Sarthak Global Q3 FY26: Revenue Collapse and Mounting Losses Raise Serious Concerns

The third quarter of fiscal 2026 marked a catastrophic deterioration in Sarthak Global's financial performance, with revenues virtually evaporating to ₹0.10 crores from ₹3.68 crores in the year-ago quarter. This represents one of the most severe revenue contractions in the steel sector, raising fundamental questions about the company's operational viability and business continuity. The sequential picture is equally alarming, with revenues increasing marginally by 11.11% quarter-on-quarter from ₹0.09 crores, but remaining far below the ₹3.55 crores reported in Q4 FY25.

Financial Performance: A Catastrophic Collapse

The financial metrics for Q3 FY26 reveal a company in severe distress across all operational parameters. Net sales of ₹0.10 crores represent a staggering 97.28% decline year-on-year, whilst the sequential improvement of 11.11% from Q2's ₹0.09 crores provides little comfort given the abysmal base. The company's inability to generate meaningful revenue suggests either a complete breakdown in operations, severe market conditions, or fundamental business model challenges.

Operating profit before depreciation, interest, and tax (excluding other income) stood at negative ₹0.06 crores, translating to an operating margin of negative 60.00%. This represents a dramatic worsening from Q2 FY26's negative 33.33% margin and indicates that the company is burning cash on every rupee of revenue generated. Employee costs of ₹0.11 crores exceeded total revenues, highlighting a severe cost structure misalignment with current business activity levels.

The net loss of ₹0.07 crores in Q3 FY26 marks a return to red ink after Q2's breakeven performance, with the profit after tax margin deteriorating to negative 70.00%. The company's tax credit of ₹0.02 crores partially offset the pre-tax loss of ₹0.09 crores, resulting in an effective tax rate of 22.22%. However, this provides little solace given the underlying operational challenges.

Operational Distress: Weak Fundamentals and High Leverage

Sarthak Global's operational metrics reveal a company struggling with weak fundamental strength and concerning capital efficiency. The average return on equity (ROE) of 4.88% over recent periods falls significantly short of acceptable thresholds for profitable operations, whilst the latest ROE of 22.27% appears inflated due to the severely eroded equity base rather than genuine operational improvements. The company's return on capital employed (ROCE) stands at negative 7.47% for the latest period, with an average of negative 7.88%, indicating value destruction rather than creation.

The balance sheet presents additional concerns, with shareholder funds of just ₹1.69 crores as of March 2025, comprising share capital of ₹3.00 crores offset by accumulated losses in reserves of negative ₹1.31 crores. Long-term debt has increased to ₹13.15 crores from ₹15.19 crores in the previous year, resulting in a debt-to-equity ratio of 4.08 times on average. This high leverage position leaves the company vulnerable to any further operational setbacks and limits financial flexibility for business recovery initiatives.

The Revenue Crisis: Understanding the Collapse

The dramatic revenue decline from ₹7.00 crores in FY25 to current quarterly run-rates suggests either a deliberate scaling down of operations or severe market-related challenges. The steel and sponge iron industry has faced headwinds from fluctuating raw material prices and demand pressures, but Sarthak Global's revenue collapse far exceeds typical sector trends. The company's five-year sales growth of negative 28.80% and EBIT growth of negative 21.40% underscore a prolonged period of operational deterioration.

Current assets of ₹16.93 crores as of March 2025 provide some liquidity cushion, though the composition and realisability of these assets remain unclear. The company generated positive operating cash flow of ₹2.00 crores in FY25, primarily driven by working capital adjustments of ₹2.00 crores, but this appears unsustainable given the current revenue trajectory. Cash flow from investing activities showed an inflow of ₹2.00 crores, possibly from asset disposals, whilst financing activities consumed ₹3.00 crores, likely for debt servicing.

Industry Positioning: Lagging Far Behind Peers

Within the steel and sponge iron sector, Sarthak Global's positioning appears extremely weak relative to established players. The company's market capitalisation of ₹9.22 crores places it firmly in micro-cap territory, whilst peers like JSW Steel, Tata Steel, and Jindal Steel command market values in the thousands of crores. This size disparity reflects not just scale differences but fundamental operational capabilities and market access.

The company's average ROE of 4.88% pales in comparison to the peer group average of approximately 30%, with Lloyds Metals achieving an exceptional 83.54% ROE. Similarly, Sarthak Global's debt-to-equity ratio of 4.08 times significantly exceeds the peer average of around 0.60 times, indicating a more precarious financial structure. The company's inability to generate consistent profits or positive cash flows from operations further distinguishes it negatively from sector leaders who demonstrate stable profitability and cash generation.

The peer comparison reveals that whilst Sarthak Global trades at a seemingly reasonable P/E ratio of 18.68 times compared to the peer average of approximately 30 times, this lower multiple reflects market scepticism about the company's ability to sustain even minimal earnings. The price-to-book ratio of 4.16 times appears elevated relative to the severely eroded book value, suggesting that even at current distressed prices, the stock may not offer compelling value given the operational challenges.

Valuation Analysis: Risky Classification Justified

Sarthak Global's current valuation of ₹30.72 per share, translating to a market capitalisation of ₹9.22 crores, carries significant risk factors that justify its "RISKY" classification. The stock trades at a P/E ratio of 18.68 times based on trailing twelve-month earnings, but this multiple provides limited insight given the company's erratic profitability and recent return to losses. The price-to-book ratio of 4.16 times suggests the market is pricing in some recovery potential, though this appears optimistic given current operational realities.

The enterprise value to EBITDA multiple of negative 17.38 times reflects the company's negative EBITDA generation, rendering traditional valuation metrics largely meaningless. The EV-to-sales ratio of 2.13 times appears elevated for a company with collapsing revenues and negative margins, suggesting potential downside risk if operational challenges persist. The stock's 52-week range of ₹17.45 to ₹76.57 indicates extreme volatility, with the current price sitting 59.88% below the 52-week high but 76.05% above the 52-week low.

Shareholding Pattern: Stable Promoter Base, Zero Institutional Interest

The shareholding pattern reveals a highly concentrated ownership structure with promoters holding 72.63% as of December 2025, marginally down from 72.72% in September 2025. This minimal 0.09 percentage point decline suggests stable promoter commitment, though the complete absence of institutional participation raises concerns about professional investor confidence in the company's prospects. The promoter group comprises multiple entities including Gagandeep Exports Pvt. Ltd. (14.13%), Mahakosh Papers Pvt. Ltd. (8.33%), and several other private limited companies, indicating a complex ownership structure.

The complete absence of foreign institutional investors (FIIs), mutual funds, insurance companies, and other domestic institutional investors (DIIs) is particularly telling. Zero institutional participation typically signals serious concerns about corporate governance, financial transparency, or business viability that professional investors find unacceptable. The 27.37% non-institutional shareholding represents primarily retail investors who may lack the resources or expertise to conduct thorough due diligence. Positively, there is no promoter pledging, eliminating one potential risk factor, though this provides limited comfort given the broader operational challenges.

Stock Performance: Extreme Volatility and Underperformance

Sarthak Global's stock price performance reveals extreme volatility and significant underperformance across most timeframes. The shares closed at ₹30.72 on February 11, 2026, representing a 4.99% gain on the day but masking deeper concerns about the stock's trajectory. Over the past three months, the stock has plummeted 48.16%, vastly underperforming the Sensex's 0.43% gain by a margin of 48.59 percentage points. Year-to-date, the stock has declined 26.35% compared to the Sensex's 1.16% decline, indicating significant alpha destruction of 25.19 percentage points.

The longer-term picture presents a contradictory narrative, with four-year and five-year returns of 462.64% and 546.74% respectively, vastly outperforming the Sensex. However, this exceptional long-term performance appears to reflect recovery from extremely depressed levels during the COVID-19 period rather than sustainable business improvements. The stock currently trades below all major moving averages – 5-day (₹29.96), 20-day (₹31.09), 50-day (₹34.91), and 100-day (₹42.97) – indicating a clear bearish technical setup.

Investment Thesis: Multiple Red Flags Outweigh Limited Positives

The investment thesis for Sarthak Global is overwhelmingly negative, with multiple structural and operational challenges that far outweigh any potential positives. The company's proprietary Mojo score of 33 out of 100 and "SELL" rating reflect these fundamental concerns. The valuation carries a "RISKY" classification, the quality grade stands at "BELOW AVERAGE," the financial trend is classified as "FLAT," and the technical trend shows only "MILDLY BULLISH" signals that appear unsustainable given the fundamental deterioration.

Outlook: Critical Monitoring Points for Survival

The outlook for Sarthak Global remains highly uncertain, with business viability dependent on a dramatic operational turnaround that appears increasingly unlikely given current trends. Investors and stakeholders should monitor several critical factors that will determine whether the company can stabilise operations or faces further deterioration towards potential insolvency.