The quarter's performance was marked by a significant revenue contraction, with net sales falling to ₹64.76 crores in Q2 FY26, down from ₹84.59 crores in the same quarter last year. This represents the lowest quarterly revenue in recent periods, signalling demand headwinds in the company's core markets. The sequential decline of 1.70% from Q1 FY26's ₹65.88 crores further underscores the challenging operating environment. Trading at ₹63.70 as of November 14, 2025, the stock has plunged 41.72% from its 52-week high of ₹109.30, reflecting investor concerns about the company's near-term growth trajectory.
Financial Performance: Margin Compression Amplifies Profit Decline
The second quarter of FY2026 revealed multiple pressure points in Roto Pumps' financial performance. Net sales of ₹64.76 crores marked a sharp 23.44% year-on-year decline and a 1.70% sequential drop, making it the weakest quarterly revenue performance in the trailing twelve-month period. The company's operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) stood at ₹11.67 crores, down 39.89% from ₹19.41 crores in Q2 FY25.
Operating margin compression was particularly pronounced, with the PBDIT margin (excluding other income) declining to 18.02% from 22.95% in the year-ago quarter—a contraction of 493 basis points. This margin erosion was driven by elevated employee costs, which rose to ₹21.22 crores in Q2 FY26 from ₹19.95 crores in Q2 FY25, even as revenues contracted. The employee cost as a percentage of sales surged to 32.77% from 23.59%, indicating deteriorating operating leverage.
Profit before tax declined 48.54% year-on-year to ₹8.11 crores from ₹15.76 crores, whilst net profit fell to ₹5.96 crores from ₹11.47 crores. The PAT margin contracted sharply to 9.20% from 13.56% in the year-ago quarter. Notably, the effective tax rate spiked to 26.51% in Q2 FY26 from 27.28% in Q2 FY25, though this was lower than the anomalous 41.88% rate seen in Q1 FY26.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 (Q2) | 64.76 | -1.70% | 5.96 | -5.40% | 18.02% |
| Jun'25 (Q1) | 65.88 | -16.60% | 6.30 | -51.05% | 20.61% |
| Mar'25 (Q4) | 78.99 | +8.67% | 12.54 | +212.72% | 25.65% |
| Dec'24 (Q3) | 72.69 | -14.07% | 4.01 | -65.04% | 15.48% |
| Sep'24 (Q2) | 84.59 | +46.83% | 11.47 | +104.09% | 22.95% |
| Jun'24 (Q1) | 57.61 | -29.68% | 5.62 | -56.00% | 20.92% |
| Mar'24 (Q4) | 81.93 | — | 12.77 | — | 25.64% |
On a half-yearly basis (H1 FY26), the company reported consolidated net profit of ₹12.26 crores, down 27.71% from ₹16.96 crores in H1 FY25. Revenue for the first six months stood at ₹130.64 crores, representing a modest 8.04% decline year-on-year. The half-yearly performance suggests that whilst Q2 was particularly weak, the overall trend for FY2026 remains concerning.
Operational Challenges: Profitability Metrics Under Pressure
Roto Pumps' return on capital employed (ROCE) for H1 FY26 fell to 16.81%, marking the lowest level in recent periods and significantly below the company's five-year average of 23.09%. This decline in capital efficiency reflects both the revenue contraction and margin compression, indicating that the company is generating lower returns on its invested capital. The latest annual ROCE of 18.81% for FY2025 was already below historical norms, and the half-yearly trend suggests further deterioration.
Return on equity (ROE) has similarly weakened, with the latest annual figure at 15.30% compared to the five-year average of 19.20%. Higher ROE typically indicates superior capital efficiency and profitability, making this decline a notable concern for equity investors. The company's ability to generate returns for shareholders has diminished as profitability margins have compressed and revenue growth has stalled.
Critical Concern: Deteriorating Cash Position
Cash and cash equivalents for H1 FY26 stood at ₹18.51 crores, the lowest level in recent periods. This decline in liquidity, combined with rising working capital requirements, raises concerns about the company's financial flexibility. The cash flow statement for FY2025 showed operating cash flow of ₹36.00 crores, down from ₹38.00 crores in FY2024, whilst investing activities consumed ₹19.00 crores. With closing cash of ₹29.00 crores as of March 2025, the further decline to ₹18.51 crores in H1 FY26 suggests intensifying working capital pressures.
The balance sheet reveals a company navigating growth investments whilst managing debt prudently. Total shareholder funds stood at ₹220.81 crores as of March 2025, up from ₹194.94 crores in the previous year. Long-term debt remained modest at ₹2.76 crores, resulting in a very low net debt-to-equity ratio of 0.07. However, current liabilities declined to ₹83.22 crores from ₹89.75 crores, primarily driven by reduced other current liabilities, which could indicate slower business activity.
Fixed assets increased to ₹90.09 crores from ₹92.60 crores, reflecting ongoing capital expenditure despite the challenging operating environment. The company's capital allocation strategy appears focused on long-term capacity building, though the immediate payoff in terms of revenue generation remains elusive. With current assets at ₹188.31 crores and a healthy current ratio, Roto Pumps maintains adequate short-term liquidity, though the declining cash position warrants monitoring.
Industry Context: Navigating Sector Headwinds
The compressors, pumps, and diesel engines sector has faced mixed demand conditions over the past year, with infrastructure spending and industrial activity showing uneven momentum. Roto Pumps' 23.44% year-on-year revenue decline in Q2 FY26 significantly underperformed the broader sector, suggesting company-specific challenges beyond general market conditions. The stock's one-year return of -23.57% compares unfavourably to the sector's -11.67% decline, indicating a loss of market share or customer preference.
Competition in the pump manufacturing space has intensified, with established players like Shakti Pumps and Kirloskar Pneumatic maintaining stronger market positions. Roto Pumps' ability to differentiate its product offerings and maintain pricing power appears to have weakened, as evidenced by the revenue contraction despite stable industry demand in certain segments. The company's focus on progressive cavity pumps and other specialised equipment may be facing headwinds from project delays or customer budget constraints.
Sector Positioning: Underperformance Signals Market Share Loss
Over the past year, Roto Pumps has underperformed its sector by 11.90 percentage points, with the stock declining 23.57% compared to the sector's -11.67% return. This relative weakness suggests that the company is losing ground to competitors, possibly due to pricing pressures, product mix shifts, or execution challenges. The company's market capitalisation of ₹1,200.40 crores positions it as a smaller player in the sector, limiting its ability to compete on scale and potentially affecting its bargaining power with suppliers and customers.
Peer Comparison: Valuation Premium Unjustified by Performance
When benchmarked against sector peers, Roto Pumps presents a mixed valuation picture. The company's price-to-earnings ratio of 41.54x is significantly higher than Shakti Pumps (22.45x) and Swaraj Engines (27.00x), yet its return on equity of 19.20% lags behind Oswal Pumps (54.66%) and Swaraj Engines (44.26%). This valuation premium appears unjustified given the company's deteriorating financial trends and below-peer profitability metrics.
| Company | P/E (TTM) | ROE % | Div Yield | P/BV | Debt/Equity |
|---|---|---|---|---|---|
| Roto Pumps | 41.54 | 19.20% | 1.25% | 5.47 | 0.07 |
| Shakti Pumps | 22.45 | 20.03% | 0.14% | 5.54 | 0.13 |
| Oswal Pumps | 31.48 | 54.66% | — | 17.99 | 0.64 |
| Kirloskar Pneumatic | 37.58 | 15.58% | 0.90% | 6.29 | -0.38 |
| Greaves Cotton | 47.94 | 7.17% | 0.94% | 3.61 | -0.03 |
| Swaraj Engines | 27.00 | 44.26% | 2.66% | 12.19 | -0.45 |
Roto Pumps' price-to-book value of 5.47x is relatively modest compared to Oswal Pumps (17.99x) and Swaraj Engines (12.19x), but this lower multiple reflects the market's recognition of inferior return metrics. The company's dividend yield of 1.25% is competitive, ranking second in the peer group after Swaraj Engines' 2.66%, though the sustainability of this payout (15.06% payout ratio) may be questioned given the recent profit decline.
From a leverage perspective, Roto Pumps maintains one of the lowest debt-to-equity ratios at 0.07, indicating conservative financial management. However, this balance sheet strength has not translated into superior operational performance or shareholder returns. The company's average EBIT-to-interest coverage of 16.04x provides ample cushion for debt servicing, but with EBIT under pressure, this metric may deteriorate in coming quarters.
Valuation Analysis: Premium Pricing for Deteriorating Fundamentals
At the current price of ₹63.70, Roto Pumps trades at a trailing twelve-month P/E ratio of 41.54x, representing a 15% premium to the sector average of 36x. This elevated multiple appears disconnected from the company's recent performance trajectory, with net profit declining 47.81% year-on-year in Q2 FY26 and financial trends turning decisively negative. The company's proprietary score of 28 out of 100, firmly in "Strong Sell" territory, reflects the deterioration across multiple parameters.
The price-to-book value of 5.47x suggests that investors are paying ₹5.47 for every rupee of book value (₹11.72 per share), a valuation that appears stretched given the 15.30% return on equity. Historically, Roto Pumps has commanded premium valuations during periods of strong growth, but the current environment of revenue contraction and margin compression does not support such multiples. The stock's enterprise value-to-EBITDA ratio of 21.56x is elevated for a company facing near-term headwinds.
The valuation grade has been classified as "Very Expensive" since January 2023, with the stock oscillating between "Expensive" and "Very Expensive" categories over the past three years. This persistent premium valuation has not been justified by operational performance, particularly in recent quarters. With the stock trading 41.72% below its 52-week high of ₹109.30 but only 3.98% above its 52-week low of ₹61.26, the risk-reward equation appears unfavourable for new investors.
Based on the company's current earnings trajectory and peer valuations, a fair value estimate of approximately ₹45-50 per share appears more reasonable, implying a potential downside of 21-29% from current levels. This estimate assumes a normalised P/E ratio of 25-28x (in line with better-performing peers) applied to FY2026 estimated earnings, which are likely to remain under pressure given the weak H1 performance.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Promoter holding in Roto Pumps has remained remarkably stable at 66.61-66.62% over the past five quarters, with only a marginal 0.01% decline in the September 2025 quarter. This consistency reflects the founding family's long-term commitment to the business, with no pledging of shares—a positive indicator of financial stability and confidence. Key promoters include Asha Gupta (15.92%), H C Gupta (12.97%), and Arvind Gupta (8.11%), maintaining concentrated control.
| Quarter | Promoter % | Change | FII % | MF % | Non-Inst % |
|---|---|---|---|---|---|
| Sep'25 | 66.61% | -0.01% | 0.14% | 1.06% | 32.18% |
| Jul'25 | 66.62% | — | 0.13% | 0.95% | 32.28% |
| Jun'25 | 66.62% | — | 0.20% | 1.06% | 32.11% |
| Mar'25 | 66.62% | — | 0.14% | 1.00% | 32.24% |
| Dec'24 | 66.62% | — | 0.28% | 0.60% | 32.48% |
Foreign institutional investor (FII) holdings remain negligible at 0.14%, with six FII entities holding stakes. Mutual fund participation is similarly minimal at 1.06%, with only three funds invested. This lack of institutional interest reflects the company's small-cap status and limited liquidity, with total institutional holdings at just 1.21%. The absence of insurance company holdings further underscores the stock's limited appeal to long-term institutional investors.
Mutual fund holdings have shown some volatility, increasing from 0.60% in December 2024 to 1.06% in September 2025, with sequential fluctuations each quarter. This pattern suggests that the limited institutional investors present are actively reassessing their positions rather than maintaining stable, long-term holdings. The dominance of non-institutional holdings at 32.18% indicates that the stock is primarily held by retail investors and smaller entities, which can contribute to higher volatility.
Stock Performance: Severe Underperformance Across All Timeframes
Roto Pumps' stock performance over the past year has been deeply disappointing, with the shares declining 23.57% compared to the Sensex's 8.43% gain—a negative alpha of 32.00 percentage points. The underperformance has been consistent across multiple timeframes, with the stock falling 12.07% over the past month whilst the benchmark gained 2.55%. Year-to-date, the stock has plummeted 32.51% against the Sensex's 7.66% advance, reflecting a 40.17 percentage point underperformance.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -4.18% | +1.09% | -5.27% |
| 1 Month | -12.07% | +2.55% | -14.62% |
| 3 Months | -28.22% | +4.37% | -32.59% |
| 6 Months | -26.18% | +3.43% | -29.61% |
| YTD | -32.51% | +7.66% | -40.17% |
| 1 Year | -23.57% | +8.43% | -32.00% |
| 3 Years | +81.85% | +36.51% | +45.34% |
| 5 Years | +577.00% | +92.77% | +484.23% |
The stock's technical posture has deteriorated significantly, with the price trading below all key moving averages—5-day (₹65.28), 20-day (₹69.43), 50-day (₹75.53), 100-day (₹83.52), and 200-day (₹81.55). This comprehensive breach of support levels indicates strong bearish momentum and lack of buying interest. The technical trend officially turned "Bearish" on September 26, 2025, at ₹77.99, and has remained negative since, with multiple technical indicators—MACD, Bollinger Bands, KST, and OBV—all flashing bearish signals.
The stock's beta of 1.35 indicates high volatility relative to the market, with actual volatility at 45.26% compared to the Sensex's 12.26%. This elevated volatility, combined with negative returns, places Roto Pumps in the "High Risk Low Return" category—an unfavourable combination for investors. The risk-adjusted return of -0.52 over the past year compares poorly to the Sensex's positive 0.69, highlighting the stock's inability to compensate investors for the elevated risk.
Whilst longer-term performance remains impressive—with three-year returns of 81.85% and five-year returns of 577.00%—these historical gains are rapidly eroding. The two-year return has declined to just -5.68%, suggesting that the stock's multi-year outperformance has reversed sharply over the past 18-24 months. Investors who entered the stock during its 2023-2024 peak are now facing significant mark-to-market losses.
Investment Thesis: Quality Company Facing Cyclical Headwinds
Roto Pumps' investment case presents a complex picture of a fundamentally sound company facing significant near-term challenges. The company's quality grade remains "Good," reflecting its long-term track record of 19.40% sales growth and 25.95% EBIT growth over five years. The balance sheet is conservatively managed, with minimal leverage (debt-to-equity of 0.07) and no promoter pledging. However, these quality attributes are being overshadowed by deteriorating operational performance and negative financial trends.
The convergence of negative financial trends and bearish technical indicators creates a challenging environment for the stock. The company's quarterly financial trend has been classified as "Negative" since September 2025, with five key factors contributing to this assessment: declining profit before tax (down 50.97%), lowest quarterly revenue (₹64.76 crores), weakest half-yearly PAT (₹12.26 crores), lowest H1 ROCE (16.81%), and declining cash position (₹18.51 crores). These metrics collectively paint a picture of a business under significant operational stress.
KEY STRENGTHS
- Strong long-term growth track record with 19.40% sales CAGR over five years
- Conservative balance sheet with debt-to-equity of just 0.07 and no promoter pledging
- Adequate interest coverage at 16.04x providing financial flexibility
- Stable promoter holding at 66.61% demonstrating long-term commitment
- Dividend yield of 1.25% with sustainable 15.06% payout ratio
- Established presence in specialised pump manufacturing segment
- Good quality rating reflecting solid historical fundamentals
KEY CONCERNS
- Sharp 47.81% YoY profit decline in Q2 FY26 to ₹5.96 crores
- Revenue contraction of 23.44% YoY with Q2 sales at lowest level (₹64.76 crores)
- Operating margin compression of 493 bps to 18.02% reflecting cost pressures
- Declining ROCE to 16.81% in H1 FY26, lowest in recent periods
- Deteriorating cash position at ₹18.51 crores raising liquidity concerns
- Elevated P/E of 41.54x unjustified by current performance trajectory
- Stock underperformance of 32 percentage points vs Sensex over past year
- Minimal institutional interest at 1.21% limiting liquidity and support
- Bearish technical trend with price below all major moving averages
Outlook: Monitoring Points for Potential Recovery
The path forward for Roto Pumps depends critically on the company's ability to stabilise revenue trends and restore operating margins. Management commentary on order book trends, customer engagement, and sector demand outlook will be crucial in assessing whether Q2 FY26 represents a cyclical trough or the beginning of a more prolonged downturn. The company's specialisation in progressive cavity pumps and other niche products provides differentiation, but execution will determine whether this translates into market share gains.
POSITIVE CATALYSTS
- Stabilisation of quarterly revenue trends above ₹70 crores
- Recovery in operating margins towards 22-24% historical range
- Improvement in order book visibility for H2 FY26
- Successful cost optimisation initiatives to improve profitability
- Increased institutional interest as valuations become more reasonable
RED FLAGS
- Further sequential revenue decline in Q3 FY26 below ₹64 crores
- Continued margin compression below 18% operating margin
- Additional deterioration in cash position below ₹15 crores
- ROCE falling below 15% indicating structural profitability issues
- Increased working capital requirements straining liquidity
For existing shareholders, the decision to hold or exit depends on investment time horizon and risk tolerance. Those with a long-term perspective may choose to weather the current downturn, banking on the company's historical ability to navigate cycles and its strong balance sheet. However, the combination of negative financial trends, bearish technicals, and elevated valuation creates a high-risk scenario where further downside appears more probable than near-term recovery.
"With profit declining 47.81% year-on-year, revenue at multi-quarter lows, and operating margins compressed by nearly 500 basis points, Roto Pumps faces a challenging road to recovery that justifies significant caution."
The company's proprietary score of 28 out of 100 reflects the severity of current challenges, with the "Strong Sell" rating indicating that risk-reward dynamics favour avoiding the stock until clear signs of stabilisation emerge. The convergence of negative financial trends, bearish technical indicators, and expensive valuation creates a trifecta of concerns that experienced investors typically avoid.
The Verdict: Avoid Until Clear Stabilisation Emerges
Score: 28/100
For Fresh Investors: Avoid initiating positions. The combination of deteriorating fundamentals, negative financial trends, bearish technical posture, and elevated valuation creates an unfavourable risk-reward equation. Wait for clear evidence of revenue stabilisation, margin recovery, and improved order book visibility before considering entry. A more attractive entry point would be around ₹45-50, representing 21-29% downside from current levels, with P/E compression to 25-28x aligned with better-performing peers.
For Existing Holders: Consider reducing exposure or exiting positions, particularly if purchased above ₹80. The stock has broken below all major moving averages and shows no signs of technical support. Whilst the company's long-term quality remains intact, the near-term trajectory suggests further downside risk. Those with very long time horizons (3+ years) and high risk tolerance may hold through the cycle, but should be prepared for continued volatility and potential further declines. Monitor Q3 FY26 results closely for signs of stabilisation.
Fair Value Estimate: ₹45-50 (21-29% downside from current ₹63.70)
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, and all investments carry risk of loss.
