The December quarter results reveal a mixed performance, with the company navigating seasonal headwinds that impacted top-line growth. Whilst net sales declined 7.44% sequentially to ₹411.25 crores, the year-on-year comparison shows an 8.32% contraction, signalling broader demand challenges in the ethnic wear segment. However, the company managed to preserve profitability through improved operational efficiency, with operating margins expanding to 17.08% from 16.21% in the previous quarter.
The stock has underperformed significantly over the past year, declining 18.55% against the Sensex's 8.65% gain, resulting in a negative alpha of 27.20 percentage points. The current price of ₹129.10 represents a 42.08% decline from its 52-week high of ₹222.90, though it remains 16.25% above the 52-week low of ₹111.05. Following the results, the stock gained 4.07% in trading on January 19, 2026, suggesting some investor optimism despite the challenging quarterly numbers.
| Quarter | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 411.25 | 444.33 | 379.02 | 398.84 | 448.56 | 347.31 |
| QoQ Growth | -7.44% | +17.23% | -4.97% | -11.08% | +29.15% | +29.94% |
| YoY Growth | -8.32% | +27.93% | +41.80% | — | — | — |
| Net Profit (₹ Cr) | 38.14 | 40.08 | 30.05 | 13.51 | 46.02 | 23.77 |
| QoQ Growth | -4.84% | +33.38% | +122.43% | -70.65% | +93.61% | — |
| Operating Margin | 17.08% | 16.21% | 15.07% | 14.65% | 17.59% | 15.94% |
| PAT Margin | 9.27% | 9.02% | 7.93% | 3.39% | 10.26% | 6.84% |
Financial Performance: Margin Resilience Amid Revenue Pressure
The third quarter of FY2026 witnessed net sales of ₹411.25 crores, marking a sequential decline of 7.44% from the previous quarter's ₹444.33 crores. More concerning is the year-on-year contraction of 8.32%, indicating softer consumer demand compared to the festive season of the previous year. For the nine-month period ending December 2025, total revenue stood at ₹1,234.60 crores, representing growth of approximately 1.8% over the corresponding period of the previous year.
Despite the revenue headwinds, the company demonstrated operational discipline by expanding its operating margin (excluding other income) to 17.08% in Q3 FY26 from 16.21% in Q2 FY26, an improvement of 87 basis points. This margin enhancement was achieved through better cost management, with employee costs rising modestly to ₹58.01 crores from ₹53.61 crores in the previous quarter. Operating profit (PBDIT excluding other income) declined marginally to ₹70.24 crores from ₹72.02 crores, reflecting the top-line pressure.
Net profit for Q3 FY26 came in at ₹38.14 crores, down 4.84% quarter-on-quarter from ₹40.08 crores, though significantly better than the year-ago quarter's ₹46.02 crores on a year-on-year basis shows a decline of 17.12%. The PAT margin improved to 9.27% from 9.02% in the previous quarter, demonstrating the company's ability to protect bottom-line profitability despite revenue challenges. For the nine-month period, cumulative net profit stood at ₹108.27 crores.
The quality of earnings shows positive trends, with interest costs declining to ₹7.33 crores in Q3 FY26 from ₹9.61 crores in the year-ago quarter, a reduction of 23.7%. This reflects improved financial management and lower debt levels. Depreciation expenses increased to ₹15.80 crores from ₹13.41 crores year-on-year, indicating ongoing capital investments in store infrastructure and expansion. The effective tax rate for the quarter stood at 25.35%, normalising after the previous quarter's elevated rate of 26.34%.
Operational Challenges: Navigating Demand Headwinds
The company's operational performance reveals underlying challenges in sustaining growth momentum. The return on equity (ROE) for the latest period stands at 10.92%, whilst the average ROE over recent periods is 9.49%, indicating modest capital efficiency. This ROE level, whilst positive, remains below the industry leaders and suggests room for improvement in generating returns for shareholders. The return on capital employed (ROCE) at 17.22% for the latest period is healthier, demonstrating better utilisation of total capital deployed in the business.
The balance sheet as of March 2025 shows shareholder funds of ₹1,131.77 crores, with minimal long-term debt of ₹17.64 crores, resulting in a debt-to-equity ratio of just 0.03. This conservative capital structure provides financial flexibility, though it also suggests the company may not be fully leveraging its borrowing capacity for growth. Current assets stood at ₹1,125.09 crores against current liabilities of ₹251.32 crores, indicating robust working capital management with a current ratio exceeding 4.4 times.
Key Monitoring Point: Revenue Growth Concerns
The year-on-year revenue decline of 8.32% in Q3 FY26 and the sequential contraction of 7.44% raise questions about demand sustainability in the ethnic wear segment. With five-year sales CAGR at 11.91%, the recent slowdown marks a notable departure from historical growth trends. Management's ability to revive top-line momentum will be critical for maintaining investor confidence and justifying current valuations.
Employee costs have been trending upward, rising from ₹42.82 crores in Q1 FY25 to ₹58.01 crores in Q3 FY26, reflecting both inflationary pressures and potentially higher staffing levels to support expansion plans. The company's ability to manage this cost line whilst maintaining service quality will be crucial for protecting margins in a competitive retail environment. Operating leverage, which typically benefits retailers during high-growth phases, has worked in reverse during the recent quarters of muted revenue growth.
Industry Context: Ethnic Wear Sector Dynamics
The garments and apparels sector, particularly the ethnic wear segment, has faced headwinds from changing consumer preferences and increased competition from both organised and unorganised players. Sai Silks (Kalamandir) operates in a market characterised by regional preferences, seasonal demand patterns, and price sensitivity. The company's performance must be viewed against the backdrop of broader retail trends, including the shift towards omnichannel retailing and evolving fashion preferences among younger consumers.
The festive season, traditionally a strong period for ethnic wear retailers, delivered below-expectation results in Q3 FY26, suggesting either market share losses or broader demand weakness. The company's ability to differentiate through product quality, design innovation, and customer experience will determine its competitive positioning. With institutional holdings at 15.08%, the company has moderate institutional investor interest, which could increase if operational performance improves.
Competitive Positioning Insight
Sai Silks (Kalamandir) operates with a P/E ratio of 15.27x, significantly below the sector average of approximately 30x, suggesting the market is pricing in concerns about growth sustainability. The company's ROE of 9.49% lags behind peers like Go Fashion (14.16%) and Filatex India (18.10%), indicating room for improvement in capital efficiency. However, its conservative balance sheet with minimal debt provides a buffer against sector volatility.
Peer Comparison: Valuation Discount Reflects Concerns
When benchmarked against industry peers, Sai Silks (Kalamandir) trades at a notable valuation discount, which reflects both its operational challenges and lower growth profile. The company's P/E ratio of 15.27x compares favourably to Baazar Style's 65.82x and Go Fashion's 23.98x, but this discount appears justified given the weaker ROE and recent revenue trends. The price-to-book value of 1.67x is lower than most peers, with Go Fashion trading at 2.86x and Baazar Style at 5.31x.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield % |
|---|---|---|---|---|---|
| Sai Silks (Kalamandir) | 15.27 | 1.67 | 9.49% | 0.03 | 0.77% |
| Baazar Style | 65.82 | 5.31 | 8.07% | 1.81 | — |
| Go Fashion (India) | 23.98 | 2.86 | 14.16% | 0.46 | — |
| Filatex India | 10.89 | 1.37 | 18.10% | -0.15 | — |
| Ganesha Ecosphere | 30.38 | 1.53 | 9.65% | 0.34 | 0.42% |
| Dollar Industries | 17.71 | 2.09 | 13.39% | 0.38 | 0.91% |
The company's ROE of 9.49% places it near the bottom of the peer group, with only Baazar Style (8.07%) posting a lower figure. This modest return on equity, combined with slowing revenue growth, explains the market's cautious stance. However, Sai Silks' virtually debt-free balance sheet (debt-to-equity of 0.03) stands out positively, providing financial stability that some higher-growth peers lack. The dividend yield of 0.77%, whilst modest, offers some income support for investors.
Valuation Analysis: Attractive Entry Point or Value Trap?
At the current price of ₹129.10, Sai Silks (Kalamandir) trades at a P/E ratio of 15.27x based on trailing twelve-month earnings, representing a significant discount to the industry P/E of 77x. The company's EV/EBITDA multiple of 7.54x and EV/Sales of 1.20x also suggest reasonable valuations on absolute terms. However, these multiples must be evaluated in the context of the company's growth trajectory and quality metrics.
The stock's PEG ratio of 0.31x appears attractive, suggesting the valuation is low relative to growth potential. However, this metric should be interpreted cautiously given the recent revenue deceleration. The price-to-book value of 1.67x offers some downside protection, trading at a modest premium to book value of ₹76.81 per share. The stock's 42.08% decline from its 52-week high of ₹222.90 has brought valuations to levels that could appeal to contrarian investors, though the technical picture remains weak with the stock in a bearish trend.
The valuation grade has oscillated between "Attractive" and "Very Attractive" over the past several months, currently standing at "Attractive" as of the latest assessment. This suggests that whilst the stock offers reasonable value, it does not present a compelling bargain given the operational challenges. For value-conscious investors, the current levels may offer an entry point, but only if confidence exists in management's ability to revive revenue growth and sustain margin improvements.
Shareholding Pattern: Institutional Caution Evident
The shareholding pattern reveals a stable promoter base holding 60.97% as of September 2025, unchanged from the previous quarter but marginally higher than the 60.80% held in September 2024. The absence of promoter pledging is a positive signal, indicating confidence and financial stability at the promoter level. However, the institutional shareholding trends warrant closer examination.
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 60.97% | 60.97% | 60.87% | 0.00% |
| FII | 3.85% | 3.45% | 3.17% | +0.40% |
| Mutual Funds | 10.16% | 11.83% | 13.18% | -1.67% |
| Other DII | 1.07% | 0.55% | 2.56% | +0.52% |
| Non-Institutional | 23.95% | 23.21% | 20.23% | +0.74% |
Mutual fund holdings have declined consistently over the past three quarters, falling from 13.18% in March 2025 to 10.16% in September 2025, a reduction of 302 basis points. This steady exit by domestic institutional investors suggests waning confidence in the near-term growth prospects. The most recent quarter saw a decline of 167 basis points, indicating continued selling pressure from mutual funds. Foreign institutional investors (FIIs) have marginally increased their stake to 3.85% from 3.45%, though the absolute holding remains modest.
The increase in non-institutional holdings to 23.95% from 20.23% over two quarters indicates some retail investor interest, possibly attracted by the valuation correction. However, the overall institutional holding of 15.08% remains relatively low for a company of this market capitalisation, suggesting limited institutional sponsorship. For the stock to re-rate meaningfully, it will need to demonstrate sustained operational improvements that can attract institutional buying interest.
Stock Performance: Significant Underperformance Across Timeframes
The stock's performance over the past year has been disappointing across all timeframes, with particularly severe underperformance in medium-term horizons. Over the past year, Sai Silks (Kalamandir) has declined 18.55%, whilst the Sensex gained 8.65%, resulting in a negative alpha of 27.20 percentage points. The underperformance is even more pronounced over a two-year period, with the stock down 47.10% against the Sensex's 16.13% gain, translating to a staggering negative alpha of 63.23 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +6.04% | -0.75% | +6.79% |
| 1 Month | -15.54% | -1.98% | -13.56% |
| 3 Months | -26.08% | -0.84% | -25.24% |
| 6 Months | -22.93% | +1.82% | -24.75% |
| YTD | -18.01% | -2.32% | -15.69% |
| 1 Year | -18.55% | +8.65% | -27.20% |
| 2 Years | -47.10% | +16.13% | -63.23% |
The stock has also underperformed its sector, with the Garments & Apparels sector delivering a positive return of 1.77% over the past year, resulting in sectoral underperformance of 20.32 percentage points. The recent one-week performance shows a gain of 6.04%, suggesting some short-term buying interest, possibly driven by oversold conditions or bargain hunting. However, this must be viewed against the backdrop of a 26.08% decline over three months and a 15.54% drop over one month.
From a risk-adjusted perspective, the stock's volatility of 47.96% is significantly higher than the Sensex's 11.31%, classifying it as a high-risk investment. The negative risk-adjusted return of -0.39 over the past year indicates that investors have not been compensated for the elevated volatility. The stock's beta of 1.35 suggests it is more volatile than the broader market, amplifying both gains and losses. The current technical trend is bearish, with the stock trading below all major moving averages, indicating weak momentum.
Investment Thesis: Mixed Signals Across Parameters
The investment case for Sai Silks (Kalamandir) presents a complex picture with competing positive and negative factors. The company's quarterly financial trend is classified as "Positive," supported by the highest half-yearly ROCE of 15.52% and the lowest debt-to-equity ratio of 0.25 times. The nine-month net profit of ₹108.27 crores represents a significant improvement over the previous year. However, these positives are offset by concerning technical trends and quality assessments.
The quality assessment rates the company as "Average," reflecting its long-term financial performance. The five-year sales CAGR of 11.91% and EBIT growth of 10.94% are respectable but not exceptional. The average EBIT-to-interest coverage of 4.02x is adequate but not robust, whilst the average ROE of 9.49% lags industry leaders. The debt-to-EBITDA ratio of 2.04 indicates moderate leverage, though the current debt levels are minimal. The absence of promoter pledging and institutional holdings of 15.08% provide some comfort.
The proprietary Mojo score stands at 46 out of 100, placing the stock in the "SELL" category with a recommendation to "consider selling" and "look for exit opportunities." This score reflects the bearish technical trend and concerns about long-term growth sustainability. The score has declined from a previous rating of "BUY" at 71 in October 2025, indicating deteriorating sentiment and fundamentals over recent months.
"Whilst valuation appears attractive on surface metrics, the combination of slowing revenue growth, bearish technical trends, and declining institutional interest suggests caution is warranted until clearer signs of operational turnaround emerge."
Key Strengths & Risk Factors
KEY STRENGTHS
- Conservative Balance Sheet: Virtually debt-free with debt-to-equity of just 0.03, providing financial flexibility and stability
- Margin Resilience: Operating margin improved to 17.08% in Q3 FY26 despite revenue pressure, demonstrating cost management capability
- Attractive Valuation: P/E of 15.27x represents significant discount to industry average of 77x, offering value potential
- Declining Interest Burden: Interest costs down 23.7% year-on-year, improving profitability and cash flow
- No Promoter Pledging: Zero pledged shares indicate promoter confidence and financial strength
- Positive Financial Trend: Nine-month net profit of ₹108.27 crores shows improvement over previous year
- Strong Working Capital: Current ratio exceeding 4.4x indicates robust liquidity management
KEY CONCERNS
- Revenue Deceleration: Net sales declined 8.32% year-on-year in Q3 FY26, raising concerns about demand sustainability
- Weak ROE: Return on equity of 9.49% lags industry peers, indicating suboptimal capital efficiency
- Institutional Exodus: Mutual fund holdings declined from 13.18% to 10.16% over two quarters, signalling waning confidence
- Severe Underperformance: Stock down 47.10% over two years versus Sensex gain of 16.13%, massive negative alpha
- Bearish Technical Trend: Stock trading below all major moving averages with weak momentum indicators
- High Volatility: 47.96% volatility with negative risk-adjusted returns, classifying it as high-risk investment
- Modest Growth Profile: Five-year sales CAGR of 11.91% is respectable but not exceptional for a small-cap stock
Outlook: What to Watch in Coming Quarters
The outlook for Sai Silks (Kalamandir) hinges on management's ability to revive revenue growth whilst maintaining the margin improvements achieved in recent quarters. The company operates in a competitive and dynamic sector where consumer preferences shift rapidly, requiring constant innovation in product offerings and customer engagement strategies. The festive season performance in Q3 FY26 fell short of expectations, but the upcoming quarters will provide clarity on whether this was a temporary blip or indicative of deeper structural challenges.
POSITIVE CATALYSTS
- Revival of top-line growth to double-digit levels in upcoming quarters
- Sustained operating margin improvement above 17% through operational efficiency
- Stabilisation and reversal of mutual fund selling with renewed institutional interest
- Technical trend reversal with stock reclaiming key moving averages
- Successful store expansion driving market share gains
RED FLAGS
- Further sequential revenue declines in Q4 FY26 indicating demand weakness
- Margin compression due to competitive pressures or promotional activities
- Continued institutional selling pushing holdings below 10%
- Stock breaking below 52-week low of ₹111.05, signalling technical breakdown
- Deterioration in working capital metrics or increase in debt levels
Investors should monitor the company's quarterly revenue trajectory closely, looking for signs of stabilisation and eventual recovery. The management's commentary on demand trends, competitive intensity, and expansion plans will provide valuable insights into the medium-term outlook. Additionally, any change in institutional shareholding patterns, particularly if mutual funds resume buying, could signal improving sentiment. From a technical perspective, the stock needs to reclaim the ₹141.81 level (20-day moving average) to indicate any meaningful trend reversal.
The Verdict: Caution Warranted Despite Valuation Appeal
Score: 46/100
For Fresh Investors: Avoid initiating positions at current levels. Whilst valuations appear attractive, the combination of deteriorating revenue trends, weak technical momentum, and declining institutional interest suggests significant downside risk. Wait for clear signs of operational turnaround, including at least two consecutive quarters of positive revenue growth and stabilisation of institutional holdings before considering entry.
For Existing Holders: Consider reducing positions on any near-term rallies towards the ₹140-145 zone. The stock's classification as "SELL" with a score of 46/100 reflects fundamental concerns that outweigh valuation comfort. If holding for long-term, reassess the investment thesis if revenue growth does not revive by Q1 FY27 or if the stock breaks below the ₹111 support level.
Fair Value Estimate: ₹115-120 (11.0% downside risk from current levels), based on conservative earnings estimates and peer valuations adjusted for growth and quality concerns.
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. The views expressed are based on data available as of January 19, 2026, and are subject to change.
