With a market capitalisation of ₹2,429 crores, Rashi Peripherals operates in the competitive IT hardware distribution space, serving as a critical link between global technology brands and the Indian market. The company's Q3 FY26 results showcase impressive top-line momentum, with net sales reaching ₹4,030.41 crores, marking a substantial 42.60% year-on-year growth, though revenues declined 3.01% sequentially from Q2 FY26's elevated base of ₹4,155.41 crores.
The quarter's standout performance lies in the dramatic profit expansion, with consolidated net profit more than doubling from ₹31.84 crores in Q3 FY25 to ₹73.55 crores. This exceptional growth trajectory, however, must be contextualised against the unusually weak base of Q3 FY25, when the company recorded its lowest quarterly profit in recent history. The sequential profit growth of 25.71% from Q2 FY26's ₹58.51 crores demonstrates more sustainable momentum, driven by improved operational efficiency and better cost management.
| Quarter | Net Sales (₹ Cr) | QoQ % | YoY % | Net Profit (₹ Cr) | QoQ % | YoY % | PAT Margin % |
|---|---|---|---|---|---|---|---|
| Dec'25 | 4,030.41 | -3.01% | +42.60% | 73.55 | +25.71% | +131.00% | 1.85% |
| Sep'25 | 4,155.41 | +31.83% | +12.12% | 58.51 | -4.58% | -16.10% | 1.43% |
| Jun'25 | 3,152.14 | +6.02% | -26.13% | 61.32 | +19.58% | +11.07% | 1.96% |
| Mar'25 | 2,973.17 | +5.20% | — | 51.28 | +61.06% | — | 1.77% |
| Dec'24 | 2,826.31 | -23.74% | — | 31.84 | -54.34% | — | 1.13% |
| Sep'24 | 3,706.17 | -13.15% | — | 69.74 | +26.32% | — | 1.89% |
| Jun'24 | 4,267.08 | — | — | 55.21 | — | — | 1.29% |
Financial Performance: Growth Momentum Tempered by Margin Volatility
Rashi Peripherals' Q3 FY26 financial performance reveals a company experiencing significant top-line expansion whilst navigating persistent margin challenges. Net sales of ₹4,030.41 crores in Q3 FY26 represent a 42.60% year-on-year increase, substantially outpacing the company's five-year sales compound annual growth rate of 22.60%. However, the 3.01% sequential decline from Q2 FY26's ₹4,155.41 crores suggests some volatility in quarterly revenue patterns, typical of the IT hardware distribution sector where demand fluctuates based on product launches, enterprise refresh cycles, and seasonal buying patterns.
The operating profit before depreciation, interest, tax and other income (PBDIT excluding OI) reached ₹118.93 crores in Q3 FY26, marking the highest quarterly level on record. This translated to an operating margin of 2.95%, a substantial improvement from the exceptionally weak 0.76% recorded in Q3 FY25, though only marginally better than Q2 FY26's 2.49%. The year-on-year margin expansion of 219 basis points reflects improved product mix, better vendor terms, and enhanced operational efficiency, though the absolute margin level remains modest by industry standards.
The profit after tax margin of 1.85% in Q3 FY26, whilst improved from 1.13% in Q3 FY25, remains below the company's historical peak and reflects the inherently low-margin nature of the IT hardware distribution business. The gross profit margin of 2.60% and PAT margin of 1.85% underscore the capital-intensive, volume-driven nature of the business model, where success depends on rapid inventory turnover and efficient working capital management rather than premium pricing power.
Interest costs increased to ₹26.24 crores in Q3 FY26 from ₹22.86 crores in Q3 FY25, reflecting higher working capital requirements to support the expanded revenue base. The tax rate of 24.44% in Q3 FY26 remained within the normalised range, indicating no material tax benefits or anomalies distorting the reported profit figures. Employee costs rose to ₹55.66 crores from ₹43.15 crores year-on-year, a 29.00% increase that broadly aligns with revenue growth and suggests controlled headcount expansion.
Capital Efficiency: Modest Returns Despite Growth Momentum
Rashi Peripherals' return on equity (ROE) stands at 10.87% on an average basis, with the latest reading at 10.84%, positioning the company in the lower tier of profitability metrics. Whilst higher ROE values typically indicate superior capital efficiency and profitability, Rashi's single-digit to low-double-digit ROE reflects the structural constraints of the IT hardware distribution sector, where thin margins and high capital intensity limit return potential. The return on capital employed (ROCE) of 11.17% on average, with the latest figure at 10.91%, similarly underscores moderate capital productivity.
The company's balance sheet reveals a shareholder equity base of ₹1,742.16 crores as of March 2025, up from ₹1,550.58 crores in March 2024, demonstrating steady capital accumulation through retained earnings. Long-term debt remains minimal at ₹0.88 crores, though current liabilities of ₹2,506.07 crores reflect the working capital-intensive nature of the distribution business. The debt-to-EBITDA ratio of 2.87 and net debt-to-equity of 0.50 indicate moderate leverage levels, manageable given the company's cash generation capabilities and established market position.
Capital Efficiency Reality Check
With ROE of 10.84% and ROCE of 10.91%, Rashi Peripherals generates returns that, whilst positive, lag behind higher-quality businesses in other sectors. The IT hardware distribution model inherently limits margin expansion due to intense competition, limited product differentiation, and the need to maintain competitive pricing. Investors should temper expectations for dramatic profitability improvements, as the business model favours volume growth over margin expansion.
Current assets of ₹4,175.94 crores as of March 2025, comprising primarily inventory and receivables, dwarf the fixed asset base of ₹53.98 crores, highlighting the working capital-intensive nature of operations. The company's ability to efficiently manage this substantial working capital base—converting inventory to sales and collecting receivables promptly—remains critical to sustaining profitability and generating positive cash flows.
Cash Flow Dynamics: Working Capital Absorption Remains a Concern
Rashi Peripherals' cash flow statement for FY25 reveals persistent challenges in converting accounting profits into operating cash flows. Despite reporting a profit before tax of ₹268.00 crores for FY25, the company generated negative operating cash flow of ₹299.00 crores, primarily due to a ₹565.00 crores absorption in working capital. This pattern of working capital intensity reflects the rapid revenue growth trajectory, where expanding sales necessitate proportional increases in inventory and receivables, temporarily consuming cash before the business cycle completes.
The closing cash position of ₹21.00 crores as of March 2025, down from ₹145.00 crores in March 2024, highlights the cash-intensive nature of the growth phase. However, cash flow from financing activities of ₹122.00 crores in FY25 provided necessary liquidity support, demonstrating the company's ability to access capital markets and banking facilities to fund expansion. Investors should monitor whether future quarters demonstrate improved cash conversion as revenue growth potentially moderates and working capital requirements stabilise.
Industry Context: Navigating a Challenging IT Hardware Landscape
The IT hardware distribution sector in India faces a complex operating environment characterised by rapid technological change, intense competition, and evolving customer preferences. Rashi Peripherals operates as an intermediary between global technology manufacturers and Indian enterprises, retailers, and consumers, providing logistics, financing, and market access services. The sector's health depends significantly on enterprise IT spending cycles, government digitisation initiatives, and consumer demand for personal computing devices.
Recent quarters have witnessed volatility in demand patterns, with Q3 FY25's weak performance attributed to broader market softness and inventory destocking across channels. The subsequent recovery in FY26 suggests improved demand conditions, potentially driven by enterprise refresh cycles, educational institution purchases, and consumer upgrade patterns. However, the sector remains inherently cyclical, with profitability vulnerable to changes in vendor terms, competitive intensity, and foreign exchange fluctuations given the predominantly imported nature of products.
Competitive Positioning and Market Share
Rashi Peripherals' ability to sustain 42.60% year-on-year revenue growth in Q3 FY26, substantially outpacing the broader IT hardware sector's performance, suggests market share gains and successful vendor partnerships. The company's established relationships with leading global technology brands, extensive distribution network, and financial strength provide competitive advantages in securing favourable terms and accessing growth opportunities. However, maintaining this growth trajectory will require continued investment in infrastructure, talent, and technology whilst managing margin pressures from intensifying competition.
Peer Comparison: Valuation Discount Reflects Quality Concerns
Rashi Peripherals' valuation metrics reveal a significant discount to several peers in the IT hardware sector, though direct comparisons prove challenging given the diverse business models and scale differences within the peer group. The company's price-to-earnings ratio of 12.08 times trailing twelve-month earnings positions it at a substantial discount to peers like Aditya Infotech (128.92x), GNG Electronics (46.11x), and NELCO (758.54x), though more comparable to D-Link India's 14.19x multiple.
| Company | P/E (TTM) | P/BV | ROE % | Div Yield % | Debt/Equity |
|---|---|---|---|---|---|
| Rashi Peripherals | 12.08 | 1.31 | 10.87 | 0.54 | 0.50 |
| Aditya Infotech | 128.92 | 12.71 | 31.32 | — | 0.78 |
| GNG Electronics | 46.11 | 4.76 | 31.22 | — | 1.65 |
| NELCO | 758.54 | 11.57 | 15.67 | 0.15 | 0.32 |
| D-Link India | 14.19 | 3.11 | 20.15 | 5.07 | -0.51 |
| Bharat Global | 223.06 | 5.84 | 2.89 | — | 0.46 |
The company's return on equity of 10.87% lags considerably behind peers like Aditya Infotech (31.32%), GNG Electronics (31.22%), and D-Link India (20.15%), explaining much of the valuation discount. The price-to-book ratio of 1.31 times, whilst modest in absolute terms, appears reasonable given the subdued ROE profile. Investors paying 1.31 times book value for a business generating 10.87% returns on equity receive a valuation that broadly aligns with the underlying profitability, though offers limited margin of safety.
Rashi Peripherals' dividend yield of 0.54%, based on the latest dividend of ₹2.00 per share, trails D-Link India's more attractive 5.07% yield, reflecting the company's preference to retain earnings for growth investments rather than distribute cash to shareholders. The dividend payout ratio of 4.94% confirms this capital retention strategy, appropriate for a company in growth mode but potentially disappointing for income-focused investors.
Valuation Analysis: Attractive Entry Point with Quality Caveats
At the current market price of ₹387.95, Rashi Peripherals trades at 12.08 times trailing twelve-month earnings and 1.31 times book value, multiples that appear undemanding relative to the company's growth trajectory. The enterprise value-to-EBITDA ratio of 10.43 times and EV-to-capital employed of 1.21 times further support the assessment of attractive valuation, particularly when contextualised against the company's market position and growth potential.
The stock's price-earnings-to-growth (PEG) ratio of 0.23 suggests significant undervaluation if the company can sustain its historical growth rates, though investors should exercise caution given the cyclical nature of the IT hardware sector and the challenges in maintaining elevated growth rates from an expanding base. The valuation grade of "Very Attractive" assigned by quantitative models reflects these compelling multiples, though qualitative factors—including modest profitability metrics and working capital intensity—warrant consideration.
The stock's 52-week range of ₹245.00 to ₹410.50 provides context for current valuation, with the present price of ₹387.95 positioned 5.49% below the recent high and 58.35% above the annual low. This positioning suggests the market has largely priced in the improved operational performance, though further upside potential exists if the company demonstrates sustainable margin expansion and improved cash generation in coming quarters.
Shareholding Pattern: Steady Institutional Accumulation
Rashi Peripherals' shareholding structure reveals stable promoter commitment alongside gradually increasing institutional participation. Promoter holdings stood at 63.98% as of December 2025, marginally up from 63.65% in June 2025, demonstrating continued confidence in the company's prospects. The promoter group, led by the founding families of Suresh Kumar Pansari and Krishna Kumar Choudhary, maintains substantial skin in the game with zero pledged shares, a positive indicator of financial health and alignment with minority shareholders.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % |
|---|---|---|---|---|---|
| Dec'25 | 63.98 | 0.66 | 8.81 | 0.01 | 9.63 |
| Jun'25 | 63.65 | 1.05 | 7.20 | 0.55 | 8.65 |
| Mar'25 | 63.61 | 1.12 | 7.12 | 0.61 | 8.63 |
| Dec'24 | 63.41 | 1.67 | 6.92 | 0.66 | 8.51 |
| Sep'24 | 63.41 | 0.90 | 6.12 | 0.64 | 8.52 |
Mutual fund holdings increased notably to 8.81% in December 2025 from 7.20% in June 2025, indicating growing interest from domestic institutional investors who have likely recognised the company's improving fundamentals and attractive valuation. Other domestic institutional investors (DIIs) similarly increased their stake to 9.63% from 8.65%, reinforcing the positive institutional sentiment. The combined institutional holding of 19.11% provides a supportive shareholder base, though remains modest compared to larger, more liquid stocks.
Foreign institutional investor (FII) participation decreased to 0.66% in December 2025 from 1.05% in June 2025, suggesting some profit-booking or reallocation by overseas investors. Insurance company holdings declined sharply to 0.01% from 0.55%, though the absolute magnitude remains immaterial. The non-institutional shareholding of 16.91% provides adequate free float for liquidity, though investors should note the stock's small-cap classification and potential for volatility during market stress.
Stock Performance: Outperformance Driven by Results Recovery
Rashi Peripherals' stock has delivered impressive returns across multiple timeframes, substantially outperforming the broader Sensex and demonstrating strong positive alpha. The one-year return of 19.33% compares favourably to the Sensex's 6.63% gain, generating alpha of 12.70 percentage points. More notably, the stock has generated 33.45% returns over the past six months against the Sensex's 3.43%, reflecting the market's recognition of improving operational performance and earnings momentum.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +8.85% | +1.76% | +7.09% |
| 1 Month | +8.35% | -2.29% | +10.64% |
| 3 Months | +15.70% | +0.40% | +15.30% |
| 6 Months | +33.45% | +3.43% | +30.02% |
| YTD | +8.24% | -1.67% | +9.91% |
| 1 Year | +19.33% | +6.63% | +12.70% |
The stock's recent momentum has been particularly strong, with the one-week return of 8.85% and one-month return of 8.35% reflecting positive investor response to the Q3 FY26 results. The stock trades above all key moving averages—5-day (₹359.55), 20-day (₹362.33), 50-day (₹349.09), 100-day (₹337.64), and 200-day (₹317.34)—indicating robust technical momentum and positive trend structure.
Compared to the IT hardware sector, which delivered negative returns of 25.29% over the past year, Rashi Peripherals' 19.33% gain represents substantial outperformance of 44.62 percentage points. This sector-relative strength highlights the company's idiosyncratic positive factors—improving market share, better vendor relationships, and operational efficiency gains—that have insulated it from broader sectoral headwinds.
The stock's beta of 1.35 classifies it as a high-beta security, meaning it tends to move 35% more than the broader market in either direction. This elevated volatility, reflected in the 34.05% annual volatility measure, demands careful position sizing and risk management. The Sharpe ratio, whilst positive, indicates that investors receive moderate risk-adjusted returns given the substantial volatility profile.
Investment Thesis: Growth Potential Tempered by Quality Concerns
Rashi Peripherals presents a compelling investment case built on strong revenue growth momentum, improving profitability, and attractive valuation multiples. The company's ability to deliver 42.60% year-on-year revenue growth in Q3 FY26 whilst expanding operating margins demonstrates operational leverage and market share gains. The "Very Attractive" valuation grade, supported by a P/E ratio of 12.08 times and PEG ratio of 0.23, suggests the market has not fully priced in the company's growth potential.
However, several quality concerns temper enthusiasm. The average quality grade reflects modest return on equity (10.87%) and return on capital employed (11.17%), metrics that lag behind higher-quality peers and limit the company's ability to compound shareholder wealth at elevated rates. The persistently negative operating cash flows, driven by working capital absorption, raise questions about the sustainability of the growth model and the company's ability to self-fund expansion without continued reliance on external financing.
The positive financial trend classification for Q3 FY26, driven by record quarterly profits and improved margins, provides near-term momentum. Technical indicators uniformly point to bullish conditions, with the stock trading above all major moving averages and displaying positive momentum across weekly and monthly timeframes. The recent trend change to "Bullish" from "Mildly Bullish" on February 3, 2026, confirms improving technical structure.
Key Strengths & Risk Factors
KEY STRENGTHS
- Robust Revenue Growth: 42.60% YoY sales growth in Q3 FY26 demonstrates strong market demand and potential market share gains in the IT hardware distribution space.
- Improving Profitability: Operating margins expanded 219 basis points YoY to 2.95%, with net profit more than doubling, indicating operational leverage and efficiency gains.
- Attractive Valuation: P/E of 12.08x and PEG ratio of 0.23 suggest significant undervaluation relative to growth potential, providing margin of safety.
- Strong Promoter Commitment: 63.98% promoter holding with zero pledging demonstrates alignment with shareholders and financial stability.
- Increasing Institutional Interest: Mutual fund holdings rose to 8.81% from 6.12%, reflecting growing confidence from sophisticated investors.
- Positive Technical Momentum: Stock trading above all moving averages with bullish trend classification supports near-term price performance.
- Sector Outperformance: 44.62 percentage points of outperformance versus IT hardware sector demonstrates company-specific strengths.
KEY CONCERNS
- Modest Return Metrics: ROE of 10.87% and ROCE of 11.17% indicate below-average capital efficiency, limiting wealth compounding potential.
- Thin Margins: Operating margin of 2.95% and PAT margin of 1.85% leave limited buffer for adverse developments or competitive pressures.
- Working Capital Intensity: Negative operating cash flow of ₹299 crores in FY25 raises concerns about cash generation and sustainability of growth model.
- High Volatility: Beta of 1.35 and volatility of 34.05% indicate substantial price fluctuations, unsuitable for conservative investors.
- Cyclical Sector Exposure: IT hardware distribution remains vulnerable to demand cycles, technological disruptions, and competitive intensity.
- Low Dividend Yield: 0.54% dividend yield provides minimal income component, with most value dependent on capital appreciation.
- Small-Cap Liquidity: Market cap of ₹2,429 crores limits institutional participation and may result in liquidity challenges during market stress.
Outlook: What to Watch in Coming Quarters
POSITIVE CATALYSTS
- Sustained Revenue Momentum: Continued quarterly sales growth above 20% YoY would validate market share gains and strengthen investment case.
- Margin Expansion: Operating margins crossing 3.50% sustainably would demonstrate pricing power and operational efficiency improvements.
- Cash Flow Conversion: Positive operating cash flows would address key quality concern and demonstrate business model sustainability.
- Institutional Accumulation: Further increases in mutual fund and DII holdings would provide price support and validate improving fundamentals.
RED FLAGS
- Revenue Deceleration: Sequential revenue declines or YoY growth falling below 15% would signal market share loss or sector weakness.
- Margin Compression: Operating margins falling below 2.50% would raise concerns about competitive pressures and pricing environment.
- Deteriorating Working Capital: Further increases in working capital absorption or inventory days would strain cash flows and financial flexibility.
- Promoter Stake Reduction: Any material decrease in promoter holdings or emergence of pledging would signal potential concerns about business prospects.
The forward outlook for Rashi Peripherals depends critically on the company's ability to sustain revenue growth momentum whilst improving capital efficiency and cash generation. The IT hardware sector's cyclical nature demands vigilant monitoring of demand trends, competitive dynamics, and margin pressures. Management's ability to navigate these challenges whilst expanding market share and improving operational metrics will determine whether the current attractive valuation translates into sustained shareholder value creation.
The Verdict: Cautious Hold with Growth Potential
Score: 67/100
For Fresh Investors: Exercise caution at current levels. Whilst the valuation appears attractive and growth momentum is encouraging, the modest quality metrics (ROE 10.87%, negative operating cash flows) and high volatility (beta 1.35) suggest waiting for a better entry point or evidence of sustained margin expansion and improved cash generation. Consider initiating small positions with strict stop-losses if risk tolerance permits.
For Existing Holders: Continue to hold positions whilst monitoring quarterly results closely. The improving financial trend, positive technical momentum, and attractive valuation provide support, but be prepared to exit if margins compress or revenue growth decelerates materially. Set mental stop-loss at ₹340-350 levels (10% below current price) to protect gains.
Fair Value Estimate: ₹420-450 (8-16% upside potential), contingent upon sustained revenue growth above 25% YoY and operating margins stabilising above 3.00%. The estimate assumes continued market share gains, stable competitive environment, and gradual improvement in return metrics over the next 12-18 months.
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.
