Rajshree Polypack Q3 FY26: Profit Plunges 52% as Revenue Contracts

The stock, trading at ₹18.19 as of February 06, 2026, has declined 2.52% in the latest session and remains under significant pressure, having lost 43.05% over the past year. With profitability margins compressing and operational challenges mounting, the company faces an uphill battle to restore investor confidence.

The December 2025 quarter results reveal multiple pressure points across Rajshree Polypack's financial performance. Revenue declined to its lowest level in seven quarters, whilst net profit margin compressed to 3.07% from 5.32% in the preceding quarter. On a year-on-year basis, whilst net sales declined marginally by 1.49%, the consolidated net profit comparison shows extreme volatility, reflecting the company's struggle to maintain consistent operational performance.

Financial Performance: Margins Under Siege

Rajshree Polypack's Q3 FY26 financial performance reflects significant operational headwinds. Net sales of ₹71.62 crores represent the lowest quarterly revenue since June 2024, declining 17.14% sequentially from ₹86.43 crores in Q2 FY26. Year-on-year revenue contracted by 1.49%, indicating persistent demand challenges in the company's core markets.

Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) declined to ₹8.68 crores from ₹10.94 crores in the previous quarter, though the operating margin excluding other income remained relatively stable at 12.12% compared to 12.66% in Q2 FY26. This suggests that the margin compression at the bottom line stems primarily from factors below the operating level rather than gross profitability deterioration.

The profit before tax (PBT) plummeted 51.58% quarter-on-quarter to ₹2.91 crores from ₹6.01 crores, whilst net profit after tax dropped 52.17% to ₹2.20 crores. The PAT margin compressed sharply to 3.07% from 5.32% in Q2 FY26, reflecting the combined impact of lower sales volumes, higher interest costs, and elevated depreciation charges.

Interest expenses rose to ₹2.78 crores from ₹2.65 crores, whilst depreciation jumped 8.73% to ₹4.61 crores from ₹4.24 crores, reflecting the capital-intensive nature of the business. The operating profit to interest coverage ratio weakened to 3.12 times, marking the lowest level in recent quarters and raising concerns about financial flexibility.

Operational Challenges: Weak Capital Efficiency

Rajshree Polypack's operational metrics reveal fundamental challenges in capital efficiency and profitability generation. The company's average return on equity (ROE) of 6.15% over recent periods significantly lags industry standards and reflects weak shareholder value creation. Similarly, the average return on capital employed (ROCE) of 8.63% indicates suboptimal utilisation of the capital base, with the latest half-yearly ROCE at 9.06% showing only marginal improvement.

The balance sheet as of March 2025 shows shareholder funds of ₹161.38 crores, supported by equity capital of ₹36.67 crores and reserves of ₹123.00 crores. Long-term debt stood at ₹25.09 crores, with the debt-to-equity ratio at 0.66, indicating moderate leverage. However, the company's ability to service this debt comfortably is questionable given the weak interest coverage ratio of 2.75 times on average.

Working capital management shows mixed signals. Current assets of ₹147.11 crores as of March 2025 provide adequate liquidity coverage against current liabilities of ₹118.01 crores, though the cash flow from operations at ₹18.00 crores in FY25 declined from ₹20.00 crores in FY24. The company invested ₹35.00 crores in capital expenditure during FY25, funded through a combination of internal accruals and debt, resulting in a net cash inflow of ₹4.00 crores for the year.

Industry Context: Underperformance Against Peers

Within the diversified consumer products sector, Rajshree Polypack's performance metrics lag significantly behind industry peers. The company's ROE of 6.15% compares unfavourably with competitors such as Aeron Composites (22.57%), Eleganz Interiors (17.94%), and Avro India (12.89%). This substantial gap indicates structural challenges in generating competitive returns on invested capital.

The company's five-year sales growth of 12.47% appears reasonable on the surface, but the five-year EBIT growth of just 3.96% reveals that revenue expansion has not translated into proportionate profit growth. This disconnect suggests margin pressures, rising costs, or operational inefficiencies that have eroded profitability over time.

Rajshree Polypack trades at a P/E ratio of 11.86x, which appears reasonable compared to the peer average of approximately 22x. However, the market is clearly pricing in the company's weak ROE and below-average quality metrics. The price-to-book ratio of 0.78x—significantly below the peer average of around 2.0x—suggests the market assigns little premium to the company's asset base, reflecting concerns about its ability to generate adequate returns.

Valuation Analysis: Attractive Price, Questionable Quality

From a pure valuation perspective, Rajshree Polypack appears attractively priced. Trading at a P/E ratio of 12x and a price-to-book value of 0.78x, the stock trades at a significant discount to both its peer group and historical averages. The EV/EBITDA multiple of 6.30x and EV/Sales ratio of 0.75x further reinforce the perception of undervaluation.

The company's valuation grade stands at "Attractive," having fluctuated between "Attractive" and "Very Attractive" over the past year. The PEG ratio of 0.71x suggests the stock may be undervalued relative to its growth prospects, though this metric must be viewed cautiously given the company's inconsistent earnings trajectory and weak recent performance.

However, attractive valuation multiples alone do not constitute an investment case. The stock has declined 43.05% over the past year and 78.03% over two years, significantly underperforming the Sensex's 7.07% and 15.78% gains over the same periods. The current price of ₹18.19 sits 50.77% below the 52-week high of ₹36.95, though it remains 18.19% above the 52-week low of ₹15.39.

Shareholding Pattern: Stable Promoter Base

Rajshree Polypack's shareholding structure shows relative stability at the promoter level, though the absence of institutional participation raises concerns about professional investor interest. Promoter holding stood at 43.90% as of December 2025, marginally up from 43.78% in September 2025. The promoter group includes Ramswaroop Radheshyam Thard (15.94%), Sajjan N Rungta HUF (13.94%), and Naresh Radheshyam Thard (13.01%).

Notably, the company has zero institutional holdings from foreign institutional investors (FIIs), mutual funds, insurance companies, or other domestic institutional investors (DIIs). This complete absence of institutional participation is highly unusual for a listed company and suggests professional investors have found little appeal in the investment proposition. The remaining 56.10% shareholding comprises non-institutional investors, primarily retail shareholders.

Positively, there is no promoter pledging of shares, which eliminates one potential risk factor. However, the lack of institutional interest remains a significant red flag, as sophisticated investors typically conduct thorough due diligence before committing capital.

Stock Performance: Persistent Underperformance

Rajshree Polypack's stock price performance has been dismal across all meaningful timeframes, consistently underperforming both the broader market and its sector. The stock has generated negative absolute returns across one-year (-43.05%), two-year (-78.03%), three-year (-67.47%), four-year (-75.06%), and five-year (-51.39%) periods.

The negative alpha across all periods—ranging from -50.12% over one year to -105.60% over three years—demonstrates consistent value destruction relative to the broader market. Even within its sector, the stock has underperformed dramatically, with the diversified consumer products sector declining 8.69% over the past year compared to Rajshree Polypack's 43.05% fall.

The stock exhibits high volatility with a beta of 1.50, indicating movements 50% more volatile than the broader market. Combined with negative returns, this places the stock firmly in the "high risk, low return" category. The risk-adjusted return of -0.88 over the past year, compared to the Sensex's positive 0.61, underscores the poor risk-reward proposition.

Investment Thesis: Value Trap or Turnaround Opportunity?

Rajshree Polypack presents a classic case of a value trap—a stock that appears cheap on traditional valuation metrics but faces fundamental challenges that justify the discount. The company's proprietary investment score of 28 out of 100 places it firmly in "Strong Sell" territory, reflecting the convergence of multiple negative factors.

The investment thesis faces headwinds across three of the four key parameters. Whilst valuation appears attractive, the company suffers from below-average quality (weak ROE and ROCE), flat financial performance in recent quarters, and mildly bearish technical trends. The technical picture shows the stock trading below all major moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), with bearish signals from the MACD, Bollinger Bands, Dow Theory, and On-Balance Volume indicators.

Key Strengths & Risk Factors

Outlook: What to Watch

The forward outlook for Rajshree Polypack remains challenging. The company needs to demonstrate sustained improvement in core operational metrics—particularly revenue growth, margin expansion, and return ratios—to justify even its current depressed valuation. The absence of institutional investors suggests the market remains sceptical about the company's ability to execute a turnaround.

For the stock to re-rate meaningfully, investors would need to see evidence of: (1) consistent quarter-on-quarter revenue growth, (2) PAT margins expanding towards 6-7% levels, (3) ROE improving towards double digits, (4) reduced dependency on other income, and (5) some level of institutional participation validating the investment case. Until these catalysts materialise, the stock is likely to remain range-bound or continue its downward trajectory.