13.34), and 200-day (₹13.52)—are positioned above the current price, creating a formidable resistance zone.
Technical indicators uniformly signal weakness. The MACD displays bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate mildly bearish conditions. The KST oscillator confirms the bearish trend across both weekly and monthly periods. Only the Dow Theory provides a mildly bullish signal on the weekly timeframe, but this is insufficient to override the preponderance of negative indicators.
The immediate support level rests at ₹10.80, representing the 52-week low and a critical psychological level. A breach below this support would likely trigger accelerated selling and potentially test lower levels. Conversely, the stock faces immediate resistance at ₹12.84 (20-day moving average), followed by stronger resistance at ₹13.34 (100-day moving average) and ₹13.52 (200-day moving average). The 52-week high of ₹20.28 represents a distant resistance level, currently 56% above the current price, making any near-term recovery to those levels highly improbable.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
Raghunath International's investment thesis is fundamentally challenged by structural business issues that overshadow any superficial valuation appeal. The company's proprietary Mojo Score of just 16 out of 100 and 'Strong Sell' rating reflect a comprehensive assessment across valuation, quality, financial trends, and technical factors—all of which paint a concerning picture.
The valuation grade of 'Risky' appropriately captures the disconnect between low multiples and fundamental business challenges. Whilst the P/E of 5.24x and P/BV of 0.38x appear statistically cheap, these metrics reflect justified market scepticism about earnings sustainability and asset quality. The quality assessment of 'Does Not Qualify' underscores long-term financial underperformance, with negative five-year growth rates and negligible returns on equity and capital employed.
The financial trend designation of 'Flat' in Q2 FY26 provides no positive momentum, whilst the technical trend of 'Bearish' signals continued selling pressure. The combination of these four negative factors—risky valuation, poor quality, flat financials, and bearish technicals—creates an investment profile with minimal upside potential and substantial downside risk.
Key Strengths & Risk Factors
Key Strengths ✓
- Zero Debt Position: Company operates with no long-term debt and maintains net cash position, eliminating financial leverage risk.
- No Promoter Pledging: Zero pledged shares reduces governance concerns and eliminates forced-selling risk.
- Established Brand: 'SIR' brand has historical presence in pan masala and mouth freshener segments.
- Low Valuation Multiples: P/E of 5.24x and P/BV of 0.38x offer statistical cheapness if business stabilises.
- Positive Book Value: Book value per share of ₹32.35 provides theoretical asset backing.
Key Concerns ⚠
- Revenue Inconsistency: Zero sales in five of last seven quarters indicates severe business model challenges or operational collapse.
- Secular Decline: Five-year sales growth of negative 10.95% and EBIT growth of negative 26.13% demonstrate long-term deterioration.
- Poor Capital Efficiency: Latest ROE of 7.30% and ROCE of 1.37% are well below acceptable standards; average ROE is 0.0%.
- Zero Institutional Holdings: Complete absence of FII, mutual fund, and insurance holdings signals lack of professional investor confidence.
- Extreme Illiquidity: Market cap of just ₹6.00 crores and minimal trading volumes create severe liquidity constraints.
- Bearish Technical Trend: Stock in confirmed bearish trend since October 2025 with all moving averages acting as resistance.
- Quality Disqualification: 'Does Not Qualify' quality grade based on long-term financial underperformance.
Outlook: What to Watch for Any Potential Stabilisation
Positive Catalysts
- Consistent revenue generation for at least three consecutive quarters demonstrating business model viability
- Management commentary explaining past operational disruptions and providing credible turnaround roadmap
- Entry of institutional investors or strategic partners validating business potential
- Capital deployment initiatives demonstrating commitment to business revival rather than passive asset holding
- Improvement in ROE above 12% and ROCE above 10% on sustained basis
Red Flags
- Continuation of zero or sporadic sales pattern beyond Q3 FY26, confirming business model failure
- Further deterioration in book value or dissipation of cash reserves without corresponding business improvement
- Any increase in promoter pledging or reduction in promoter holding signalling loss of confidence
- Breach of ₹10.80 support level on sustained basis, potentially triggering capitulation selling
- Regulatory actions, delisting threats, or governance concerns emerging
For any potential investment thesis to develop, Raghunath International must demonstrate consistent revenue generation over multiple quarters, provide transparent communication about past challenges and future strategy, and show measurable improvement in return ratios. Until such evidence materialises, the stock remains a speculative micro-cap with significant business viability concerns that outweigh any superficial valuation appeal.
"Raghunath International's chronic revenue inconsistency and secular decline in financial performance render low valuation multiples a value trap rather than a genuine opportunity—the company requires fundamental business model rehabilitation before any investment consideration."
The Verdict: High-Risk Micro-Cap Facing Existential Business Challenges
Score: 16/100
For Fresh Investors: Avoid entirely. The company's chronic revenue inconsistency, secular financial decline, complete absence of institutional validation, and 'Does Not Qualify' quality grade create an investment profile with minimal upside potential and substantial risk of permanent capital loss. The micro-cap status and extreme illiquidity compound these concerns.
For Existing Holders: Exit at current levels or on any technical bounce towards ₹14-15 resistance zone. The Q2 FY26 results, whilst showing sequential profit improvement, do nothing to address underlying business model viability concerns. The 65.52% year-on-year profit decline and continuation of sporadic revenue patterns indicate structural challenges that management has failed to resolve over multiple quarters.
Fair Value Estimate: Not applicable given fundamental business viability concerns. Current price of ₹13.00 already reflects significant distress discount to book value of ₹32.35, yet further downside remains probable if revenue generation does not stabilise.
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. The analysis presented herein is based on publicly available information as of November 12, 2025, and may not reflect subsequent developments. Past performance is not indicative of future results, and investments in micro-cap stocks carry substantial risks including extreme volatility, illiquidity, and potential for total capital loss.
