Raw Edge Industrial Solutions Q2 FY26: Losses Deepen as Revenue Contraction Persists

The second quarter results underscore deepening operational challenges, with net sales declining 34.17% year-on-year to ₹8.40 crores. On a sequential basis, revenue grew a modest 4.48% from Q1 FY26's ₹8.04 crores, but this marginal improvement does little to offset the concerning year-over-year contraction. The company's inability to generate profits despite operating in the minerals and mining sector—typically characterised by stable demand—raises questions about operational efficiency and competitive positioning.

The net loss of ₹0.24 crores in Q2 FY26 represents a slight improvement from Q1 FY26's loss of ₹0.27 crores on a quarter-on-quarter basis. However, the year-over-year comparison paints a starker picture: Q2 FY25 had delivered a marginal profit of ₹0.05 crores, meaning the company has swung from profitability to losses. This deterioration reflects not just revenue pressures but also margin compression and elevated fixed costs that the business has struggled to absorb.

Financial Performance: Margin Erosion Compounds Revenue Decline

Raw Edge Industrial Solutions' Q2 FY26 performance reveals a troubling combination of top-line pressure and margin compression. Net sales of ₹8.40 crores declined 34.17% year-on-year from ₹12.76 crores in Q2 FY25, whilst the quarter-on-quarter comparison showed a marginal 4.48% uptick from ₹8.04 crores in Q1 FY26. This sequential improvement, however, offers little comfort given the company's sales have fallen 21.30% below the previous four-quarter average, indicating a structural deterioration in business momentum.

Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) stood at ₹0.56 crores in Q2 FY26, translating to an operating margin of 6.67%. This represents a 62 basis point contraction from the 7.29% margin achieved in Q2 FY25. More concerning is the sequential decline: the company's operating margin has compressed from 7.59% in Q1 FY26, suggesting intensifying cost pressures or pricing headwinds. At ₹0.56 crores, the quarterly operating profit is at its lowest level in recent history, reflecting the company's inability to maintain operational efficiency amidst revenue pressures.

The company's interest burden remains elevated at ₹0.35 crores in Q2 FY26, whilst depreciation stood at ₹0.55 crores. Combined, these fixed costs of ₹0.90 crores exceed the operating profit of ₹0.56 crores, pushing the company into pre-tax losses of ₹0.32 crores. After accounting for a tax credit of ₹0.07 crores, the net loss narrowed to ₹0.24 crores. The PAT margin of -2.86% underscores the company's profitability crisis, marking a sharp deterioration from the 0.39% positive margin in Q2 FY25.

Employee costs remained relatively stable at ₹0.67 crores in Q2 FY26, up marginally from ₹0.64 crores in Q1 FY26 and ₹0.71 crores in Q2 FY25. This stability suggests the company has not resorted to significant workforce reductions, though it raises questions about operational leverage. With revenue declining sharply, the inability to flex employee costs indicates limited operational agility. The gross profit margin of 2.62% in Q2 FY26, whilst slightly down from 3.23% in Q1 FY26, remains anaemic and insufficient to cover the company's fixed cost structure.

Operational Challenges: Weak Returns and Balance Sheet Concerns

Raw Edge Industrial Solutions' operational metrics paint a concerning picture of a business struggling with capital efficiency. The company's latest return on equity (ROE) stands at a negative 5.66%, a stark deterioration from the already weak average ROE of 0.03% over recent periods. This negative ROE—indicating the company is destroying shareholder value—is particularly alarming for a capital-intensive minerals and mining business where consistent returns are essential for long-term sustainability. The company's return on capital employed (ROCE) of 3.24% for the latest period, whilst positive, remains anaemic and well below the cost of capital, further highlighting operational inefficiencies.

The company's balance sheet reveals elevated leverage that compounds operational challenges. As of March 2025, Raw Edge Industrial Solutions carried long-term debt of ₹11.86 crores against shareholder funds of ₹20.86 crores, resulting in a net debt-to-equity ratio of 0.89. More concerning is the debt-to-EBITDA ratio of 6.49, indicating the company would need more than six years of current operating profits to repay its debt—an unsustainable position for a business generating losses. The EBIT-to-interest coverage ratio of 0.78 reveals that operating profits are insufficient to service interest obligations, forcing the company to rely on balance sheet resources or additional borrowing.

Fixed assets stood at ₹25.34 crores as of March 2025, representing the bulk of the company's ₹49.20 crores in total assets. Current assets of ₹23.68 crores include working capital tied up in inventory and receivables, though these have declined from ₹28.31 crores in March 2024. Trade payables of ₹9.44 crores and other current liabilities of ₹0.04 crores bring total current liabilities to ₹16.48 crores. The company's sales-to-capital-employed ratio of 1.09 suggests modest asset turnover, but given the negative profitability, this metric offers little comfort. The combination of declining revenues, negative returns, and elevated leverage creates a precarious financial position with limited room for error.

Industry Context: Underperformance in a Challenging Sector

The minerals and mining sector has faced headwinds over the past year, with the industry delivering a negative 3.04% return. However, Raw Edge Industrial Solutions' 42.21% decline significantly underperforms this sectoral benchmark by 39.17 percentage points, indicating company-specific challenges rather than purely industry-driven weakness. This massive underperformance suggests investors have lost confidence in the company's ability to navigate sector challenges and return to profitability.

The company's five-year track record reveals structural issues beyond cyclical pressures. Sales have contracted at a compound annual growth rate (CAGR) of -6.48% over the past five years, whilst operating profits (EBIT) have declined at an even steeper -22.77% CAGR. This deterioration in both top-line and bottom-line metrics indicates the company has struggled to maintain market share and pricing power in an industry that typically benefits from infrastructure spending and industrial demand. The inability to grow revenues whilst margins compress suggests competitive disadvantages or operational inefficiencies that management has failed to address.

Raw Edge Industrial Solutions' current quarterly revenue run-rate of approximately ₹8.40 crores translates to an annualised revenue of roughly ₹34 crores, well below the ₹44.00 crores reported in FY25. This trajectory, if sustained, would mark a further deterioration in the company's top-line performance. The minerals and mining sector's capital-intensive nature typically requires scale to achieve operational efficiency, and Raw Edge's declining revenue base raises questions about whether the company possesses sufficient scale to compete effectively. With operating margins of 6.67% significantly below the double-digit margins typically expected in this sector, the company appears structurally disadvantaged.

Peer Comparison: Lagging Across All Key Metrics

A comparison with peers in the minerals and mining sector highlights Raw Edge Industrial Solutions' relative weakness across virtually all financial metrics. The company's ROE of 0.03% trails far behind competitors such as Gravita India (25.84%), Ashapura Minechem (19.28%), and 20 Microns (13.94%). Even MOIL, a public sector undertaking, delivers a respectable 12.54% ROE. This stark differential underscores Raw Edge's inability to generate adequate returns on shareholder capital, a fundamental weakness that justifies its valuation discount.

The company's price-to-book value ratio of 1.21x appears reasonable on the surface, trading at a discount to peers like Ashapura Minechem (4.94x) and MOIL (2.83x). However, this valuation metric is misleading given Raw Edge's negative profitability and deteriorating fundamentals. Whilst peers like Gravita India trade at 0.57x book value despite superior ROE, they do so from a position of strength with negative net debt (cash-positive balance sheets). Raw Edge, by contrast, combines a higher P/BV with elevated leverage (debt-to-equity of 0.89) and negative returns, making the valuation far less attractive than it appears.

The company's inability to command a P/E ratio—trading as "NA (Loss Making)"—stands in stark contrast to peers who trade at earnings multiples ranging from 11.32x (20 Microns) to 35.24x (Gravita India). This reflects the market's assessment that Raw Edge lacks a clear path to profitability. Additionally, the company pays no dividend, unlike peers such as MOIL (1.53% yield) and 20 Microns (0.62% yield), eliminating any income component to shareholder returns. The combination of no earnings, no dividends, and deteriorating fundamentals leaves Raw Edge with limited investment appeal relative to better-capitalised, more profitable peers.

Valuation Analysis: Attractive Price Masks Fundamental Weakness

Raw Edge Industrial Solutions trades at ₹24.89 per share, down 46.82% from its 52-week high of ₹46.80 but up 15.23% from its 52-week low of ₹21.60. The stock's valuation grade of "Attractive" reflects its depressed price levels rather than compelling fundamentals. With a market capitalisation of just ₹25.00 crores and book value per share of ₹20.74, the stock trades at a price-to-book ratio of 1.21x—a seemingly modest premium. However, this valuation metric loses relevance when the company generates negative returns on equity, effectively destroying the book value it trades above.

The company's enterprise value multiples paint a concerning picture. An EV-to-EBITDA ratio of 14.80x and EV-to-EBIT ratio of 42.52x appear elevated for a loss-making business with declining revenues. These multiples suggest the market is pricing in significant leverage (the company's debt inflates enterprise value) whilst operating profits remain insufficient to justify such valuations. The EV-to-sales ratio of 1.03x and EV-to-capital-employed ratio of 1.11x appear more reasonable but offer little comfort given the negative profitability and deteriorating operational metrics.

The stock's "Attractive" valuation grade history reveals multiple downgrades and upgrades over recent months, suggesting high volatility and uncertainty about fair value. The grade changed to "Attractive" from "Very Attractive" in September 2025, having oscillated between "Fair" and "Attractive" earlier in the year. This volatility in valuation assessment reflects the market's struggle to price a business with deteriorating fundamentals and uncertain prospects. Whilst the current price may appear statistically cheap relative to book value, the absence of earnings, negative cash generation, and structural challenges make this an unattractive value proposition for most investors.

Shareholding: Stable Promoter Base, Zero Institutional Interest

Raw Edge Industrial Solutions' shareholding pattern reveals a stable promoter holding of 74.58% that has remained unchanged across the last five quarters through September 2025. The promoter group, led by key individuals including Siddharth Bimal Bansal (19.93%), Sourabh Bimalkumar Bansal (19.93%), and Bimalkumar Rajkumar Bansal (18.20%), maintains strong control with no pledging of shares—a positive indicator of promoter confidence and financial stability at the ownership level.

However, the complete absence of institutional participation raises significant red flags. Foreign institutional investors (FIIs), mutual funds, insurance companies, and other domestic institutional investors (DIIs) collectively hold 0.00% of the company's equity. This institutional void suggests sophisticated investors have evaluated the company's prospects and chosen to stay away, likely due to concerns about the business model, financial performance, and corporate governance. The remaining 25.42% public shareholding has also remained static, indicating limited trading interest and poor liquidity.

The lack of institutional interest is particularly concerning for a listed company, as it limits access to growth capital and reduces market credibility. Institutional investors typically conduct rigorous due diligence and their absence often signals underlying issues that retail investors may overlook. For Raw Edge Industrial Solutions, the zero institutional holding aligns with the company's weak fundamentals—negative profitability, declining revenues, and poor capital efficiency provide little incentive for institutions to allocate capital. The stable but concentrated shareholding structure also raises questions about minority shareholder protection and the company's ability to attract fresh equity capital should it be needed.

Stock Performance: Severe Underperformance Across All Timeframes

Raw Edge Industrial Solutions' stock price performance has been dismal across virtually all timeframes, with the company massively underperforming both the Sensex and its sectoral peers. Over the past year, the stock has declined 42.21%, generating negative alpha of -47.30 percentage points versus the Sensex's 5.09% gain. This underperformance accelerates over longer periods: two-year returns of -44.37% trail the Sensex by 73.09 percentage points, whilst three-year returns of -44.00% lag by 79.19 percentage points. The five-year performance is equally dire, with the stock down 48.30% against the Sensex's 91.64% gain—a staggering 139.94 percentage point underperformance.

The stock's technical position is equally weak, with the current price of ₹24.89 trading below all key moving averages: 5-day (₹25.51), 20-day (₹27.06), 50-day (₹27.68), 100-day (₹25.50), and 200-day (₹26.95). This alignment of the stock below all moving averages signals strong bearish momentum and lack of buying interest. The technical trend is classified as "Mildly Bearish" as of November 10, 2025, having changed from "Sideways" the previous day. Recent trend history shows oscillation between bearish and mildly bullish phases, but the predominant direction has been downward.

The stock's risk-adjusted returns paint an even grimmer picture. With a one-year absolute return of -42.21% and volatility of 61.58%, the risk-adjusted return stands at -0.69, indicating investors have been penalised with high volatility and negative returns—a worst-case scenario. The stock's beta of 1.50 classifies it as "High Beta," meaning it exhibits 50% more volatility than the broader market. This high beta, combined with negative returns, places Raw Edge in the "HIGH RISK LOW RETURN" category—an investment profile that offers no rational appeal. The Sensex, by contrast, delivered a risk-adjusted return of 0.41 with volatility of just 12.38%, highlighting the opportunity cost of holding Raw Edge shares.

Investment Thesis: Weak Fundamentals Overshadow Valuation Appeal

Raw Edge Industrial Solutions' investment case is fundamentally challenged by deteriorating financial performance, weak competitive positioning, and structural profitability issues. The company's proprietary Mojo Score of 20 out of 100 places it firmly in "STRONG SELL" territory, reflecting the convergence of negative factors across valuation, quality, financial trends, and technical indicators. Whilst the valuation appears "Attractive" on a price-to-book basis, this metric is rendered meaningless by the company's negative ROE, declining revenues, and persistent losses.

The company's quality assessment of "Below Average" reflects long-term underperformance: five-year sales CAGR of -6.48%, EBIT CAGR of -22.77%, and average ROCE of just 4.18%. These metrics indicate a business that has consistently destroyed value rather than created it. The elevated debt-to-EBITDA ratio of 6.49 and EBIT-to-interest coverage of 0.78 highlight financial stress, whilst the average ROE of 0.03% demonstrates an inability to generate returns for shareholders. The complete absence of institutional holdings (0.0%) further validates concerns about the company's investment quality.

The short-term financial trend is unambiguously "Negative," with Q2 FY26 net sales falling 21.30% below the previous four-quarter average and operating profit hitting its lowest level. The technical trend of "Mildly Bearish" and stock price trading below all moving averages suggest continued selling pressure. The combination of these four parameters—attractive but misleading valuation, below-average quality, negative financial trend, and bearish technicals—creates a compelling case for avoiding or exiting the stock. The lack of any positive catalysts or turnaround indicators makes it difficult to justify holding Raw Edge shares, even at depressed price levels.

Key Strengths & Risk Factors

Outlook: What to Watch

Forward Outlook

Raw Edge Industrial Solutions faces a challenging path ahead with limited visibility on a turnaround. The company's immediate priority must be returning to profitability, which requires either significant revenue growth or dramatic cost restructuring—neither of which appears imminent based on current trends. The Q2 FY26 results demonstrate that sequential revenue improvements of 4-5% are insufficient to offset the company's fixed cost burden and interest expenses. Without a material acceleration in top-line growth or margin expansion, the company risks extending its loss-making streak into additional quarters.

The elevated leverage position constrains management's strategic options. With debt-to-EBITDA at 6.49 and insufficient operating profits to service interest, the company may face pressure from lenders if performance does not improve. Any further deterioration could force asset sales, equity dilution, or operational restructuring—all of which would be value-destructive for existing shareholders. The absence of institutional investors also limits the company's access to growth capital, leaving it reliant on internal cash generation (currently negative) or promoter funding.

For the stock to merit reconsideration, investors would need to see tangible evidence of operational improvement: quarterly revenues stabilising above ₹10 crores, operating margins expanding above 8%, and a clear path to sustained profitability. Additionally, debt reduction and the entry of institutional investors would signal improving fundamentals and governance. Until such catalysts materialise, the stock remains a speculative bet on a turnaround with limited probability of success. The combination of weak fundamentals, bearish technicals, and structural challenges makes Raw Edge Industrial Solutions unsuitable for conservative investors seeking capital preservation or income generation.