The quarter's performance reflects a troubling divergence between top-line expansion and bottom-line profitability. Whilst net sales grew 3.30% sequentially to ₹2,756.40 crores and posted a respectable 15.57% year-on-year increase, the company's ability to convert revenue into profit remains severely constrained by elevated interest costs of ₹212.70 crores and rising employee expenses of ₹1,497.60 crores. The stock has declined 2.21% in the latest trading session, extending its bearish trajectory that has seen it underperform the broader market by 33.56% over the past year.
The December quarter results paint a concerning picture of a company struggling with its debt servicing obligations despite maintaining revenue momentum. The interest burden has become increasingly onerous, consuming a substantial portion of operating profits and pushing the company into negative territory at the profit before tax level. This structural challenge is compounded by an abnormal tax charge of ₹31.16 crores despite reporting a pre-tax loss, resulting in an effective tax rate of negative 29.64% for the quarter.
| Quarter | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 2,756.40 | 2,668.26 | 2,971.41 | 2,541.26 | 2,385.05 | 2,165.73 |
| QoQ Growth | +3.30% | -10.20% | +16.93% | +6.55% | +10.13% | -13.93% |
| Operating Profit (₹ Cr) | 331.95 | 305.81 | 600.27 | 334.68 | 268.39 | 217.68 |
| Operating Margin % | 12.04% | 11.46% | 20.20% | 13.17% | 11.25% | 10.05% |
| Consolidated PAT (₹ Cr) | -111.55 | -52.02 | 83.09 | -13.11 | -59.98 | -77.85 |
| PAT Margin % | -4.05% | -1.95% | 2.80% | -0.52% | -2.52% | -3.59% |
Financial Performance: Revenue Growth Fails to Translate into Profitability
RPSG Ventures demonstrated resilience at the revenue level in Q3 FY26, with net sales advancing 3.30% quarter-on-quarter to ₹2,756.40 crores and registering a healthy 15.57% year-on-year expansion. This represents the company's second consecutive quarter of sequential revenue growth, following a 10.20% decline in Q2 FY26. On a nine-month basis for FY26 (April-December 2025), the company generated consolidated revenues of ₹8,396.07 crores, though profitability remains elusive with a nine-month consolidated net profit of just ₹23.42 crores.
However, the revenue growth narrative is overshadowed by severe margin compression and profitability challenges. Operating profit before depreciation, interest, tax, and other income (PBDIT) stood at ₹331.95 crores in Q3 FY26, yielding an operating margin of 12.04%—a modest 58 basis point improvement from the previous quarter's 11.46% but significantly below the 20.20% achieved in Q1 FY26. This margin volatility suggests inconsistent operational efficiency and potential pricing pressures in the company's service delivery model.
The company's cost structure reveals significant pressure points. Employee costs surged to ₹1,497.60 crores in Q3 FY26, representing 54.3% of net sales and reflecting the labour-intensive nature of the IT services business. This represents a sequential increase of 4.81% from Q2 FY26's ₹1,428.94 crores. Depreciation charges also climbed to ₹124.45 crores, up 1.40% quarter-on-quarter, indicating ongoing capital investments in fixed assets that now total ₹10,118.64 crores on the balance sheet as of March 2025.
Most critically, interest expenses of ₹212.70 crores in Q3 FY26 continue to erode profitability, representing a 0.93% sequential increase and accounting for 7.7% of revenue. This substantial financial charge stems from the company's elevated debt burden, with long-term debt standing at ₹2,489.18 crores as of March 2025—more than double the previous year's ₹1,205.39 crores. The interest coverage ratio remains precarious, with the company generating operating profit of just 1.56 times its interest obligation, well below comfortable levels.
Operational Challenges: Debt Burden Strangles Capital Efficiency
RPSG Ventures faces a fundamental challenge in its capital structure that severely constrains its ability to generate shareholder returns. The company's return on equity (ROE) stood at a meagre 1.10% on an average basis, with the latest annual figure deteriorating to negative 1.99% as of March 2025. This abysmal ROE—significantly below the cost of equity—indicates that the company is destroying shareholder value rather than creating it. For context, higher ROE percentages signify superior capital efficiency and profitability, making this single-digit return particularly concerning for equity investors.
The company's return on capital employed (ROCE) of 13.32% on an average basis, whilst marginally better than ROE, remains inadequate given the elevated risk profile. The latest ROCE of 13.86% as of March 2025 barely exceeds the company's weighted average cost of capital, suggesting minimal value creation from deployed capital. This weak return profile is directly attributable to the company's aggressive leverage strategy, with a debt-to-equity ratio that has ballooned to alarming levels.
Critical Concern: Unsustainable Leverage Levels
Debt-to-Equity Ratio: The company's half-yearly debt-to-equity ratio reached a peak of 2.41 times in H1 FY26, representing the highest leverage in recent history. With net debt to equity averaging 1.94 times and long-term debt more than doubling to ₹2,489.18 crores in FY25, the capital structure has become increasingly fragile.
Debt Servicing Pressure: The debt-to-EBITDA ratio of 3.39 times indicates that the company would require more than three years of operating profits to repay its debt, assuming no other uses of cash. Combined with weak interest coverage of just 2.15 times on average, the company faces severe financial stress.
Balance Sheet Deterioration: Total liabilities surged to ₹10,307.44 crores as of March 2025, whilst shareholder funds remained relatively stagnant at ₹2,663.10 crores. This imbalance between debt and equity financing raises questions about long-term financial sustainability.
The company's working capital management has also deteriorated, with the debtors turnover ratio falling to its lowest level of 5.10 times on a half-yearly basis. This suggests that RPSG Ventures is taking longer to collect receivables from customers, potentially indicating either weaker bargaining power or deteriorating client financial health. Such working capital pressure further constrains cash generation and increases reliance on external financing.
From an operational standpoint, sales to capital employed averaged just 1.28 times, indicating low asset productivity. The company requires substantial capital investment to generate each rupee of revenue, which is suboptimal in a services business that should theoretically be asset-light. This metric, combined with elevated fixed assets of ₹10,118.64 crores, suggests either significant infrastructure investments or potential asset inefficiency.
Industry Context: Commercial Services Sector Faces Headwinds
RPSG Ventures operates within the commercial services and supplies sector, which has delivered modest returns of 1.73% over the past year. The company's performance has significantly lagged this already subdued sector benchmark, underperforming by 28.66 percentage points with a negative 26.93% return over the same period. This substantial underperformance reflects company-specific challenges rather than broader sectoral weakness.
The IT services and allied services segment in India has faced multiple headwinds, including pricing pressure from global clients, elevated attrition rates affecting service delivery, and increased competition from both domestic and international players. For RPSG Ventures specifically, the challenge has been compounded by its diversified portfolio approach, which may have diluted management focus and operational excellence compared to pure-play IT services firms.
Quality Assessment: Average Grade with Fundamental Concerns
RPSG Ventures carries an "Average" quality grade, reflecting mixed long-term financial performance. Whilst the company has demonstrated healthy five-year sales growth of 16.94% and impressive EBIT growth of 29.66%, these positives are offset by weak profitability metrics, elevated leverage, and inconsistent earnings quality.
Key Quality Indicators: The company benefits from zero promoter pledging and stable 63.51% promoter holding, indicating confidence from the RP-Sanjiv Goenka Group. However, institutional holdings remain anaemic at just 5.25%, suggesting limited conviction from professional investors. The company's average ROCE of 13.32% and ROE of 1.10% fall well short of quality thresholds, whilst the tax ratio of 57.89% and debt-to-EBITDA of 3.39 times raise red flags about financial efficiency and sustainability.
The company's quality grade was downgraded from "Good" to "Average" in July 2020 and has remained at this level since November 2025, reflecting persistent operational and financial challenges. The lack of dividend payments (0.0% payout ratio) further underscores the company's cash constraints and inability to reward shareholders, directing all available cash flow towards debt servicing and operational requirements.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| RPSG Ventures | NA (Loss Making) | 0.89x | 1.10% | 1.94x | NA |
| Firstsource Solutions | 29.90x | 4.85x | 15.29% | 0.47x | 1.34% |
| eClerx Services | 31.93x | 8.14x | 24.29% | -0.33x | 0.02% |
| Hinduja Global | NA (Loss Making) | 0.24x | 19.27% | -0.35x | NA |
| Digitide Solutions | 12.82x | 1.87x | 15.00% | 0.32x | NA |
| Alldigi Tech | 17.69x | 5.45x | 21.79% | -0.22x | 6.78% |
The peer comparison reveals RPSG Ventures trading at a significant discount to its commercial services peers, with a price-to-book value of 0.89 times compared to the peer average of approximately 4.10 times. However, this valuation discount is entirely justified by the company's inferior return on equity of 1.10% versus peer average of approximately 19%, and its elevated debt-to-equity ratio of 1.94 times compared to peers that are either debt-free or carry minimal leverage. The market is correctly pricing in the company's structural profitability challenges and financial risk.
Valuation Analysis: Discount Justified by Weak Fundamentals
RPSG Ventures trades at a price-to-book value of 0.89 times, representing a 11% discount to its book value of ₹804.81 per share. At first glance, this below-book valuation might appear attractive. However, the discount is entirely warranted given the company's inability to generate adequate returns on that book value. With an ROE of just 1.10% on average and negative 1.99% in the latest fiscal year, the company is effectively destroying shareholder value, making any premium to book value unjustifiable.
The company's loss-making status in recent quarters means traditional earnings-based valuation metrics like P/E ratio are not applicable. The stock trades at an EV/EBITDA multiple of 4.96 times and EV/EBIT of 6.94 times, which appear superficially reasonable. However, these multiples fail to capture the unsustainable nature of the current capital structure and the ongoing cash drain from interest obligations. The enterprise value to capital employed ratio of 0.96 times suggests the market values the company's deployed capital at essentially replacement cost, offering no premium for going concern value or competitive advantages.
The proprietary Mojo Score of 40 out of 100 places RPSG Ventures firmly in "SELL" territory, reflecting the confluence of negative factors: bearish technical trends, flat financial performance, very attractive valuation that serves as a value trap, and average quality grade. The score has oscillated between "Hold" (51 points) and "Sell" (45 points) over the past year, with the recent deterioration to 40 points on November 10, 2025, reflecting worsening fundamentals.
From a historical valuation perspective, the company's valuation grade has remained "Very Attractive" since August 2021, with brief interludes of "Attractive" rating. This persistent valuation discount over nearly five years underscores the market's scepticism about the company's ability to improve operational performance and return metrics. The valuation is not attractive in the Benjamin Graham sense of buying quality assets at a discount; rather, it represents a value trap where low multiples reflect genuinely poor business economics.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % |
|---|---|---|---|---|---|
| Dec'25 | 63.51% | 3.35% | 0.00% | 0.38% | 1.52% |
| Sep'25 | 63.51% | 3.45% | 0.00% | 0.38% | 1.52% |
| Jun'25 | 63.51% | 3.42% | 0.00% | 0.43% | 1.58% |
| Mar'25 | 63.51% | 3.61% | 0.00% | 0.43% | 1.52% |
| Dec'24 | 63.51% | 3.52% | 0.00% | 0.43% | 1.52% |
| QoQ Change (Dec'25) | 0.00% | -0.10% | 0.00% | 0.00% | 0.00% |
Shareholding: Stable Promoter Base, Weak Institutional Interest
The shareholding pattern of RPSG Ventures reveals a tale of two investor classes: unwavering promoter commitment juxtaposed against tepid institutional interest. Promoter holding has remained rock-solid at 63.51% for at least the past five quarters through December 2025, with no sequential changes. This stability, led by Rainbow Investments Ltd. (39.08%) and Integrated Coal Mining Ltd. (16.99%), reflects the RP-Sanjiv Goenka Group's long-term commitment to the venture despite ongoing operational challenges. The absence of any promoter pledging further reinforces this confidence.
However, the institutional investor landscape tells a starkly different story. Foreign institutional investors (FIIs) marginally reduced their stake to 3.35% in Q3 FY26 from 3.45% in the previous quarter, marking a subtle but telling vote of no confidence. More concerning is the complete absence of mutual fund holdings at 0.00%, indicating that domestic fund managers see no compelling investment case in the current business model and financial structure. Insurance companies maintain a minimal 0.38% stake, whilst other domestic institutional investors hold just 1.52%.
The combined institutional holding of merely 5.25% represents one of the lowest levels amongst listed companies of comparable size, signalling widespread scepticism from professional investors about the company's prospects. The non-institutional and retail shareholding of 31.24% has gradually increased by 10 basis points quarter-on-quarter, suggesting retail accumulation potentially driven by the low absolute share price rather than fundamental conviction. This divergence between stable promoter holding and weak institutional participation creates an information asymmetry that investors should carefully consider.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -4.18% | +1.17% | -5.35% |
| 1 Month | -6.47% | -2.15% | -4.32% |
| 3 Months | -17.61% | -0.09% | -17.52% |
| 6 Months | -24.47% | +3.34% | -27.81% |
| Year-to-Date | -7.95% | -2.33% | -5.62% |
| 1 Year | -26.93% | +6.63% | -33.56% |
| 3 Years | +54.92% | +37.57% | +17.35% |
| 5 Years | +111.31% | +64.07% | +47.24% |
Stock Performance: Persistent Underperformance Across Timeframes
RPSG Ventures has delivered deeply disappointing returns to shareholders across virtually all meaningful timeframes. Over the past year, the stock has declined 26.93% whilst the Sensex gained 6.63%, resulting in a negative alpha of 33.56 percentage points. This substantial underperformance reflects the market's growing concerns about the company's deteriorating financial health and questionable path to sustainable profitability.
The stock's technical position has turned decidedly bearish, with the price trading below all key moving averages: 5-day MA (₹712.17), 20-day MA (₹707.95), 50-day MA (₹741.43), 100-day MA (₹788.34), and 200-day MA (₹843.03). This complete breakdown of technical support levels indicates strong selling pressure and lack of buying interest. The stock changed to a bearish trend on November 14, 2025, at ₹832.45 and has since declined 16.9% to the current level of ₹691.50.
The recent price action has been particularly weak, with the stock declining 4.18% over the past week and 6.47% over the past month, significantly underperforming the Sensex in both periods. The three-month return of negative 17.61% and six-month return of negative 24.47% underscore the accelerating downward momentum. The stock now trades just 6.25% above its 52-week low of ₹650.85 and a troubling 32.74% below its 52-week high of ₹1,028.10 achieved in early 2025.
Risk Assessment: High Volatility, Negative Risk-Adjusted Returns
RPSG Ventures exhibits high volatility of 36.53% compared to the Sensex's 11.53%, resulting in a beta of 1.22. This high-beta characteristic means the stock amplifies market movements, falling more in downturns and theoretically rising more in upswings. However, the one-year risk-adjusted return of negative 0.74 indicates that investors are not being compensated for taking on this elevated risk.
The stock falls into the "HIGH RISK LOW RETURN" category, the worst possible combination for investors. With a negative Sharpe ratio, the stock is destroying value on a risk-adjusted basis, making it unsuitable for risk-averse investors and questionable even for those with higher risk tolerance.
On a positive note, the longer-term picture shows that early investors have been rewarded, with three-year returns of 54.92% (alpha of positive 17.35%) and five-year returns of 111.31% (alpha of positive 47.24%). However, these historical gains are increasingly under threat from the company's deteriorating fundamentals and mounting debt burden. The stock's recent underperformance versus its commercial services sector by 28.66 percentage points over one year further highlights company-specific issues rather than sectoral headwinds.
Investment Thesis: Multiple Warning Signals Flash Red
The investment case for RPSG Ventures rests on four critical pillars, each telling a different part of the story. The Mojo 4 Dots Analysis reveals a company facing structural challenges across multiple dimensions:
The "very attractive" valuation assessment, whilst technically accurate based on low multiples, represents a classic value trap. The company trades at a discount because it deserves to trade at a discount—the business economics are fundamentally challenged. An average quality grade combined with flat-to-negative financial trends and bearish technical momentum creates a toxic cocktail for investors. The near-term drivers are decidedly mixed, with quarterly financial trends rated as "flat" despite sequential revenue growth, reflecting the market's focus on profitability rather than top-line expansion.
KEY STRENGTHS
- Consistent revenue growth: 15.57% YoY in Q3 FY26, demonstrating market demand for services
- Strong promoter backing: Stable 63.51% holding by RP-Sanjiv Goenka Group with zero pledging
- Healthy long-term growth: Five-year sales CAGR of 16.94% and EBIT CAGR of 29.66%
- Improved operating margins: Q3 margin of 12.04% up from 11.46% in Q2, showing operational leverage
- Diversified portfolio: Presence across IT and allied services provides revenue resilience
- Substantial asset base: Fixed assets of ₹10,118.64 crores provide scale and infrastructure
- Positive long-term returns: Five-year return of 111.31% with 47.24% alpha generation
KEY CONCERNS
- Deepening losses: Q3 consolidated loss of ₹111.55 crores, up 114.44% QoQ
- Crippling debt burden: Long-term debt of ₹2,489.18 crores with debt-to-equity of 2.41 times
- Abysmal returns: ROE of 1.10% average and negative 1.99% latest, destroying shareholder value
- Excessive interest costs: ₹212.70 crores in Q3 consuming 64% of operating profit
- Weak interest coverage: EBIT to interest of just 2.15 times, indicating financial stress
- No institutional support: Combined FII and MF holding of just 3.35%, zero mutual fund interest
- Persistent underperformance: Negative 26.93% one-year return vs Sensex positive 6.63%
- Deteriorating working capital: Debtors turnover ratio at lowest level of 5.10 times
- High volatility: 36.53% volatility with negative risk-adjusted returns
Outlook: What to Watch in Coming Quarters
POSITIVE CATALYSTS
- Debt refinancing or restructuring that reduces interest burden below ₹200 crores per quarter
- Operating margin expansion to 15%+ levels sustained for two consecutive quarters
- Return to quarterly profitability with consolidated PAT exceeding ₹50 crores
- Institutional investor entry with FII or MF stakes increasing above 5%
- Improved working capital efficiency with debtors turnover improving to 6+ times
RED FLAGS TO MONITOR
- Further deterioration in quarterly losses beyond ₹120 crores
- Long-term debt increasing above ₹2,700 crores, indicating continued cash burn
- Operating margins falling below 10%, suggesting pricing pressure or cost inflation
- Promoter stake reduction or any pledging of shares
- Stock breaking below 52-week low of ₹650.85, indicating technical breakdown
- Interest coverage ratio falling below 2.0 times, signalling acute financial distress
The path forward for RPSG Ventures requires decisive action on multiple fronts. The company must prioritise debt reduction through asset monetisation, operational cash flow improvement, or equity infusion. Without addressing the fundamental mismatch between its cost of capital and return on capital, the business model remains unsustainable. Management's ability to demonstrate a credible turnaround plan with specific milestones will be critical in determining whether the current valuation discount narrows or widens further.
The Verdict: Avoid Until Fundamental Restructuring
Score: 40/100
For Fresh Investors: Avoid initiating positions. The combination of deepening losses, unsustainable debt levels, and abysmal return on equity makes this a value trap rather than a value opportunity. The "very attractive" valuation is justified by fundamentally challenged business economics. Wait for concrete evidence of debt reduction and sustained return to profitability before considering entry.
For Existing Holders: Consider reducing exposure or exiting positions. The deteriorating financial trajectory, mounting interest burden, and complete absence of institutional investor confidence suggest further downside risk. The stock's high beta of 1.22 means it will likely amplify any market weakness. Only long-term investors with very high risk tolerance and conviction in the promoter group's restructuring ability should maintain holdings.
Fair Value Estimate: ₹580-620 (15-18% downside from current levels), reflecting the elevated financial risk and weak return profile. Any valuation premium requires demonstrable improvement in ROE above 8% and debt-to-equity below 1.5 times.
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 does not guarantee future results. The views expressed are based on information available as of February 06, 2026, and are subject to change.
