With a market capitalisation of ₹424.00 crores, the Mumbai-based company continues to demonstrate strong revenue momentum, posting net sales of ₹123.10 crores in Q3 FY26, representing a 20.00% year-on-year increase. Yet, operating profit margins (excluding other income) slipped to 11.91% from 12.09% in the corresponding quarter last year, raising questions about the sustainability of profitability amidst rising input costs and competitive pressures in the auto components sector.
The December quarter results reveal a company navigating the delicate balance between aggressive revenue growth and margin preservation. While net sales climbed 6.50% sequentially from ₹115.59 crores in Q2 FY26, operating profit before depreciation, interest, and tax (excluding other income) grew at a slower pace of 9.98% quarter-on-quarter to ₹14.66 crores. This divergence between topline and operating profit growth suggests mounting cost pressures, particularly evident in the 18.81% year-on-year surge in employee costs to ₹24.63 crores during Q3 FY26.
| Metric (₹ Cr) | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 | Jun'24 |
|---|---|---|---|---|---|---|---|
| Net Sales | 123.10 | 115.59 | 99.63 | 106.18 | 102.58 | 91.31 | 76.50 |
| YoY Growth | +20.00% | +26.59% | +30.24% | — | — | — | — |
| Cons. Net Profit | 5.12 | 4.06 | 3.64 | 4.55 | 3.98 | 3.13 | 2.70 |
| YoY Growth | +28.64% | +29.71% | +34.81% | — | — | — | — |
| Operating Margin % | 11.91% | 11.53% | 10.63% | 10.32% | 12.09% | 8.20% | 8.50% |
| PAT Margin % | 5.16% | 5.53% | 4.82% | 6.17% | 4.62% | 3.27% | 3.52% |
Financial Performance: Growth Trajectory Intact Despite Margin Headwinds
Remsons Industries delivered its highest-ever quarterly net sales of ₹123.10 crores in Q3 FY26, extending a consistent growth trajectory that saw revenues expand across all three quarters of the current fiscal year. On a nine-month basis, the company generated net sales of ₹338.32 crores, representing a 25.31% year-on-year increase compared to ₹270.39 crores in the corresponding period of FY25. This robust topline performance reflects strong demand from key automobile manufacturers and successful market share gains in the competitive auto components landscape.
However, profitability metrics present a more nuanced picture. While consolidated net profit for Q3 FY26 reached ₹5.12 crores—the highest in recent quarters—the profit after tax margin of 5.16% remains below the 6.17% achieved in Q4 FY25. The compression stems primarily from elevated employee costs, which surged to ₹73.85 crores on a nine-month basis (21.83% of sales) compared to ₹54.80 crores (20.26% of sales) in the year-ago period. This 157 basis points margin impact suggests wage inflation and potential hiring to support capacity expansion are weighing on near-term profitability.
Interest costs remain well-managed at ₹2.00 crores for Q3 FY26, translating to a healthy interest coverage ratio of 7.33 times (operating profit to interest). Depreciation expenses increased notably to ₹4.42 crores in the December quarter compared to ₹3.76 crores in Q3 FY25, reflecting the company's ongoing capital expenditure programme to enhance manufacturing capabilities. The effective tax rate of 21.12% for Q3 FY26 remains within the company's historical range, indicating stable tax planning and no material adverse developments on the fiscal front.
Operational Dynamics: Capital Efficiency Amidst Expansion Phase
Remsons Industries demonstrates strong capital efficiency metrics despite being in an expansion phase. The company's latest return on capital employed (ROCE) stands at 16.62%, significantly above the five-year average of 13.18%, indicating improving asset productivity and operational excellence. This high ROCE—particularly impressive for a micro-cap manufacturer—reflects management's ability to generate attractive returns from deployed capital, a critical strength in the capital-intensive auto components business.
However, the return on equity (ROE) metric tells a more cautious story. The latest ROE of 12.53% marks a decline from the five-year average of 17.19%, suggesting that equity capital is being utilised less efficiently than in prior periods. This compression likely stems from the significant equity capital raise and reserve accumulation visible in the balance sheet, where shareholder funds expanded from ₹111.28 crores in March 2024 to ₹125.61 crores in March 2025. While this bolstered equity base strengthens the balance sheet, it temporarily dilutes return ratios until the deployed capital begins generating commensurate profits.
Leverage Profile: Moderate Debt, Rising Interest Burden
Long-term debt surged to ₹40.58 crores in March 2025 from ₹15.39 crores in the previous year, reflecting aggressive capacity expansion. With a debt-to-EBITDA ratio of 3.48 times and net debt-to-equity of 0.52, leverage remains within manageable bounds. However, interest costs on a nine-month basis grew 24.44% year-on-year to ₹6.16 crores, warranting close monitoring as debt servicing obligations intensify.
The balance sheet reveals substantial capital deployment underway. Fixed assets jumped to ₹94.47 crores in March 2025 from ₹47.24 crores a year earlier, nearly doubling in a single year. This aggressive capex programme—evidenced by negative cash flow from investing activities of ₹48.00 crores in FY24—positions the company to capture growing demand from automobile OEMs. Current assets of ₹186.29 crores provide adequate liquidity, though working capital management requires attention as trade payables climbed to ₹52.70 crores.
Margin Dynamics: The Operating Leverage Puzzle
The most perplexing aspect of Remsons Industries' Q3 FY26 performance lies in the margin trajectory. Despite achieving record revenues and presumably better fixed cost absorption, operating margins (excluding other income) contracted 18 basis points year-on-year to 11.91%. This counter-intuitive outcome—where higher volumes fail to translate into improved operating leverage—points to either deteriorating realisation prices, unfavourable product mix shifts, or rising variable costs that offset scale benefits.
A closer examination reveals employee costs as the primary culprit. The employee cost-to-sales ratio deteriorated to 20.01% in Q3 FY26 from 20.21% in Q2 FY26 and 18.81% in the year-ago quarter. While some increase is justifiable given capacity expansion and potential quality enhancement initiatives, the magnitude of this shift—nearly 180 basis points year-on-year—represents a material drag on profitability. Management's ability to rationalise this cost structure as new capacities ramp up will prove critical to margin recovery in coming quarters.
Quality of Earnings: Sustainable or Boosted?
Other income declined sharply to ₹0.66 crores in Q3 FY26 from ₹1.60 crores in Q2 FY25, suggesting the company is not relying on non-operating income to inflate profitability. This is a positive indicator of earnings quality. The profit before tax (excluding other income) of ₹7.39 crores represents the true operating performance, and its 15.47% year-on-year growth, though healthy, lags the 20.00% topline expansion—another confirmation of margin pressure.
Industry Context: Auto Components Sector Headwinds
The broader auto components sector has delivered stellar returns of 38.01% over the past year, significantly outpacing Remsons Industries' muted stock performance. This underperformance—the stock is down 16.13% over three months and 5.61% over six months—reflects investor concerns about the company's ability to capitalise on the sector's favourable demand environment. With automobile production volumes remaining robust and electric vehicle penetration creating new component opportunities, Remsons' margin compression stands out as an anomaly requiring explanation.
The company's customer concentration in commercial vehicles and two-wheelers exposes it to cyclical demand patterns. Major clients including Tata Motors, Hero MotoCorp, and Mahindra & Mahindra have reported mixed volume trends, with two-wheeler demand remaining strong but commercial vehicle sales facing headwinds. Remsons' ability to diversify its product portfolio and customer base will determine whether it can sustain the current growth momentum or faces revenue volatility in line with industry cycles.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Remsons Ind. | 25.35 | 3.18 | 17.19% | 0.52 | 0.24% |
| Hind. Composites | 16.88 | 0.56 | 3.00% | -0.05 | 0.46% |
| Munjal Showa | 16.63 | 0.80 | 3.94% | -0.51 | 3.33% |
| Pradeep Metals | 19.10 | 3.55 | 23.42% | 0.42 | 0.83% |
| Veljan Denison | 18.51 | 2.07 | 10.03% | -0.16 | 0.78% |
| Triton Valves | 89.41 | 3.69 | 2.36% | 0.97 | 0.27% |
Relative to micro-cap peers in the auto components space, Remsons Industries commands a premium valuation justified by its superior return on equity of 17.19% (five-year average) versus peer averages in the 3-10% range. The company's P/E ratio of 25.35 times appears reasonable compared to Triton Valves' astronomical 89.41 times, though it trades at a premium to Hindustan Composites (16.88 times) and Munjal Showa (16.63 times). The price-to-book value of 3.18 times aligns closely with Pradeep Metals (3.55 times) and exceeds Triton Valves (3.69 times), suggesting investors are willing to pay for Remsons' track record of capital efficiency.
Valuation Analysis: Fair Pricing with Limited Upside
At the current market price of ₹117.00, Remsons Industries trades at 25.35 times trailing twelve-month earnings, representing a discount to the broader auto components sector's average P/E of 39 times. This valuation gap reflects the company's micro-cap status, limited liquidity (average daily volumes of around 50,000-70,000 shares), and concerns about near-term margin trajectory. The price-to-book value of 3.18 times appears stretched relative to the book value per share of ₹36.01, particularly given the recent ROE compression.
The stock's enterprise value-to-EBITDA multiple of 10.60 times and EV-to-EBIT of 14.63 times suggest moderate valuation relative to growth prospects. With a five-year EBIT growth rate of 41.43%, the PEG ratio of 1.19 indicates the stock is not egregiously expensive, though it offers limited margin of safety. The dividend yield of merely 0.24% (annual dividend of ₹0.30 per share) provides negligible income support, with the company retaining 92.14% of earnings for reinvestment—appropriate given its growth phase.
The valuation grade history reveals market sentiment volatility. The stock was rated "Very Attractive" in August 2025 when it traded near ₹140-150 levels, but has since oscillated between "Attractive" and "Fair" as it corrected to current levels. At ₹117.00, the stock sits 25.48% below its 52-week high of ₹157.00 and 14.37% above its 52-week low of ₹102.30. This positioning in the lower half of the annual range suggests some downside protection, though the lack of strong technical support raises concerns about further correction potential.
Shareholding Pattern: Stable Promoter Base, Volatile FII Interest
The shareholding structure of Remsons Industries reflects a stable promoter-dominated ownership with minimal institutional participation. Promoter holding remained steady at 66.24% in Q3 FY26 (December 2025), unchanged from the previous quarter but marginally higher than 65.30% a year ago. This gradual increase in promoter stake—primarily through the Kejriwal family led by Chand Krishna Kejriwal (25.85%) and Krishna Radhakrishna Kejriwal (24.06%)—demonstrates management's confidence in the company's long-term prospects. Importantly, there is zero promoter pledging, eliminating concerns about financial stress or forced selling.
Foreign institutional investor (FII) participation has been volatile, declining sharply to 3.39% in Q3 FY26 from 4.90% in the previous quarter. This 151 basis points sequential reduction suggests foreign investors are booking profits or reallocating capital to larger, more liquid auto component plays. Over the past year, FII holding has fluctuated between 3.64% and 5.09%, indicating tactical positioning rather than strategic conviction. The absence of mutual fund and insurance company holdings (0.00% each) underscores the stock's limited appeal to domestic institutional investors, likely due to liquidity constraints and micro-cap classification.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 66.24% | 66.24% | 66.24% | 66.12% | 0.00% |
| FII | 3.39% | 4.90% | 5.09% | 3.64% | -1.51% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 1.13% | 1.02% | 0.91% | 0.36% | +0.11% |
| Non-Institutional | 29.24% | 27.84% | 27.76% | 29.87% | +1.40% |
The non-institutional category, comprising retail and high-net-worth investors, increased to 29.24% in Q3 FY26 from 27.84% in the previous quarter, absorbing shares sold by FIIs. This 140 basis points sequential rise suggests retail interest remains intact despite the stock's recent underperformance. Other domestic institutional investors (DIIs) have been gradually accumulating, with holdings rising from 0.36% in March 2025 to 1.13% in December 2025, though the absolute quantum remains negligible. The lack of marquee institutional backing limits the stock's re-rating potential until it achieves greater scale and liquidity.
Stock Performance: Significant Underperformance Amidst Technical Weakness
Remsons Industries' stock performance over the past year has been disappointing, particularly when juxtaposed against the broader market and sectoral indices. While the company delivered strong financial results, the stock generated negative alpha across most timeframes, underperforming the Sensex by 15.19% over three months, 9.90% over six months, and a staggering 38.01% versus the auto components sector over one year. This disconnect between operational performance and stock price behaviour reflects concerns about margin sustainability, limited institutional participation, and technical selling pressure.
The near-term price action has been particularly volatile. After rallying 4.93% over the past week, the stock surrendered gains with a sharp 4.18% decline on February 12, 2026, closing at ₹117.00. The stock trades below all key moving averages—5-day (₹117.61), 20-day (₹111.94), 50-day (₹116.40), 100-day (₹123.30), and 200-day (₹126.88)—a technically bearish configuration suggesting sustained selling pressure. The current price represents a 25.48% correction from the 52-week high of ₹157.00 achieved in mid-2025, though it remains 14.37% above the 52-week low of ₹102.30.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +4.93% | +0.43% | +4.50% |
| 1 Month | +2.54% | -0.24% | +2.78% |
| 3 Months | -16.13% | -0.94% | -15.19% |
| 6 Months | -5.61% | +4.29% | -9.90% |
| YTD (2026) | -1.31% | -1.81% | +0.50% |
| 3 Years | +152.16% | +37.89% | +114.27% |
| 5 Years | +378.72% | +62.34% | +316.38% |
Longer-term performance paints a more favourable picture. Over three years, the stock delivered exceptional returns of 152.16%, massively outperforming the Sensex (37.89%) with alpha of 114.27 percentage points. The five-year return of 378.72% versus Sensex's 62.34% demonstrates the wealth-creation potential of micro-cap auto component plays during favourable market cycles. However, the stock's high beta of 1.62 and volatility of 52.24% underscore its risk profile—investors must endure significant drawdowns to capture these outsized long-term gains.
Investment Thesis: Mojo Parameters Dashboard
The proprietary Mojo scoring framework assigns Remsons Industries an overall score of 55 out of 100, placing it firmly in "HOLD" territory. This moderate score reflects a balanced assessment across four key dimensions: valuation (attractive), quality (good), financial trend (positive), and technical trend (mildly bearish). The company's strengths in operational efficiency and growth momentum are offset by technical weakness and margin pressure concerns, resulting in a neutral investment recommendation for fresh capital deployment.
The valuation assessment of "Fair" reflects the stock's current positioning at 25.35 times earnings—reasonable but not compelling given margin headwinds. The quality grade of "Good" recognises the company's healthy long-term growth (10.49% sales CAGR, 41.43% EBIT CAGR over five years), strong return on capital employed of 16.62%, and zero promoter pledging. However, the recent downgrade from "Average" quality in November 2025 signals deteriorating near-term fundamentals that warrant monitoring.
The financial trend remains "Positive" based on Q3 FY26 achieving record highs across net sales (₹123.10 crores), operating profit (₹14.66 crores), and profit after tax. This positive trajectory, however, is tempered by the "Mildly Bearish" technical trend, which changed from "Bearish" on February 9, 2026, at ₹122.05. The stock's position below all major moving averages and negative three-month momentum (-16.13%) suggest technical consolidation or further downside before a sustainable recovery emerges.
Key Strengths & Risk Factors
KEY STRENGTHS
- Exceptional Capital Efficiency: ROCE of 16.62% (latest) and 13.18% (5-year average) demonstrates superior asset productivity in capital-intensive auto components manufacturing
- Strong Revenue Momentum: Net sales grew 20.00% YoY in Q3 FY26 and 25.31% YoY on nine-month basis, reflecting market share gains and robust OEM demand
- Healthy Interest Coverage: Operating profit-to-interest ratio of 7.33 times provides substantial debt servicing cushion despite recent leverage increase
- Zero Promoter Pledging: Stable 66.24% promoter holding with no pledged shares eliminates concerns about financial stress or governance issues
- Impressive Long-Term Track Record: Five-year EBIT growth of 41.43% and stock returns of 378.72% demonstrate wealth-creation potential
- Diversified OEM Base: Supplies to marquee customers including Tata Motors, Maruti Suzuki, Hero MotoCorp, and Mahindra & Mahindra reduces customer concentration risk
- Aggressive Capacity Expansion: Fixed assets nearly doubled to ₹94.47 crores in March 2025, positioning company for future growth
KEY CONCERNS
- Margin Compression: Operating margin (excl OI) declined to 11.91% from 12.09% YoY despite higher volumes, raising questions about cost management
- Elevated Employee Costs: Employee cost-to-sales ratio surged 180 bps YoY to 20.01%, materially impacting profitability
- Rising Leverage: Long-term debt jumped to ₹40.58 crores from ₹15.39 crores, with interest costs growing 24.44% YoY on nine-month basis
- Declining ROE: Latest ROE of 12.53% significantly trails five-year average of 17.19%, indicating reduced equity capital efficiency
- Weak Technical Positioning: Stock trades below all key moving averages with mildly bearish trend, suggesting continued selling pressure
- Limited Institutional Participation: Zero mutual fund and insurance holdings, declining FII stake (3.39%), restricts liquidity and re-rating potential
- Significant Underperformance: Stock lagged auto components sector by 38.01% over one year and Sensex by 15.19% over three months
Outlook: What to Watch in Coming Quarters
POSITIVE CATALYSTS
- Margin Recovery: Stabilisation or improvement in operating margins as new capacities ramp up and employee cost ratio normalises
- Operating Leverage: Higher capacity utilisation translating into better fixed cost absorption and improved profitability
- Institutional Interest: Entry of mutual funds or sustained FII accumulation signalling broader market recognition
- OEM Volume Growth: Continued strong demand from automobile manufacturers driving topline expansion above 20% YoY
- Technical Reversal: Stock reclaiming 200-day moving average (₹126.88) and establishing higher lows for trend reversal
RED FLAGS
- Further Margin Erosion: Operating margins falling below 11% would signal structural profitability challenges
- Revenue Growth Deceleration: Topline growth slowing to mid-single digits indicating market share losses or weak OEM demand
- Debt Servicing Stress: Interest coverage ratio declining below 5 times or debt-to-EBITDA exceeding 4 times
- Continued FII Selling: Further reduction in foreign institutional holding below 3% reflecting lost confidence
- Technical Breakdown: Stock breaching 52-week low of ₹102.30 opening door to deeper correction toward ₹90-95 levels
The forward outlook for Remsons Industries hinges critically on management's ability to convert aggressive capacity expansion into profitable revenue growth. With fixed assets nearly doubling and debt increasing substantially, the company has placed significant bets on capturing incremental OEM demand. The success of this strategy will be evident in the next 2-3 quarters as new capacities stabilise and operating leverage begins to materialise. Investors should closely monitor quarterly margin trends, with operating margins (excluding other income) needing to sustain above 12% to justify current valuations.
The automobile industry's transition toward electric vehicles presents both opportunities and risks. Remsons' product portfolio in cables and control systems positions it to benefit from EV growth, though the company must invest in new technologies and certifications to remain relevant. Management commentary on EV-specific product development and order wins from electric vehicle manufacturers will be crucial indicators of the company's ability to navigate this industry transformation. Any material contracts with EV OEMs could serve as a significant re-rating catalyst.
The Verdict: Hold for Existing Investors, Wait for Fresh Entry
Score: 55/100
For Fresh Investors: Wait for clearer signs of margin stabilisation and technical trend reversal before initiating positions. Current risk-reward does not favour fresh capital deployment given margin headwinds and bearish technical setup. Consider accumulation only if stock corrects to ₹105-108 levels with improving quarterly trends.
For Existing Holders: Continue holding with stop-loss at ₹102 (52-week low). The company's strong revenue growth, healthy interest coverage, and aggressive capacity expansion justify patience. However, closely monitor Q4 FY26 results for margin trajectory and management commentary on cost rationalisation initiatives. Consider partial profit booking if stock rallies above ₹130 without corresponding margin improvement.
Fair Value Estimate: ₹125-130 (7% to 11% upside from current levels), contingent on operating margins recovering to 12%+ and sustained revenue growth above 20% YoY.
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. Investments in micro-cap stocks carry substantial risk including limited liquidity, high volatility, and potential for significant capital loss.
