The quarter's results reflect a company in severe operational distress. Whilst revenue showed a sequential recovery of 32.64% quarter-on-quarter to ₹6.42 crores, this remains 41.32% below the year-ago period's ₹10.94 crores. More alarmingly, the company's operating profit before depreciation, interest, tax and other income (PBDIT excluding OI) stood at negative ₹1.57 crores, translating to a deeply negative operating margin of -24.45%. This marks a concerning trend of persistent operational losses across recent quarters.
Financial Performance: Deteriorating Revenue Quality and Profitability
Scoobee Day Garments' Q3 FY26 performance reveals fundamental weaknesses in its business model. Net sales of ₹6.42 crores, whilst showing sequential improvement from Q2 FY26's ₹4.84 crores, remain substantially below historical levels. The company's revenue trajectory over the past year has been highly volatile, with Q1 FY26 recording ₹15.54 crores and Q4 FY25 at ₹21.70 crores, suggesting significant instability in order flows and production capacity utilisation.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Dec'25 (Q3) | 6.42 | +32.64% | -41.32% | -2.55 | -24.45% | -39.72% |
| Sep'25 (Q2) | 4.84 | -68.85% | -26.78% | -2.31 | -43.60% | -47.73% |
| Jun'25 (Q1) | 15.54 | -28.39% | +114.05% | 0.87 | 14.29% | 5.60% |
| Mar'25 (Q4) | 21.70 | +98.35% | — | 1.49 | 15.62% | 6.87% |
| Dec'24 (Q3) | 10.94 | +65.51% | — | 0.06 | 9.69% | 0.55% |
| Sep'24 (Q2) | 6.61 | -8.95% | — | 0.14 | -3.78% | 2.12% |
| Jun'24 (Q1) | 7.26 | — | — | 0.22 | 20.80% | 3.03% |
The cost structure reveals severe operational inefficiencies. Employee costs in Q3 FY26 stood at ₹3.75 crores, representing 58.41% of net sales—an unsustainably high proportion that indicates significant overstaffing relative to revenue generation capacity. Combined with interest costs of ₹0.32 crores and depreciation of ₹1.67 crores, the company's fixed cost burden overwhelms its ability to generate positive cash flows at current revenue levels.
Profit before tax (PBT) deteriorated sharply to negative ₹3.40 crores in Q3 FY26 from negative ₹3.09 crores in Q2 FY26, with the company recording a tax credit of ₹0.85 crores. The net loss of ₹2.55 crores translates to a PAT margin of -39.72%, amongst the worst in the garments and apparels sector. On a half-yearly basis (H1 FY26), the company reported cumulative net losses of ₹4.86 crores on revenues of ₹11.26 crores, reflecting a 35.84% decline compared to the corresponding period.
Critical Alert: Operational Viability Under Threat
Key Concerns: The company has reported negative operating profits (PBDIT excluding other income) in three of the last four quarters, with Q3 FY26 marking the lowest at negative ₹3.55 crores. This persistent inability to cover operating expenses raises serious questions about the sustainability of current operations without significant restructuring or capital infusion.
Balance Sheet Stress: High Leverage and Weak Capital Structure
Scoobee Day Garments operates with a precarious balance sheet characterised by high leverage and minimal equity cushion. As of March 2025, shareholder funds stood at merely ₹4.93 crores, comprising share capital of ₹13.50 crores offset by accumulated losses reflected in negative reserves and surplus of ₹8.57 crores. The company's book value per share of ₹3.61 contrasts sharply with the current market price of ₹81.50, resulting in an astronomical price-to-book ratio of 39.63 times.
The debt profile presents significant concerns. Long-term debt of ₹4.02 crores as of March 2025, whilst reduced from ₹8.28 crores in the previous year, remains substantial relative to the company's equity base. More troubling is the current liabilities position of ₹56.79 crores, which includes trade payables of ₹2.36 crores. The company's average debt-to-EBITDA ratio stands at an elevated 9.05 times, whilst the net debt-to-equity ratio of 14.92 times indicates severe financial leverage that amplifies the impact of operational underperformance.
Current assets of ₹20.53 crores as of March 2025 provide limited comfort against current liabilities of ₹56.79 crores, suggesting potential working capital stress. The company's fixed assets of ₹46.36 crores represent the bulk of its asset base, but with depreciation charges of ₹1.67 crores in Q3 FY26 alone, asset productivity remains questionable given the revenue generation levels.
Cash Flow Crisis: Negative Operating Cash Generation
The cash flow statement for FY25 reveals a company struggling to convert operations into cash. Cash flow from operations turned negative at ₹4.00 crores in FY25, a sharp reversal from positive ₹10.00 crores in FY24. This deterioration stemmed primarily from adverse working capital changes of negative ₹10.00 crores, indicating either inventory build-up, receivables elongation, or both—all signs of operational stress.
The company generated modest positive cash flow from investing activities of ₹1.00 crore in FY25, likely from asset disposals, whilst cash flow from financing activities remained positive at ₹2.00 crores. However, these inflows barely offset the operating cash burn, leaving the company with negligible closing cash balances. The persistent negative operating cash flows raise concerns about the company's ability to service debt obligations and fund working capital requirements without additional external financing.
Industry Context: Underperforming a Challenged Sector
The garments and apparels sector in India has faced headwinds from fluctuating raw material costs, global demand uncertainties, and intense competition. However, Scoobee Day Garments' performance significantly lags even this challenging backdrop. The sector delivered a one-year return of -1.08%, whilst Scoobee Day Garments plummeted 31.68%, underperforming its peer group by 30.60 percentage points.
The company's struggles appear company-specific rather than sector-wide. Whilst peers have managed to maintain operational profitability despite sector headwinds, Scoobee Day Garments' inability to control costs and maintain stable revenue streams suggests fundamental execution issues. The volatility in quarterly revenues—ranging from ₹4.84 crores to ₹21.70 crores over recent quarters—indicates either severe customer concentration, order lumpiness, or production constraints that prevent consistent operations.
Peer Comparison: Valuation Disconnect Amidst Operational Weakness
A comparison with garments and apparels sector peers highlights the stark valuation anomaly surrounding Scoobee Day Garments. Despite recording the weakest operational metrics in its peer group, the stock trades at the highest valuation multiples, suggesting significant overvaluation.
| Company | P/E (TTM) | P/BV | Dividend Yield | Debt/Equity |
|---|---|---|---|---|
| Scoobee Garments | 1253.62x | 39.63x | — | 14.92x |
| Suryalata Spinning | 4.85x | 0.58x | 0.53% | 0.17x |
| Winsome Textile | 6.06x | 0.49x | — | 0.70x |
| BSL Ltd. | 39.05x | 1.18x | 0.58% | 3.66x |
| Premco Global | 13.67x | 1.29x | 10.19% | -0.16x |
The peer comparison reveals glaring disparities. Scoobee Day Garments trades at a P/E ratio of 1253.62 times trailing twelve-month earnings, compared to a peer average of approximately 16 times. More tellingly, its price-to-book ratio of 39.63 times far exceeds the peer average of around 1.3 times, despite the company having negligible equity and accumulated losses. The debt-to-equity ratio of 14.92 times is the highest in the peer group, whilst peers maintain significantly lower leverage profiles.
This valuation disconnect becomes even more apparent when examining operational metrics. Peers like Winsome Textile and Lorenzini Apparels maintain double-digit return on equity (11.19% and 18.93% respectively), whilst Scoobee Day Garments records an effective ROE of 0.0%. The company's inability to generate returns on capital employed stands in stark contrast to better-managed peers who have successfully navigated the same sector challenges.
Valuation Analysis: Expensive Multiple on Weak Fundamentals
The valuation metrics paint a picture of a severely overvalued stock trading on hope rather than fundamentals. At the current price of ₹81.50, Scoobee Day Garments commands a market capitalisation of ₹137.00 crores—a valuation that appears entirely disconnected from underlying business performance.
The P/E ratio of 1253.62 times reflects the minimal profitability generated over the trailing twelve months, with the company recording cumulative profits of merely ₹1.00 crore in FY25. The PEG ratio of 9.05 suggests the stock is expensive relative to its growth prospects, particularly concerning given the company's recent trajectory of declining revenues and mounting losses.
The proprietary valuation assessment categorises the stock as "EXPENSIVE", a grade it has held since May 2025 with only brief interludes. The enterprise value-to-EBITDA multiple of 44.56 times and EV-to-sales of 3.60 times both indicate substantial overvaluation relative to the company's ability to generate cash flows. With no dividend yield and a book value per share of just ₹3.61, the current market price implies expectations of a dramatic operational turnaround that appears increasingly unlikely based on recent quarterly trends.
Shareholding Pattern: Promoter Increase Amidst Retail Exit
The shareholding pattern reveals interesting dynamics in ownership structure over recent quarters. Promoter holding increased to 79.76% in Q3 FY26 from 74.99% in the previous quarter, representing a significant 4.77 percentage point sequential increase. This promoter stake enhancement suggests confidence from the controlling shareholders, though it occurred during a period of severe operational underperformance.
| Quarter | Promoter % | QoQ Change | FII % | MF % | Other DII % | Non-Inst % |
|---|---|---|---|---|---|---|
| Dec'25 | 79.76% | +4.77% | 0.00% | 0.00% | 1.18% | 19.06% |
| Sep'25 | 74.99% | — | 0.00% | 0.00% | 1.48% | 23.53% |
| Jun'25 | 74.99% | — | 0.00% | 0.00% | 1.48% | 23.53% |
| Mar'25 | 74.99% | — | 0.00% | 0.00% | 1.48% | 23.53% |
The corresponding decline in non-institutional holdings from 23.53% to 19.06% indicates retail investor exit, with a 4.47 percentage point reduction in Q3 FY26. Other domestic institutional investors (DII) also marginally reduced their stake from 1.48% to 1.18%, a 0.30 percentage point decrease. Notably, the stock has zero presence amongst foreign institutional investors (FIIs) and mutual funds, reflecting the complete absence of institutional interest—a significant red flag for a publicly listed company.
The key promoter entities include Anna Aluminium Company (P) Ltd. with 44.26%, Boby M Jacob with 18.53%, Minni Boby Jacob with 10.93%, and Kitex Ltd. with 6.04%. Positively, there is no promoter pledging, eliminating one potential risk factor. However, the total institutional holding of merely 1.18% suggests sophisticated investors have stayed away from the stock, likely due to concerns about governance, operational execution, and financial performance.
Stock Performance: Severe Underperformance Across Timeframes
Scoobee Day Garments' stock performance has been dismal across virtually all timeframes, significantly underperforming both the Sensex benchmark and sector peers. The stock's one-year return of -31.68% compares unfavourably to the Sensex gain of 9.85%, resulting in a negative alpha of 41.53 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.73% | +0.43% | -4.16% |
| 1 Month | +11.34% | -0.24% | +11.58% |
| 3 Months | -3.62% | -0.94% | -2.68% |
| 6 Months | -21.48% | +4.29% | -25.77% |
| YTD | +1.88% | -1.81% | +3.69% |
| 1 Year | -31.68% | +9.85% | -41.53% |
| 2 Years | +3.08% | +17.73% | -14.65% |
| 3 Years | -2.16% | +37.89% | -40.05% |
The stock has declined from its 52-week high of ₹122.70 to the current ₹81.50, representing a 33.58% drawdown. Whilst it trades 31.56% above its 52-week low of ₹61.95, the overall trajectory remains concerning. The six-month return of -21.48% against the Sensex gain of 4.29% highlights the accelerating underperformance as operational challenges have intensified.
Technical indicators paint a bearish picture. The stock trades below all key moving averages—5-day (₹85.31), 20-day (₹75.59), 50-day (₹77.33), 100-day (₹80.92), and 200-day (₹91.11)—though the current price of ₹81.50 sits marginally above some shorter-term averages. The overall technical trend is classified as "MILDLY BEARISH", with weekly MACD showing mildly bullish signals but monthly indicators remaining bearish. The high beta of 1.50 indicates the stock is significantly more volatile than the broader market, amplifying downside risk during market corrections.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
The investment case for Scoobee Day Garments is severely compromised by fundamental operational and financial weaknesses. The company's quality assessment of "BELOW AVERAGE" reflects persistent underperformance across key metrics. The five-year sales growth of 19.13% and EBIT growth of 23.23% appear respectable on paper, but recent quarters reveal a sharp deterioration that undermines this historical performance.
The average EBIT-to-interest coverage of 0.0 times indicates the company cannot service its debt obligations from operating profits—a critical solvency concern. The average debt-to-EBITDA of 9.05 times far exceeds comfortable levels, whilst the net debt-to-equity ratio of 14.92 times reflects extreme financial leverage. These metrics collectively suggest a company operating under severe financial stress with limited margin for error.
Key Strengths
- Long-term Growth Track Record: Five-year sales CAGR of 19.13% demonstrates historical expansion capability
- No Promoter Pledging: Zero pledged shares eliminates one governance risk factor
- Promoter Confidence: Recent increase in promoter stake to 79.76% signals controlling shareholder commitment
- Asset Base: Fixed assets of ₹46.36 crores provide tangible backing, though productivity remains questionable
Key Concerns
- Persistent Operating Losses: Negative PBDIT in three of last four quarters with Q3 at ₹-1.57 crores
- Extreme Valuation Disconnect: P/E of 1253.62x and P/BV of 39.63x unsupported by fundamentals
- Severe Leverage: Debt-to-equity of 14.92x with debt-to-EBITDA at 9.05x creates solvency risk
- Cash Flow Crisis: Operating cash flow turned negative ₹4.00 crores in FY25 from positive ₹10.00 crores in FY24
- Revenue Volatility: Quarterly sales ranging from ₹4.84 crores to ₹21.70 crores indicates unstable operations
- Zero Institutional Interest: No FII or mutual fund holdings reflects sophisticated investor avoidance
- Weak Profitability: PAT margin of -39.72% in Q3 FY26 amongst worst in sector
Outlook: Critical Monitoring Points and Warning Signals
The outlook for Scoobee Day Garments remains highly uncertain, with the balance of risks tilted decisively to the downside. Investors should monitor several critical factors that will determine whether the company can stabilise operations or faces further deterioration.
Positive Catalysts to Monitor
- Sustained revenue recovery above ₹15 crores quarterly
- Return to positive operating margins (PBDIT excluding OI)
- Successful cost restructuring, particularly employee costs
- Debt reduction and improved interest coverage
- Stabilisation of working capital and positive operating cash flows
Red Flags Requiring Immediate Attention
- Further revenue decline below ₹5 crores quarterly
- Continued negative operating cash flows
- Inability to service debt obligations
- Additional promoter stake dilution or pledging
- Further institutional investor exit
The company's financial trend is classified as "FLAT" for Q3 FY26, but this characterisation may be overly generous given the severity of operating losses. The trend history shows a deterioration from "POSITIVE" in March 2024 to "NEGATIVE" and "VERY NEGATIVE" in subsequent quarters before the current "FLAT" assessment. This pattern suggests ongoing struggles to establish sustainable profitability.
Investment Verdict: Strong Sell
Overall Score: 23/100
For Fresh Investors: Avoid initiating any position. The combination of persistent operating losses, extreme valuation multiples, high financial leverage, and deteriorating cash flows creates an unfavourable risk-reward profile. The stock trades at unjustifiable premiums relative to both fundamentals and peer group valuations.
For Existing Holders: Consider exiting positions at current levels. The operational trajectory shows no signs of meaningful improvement, whilst the valuation provides an opportunity to exit before further deterioration. The 31.68% one-year decline may extend further if the company cannot demonstrate a credible path to sustainable profitability.
Fair Value Estimate: ₹25-30 per share (69-63% downside from current levels), based on book value adjusted for operational risks and peer comparison normalisation.
Rationale: The STRONG SELL rating reflects multiple compounding negatives: persistently negative operating margins, mounting losses across recent quarters, extreme valuation disconnect (P/E 1253.62x, P/BV 39.63x), dangerous leverage levels (debt-to-equity 14.92x), negative operating cash flows, zero institutional participation, and a mildly bearish technical setup. Whilst promoters have increased their stake, this alone cannot offset the fundamental operational and financial challenges facing the business. The company requires significant operational restructuring and capital infusion to restore viability—outcomes that appear increasingly uncertain based on current trends.
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 publicly available information and analysis as of the publication date and may change without notice.
