The September 2025 quarter marked a significant inflection point for the Nashik-based precision instrument maker, with operating margins expanding dramatically to 17.0% from just 5.71% in the corresponding quarter last year. This 1,130 basis points improvement in margin performance, coupled with sequential profit growth of 12.44% quarter-on-quarter, signals a fundamental shift in the company's earnings trajectory after years of subdued profitability.
Quarterly Performance Trajectory: A Dramatic Turnaround
| Quarter | Revenue (₹ Cr) | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|
| Sep'25 | 196.33 | 22.15 | 17.0% | 11.25% |
| Jun'25 | 190.33 | 19.70 | 14.93% | 10.31% |
| Mar'25 | 187.45 | 6.31 | 8.63% | 3.26% |
| Dec'24 | 181.19 | 8.47 | 7.89% | 4.37% |
| Sep'24 | 182.36 | 4.13 | 5.71% | 2.13% |
| Jun'24 | 169.35 | 3.64 | 4.46% | 1.90% |
| Mar'24 | 177.91 | 2.40 | 10.13% | 1.30% |
The quarterly progression reveals a company undergoing rapid operational improvement. From a nadir of ₹2.40 crores net profit in March 2024, Rishabh Instruments has consistently expanded profitability each subsequent quarter, culminating in the September 2025 performance that represents the company's strongest quarterly showing in recent history. Revenue growth, whilst modest at 3.15% quarter-on-quarter, has been steady, with the company crossing the ₹196 crore mark for the first time.
Financial Performance: Margin Expansion Drives Bottom Line
For Q2 FY26, Rishabh Instruments reported net sales of ₹196.33 crores, representing growth of 7.66% year-on-year and 3.15% sequentially. However, the real story lies not in the top line but in the dramatic operational leverage the company has achieved. Operating profit before depreciation, interest, tax, and other income surged to ₹33.37 crores, marking a staggering 220.56% year-on-year increase from the ₹10.41 crores reported in September 2024.
The operating margin expansion from 5.71% to 17.0% reflects improved cost management and operational efficiency. Employee costs, whilst rising in absolute terms to ₹55.04 crores, declined as a percentage of revenue, suggesting better productivity metrics. The company's gross profit margin stood at 18.95%, up from 6.44% in the year-ago quarter, indicating pricing power and favourable product mix dynamics.
Net profit after tax reached ₹22.08 crores in Q2 FY26, translating to a PAT margin of 11.25%, up from a mere 2.13% in the corresponding quarter last year. On a consolidated basis, the profit stood at ₹22.15 crores, reflecting the strong performance across the group. The tax rate normalised to 22.57% in the quarter, down from 29.27% in September 2024, providing additional support to bottom-line growth.
Operational Challenges: Return on Equity Remains a Concern
Despite the impressive quarterly performance, Rishabh Instruments continues to grapple with fundamental efficiency challenges that constrain shareholder value creation. The company's average return on equity stands at just 5.63%, significantly below the threshold of 15% typically expected from quality businesses. This weak ROE reflects the company's historical struggles with profitability and suggests that whilst recent quarters show improvement, the company has yet to demonstrate sustainable high-quality earnings generation.
The return on capital employed, whilst better at 17.30% on average, has declined to 10.63% in the latest period, indicating that the improved margins have not yet translated into superior capital efficiency. The company's five-year operating profit growth stands at a concerning negative 6.53% annually, highlighting the volatility and inconsistency in earnings performance over the medium term.
Key Concern: Capital Efficiency
Return on Equity: At 5.63% average, Rishabh Instruments' ROE remains well below acceptable thresholds for quality businesses. Whilst recent quarters show operational improvement, the company must demonstrate sustained profitability to improve capital efficiency and justify higher valuations. The latest ROE of 8.23% shows progress but still lags sector leaders significantly.
On the positive side, the company maintains a robust balance sheet with minimal leverage. Net debt to equity stands at negative 0.17, indicating the company is a net cash entity with ₹90 crores in closing cash as of March 2025. This financial flexibility provides a cushion for growth investments and working capital requirements without the burden of interest costs. The debt-to-EBITDA ratio of 1.56 is comfortable, and the company's EBIT-to-interest coverage of 8.74 times demonstrates adequate debt servicing capability.
Industry Context: Outperforming the Electrical Equipment Sector
Rishabh Instruments operates in the competitive other electrical equipment segment, a space characterised by diverse players ranging from high-voltage equipment manufacturers to specialised instrument makers. The company's recent performance stands out in this context, with its one-year stock return of 45.68% significantly outpacing the sector average return of 6.45% by 39.23 percentage points.
The electrical equipment industry in India has benefited from increased infrastructure spending, renewable energy installations, and industrial capex recovery. However, the sector faces challenges from raw material price volatility, intense competition, and margin pressures. Rishabh Instruments' ability to expand margins in this environment suggests either a favourable product mix shift, improved operational efficiency, or successful price increases that have been absorbed by customers.
Sector Outperformance
Rishabh Instruments has delivered a stellar 45.68% return over the past year, dramatically outperforming the other electrical equipment sector's 6.45% return by 39.23 percentage points. This alpha generation reflects investor recognition of the company's operational turnaround and improving profitability trajectory, despite the stock's high volatility of 59.78%.
Peer Comparison: Valuation Discount Despite Strong Performance
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Rishabh Instruments | 28.91 | 2.38 | 5.63 | -0.17 | NA |
| HPL Electric | 21.83 | 2.19 | 5.48 | 0.70 | 0.31% |
| Spectrum Electrical | 77.02 | 8.68 | 11.53 | 0.75 | NA |
| RIR Power Electr | 171.26 | 11.28 | 10.15 | -0.22 | 0.10% |
| Yash Highvoltage | 54.81 | 7.36 | 14.51 | -0.20 | 0.24% |
| Salzer Electronics | 19.84 | 1.93 | 9.40 | 0.80 | 0.40% |
Rishabh Instruments trades at a P/E ratio of 28.91 times trailing twelve-month earnings, which appears moderate when compared to peers like RIR Power Electronics (171.26x) and Spectrum Electrical (77.02x). However, the company's price-to-book ratio of 2.38x is relatively modest given the peer group average of approximately 6.3x, suggesting the market has not yet fully priced in the recent operational improvements.
The key differentiator remains return on equity, where Rishabh Instruments' 5.63% lags most peers except HPL Electric (5.48%). Higher-quality peers like Yash Highvoltage (14.51% ROE) and Spectrum Electrical (11.53% ROE) command premium valuations justified by superior capital efficiency. Rishabh Instruments' valuation discount reflects this quality gap, though the recent margin expansion trajectory suggests potential for ROE improvement if sustained.
Valuation Analysis: Premium Pricing Reflects Turnaround Expectations
At the current price of ₹425.45, Rishabh Instruments trades at a P/E ratio of 28.91x, below the industry average of 37x but at a significant premium to its historical valuation levels. The stock's price-to-book ratio of 2.38x represents a premium to book value, reflecting market expectations of improved profitability and return ratios going forward.
The company's valuation grade stands at "Very Expensive," having oscillated between "Expensive" and "Very Expensive" over the past year as the stock price appreciated significantly. The EV/EBITDA multiple of 16.50x and EV/Sales of 2.02x indicate that the market is pricing in continued margin expansion and earnings growth. However, the PEG ratio of 0.13 suggests the valuation may be reasonable relative to growth prospects, though this metric must be interpreted cautiously given the company's volatile historical earnings.
The stock's 52-week range of ₹200.55 to ₹489.00 highlights the significant volatility, with the current price sitting 13% below the high and 112.14% above the low. This wide trading range reflects both the company's operational transformation and the inherent uncertainty around sustainability of the improved performance. Given the dramatic margin expansion in recent quarters, the valuation appears to embed optimistic assumptions about continuation of current profitability levels.
Shareholding Pattern: Stable Promoter Base with Modest Institutional Interest
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 69.67% | 69.81% | 69.81% | -0.14% |
| Mutual Funds | 11.58% | 11.60% | 12.42% | -0.02% |
| FII Holding | 0.24% | 0.35% | 0.05% | -0.11% |
| Other DII | 0.99% | 0.41% | 0.00% | +0.58% |
| Non-Institutional | 17.51% | 17.83% | 17.71% | -0.32% |
Promoter holding remains robust at 69.67% as of December 2025, with the Goliya family maintaining strong control through direct holdings and family trusts. The marginal 14 basis points decline in promoter stake during the quarter is insignificant and reflects normal portfolio adjustments. Importantly, there is zero promoter pledging, eliminating concerns about financial stress or forced selling risks.
Institutional participation remains modest, with mutual funds holding 11.58% and foreign institutional investors maintaining a negligible 0.24% stake. The sequential decline in mutual fund holdings from 12.42% in June 2025 to 11.58% in December 2025 suggests some profit booking by institutional investors following the stock's strong run. However, the presence of four mutual funds indicates continued institutional interest, albeit at moderate levels given the company's micro-cap status and limited liquidity.
Stock Performance: Exceptional Returns with High Volatility
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +17.24% | +0.91% | +16.33% |
| 1 Month | +4.73% | -2.49% | +7.22% |
| 3 Months | +9.09% | -0.17% | +9.26% |
| 6 Months | +49.96% | +3.23% | +46.73% |
| Year-to-Date | +6.52% | -2.24% | +8.76% |
| 1 Year | +45.68% | +6.44% | +39.24% |
| 2 Years | -30.19% | +16.15% | -46.34% |
Rishabh Instruments has delivered exceptional short-term returns, with the stock surging 17.24% in the past week alone and generating 45.68% returns over the past year. This performance has dramatically outpaced the Sensex across all timeframes from one month to one year, generating substantial positive alpha. The six-month return of 49.96% reflects the market's recognition of the operational turnaround that began manifesting in the June 2025 quarter.
However, the two-year return of negative 30.19% serves as a reminder of the stock's volatility and the company's historical struggles. The stock is classified as a high-beta security with an adjusted beta of 1.21, indicating it moves 21% more than the broader market. The volatility of 59.78% is significantly higher than the Sensex's 11.52%, categorising this as a high-risk, high-return investment suitable only for investors with appropriate risk tolerance.
Technically, the stock is in a bullish trend as of February 2, 2026, trading above all key moving averages including the 200-day MA at ₹352.94. The recent breakout and sustained momentum above the ₹400 level suggest strong buying interest, though the 13% distance from the 52-week high of ₹489 indicates potential resistance ahead.
Investment Thesis: Turnaround Story with Execution Risks
The investment case for Rishabh Instruments centres on the company's dramatic operational turnaround, evidenced by the 436% year-on-year profit growth and 1,130 basis points margin expansion in Q2 FY26. The positive financial trend, bullish technical setup, and improving quality metrics create a constructive near-term outlook. The company's net cash position, zero promoter pledging, and stable shareholding pattern provide financial stability.
However, significant concerns temper enthusiasm. The average quality grade reflects persistent challenges with capital efficiency, as evidenced by the weak 5.63% ROE and negative five-year operating profit growth. The "Very Expensive" valuation grade indicates limited margin of safety at current levels, with the stock trading at premium multiples that embed optimistic assumptions about sustainability of recent performance improvements.
KEY STRENGTHS
- Dramatic profitability improvement with 436% YoY profit growth in Q2 FY26
- Operating margin expansion to 17.0% from 5.71%, demonstrating operational leverage
- Net cash position with negative 0.17 debt-to-equity ratio provides financial flexibility
- Zero promoter pledging eliminates governance concerns
- Strong stock performance with 45.68% one-year return outpacing sector by 39 percentage points
- Bullish technical trend with price above all key moving averages
- Positive financial trend with sequential profit growth for four consecutive quarters
KEY CONCERNS
- Weak return on equity at 5.63% average indicates poor capital efficiency
- Negative five-year operating profit growth of -6.53% raises sustainability questions
- Very expensive valuation grade with limited margin of safety
- High volatility of 59.78% makes stock unsuitable for risk-averse investors
- Modest institutional participation at 12.81% limits liquidity
- Declining mutual fund holdings suggest institutional profit booking
- Two-year negative returns of -30.19% highlight historical volatility
Outlook: What to Watch
POSITIVE CATALYSTS
- Sustained margin performance above 15% in coming quarters would validate operational improvements
- Revenue growth acceleration to double digits would demonstrate market share gains
- ROE improvement towards 12-15% would justify premium valuation multiples
- Increased institutional participation would improve liquidity and reduce volatility
- Consistent quarter-on-quarter profit growth would build earnings credibility
RED FLAGS
- Margin compression below 12% would signal temporary nature of recent improvements
- Sequential revenue decline would raise demand concerns
- Working capital deterioration requiring increased debt would strain balance sheet
- Continued decline in institutional holdings would indicate lack of confidence
- Failure to sustain quarterly profit above ₹15 crores would disappoint expectations
The forward outlook hinges critically on the company's ability to sustain the margin improvements achieved in recent quarters. Management's execution on cost control, pricing strategy, and product mix optimisation will determine whether the current performance represents a structural shift or a cyclical peak. Investors should monitor quarterly results closely, with particular attention to operating margins, return on equity trends, and revenue growth acceleration.
The electrical equipment sector's growth prospects remain constructive given India's infrastructure push and industrial capex recovery. However, Rishabh Instruments must demonstrate consistent execution to capitalise on these tailwinds and justify its premium valuation. The company's micro-cap status and high volatility mean position sizing should be conservative, suitable only for portfolios with high risk tolerance and long investment horizons.
The Verdict: Promising Turnaround but Execution Risk Warrants Caution
Score: 64/100
For Fresh Investors: Avoid initiating positions at current levels. The "Very Expensive" valuation grade and unproven sustainability of margin improvements create unfavourable risk-reward dynamics. Wait for either a meaningful correction (15-20%) or demonstration of sustained operational performance over at least two more quarters before considering entry.
For Existing Holders: Continue holding with trailing stop-loss protection given the strong momentum and positive financial trend. The operational turnaround is genuine, but sustainability remains unproven. Consider partial profit booking if the stock approaches ₹475-480 levels (near 52-week high) or if margins compress below 14% in upcoming quarters.
Fair Value Estimate: ₹380-400 (8-11% downside from current levels), reflecting premium to book value justified by improved profitability but discounting execution risks and historical volatility.
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.
