Reliable Data Services Q3 FY26: Revenue Plunge Overshadows Profit Rebound

With a market capitalisation of ₹158.26 crores, Reliable Data Services operates in the competitive NBFC segment, providing data management and financial services. The December quarter results reveal a company struggling with revenue consistency whilst demonstrating improved cost management and operational efficiency. The year-on-year comparison paints an equally concerning picture, with Q3 FY26 revenue declining 29.78% from ₹33.41 crores in Q3 FY25, though net profit fell a more modest 23.54% from ₹4.12 crores.

The sharp revenue contraction from Q2 FY26's ₹69.13 crores to Q3's ₹23.46 crores represents the company's lowest quarterly sales figure in the trailing twelve-month period, raising questions about the sustainability of business operations and the nature of revenue recognition in the NBFC sector. Despite this volatility, the company managed to expand its PAT margin from 3.24% in Q2 to 13.43% in Q3, suggesting significant operational adjustments or one-time cost benefits.

Financial Performance: A Tale of Two Metrics

The quarterly trend analysis reveals extreme volatility in Reliable Data Services' revenue generation, with sequential changes ranging from a 75.23% surge in Q2 FY26 to a 66.06% collapse in Q3 FY26. This erratic pattern suggests the company's revenue is highly project-based or dependent on lumpy contract executions, typical of certain NBFC operations but concerning for investors seeking predictable cash flows. The operating profit margin excluding other income stood at 25.06% in Q3 FY26, significantly higher than Q2's 8.30%, indicating improved operational efficiency or changes in revenue mix.

On a half-yearly basis, the company's performance for H1 FY26 (April-September 2025) showed net sales of ₹108.58 crores, though the addition of Q3's weak performance brings the nine-month FY26 figure to ₹132.04 crores. The interest expense remained relatively stable at ₹0.87 crores in Q3, down marginally from ₹0.99 crores in Q2, whilst depreciation decreased substantially to ₹0.76 crores from ₹1.71 crores, contributing to the profit improvement. The tax rate remained consistent at 26.12% in Q3, compared to 26.07% in Q2, reflecting stable effective tax management.

Operational Challenges: Revenue Volatility Raises Concerns

The most pressing operational challenge facing Reliable Data Services is the extreme revenue volatility that characterises its quarterly performance. The company's Q3 FY26 revenue of ₹23.46 crores represents the lowest quarterly figure in the past seven quarters, falling below even the Jun'24 quarter's ₹20.46 crores. This instability makes it difficult for investors to model future earnings or assess the company's true operational capacity. The operating profit margin excluding other income, however, reached 25.06% in Q3 FY26, the highest in recent quarters, suggesting that whilst revenue remains unpredictable, the company has improved its cost structure.

From a balance sheet perspective, Reliable Data Services maintained shareholder funds of ₹57.12 crores as of March 2025, with long-term debt standing at ₹15.52 crores, resulting in a debt-to-equity ratio of approximately 0.27. The company's return on equity of 19.67% for the latest fiscal year demonstrates strong capital efficiency, placing it well above the average ROE of 11.97% over the longer term. This higher ROE indicates that the company generates substantial returns on shareholders' capital when revenue materialises, though the consistency of such returns remains questionable given the revenue volatility.

The company's return on capital employed (ROCE) stood at 15.39% for the latest period, above the average ROCE of 13.48%, indicating efficient utilisation of capital deployed in the business. The sales-to-capital-employed ratio of 1.24 times suggests moderate asset turnover, typical for NBFCs that require substantial capital deployment for lending operations. Fixed assets increased to ₹22.67 crores as of March 2025 from ₹16.82 crores in March 2024, representing a 34.78% increase that may support future revenue growth if operational challenges are addressed.

NBFC Sector Context: Navigating Competitive Headwinds

The broader NBFC sector has faced significant headwinds over the past year, with the sector delivering a negative return of 23.37% compared to Reliable Data Services' impressive 127.19% one-year return, resulting in a remarkable 150.56 percentage point outperformance versus the sector. This divergence suggests that either Reliable Data Services operates in a niche segment with different dynamics or that the stock's gains reflect recovery from previously depressed levels rather than fundamental sector leadership. The company's micro-cap status (₹158.26 crores market capitalisation) means it operates in a different competitive landscape than large, established NBFCs.

Interest rate dynamics and regulatory oversight remain critical factors for all NBFCs. Reliable Data Services' interest expense has remained relatively stable, ranging between ₹0.87 crores and ₹1.02 crores across recent quarters, suggesting the company has not significantly increased its borrowing base despite revenue growth ambitions. The company's average debt-to-EBITDA ratio of 1.91 indicates manageable leverage levels, though the volatile EBITDA base makes this metric less reliable than for companies with stable earnings. The debtors turnover ratio reached its highest level at 2.10 times in the half-year period, indicating improved collection efficiency.

Peer Comparison: Valuation Discount Despite Strong Returns

Reliable Data Services trades at a price-to-earnings ratio of 14.22 times trailing twelve-month earnings, positioned between Baid Finserv's 10.08 times and Keynote Financial's 19.68 times. The company's P/E multiple appears reasonable given its ROE of 11.97%, which matches Keynote Financial but trails P. H. Capital's superior 22.33%. However, the price-to-book value ratio of 2.80 times is the highest among profitable peers, exceeded only by P. H. Capital's 2.98 times, suggesting investors are pricing in growth expectations or recovery potential that may not materialise given the recent revenue challenges.

The company's debt-to-equity ratio of 0.59 places it in the middle of the peer group, higher than the minimal leverage at P. H. Capital, Keynote Financial, and Jhaveri Credits, but substantially lower than Baid Finserv's 1.43. This moderate leverage position provides some financial flexibility whilst limiting downside risk, though the negative operating cash flow raises concerns about the company's ability to service debt from internal operations. The absence of dividend payments across most peers, including Reliable Data Services, reflects the capital-intensive nature of NBFC operations and the need to retain earnings for growth.

Valuation Analysis: Premium Multiples on Uncertain Fundamentals

At the current price of ₹153.35, Reliable Data Services trades at a P/E ratio of 14.22 times, below the industry average P/E of 24 times but at a substantial premium to its book value of ₹42.27 per share, resulting in a P/BV multiple of 2.80 times. The company's enterprise value to EBITDA stands at 10.07 times, whilst EV to capital employed is 2.13 times, both metrics suggesting a "Very Attractive" valuation grade according to proprietary scoring systems. However, these multiples must be interpreted cautiously given the extreme quarterly volatility in earnings and revenue.

The stock has delivered exceptional returns over the past year, surging 127.19% compared to the Sensex's 9.67% gain, generating an alpha of 117.52 percentage points. This outperformance has pushed the stock from its 52-week low of ₹60.10 to the current price of ₹153.35, representing a 155.16% gain from the bottom. However, the stock remains 12.55% below its 52-week high of ₹175.35, suggesting some profit-booking has occurred. The six-month return of 63.89% demonstrates sustained momentum, though recent price action shows signs of consolidation with the stock trading below its 5-day, 20-day, and 50-day moving averages.

The PEG ratio of 0.10 appears extremely attractive, suggesting the stock is undervalued relative to its five-year sales growth rate of 45.06%. However, this metric can be misleading when growth rates are inconsistent or unsustainable, as appears to be the case with Reliable Data Services' lumpy quarterly performance. The company's beta of 1.50 indicates high volatility, with the stock moving 50% more than the broader market, classifying it as a "high beta" investment suitable only for risk-tolerant investors. The risk-adjusted return of 2.21 over the past year, despite the high volatility of 57.51%, reflects the magnitude of absolute gains rather than consistent performance.

Shareholding Pattern: Promoter Stake Reduction Raises Questions

The most notable development in shareholding pattern is the 3.98 percentage point reduction in promoter holding during Q3 FY26, declining from 71.77% to 67.79%. This marks the first change in promoter stake after three consecutive quarters of stability, coinciding with the quarter that saw the sharpest revenue decline. Whilst the reduction is not dramatic in absolute terms, it raises questions about promoter confidence at a time when operational performance is deteriorating. The stake reduction could reflect personal financial needs, estate planning, or concerns about near-term business prospects that are not publicly disclosed.

Institutional participation remains negligible, with FII holding at just 0.32% and mutual fund holding at 0.00%. The absence of institutional investors is typical for micro-cap stocks but limits liquidity and suggests professional money managers have not found the company's fundamentals compelling enough to warrant investment despite the strong stock price performance. Non-institutional holding increased from 28.23% to 31.89%, absorbing most of the promoter stake reduction and indicating retail investor interest. The company has no pledged shares, eliminating one potential risk factor, though the low institutional holding means there is limited research coverage or professional oversight.

Stock Performance: Exceptional Gains Mask Underlying Volatility

The stock's performance over various timeframes reveals a pattern of exceptional medium-term gains offset by recent weakness. The one-year return of 127.19% represents extraordinary outperformance versus both the Sensex (9.67%) and the NBFC sector (-23.37%), generating alpha of 117.52 and 150.56 percentage points respectively. This suggests the stock was significantly undervalued a year ago or has benefited from company-specific positive developments that are not yet reflected in consistent operational performance. The six-month return of 63.89% demonstrates sustained momentum through the latter half of 2025.

However, shorter-term performance indicators suggest the rally may be losing steam. The stock has declined 3.40% over the past week and 2.14% over three months, underperforming the Sensex in both periods. The year-to-date return of just 5.25% indicates that 2026 has started on a weaker note compared to the strong 2025 performance. Technical indicators show the stock trading below its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, though it maintains a "Bullish" overall technical trend designation. The MACD indicator shows "Mildly Bearish" signals on a weekly basis, whilst RSI provides no clear signal.

Investment Thesis: Quality Concerns Offset Attractive Valuation

The investment thesis for Reliable Data Services rests on four key pillars: valuation, quality, financial trend, and technical positioning. The company scores highest on valuation, with its "Very Attractive" grade supported by reasonable P/E and P/BV multiples relative to growth rates and ROE metrics. The EV to capital employed ratio of 2.13 times and EV to sales of 1.05 times suggest the market has not fully priced in the company's asset base or revenue potential, creating potential upside if operational consistency improves. The PEG ratio of 0.10, whilst potentially misleading given revenue volatility, indicates mathematical undervaluation relative to historical growth rates.

Quality assessment presents a more mixed picture, with the company graded as "Average" based on long-term financial performance. The five-year sales growth of 45.06% demonstrates strong top-line expansion, though this must be balanced against the recent quarterly volatility. The ROCE of 15.39% and ROE of 19.67% for the latest period indicate efficient capital deployment when revenue materialises, placing the company above many NBFC peers. However, the average EBIT to interest coverage of just 3.33 times is weak for an NBFC, suggesting limited buffer against earnings volatility. The absence of promoter pledging and low debt-to-equity ratio of 0.59 provide some comfort on financial stability.

The financial trend is classified as "Flat" for Q3 FY26, a downgrade that reflects the sharp revenue contraction despite profit growth. Key negative factors include the lowest quarterly net sales at ₹23.46 crores and minimal cash and cash equivalents of ₹0.06 crores in the half-year period. Positive factors include the 62.10% growth in net sales over the latest six months (driven primarily by Q2's spike) and the highest debtors turnover ratio of 2.10 times, suggesting improved collection efficiency. The technical trend remains "Bullish" despite recent price weakness, supported by the stock's position well above its 200-day moving average and the sustained uptrend since mid-2025.

Key Strengths and Risk Factors

Outlook: Critical Monitoring Points Ahead

The forward outlook for Reliable Data Services hinges critically on the company's ability to demonstrate revenue consistency in the coming quarters. The Q4 FY26 results (January-March 2026) will be crucial in determining whether Q3's sharp revenue decline represents a temporary setback or the beginning of a more serious operational deterioration. Investors should monitor whether the company can maintain the improved cost structure and margin profile whilst simultaneously stabilising revenue generation. The absence of management commentary or forward guidance makes it difficult to assess whether the revenue volatility reflects industry dynamics, company-specific execution issues, or accounting timing differences.

The broader NBFC sector environment remains challenging, with regulatory scrutiny on lending practices and asset quality intensifying. Reliable Data Services' specific business model within the NBFC classification is not detailed in available financial data, making it difficult to assess competitive positioning or growth runway. The company's micro-cap status means it operates below the radar of most institutional investors and analysts, creating information asymmetry that both increases risk and creates potential opportunity for investors willing to conduct thorough due diligence. The stock's high beta of 1.50 and volatility of 57.51% make it suitable only for investors with high risk tolerance and the ability to withstand significant price fluctuations.