Savani Financials Q3 FY26: Mounting Losses Deepen Despite Revenue Surge

The third quarter results reveal a company in distress, with operational losses persisting despite a substantial top-line expansion. The company's net sales surged 42.25% quarter-on-quarter from ₹3.29 crores in Q2 FY26 to ₹4.68 crores in Q3 FY26, yet this revenue momentum failed to translate into profitability. The PAT margin deteriorated to -65.38% in Q3 FY26 from -97.57% in the previous quarter, though still representing an improvement from the catastrophic -256.00% margin recorded a year ago.

What emerges from this quarterly performance is a troubling narrative of structural inefficiencies overwhelming top-line growth. Whilst the company has demonstrated an ability to scale revenues—achieving a five-year sales CAGR of 56.24%—the underlying business model appears fundamentally challenged. The company's quality grade remains "Below Average" according to long-term financial performance metrics, reflecting persistent operational weaknesses that have plagued the organisation for multiple quarters.

Financial Performance: Revenue Expansion Masks Operational Distress

Savani Financials' Q3 FY26 financial performance presents a paradoxical picture: robust revenue growth accompanied by deepening losses. Net sales in Q3 FY26 reached ₹4.68 crores, representing a 42.25% sequential increase from Q2 FY26's ₹3.29 crores and a remarkable 524.00% year-on-year surge from ₹0.75 crores in Q3 FY25. For the nine-month period ended December 2025, the company generated cumulative revenues of ₹10.34 crores compared to just ₹1.66 crores in the corresponding period of the previous year.

However, this revenue momentum has been entirely offset by escalating operating expenses. Employee costs surged to ₹3.67 crores in Q3 FY26 from ₹3.51 crores in Q2 FY26 and ₹1.48 crores in Q3 FY25, consuming 78.42% of quarterly revenues. The operating profit before depreciation, interest, and tax (excluding other income) remained deeply negative at -₹1.09 crores in Q3 FY26, though this represented an improvement from -₹2.03 crores in the previous quarter and -₹1.82 crores a year ago.

Interest expenses have also risen sharply, climbing to ₹1.95 crores in Q3 FY26 from ₹1.11 crores in Q2 FY26 and a negligible ₹0.02 crores in Q3 FY25. This 17,400% year-on-year increase in interest costs reflects the company's growing reliance on borrowed funds to sustain operations. The net loss before tax stood at -₹3.11 crores in Q3 FY26, marginally better than the -₹3.22 crores loss in Q2 FY26 but significantly worse than the -₹1.92 crores loss in Q3 FY25.

Operational Challenges: Cost Structure Overwhelms Revenue Growth

The fundamental issue plaguing Savani Financials is a cost structure that remains misaligned with its revenue base. Despite achieving impressive top-line growth, the company's operating margin (excluding other income) has consistently remained in deeply negative territory across all recent quarters. In Q3 FY26, the operating margin stood at -23.29%, a substantial improvement from -61.70% in Q2 FY26 and -242.67% in Q3 FY25, yet still indicative of an unprofitable core business.

The company's return on equity (ROE) paints an equally concerning picture. The latest ROE stands at -34.21%, reflecting the destruction of shareholder value through persistent losses. The average ROE over recent periods has been a meagre 0.79%, placing Savani Financials at the bottom of profitability metrics among its peer group. For context, a healthy NBFC typically maintains ROE above 15%, with industry leaders achieving 20% or higher.

Balance sheet quality has deteriorated significantly. Total shareholder funds increased to ₹39.96 crores as of March 2025 from just ₹0.10 crores a year earlier, primarily due to a substantial capital infusion (share capital rose from ₹4.00 crores to ₹31.99 crores). However, current liabilities surged to ₹8.86 crores from ₹2.63 crores, with trade payables increasing to ₹2.04 crores from ₹0.28 crores. The company's debt-to-equity ratio of 1.31 reflects elevated leverage, particularly concerning given the absence of profitability to service debt obligations.

NBFC Sector Context: Underperformance Against Industry Backdrop

The broader NBFC sector has delivered robust returns of 20.22% over the past year, benefiting from strong credit demand and improving asset quality across the industry. However, Savani Financials has dramatically underperformed this sectoral trend, posting a negative return of -15.96% over the same period. This 36.18 percentage point underperformance versus the sector reflects investor concerns about the company's ability to achieve sustainable profitability.

The company's struggles stand in stark contrast to the operational excellence demonstrated by established NBFCs. Whilst industry leaders maintain net interest margins (NIMs) in the 7-10% range and achieve ROEs exceeding 15%, Savani Financials operates with negative margins and deeply negative returns. The company's assets under management (AUM) and disbursement trends—critical metrics for NBFC evaluation—remain opaque from available disclosures, though the rising interest costs suggest growing loan book activity.

From a competitive positioning standpoint, Savani Financials occupies the most challenging segment of the NBFC universe: micro-cap, loss-making entities struggling to achieve scale economies. The company's market capitalisation of ₹46.00 crores places it among the smallest publicly traded NBFCs, limiting access to capital and institutional investor interest. The absence of any institutional holdings (0.00% FII, mutual fund, and insurance participation) underscores the lack of confidence from sophisticated investors.

The peer comparison reveals Savani Financials trading at a price-to-book value of 1.40x despite posting an ROE of just 0.79%—suggesting the market is pricing in expectations of a turnaround that has yet to materialise. Profitable peers like Continental Securities command similar or higher P/BV multiples (1.95x) but justify this through superior ROE (7.70%) and lower leverage (0.01 debt-to-equity ratio versus Savani's 1.31).

Valuation Analysis: Premium Valuation Unjustified by Fundamentals

At the current market price of ₹15.01, Savani Financials trades at a price-to-book value of 1.40x against a book value per share of ₹12.49. This valuation appears expensive given the company's loss-making status and negative return on equity. The stock's P/E ratio remains undefined due to negative earnings, placing it in the "NA (Loss Making)" category alongside several distressed peers.

The company's enterprise value metrics paint an equally concerning picture. With an EV/EBITDA of -9.08x and EV/EBIT of -8.79x (both negative due to operating losses), traditional valuation frameworks break down. The EV/Sales multiple of 10.86x appears elevated for a loss-making NBFC, particularly when compared to profitable NBFCs that typically trade at 2-5x EV/Sales multiples.

From a historical valuation perspective, the stock has experienced significant volatility. The shares reached a 52-week high of ₹23.29 in mid-2025 before declining 35.55% to current levels. The 52-week low of ₹12.48 was tested as recently as January 2026, with the stock currently trading just 20.27% above this trough. This price action reflects deteriorating investor sentiment as quarterly losses have persisted.

The valuation grade of "RISKY" assigned by quantitative models reflects the disconnect between market pricing and underlying fundamentals. A company destroying shareholder value (negative ROE of -34.21%) should typically trade at a discount to book value, not a 40% premium. This suggests either excessive optimism about near-term turnaround prospects or limited liquidity driving technical price movements rather than fundamental value.

Shareholding Pattern: Stable Promoter Control, Zero Institutional Interest

The shareholding structure of Savani Financials reveals concentrated promoter ownership with complete absence of institutional participation. Promoters maintain a steady 75.00% stake across all recent quarters (December 2025, September 2025, August 2025, June 2025, and March 2025), with no sequential changes. This stability suggests promoter commitment, though the lack of any stake increase despite capital raises raises questions about conviction in the turnaround strategy.

The complete absence of foreign institutional investors (FIIs), mutual funds, insurance companies, and other domestic institutional investors (DIIs) is a significant red flag. Institutional holdings stand at 0.00% across all categories, indicating sophisticated investors have avoided the stock entirely. This lack of institutional participation typically reflects concerns about governance, business model viability, or growth prospects. The 25.00% public shareholding comprises primarily retail investors, a shareholder base more susceptible to volatility and less likely to provide long-term capital support.

Positively, there is no promoter pledging of shares, eliminating one potential governance concern. The promoter group is led by Deepa Kishore Tracy (74.95%) and Kishor Sukumar Tracy (0.05%), maintaining family control of the enterprise. However, the static shareholding pattern over five quarters—with no institutional buying despite the company's capital raise—suggests the market remains sceptical about the turnaround narrative.

Stock Performance: Sustained Underperformance Across All Timeframes

Savani Financials' stock performance has been dismal across virtually all measurement periods, significantly underperforming both the Sensex benchmark and its NBFC sector peers. Over the past year, the stock declined 15.96% whilst the Sensex gained 7.18%, resulting in a negative alpha of -23.14 percentage points. This underperformance has persisted across shorter timeframes as well, with the stock down 6.54% over one month versus a Sensex decline of 2.84% (alpha of -3.70%).

The only bright spot in this performance record is the recent one-week return of +9.88%, outperforming the Sensex's +0.90% gain by 8.98 percentage points. However, this short-term bounce appears to be a technical rebound from oversold levels rather than a fundamental re-rating. The stock remains 35.55% below its 52-week high of ₹23.29 and trades just 20.27% above its 52-week low of ₹12.48, suggesting limited upside momentum.

From a risk-adjusted perspective, the stock's performance is even more concerning. With volatility of 68.91% (versus Sensex volatility of 11.21%), Savani Financials exhibits extreme price swings that have not been compensated by positive returns. The risk-adjusted return of -0.23 over one year, combined with a negative Sharpe ratio, places the stock in the "HIGH RISK LOW RETURN" category—the worst possible combination for investors. The stock's beta of 1.27 indicates it is 27% more volatile than the broader market, amplifying losses during market downturns.

Investment Thesis: Multiple Red Flags Overshadow Revenue Growth

The investment thesis for Savani Financials is severely compromised by multiple structural challenges that outweigh the positive top-line momentum. The company's proprietary Mojo score of 17 out of 100 places it firmly in "STRONG SELL" territory, reflecting poor performance across all four key assessment parameters.

The Mojo 4 Dots analysis reveals a company facing headwinds on multiple fronts. Near-term drivers present a mixed picture: whilst the quarterly financial trend has turned positive (reflecting sequential revenue growth), the technical trend remains bearish with the stock trading below all key moving averages. The quality assessment of "Below Average" reflects persistent operational losses and weak return metrics. Most concerning is the "RISKY" valuation grade, indicating the stock trades at a premium to intrinsic value despite fundamental weaknesses.

Key Strengths & Risk Factors

Outlook: Critical Monitoring Points for Investors

The outlook for Savani Financials remains highly uncertain, with the company at a critical juncture requiring dramatic operational improvements to justify current valuation. Investors should closely monitor specific catalysts and warning signs that will determine whether the recent revenue growth can translate into sustainable profitability.