The quarter's results paint a concerning picture for the Delhi-based power company, with net sales declining 20.47% sequentially to ₹653.72 crores from ₹821.96 crores in Q1 FY26. On a year-on-year basis, revenue fell 4.21% from ₹682.43 crores in Q2 FY25. The sharp revenue contraction, coupled with elevated interest costs of ₹112.08 crores, pushed the company into negative territory despite generating operating profit of ₹51.70 crores before other income.
The most alarming development, however, was the precipitous decline in promoter shareholding from 88.65% in June 2025 to 44.06% in September 2025, raising questions about ownership stability and strategic direction. This dramatic shift occurred alongside deteriorating financial metrics across virtually all operational parameters.
Financial Performance: A Quarter of Deepening Losses
RattanIndia Power's Q2 FY26 performance represents a significant deterioration from recent quarters. Net sales of ₹653.72 crores marked the lowest quarterly revenue in the past two years, declining 20.47% from Q1 FY26's ₹821.96 crores and falling 4.21% below the year-ago quarter's ₹682.43 crores. This revenue weakness stemmed from lower power generation volumes and subdued demand conditions in the company's operational regions.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Operating Profit (₹ Cr) | Margin % | Net Profit (₹ Cr) | PAT Margin % |
|---|---|---|---|---|---|---|
| Sep'25 | 653.72 | -20.47% | 51.70 | 7.91% | -31.55 | -4.83% |
| Jun'25 | 821.96 | -12.21% | 96.67 | 11.76% | -13.11 | -1.59% |
| Mar'25 | 936.25 | +27.67% | 211.84 | 22.63% | 125.94 | 13.45% |
| Dec'24 | 733.32 | +7.46% | 90.30 | 12.31% | 4.33 | 0.59% |
| Sep'24 | 682.43 | -26.76% | 93.94 | 13.77% | -1.35 | -0.20% |
| Jun'24 | 931.83 | +1.96% | 188.57 | 20.24% | 93.00 | 9.98% |
| Mar'24 | 913.96 | — | 206.03 | 22.54% | 10,665.75 | 1166.98% |
Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) collapsed to ₹51.70 crores in Q2 FY26, representing the lowest level in the past eight quarters. This translated to an operating margin of just 7.91%, down sharply from 11.76% in the previous quarter and 13.77% in the year-ago period. The margin compression reflects both revenue pressure and inadequate cost control, with total expenditure remaining elevated relative to the shrinking revenue base.
Interest expenses of ₹112.08 crores, whilst lower than the previous quarter's ₹148.18 crores, continued to exert significant pressure on profitability. The company's operating profit to interest coverage ratio stood at a concerning 0.46 times, indicating that operating profits are insufficient to service debt obligations. Combined with depreciation charges of ₹60.86 crores, these fixed costs pushed the company to a pre-tax loss of ₹31.55 crores.
The profit after tax (PAT) margin deteriorated to negative 4.83% in Q2 FY26 from negative 1.59% in Q1 FY26, highlighting the severity of the profitability challenge. For the half-year period H1 FY26, the company reported a cumulative net loss of ₹44.66 crores on revenues of ₹1,475.68 crores, a stark contrast to the ₹91.65 crore profit achieved in H1 FY25.
Critical Profitability Concerns
Operational Efficiency Crisis: Operating margins have compressed to 7.91%, the lowest in recent history, whilst interest coverage has fallen to just 0.46 times. The company's inability to generate sufficient operating profits to cover its debt servicing obligations raises serious questions about financial sustainability. With an average ROCE of 3.82% and ROE of just 0.97%, RattanIndia Power is destroying shareholder value rather than creating it.
Operational Challenges: Structural Headwinds Intensify
RattanIndia Power's operational struggles extend beyond cyclical weakness to fundamental structural challenges. The company's average return on capital employed (ROCE) of 3.82% and return on equity (ROE) of 0.97% rank amongst the weakest in the Indian power sector, indicating poor capital productivity and inefficient asset utilisation. These metrics suggest that the company is generating minimal returns on the substantial capital invested in its power generation assets.
The balance sheet reveals a highly leveraged capital structure with long-term debt of ₹3,262.40 crores as of March 2025, resulting in a debt-to-equity ratio of 0.71. Whilst this leverage ratio appears moderate on the surface, the company's weak profitability and cash generation capabilities make this debt burden particularly onerous. The average debt-to-EBITDA ratio of 13.86 times indicates that it would take nearly 14 years of current EBITDA generation to repay outstanding debt, assuming no additional capital expenditure or working capital requirements.
Cash flow generation has also weakened significantly. Operating cash flow for FY25 stood at ₹409.00 crores, the lowest in recent years and down from ₹1,305.00 crores in FY24. This declining cash generation capacity, combined with ongoing interest obligations averaging ₹478.00 crores annually, leaves little room for capital expenditure, debt reduction, or shareholder returns. The company has not paid dividends in recent years, reflecting its strained financial position.
Balance Sheet Stress Indicators
With shareholder funds of ₹4,585.03 crores supporting total assets of ₹8,946.95 crores as of March 2025, the company maintains a reasonable equity cushion. However, the negative reserves of ₹785.08 crores (after adjusting for share capital of ₹5,370.11 crores) indicate accumulated losses over time. Fixed assets of ₹6,061.97 crores represent the bulk of the asset base, comprising thermal power generation facilities that require ongoing maintenance capital expenditure.
Shareholding Shock: Promoter Stake Halves in Single Quarter
The most dramatic development in Q2 FY26 was the precipitous 44.59% decline in promoter shareholding from 88.65% to 44.06%. This represents one of the largest single-quarter promoter stake reductions in recent Indian corporate history and raises significant questions about the company's strategic direction and ownership stability. The promoter entities, RR Infralands Private Limited (24.25%) and RattanIndia Enterprises Limited (19.81%), now hold a combined stake barely above the regulatory minimum for listed companies.
| Quarter | Promoter % | QoQ Change | FII % | MF % | Insurance % | Other DII % |
|---|---|---|---|---|---|---|
| Sep'25 | 44.06% | -44.59% | 5.13% | 0.17% | 0.01% | 6.47% |
| Jun'25 | 88.65% | 0.00% | 4.96% | 0.16% | 0.01% | 6.50% |
| Mar'25 | 88.65% | 0.00% | 5.25% | 0.14% | 0.01% | 6.51% |
| Dec'24 | 88.65% | 0.00% | 5.02% | 0.00% | 0.03% | 6.50% |
| Sep'24 | 88.65% | — | 4.39% | 0.04% | 0.03% | 6.50% |
Institutional participation remains minimal, with foreign institutional investors holding just 5.13%, mutual funds at 0.17%, and insurance companies at 0.01%. The low institutional ownership of 11.78% reflects limited confidence from professional investors in the company's prospects. Non-institutional shareholders now hold 44.16% of the equity, representing primarily retail and high-net-worth individual investors who may lack the resources to influence corporate governance or strategic direction.
Positively, there is no promoter pledging, eliminating one potential risk factor. However, the dramatic reduction in promoter stake without corresponding institutional buying suggests either financial distress forcing stake sales or a strategic pivot that has yet to be disclosed to the market.
Industry Context: Power Sector Headwinds
The Indian power sector has faced challenging conditions in recent quarters, with subdued demand growth, surplus generation capacity in certain regions, and regulatory pressures on tariffs. Thermal power generators like RattanIndia Power have been particularly affected by rising coal costs, environmental compliance requirements, and competition from renewable energy sources that enjoy policy support and declining costs.
The company operates in a highly regulated environment where power purchase agreements (PPAs) with state distribution companies determine revenue visibility. Any delays in payments from discoms or renegotiation of PPAs can significantly impact cash flows and profitability. The broader sector has also witnessed consolidation, with stronger players acquiring distressed assets, potentially leaving smaller independent power producers at a competitive disadvantage.
Peer Comparison: Underperformance Across Metrics
When compared to peers in the power sector, RattanIndia Power's financial metrics reveal significant underperformance. The company's ROE of 0.97% lags far behind industry leaders such as KPI Green Energy (25.63%) and Waaree Renewables (36.64%). Even JP Power Ventures, another thermal power producer, delivers an ROE of 3.86%, nearly four times higher than RattanIndia Power.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| RattanIndia Power | 50.68x | 1.28x | 0.97% | 0.71 | — |
| Waaree Renewables | 36.64x | 1.97x | 36.64% | -0.35 | 0.08% |
| KPI Green Energy | 29.18x | 4.01x | 25.63% | 0.34 | 0.14% |
| JP Power Ventures | 16.63x | 0.10x | 3.86% | -0.11 | — |
| Reliance Infrastructure | 2.13x | 0.61x | 5.32% | 0.24 | — |
| GMR Urban | NA (Loss Making) | 14.25x | 0.00% | 15.38 | — |
The company's P/E ratio of 50.68x appears elevated relative to its operational performance and peer valuations. Whilst this multiple is higher than most peers, it reflects the minimal profitability base rather than premium quality or growth prospects. The price-to-book ratio of 1.28x suggests the market values the company only marginally above its book value, acknowledging the limited earning power of its assets.
RattanIndia Power's debt-to-equity ratio of 0.71 sits in the middle of the peer group, but its weak profitability makes this leverage more concerning than for better-performing competitors. The company's inability to pay dividends further distinguishes it from peers like KPI Green Energy and Waaree Renewables that reward shareholders whilst maintaining growth investments.
Valuation Analysis: Attractive Price Masks Fundamental Weakness
Despite its operational struggles, RattanIndia Power trades at what appears to be an "attractive" valuation on traditional metrics. The stock's current price of ₹10.93 represents a 35.48% decline from its 52-week high of ₹16.94, though it remains 29.50% above its 52-week low of ₹8.44. The company's proprietary valuation grade stands at "Attractive," having been downgraded from "Very Attractive" in July 2025.
However, this apparent valuation attractiveness must be viewed with considerable scepticism. With a P/E ratio of 50.68x on minimal earnings and deteriorating fundamentals, the stock appears expensive rather than cheap. The price-to-book ratio of 1.28x provides limited downside protection given the poor return on equity of 0.97%, suggesting the book value itself may not represent true economic value.
The EV/EBITDA multiple of 18.51x and EV/EBIT of 36.37x appear elevated for a company with declining profitability and negative financial trends. The PEG ratio of 0.46x might suggest value, but this metric becomes meaningless when the underlying earnings quality is poor and growth is driven by one-off items rather than sustainable operational improvements.
"With an average ROCE of 3.82% and ROE below 1%, RattanIndia Power is failing to generate adequate returns on invested capital, making even a seemingly attractive valuation a potential value trap."
Stock Performance: Significant Underperformance Across Timeframes
RattanIndia Power's stock has significantly underperformed both the broader market and its sectoral peers across most timeframes. Over the past year, the stock has declined 23.94% compared to the Sensex's 5.73% gain, resulting in negative alpha of 29.67%. The underperformance versus the power sector has been even more pronounced, with the stock lagging the sector by 18.39 percentage points.
| Period | Stock Return | Sensex Return | Alpha | Assessment |
|---|---|---|---|---|
| 1 Week | -1.62% | -0.32% | -1.30% | Underperforming |
| 1 Month | -5.20% | +3.65% | -8.85% | Weak |
| 3 Month | -14.48% | +3.39% | -17.87% | Severe underperformance |
| 6 Month | +9.96% | +4.61% | +5.35% | Outperforming |
| YTD | -20.10% | +7.42% | -27.52% | Major underperformance |
| 1 Year | -23.94% | +5.73% | -29.67% | Significant lag |
| 2 Years | +52.23% | +31.41% | +20.82% | Strong outperformance |
| 3 Years | +161.48% | +38.18% | +123.30% | Exceptional gains |
The recent performance has been particularly concerning, with the stock declining 14.48% over the past three months whilst the Sensex gained 3.39%. Year-to-date, the stock is down 20.10% against the Sensex's 7.42% gain. The only bright spot appears in longer-term returns, with the stock delivering 161.48% returns over three years and 52.23% over two years, significantly outperforming the broader market during those periods.
However, these historical gains reflect the stock's recovery from extremely depressed levels rather than sustainable value creation. The recent reversal in performance aligns with deteriorating fundamentals and suggests that earlier gains may have been driven by speculation rather than genuine improvement in business quality.
Technical Outlook: Bearish Signals Dominate
From a technical perspective, RattanIndia Power exhibits predominantly bearish signals across multiple timeframes. The stock's current trend is classified as "Mildly Bearish," having changed from "Sideways" on October 29, 2025, at ₹11.45. The stock trades below all key moving averages, including the 5-day (₹11.25), 20-day (₹11.25), 50-day (₹11.81), 100-day (₹12.88), and 200-day (₹11.71) moving averages, indicating sustained selling pressure.
Technical indicators present a mixed but predominantly negative picture. The MACD shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate bearish conditions across both periods. The Relative Strength Index (RSI) provides the only bullish signal on the weekly chart, though it shows no clear signal on the monthly timeframe. The On-Balance Volume (OBV) indicator suggests mildly bullish accumulation on the weekly chart but turns mildly bearish on the monthly view.
The stock faces immediate resistance at ₹11.25 (20-day moving average area), with major resistance at ₹12.88 (100-day moving average) and strong resistance at ₹11.71 (200-day moving average). Support lies at the 52-week low of ₹8.44, suggesting potential downside of 22.75% from current levels if selling pressure intensifies. The stock's high beta of 1.35 indicates greater volatility than the broader market, with volatility of 49.94% classifying it as a "High Risk Low Return" investment.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
RattanIndia Power's investment case is severely compromised by deteriorating fundamentals, weak profitability metrics, and concerning governance developments. The company's proprietary Mojo Score of 20 out of 100 places it firmly in "Strong Sell" territory, reflecting the confluence of negative factors across valuation, quality, financial trends, and technical indicators.
The company's quality grade of "Below Average" reflects its poor long-term financial performance, with an average ROCE of 3.82% and ROE of 0.97% indicating value destruction rather than creation. The financial trend is classified as "Negative," driven by declining revenues, collapsing margins, mounting losses, and deteriorating cash generation. Technical trends remain "Mildly Bearish," with the stock trading below all key moving averages and exhibiting high volatility.
Whilst the valuation appears "Attractive" on traditional metrics, this attractiveness is illusory given the poor quality of earnings and negative trajectory. A low P/E or P/B ratio means little when the underlying business generates inadequate returns on capital and faces structural profitability challenges.
Key Strengths
- Long-term Growth Track Record: 5-year sales CAGR of 17.64% demonstrates historical ability to grow top line
- No Promoter Pledging: Zero pledged shares eliminates one governance risk factor
- Established Asset Base: ₹6,061.97 crores in fixed assets comprising operational power generation facilities
- Positive Historical Returns: 161.48% returns over 3 years and 52.23% over 2 years
- Moderate Debt-to-Equity: Leverage ratio of 0.71 is manageable compared to some sector peers
Key Concerns
- Profitability Collapse: Net loss of ₹31.55 crores in Q2 FY26 versus ₹93.00 crore profit in Q2 FY25
- Margin Compression: Operating margins declined to 7.91%, lowest in recent quarters
- Weak Returns on Capital: ROCE of 3.82% and ROE of 0.97% indicate poor capital efficiency
- Dramatic Promoter Exit: Promoter stake halved from 88.65% to 44.06% in single quarter
- High Debt Servicing: Interest coverage of just 0.46x raises sustainability concerns
- Minimal Institutional Support: Only 11.78% institutional holding reflects low professional investor confidence
- Negative Financial Trend: Deteriorating metrics across revenue, margins, and cash generation
- High Volatility: Beta of 1.35 and 49.94% volatility classify it as high-risk investment
Outlook: Critical Monitoring Points
Looking ahead, RattanIndia Power faces significant challenges that will determine its viability as an investment. The company must demonstrate operational improvement, restore profitability, and provide clarity on the dramatic reduction in promoter shareholding. Investors should closely monitor several key factors in coming quarters.
Potential Positive Catalysts
- Improvement in plant load factors and capacity utilisation
- Securing new long-term power purchase agreements at remunerative tariffs
- Successful refinancing of debt at lower interest costs
- Clarity on promoter stake reduction and strategic direction
- Recovery in power demand and pricing in key markets
Critical Red Flags to Monitor
- Further deterioration in operating margins below 7% levels
- Continued quarterly losses extending beyond H1 FY26
- Additional promoter stake reductions or distress sales
- Debt covenant violations or refinancing difficulties
- Delays in receivables from state distribution companies
- Operating cash flow turning negative
The company's ability to return to profitability in H2 FY26 will be crucial. Any further deterioration in margins or continued losses would raise serious questions about the sustainability of operations. The dramatic reduction in promoter shareholding demands transparent disclosure about the reasons and implications for corporate governance and strategic direction.
The Verdict: Exit Strongly Recommended
Score: 20/100
For Fresh Investors: Avoid initiating any position. The combination of deteriorating fundamentals, weak profitability metrics, concerning governance developments, and negative technical trends creates an unfavourable risk-reward profile. The apparently attractive valuation is a value trap given the poor quality of earnings and structural challenges facing the business.
For Existing Holders: Strongly consider exiting positions at current levels. The dramatic reduction in promoter stake from 88.65% to 44.06%, coupled with mounting losses, margin compression, and weak returns on capital, suggests fundamental problems that may take considerable time to resolve. The stock's classification as "High Risk Low Return" with a Mojo Score of just 20/100 warrants immediate portfolio review.
Fair Value Estimate: ₹8.50 (22.23% downside from current price of ₹10.93). This estimate reflects the company's poor profitability, weak return metrics, and negative financial trends. Until the company demonstrates sustained operational improvement and provides clarity on the promoter stake reduction, the stock remains a high-risk proposition with limited upside potential.
Rationale: RattanIndia Power's Q2 FY26 results reveal a company in distress, with collapsing profitability, shrinking revenues, and a dramatic halving of promoter shareholding that raises serious governance questions. The weak ROCE of 3.82% and ROE of 0.97% indicate chronic value destruction, whilst the elevated debt burden and poor interest coverage threaten financial sustainability. Technical indicators remain bearish, and the stock has significantly underperformed both the market and its sector. Until fundamental improvements materialise and ownership stability is restored, the risk-reward equation remains decidedly unfavourable.
⚠️ 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.
