The Nasik-based micro-cap company, with a market capitalisation of ₹88.00 crores, manufactures specialised polymer blends used in petrol hoses, LPG tubing, O-rings, seals, gaskets, and automotive components. Despite serving critical industrial applications, Rishiroop's financial performance has deteriorated significantly, with the company facing headwinds across multiple operational metrics.
The most concerning aspect of the latest results is the compression in operating profitability. Operating margins excluding other income have plummeted to just 2.61% in Q3 FY26, marking the lowest level in recent quarters. This deterioration signals fundamental challenges in the company's core manufacturing operations, potentially stemming from raw material cost pressures, pricing constraints, or operational inefficiencies.
Financial Performance: Revenue Stagnation and Margin Erosion
Rishiroop's top-line performance has been lacklustre, with net sales declining 2.6% year-on-year to ₹74.00 crores in FY25 from ₹76.00 crores in FY24. The company's revenue trajectory has been volatile over the past five years, with sales peaking at ₹88.00 crores in FY23 before declining for two consecutive years. This represents a concerning reversal after strong growth in FY21 and FY22, when revenues surged 55.6% and 35.0% respectively.
| Period | Net Sales (₹ Cr) | YoY Growth | Operating Margin | PAT (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|
| FY25 | 74.00 | -2.6% | 6.8% | 10.00 | 13.5% |
| FY24 | 76.00 | -13.6% | 9.2% | 24.00 | 31.6% |
| FY23 | 88.00 | +4.8% | 11.4% | 8.00 | 9.1% |
| FY22 | 84.00 | +55.6% | 15.5% | 16.00 | 19.0% |
| FY21 | 54.00 | +35.0% | 11.1% | 29.00 | 53.7% |
The margin erosion is particularly alarming. Operating margins (excluding other income) have contracted from a peak of 15.5% in FY22 to just 6.8% in FY25. This 870 basis point decline over three years reflects deteriorating pricing power and cost management challenges. PAT margins have similarly compressed from 31.6% in FY24 to 13.5% in FY25, though FY24's elevated profitability was significantly boosted by exceptional other income of ₹21.00 crores.
Critical Profitability Warning
Operating margins have declined consistently from 15.5% in FY22 to 6.8% in FY25, with Q3 FY26 marking a new low at 2.61%. This sustained compression indicates structural challenges rather than temporary headwinds. The company's core manufacturing operations are generating minimal operating leverage, raising serious questions about competitive positioning and operational efficiency.
Other Income Dependency: A Red Flag for Quality of Earnings
A particularly concerning aspect of Rishiroop's financial profile is its heavy reliance on other income to support profitability. In Q3 FY26, other income constituted a staggering 94.79% of profit before tax, indicating that the company's core operations are barely contributing to bottom-line profitability. This dependency on non-operating income—which typically includes investment income, asset sales, or one-time gains—raises serious questions about the sustainability and quality of reported earnings.
The volatility in other income is evident from annual trends: ₹21.00 crores in FY24 (75% of PBT), ₹9.00 crores in FY25 (64% of PBT), and ₹1.00 crore in FY23 (9% of PBT). Such wide fluctuations suggest that other income is not a stable, recurring revenue stream but rather opportunistic gains that cannot be relied upon for consistent profitability.
Balance Sheet Strength Provides Limited Comfort
Despite operational challenges, Rishiroop maintains a debt-free balance sheet with net cash position. As of March 2025, the company held investments worth ₹106.03 crores against total shareholder funds of ₹131.86 crores. Current assets of ₹44.51 crores comfortably cover current liabilities of ₹14.37 crores, providing adequate liquidity. However, this financial cushion has not translated into operational excellence or improved manufacturing profitability.
Capital Efficiency: Weak Returns on Equity and Capital Employed
Rishiroop's capital efficiency metrics paint a concerning picture. The company's average return on equity (ROE) stands at 13.81% over recent years, which appears modest but masks significant deterioration. The latest ROE has declined to just 2.86%, indicating that the company is generating minimal returns for shareholders relative to the equity capital employed.
Return on capital employed (ROCE) tells a similar story, averaging 8.61% but declining to just 3.45% in the most recent period. The half-yearly ROCE of 4.05% represents the lowest level on record, highlighting the company's inability to generate adequate returns from its operating assets. For a manufacturing business, such low ROCE indicates either underutilised capacity, pricing pressures, or operational inefficiencies that are destroying shareholder value.
| Metric | Average | Latest | Assessment |
|---|---|---|---|
| Return on Equity (ROE) | 13.81% | 2.86% | Weak & Declining |
| Return on Capital Employed (ROCE) | 8.61% | 3.45% | Weak & Declining |
| Sales to Capital Employed | 0.71x | — | Low Asset Turnover |
The sales-to-capital-employed ratio of 0.71x indicates that the company generates less than one rupee of revenue for every rupee of capital employed. This low asset turnover, combined with declining margins, creates a toxic combination that severely constrains profitability. Improving this metric would require either significantly growing revenues without proportional capital additions or divesting unproductive assets.
Peer Comparison: Valuation Discount Reflects Fundamental Weakness
When compared to peers in the Industrial Products sector, Rishiroop presents a mixed valuation picture. The company trades at a price-to-book value of just 0.67x, representing a significant discount to book value and suggesting the market places little value on the company's assets or future earnings potential.
| Company | P/E (TTM) | P/BV | ROE % | Div Yield | Debt/Equity |
|---|---|---|---|---|---|
| Rishiroop | 23.43 | 0.67 | 13.81% | 1.47% | -0.08 |
| Cubex Tubings | 21.82 | 2.05 | 5.58% | — | 0.48 |
| Sampann Utpadan | 21.83 | 3.68 | 3.37% | — | 2.10 |
| Admach Systems | 24.19 | 6.92 | 0.0% | — | 0.00 |
| Shilp Gravures | 13.47 | 1.10 | 9.48% | 1.14% | -0.31 |
While Rishiroop's P/E ratio of 23.43x appears reasonable relative to peers, this metric is misleading given the company's deteriorating earnings quality and heavy reliance on other income. The company's historical average ROE of 13.81% is superior to most peers, but the sharp recent decline to 2.86% suggests this advantage is rapidly eroding. The market's below-book valuation reflects scepticism about the company's ability to generate adequate returns going forward.
Valuation Analysis: Discount Warranted Given Fundamental Deterioration
Rishiroop's current valuation metrics reflect the market's concerns about the company's deteriorating fundamentals. Trading at ₹102.00 with a market capitalisation of ₹88.00 crores, the stock has declined 47.40% from its 52-week high of ₹193.90, though it remains 19.72% above its 52-week low of ₹85.20.
| Valuation Metric | Current Value | Assessment |
|---|---|---|
| P/E Ratio (TTM) | 23.43x | Appears Reasonable |
| Price to Book Value | 0.67x | Below Book Value |
| EV/EBITDA | 16.37x | Moderate |
| EV/Sales | 1.15x | Reasonable |
| Dividend Yield | 1.47% | Modest |
The company's valuation grade has fluctuated between "Attractive" and "Expensive" over the past year, currently sitting at "Attractive." However, this assessment appears overly generous given the fundamental deterioration in operating performance. The below-book valuation suggests the market believes the company's assets are worth less than their stated book value, possibly due to concerns about asset productivity or future impairment risks.
Shareholding Pattern: Stable Promoter Base but Zero Institutional Interest
Rishiroop's shareholding pattern reveals stable promoter commitment but a complete absence of institutional investor interest. Promoter holding has remained steady at approximately 73.5% over the past five quarters, with marginal increases of 5 basis points in recent quarters indicating continued promoter confidence.
| Quarter | Promoter % | QoQ Change | FII % | MF % | DII % |
|---|---|---|---|---|---|
| Dec'25 | 73.54% | +0.05% | 0.00% | 0.00% | 0.01% |
| Sep'25 | 73.49% | 0.00% | 0.00% | 0.00% | 0.01% |
| Jun'25 | 73.49% | +0.05% | 0.00% | 0.00% | 0.01% |
| Mar'25 | 73.44% | +0.09% | 0.00% | 0.00% | 0.01% |
| Dec'24 | 73.35% | — | 0.00% | 0.00% | 0.01% |
However, the complete absence of foreign institutional investors (FIIs), mutual funds, and insurance companies is a significant red flag. Institutional holding stands at a negligible 0.01%, indicating that sophisticated investors have shown no interest in the stock. This lack of institutional participation limits liquidity, increases volatility, and suggests that professional investors see limited value or excessive risk in the company's business model and financial performance.
Stock Performance: Severe Underperformance Across All Timeframes
Rishiroop's stock performance has been dismal across virtually all timeframes, significantly underperforming both the Sensex and its sector peers. The stock has declined 43.14% over the past year, compared to the Sensex's 9.01% gain, resulting in negative alpha of -52.15 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | +9.68% | +0.25% | +9.43% |
| 1 Week | +8.60% | +0.64% | +7.96% |
| 1 Month | +3.34% | +0.83% | +2.51% |
| 3 Months | -9.57% | +0.88% | -10.45% |
| 6 Months | -18.27% | +5.53% | -23.80% |
| 1 Year | -43.14% | +9.01% | -52.15% |
| 2 Years | -28.22% | +17.71% | -45.93% |
| 3 Years | +1.49% | +38.88% | -37.39% |
The stock's underperformance versus the Industrial Products sector is even more stark. Over the past year, the sector delivered returns of 66.54%, while Rishiroop declined 43.14%, resulting in underperformance of -109.68 percentage points. This massive divergence indicates company-specific issues rather than sector-wide headwinds.
The stock exhibits high volatility with a beta of 1.50, meaning it moves 50% more than the broader market. Combined with negative returns, this high beta creates a "high risk, low return" profile that is unattractive for most investors. The stock's risk-adjusted return of -1.11 over the past year, compared to the Sensex's positive 0.78, further underscores the poor risk-reward proposition.
Technical Analysis: Bearish Trend Persists Despite Recent Bounce
From a technical perspective, Rishiroop remains in a confirmed bearish trend that began in October 2025 at ₹126.95. The stock trades below all major moving averages, including the 5-day (₹92.85), 20-day (₹93.36), 50-day (₹99.85), 100-day (₹110.76), and 200-day (₹118.01) moving averages. This alignment of moving averages in descending order is a classic bearish configuration.
Technical indicators across weekly and monthly timeframes show predominantly bearish signals. MACD remains bearish on both timeframes, while the KST indicator also signals bearish momentum. Bollinger Bands indicate mildly bearish conditions, suggesting the stock is trading in the lower half of its recent range. The recent 9.68% single-day surge appears to be a technical bounce rather than a trend reversal, as the stock remains well below key resistance levels.
Investment Thesis: Multiple Red Flags Outweigh Balance Sheet Strength
Rishiroop's investment case is undermined by multiple structural concerns that overshadow its debt-free balance sheet. The company's proprietary Mojo Score of 26 out of 100, categorised as "STRONG SELL," reflects the confluence of negative factors impacting the stock.
Key Strengths ✓
- Debt-free balance sheet with net cash position of ₹106.03 crores in investments
- Stable promoter holding at 73.54% with no pledging of shares
- Adequate liquidity with current ratio of 3.1x (₹44.51 Cr / ₹14.37 Cr)
- Dividend-paying company with 1.47% yield, demonstrating cash generation
- Niche manufacturing focus in polymer blends for industrial applications
Key Concerns ⚠
- Operating margins collapsed to 2.61% in Q3 FY26, lowest in multiple years
- Heavy reliance on other income (94.79% of PBT in Q3), indicating weak core operations
- ROE declined sharply to 2.86% from historical average of 13.81%
- ROCE at 3.45%, indicating poor capital efficiency and asset productivity
- Revenue decline of 2.6% YoY in FY25, following 13.6% decline in FY24
- Zero institutional investor interest (0.01% holding) signals lack of confidence
- Negative financial trend with multiple metrics at multi-year lows
Outlook: What to Watch for Potential Turnaround
For Rishiroop to stage a meaningful recovery, investors should monitor specific operational and financial improvements. However, given the severity of current challenges, any turnaround will likely require multiple quarters of sustained improvement.
Positive Catalysts to Monitor
- Operating margin recovery above 8-10% threshold
- Reduction in other income dependency to below 30% of PBT
- Revenue growth resumption with quarterly sales above ₹20 crores
- ROCE improvement above 10% indicating better asset utilisation
- Institutional investor participation signalling renewed confidence
Red Flags Requiring Immediate Attention
- Further margin compression below 2% operating margin
- Continued revenue decline for third consecutive year
- ROE/ROCE declining below 2%, indicating value destruction
- Increase in debt levels, compromising balance sheet strength
- Promoter stake reduction or pledging of shares
The Verdict: Fundamental Deterioration Warrants Caution
Score: 26/100
For Fresh Investors: Avoid initiating positions. The company faces severe operational challenges with operating margins at multi-year lows, heavy reliance on non-operating income, and deteriorating return ratios. The absence of institutional interest and negative financial trend indicate significant fundamental concerns that are unlikely to resolve quickly.
For Existing Holders: Consider exiting positions on any technical bounces. The 9.68% single-day gain provides an opportunity to reduce exposure. With operating margins at 2.61%, ROE at 2.86%, and declining revenues, the company is destroying shareholder value. The debt-free balance sheet provides limited comfort given the poor operational performance.
Fair Value Estimate: ₹75-80 (26-22% downside from current levels), reflecting continued operational challenges and margin pressures.
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.
