The quarter showcased a tale of two narratives: whilst revenue surged 11.75% sequentially to ₹61.65 crores, operating margins contracted sharply from 20.21% to 17.03%, raising questions about the sustainability of profitability amidst aggressive growth pursuits. The company's PAT margin of 11.63% remains healthy but represents a sequential decline from the previous quarter's 13.32%, suggesting rising cost pressures in the packaging industry.
The company's financial performance over the past seven quarters reveals an interesting trajectory. After posting an extraordinary net profit of ₹36.60 crores in Q4 FY25 (inflated by a negative tax provision of ₹29.51 crores), Shree Rama Multi-Tech has settled into a more normalised earnings pattern. The latest quarter's performance, whilst showing year-on-year strength, indicates the company is navigating through operational headwinds that warrant closer examination.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 61.65 | +11.75% | 7.17 | -2.45% | 17.03% |
| Jun'25 | 55.17 | -4.91% | 7.35 | -79.92% | 20.21% |
| Mar'25 | 58.02 | +10.22% | 36.60 | +595.82% | 18.58% |
| Dec'24 | 52.64 | +0.19% | 5.26 | -0.57% | 14.48% |
| Sep'24 | 52.54 | +22.84% | 5.29 | +25.95% | 13.95% |
| Jun'24 | 42.77 | -7.68% | 4.20 | +25.37% | 12.46% |
| Mar'24 | 46.33 | — | 3.35 | — | 9.91% |
Financial Performance: Growth Momentum Meets Margin Pressures
Shree Rama Multi-Tech's Q2 FY26 results present a nuanced picture of a company experiencing robust topline expansion whilst grappling with profitability challenges. Net sales of ₹61.65 crores represented the highest quarterly revenue in the company's recent history, surging 11.75% from Q1 FY26's ₹55.17 crores and accelerating 17.34% year-on-year from ₹52.54 crores in Q2 FY25. This performance underscores strong demand for the company's primary packaging solutions and successful market penetration efforts.
However, the margin narrative tells a more cautionary tale. Operating profit (PBDIT) excluding other income stood at ₹10.50 crores, yielding an operating margin of 17.03%—a significant contraction of 318 basis points from the previous quarter's 20.21%. This compression appears driven by rising employee costs, which increased to ₹6.73 crores from ₹5.70 crores quarter-on-quarter, representing a 18.07% sequential jump. The company's total expenditure growth has outpaced revenue growth, suggesting pricing power constraints or input cost inflation.
On a positive note, other income surged to ₹1.70 crores from ₹1.50 crores, providing some cushion to overall profitability. The company's tax normalisation at 24.84% in Q2 FY26 (versus the anomalous negative tax rate in Q4 FY25) brings earnings quality back to sustainable levels. Net profit margin of 11.63%, whilst down from 13.32% sequentially, remains respectable and demonstrates the company's ability to maintain double-digit bottom-line margins despite operational pressures.
Operational Excellence: Capital Efficiency Shines Despite Margin Headwinds
Whilst margin compression raises near-term concerns, Shree Rama Multi-Tech's capital efficiency metrics paint an encouraging picture of operational quality. The company's latest Return on Equity (ROE) of 33.67% stands out as exceptional, significantly outperforming the average ROE of 11.07% over the past several years. This dramatic improvement reflects not just earnings growth but also efficient deployment of shareholder capital, a critical metric for assessing management's ability to generate wealth.
The company's Return on Capital Employed (ROCE) for the half-year period reached a historic high of 17.62%, substantially above the average ROCE of 6.98%. This improvement signals that the business is extracting better returns from every rupee of capital employed, validating the company's capacity expansion and operational improvement initiatives. The latest ROCE of 17.18% demonstrates sustainable value creation beyond short-term profitability fluctuations.
From a balance sheet perspective, Shree Rama Multi-Tech has maintained financial prudence. Net debt to equity ratio of 0.04 indicates minimal leverage, providing the company with substantial financial flexibility for growth investments. Shareholder funds expanded to ₹153.18 crores in FY25 from ₹102.72 crores in FY24, driven by retained earnings accumulation. The company's reserves and surplus surged to ₹86.44 crores from ₹35.99 crores, reflecting strong internal accrual generation.
However, the company's debt profile warrants monitoring. Long-term debt increased to ₹20.45 crores in FY25 from ₹7.67 crores in FY24, suggesting capital deployment for expansion. The debt-to-EBITDA ratio of 7.33 (average) appears elevated, though the minimal net leverage provides comfort. Interest coverage ratio of 8.15 times (average) remains adequate, indicating the company can comfortably service its debt obligations even during challenging periods.
⚠️ Key Monitoring Point: Margin Sustainability
The 318 basis points sequential decline in operating margins from 20.21% to 17.03% represents the steepest quarterly compression in recent history. Employee costs surged 18.07% quarter-on-quarter, outpacing revenue growth. Investors should closely monitor whether this represents temporary investment in growth infrastructure or a structural shift in the cost base. Management commentary on pricing power and input cost trends will be critical for assessing margin trajectory in coming quarters.
Industry Context: Navigating a Challenging Packaging Landscape
The packaging industry has faced headwinds from volatile raw material prices and changing customer demand patterns. Shree Rama Multi-Tech's 17.34% year-on-year revenue growth in Q2 FY26 significantly outpaces the broader packaging sector, which has struggled with negative returns. The company's sector comparison reveals a stark contrast: whilst the packaging industry delivered -12.90% returns over the past year, Shree Rama Multi-Tech generated 44.68% returns, outperforming its sector by a remarkable 57.58 percentage points.
This outperformance stems from the company's focus on primary packaging solutions, which enjoy relatively stable demand from FMCG and pharmaceutical clients. Unlike commodity packaging players exposed to cyclical industrial demand, Shree Rama Multi-Tech's positioning in essential consumer-facing segments provides greater revenue visibility. The company's ability to maintain double-digit PAT margins whilst competitors struggle reflects superior operational execution and potentially better customer relationships.
However, the industry-wide margin pressures are evident in Shree Rama Multi-Tech's recent performance. Raw material inflation, particularly in polymers and specialty papers, has compressed margins across the packaging value chain. The company's 5-year sales CAGR of 13.48% demonstrates consistent growth capability, but the 5-year EBIT CAGR of 47.44% suggests historical margin expansion that may be difficult to replicate in the current environment. The recent margin compression may represent a normalisation rather than a permanent impairment.
Competitive Positioning: Micro-Cap with Macro Ambitions
With a market capitalisation of ₹743.42 crores, Shree Rama Multi-Tech operates in the micro-cap segment, limiting institutional participation (current institutional holding: 0.02%). However, this small size also provides agility and growth optionality unavailable to larger peers. The company's promoter holding of 61.57% demonstrates strong alignment of interests, whilst zero pledging of promoter shares eliminates a key governance risk common in smaller companies.
Peer Comparison: Valuation Premium Reflects Quality Metrics
Shree Rama Multi-Tech's valuation metrics reveal an interesting positioning relative to packaging sector peers. The company trades at a Price-to-Earnings ratio of 13.39 times trailing twelve-month earnings, appearing reasonable compared to peers like Ester Industries (241.42x) and Cropster Agro (96.95x), though higher than Cosmo First (10.36x) and Huhtamaki India (14.03x). The relatively modest P/E multiple suggests the market has not yet fully priced in the company's superior growth trajectory.
Where Shree Rama Multi-Tech commands a clear premium is on the Price-to-Book Value metric at 4.51 times, significantly above peers like Cosmo First (0.98x), Huhtamaki India (1.13x), and Ester Industries (1.17x). This premium appears justified by the company's exceptional ROE of 11.07% (average), which exceeds most peers except Cosmo First (17.89%). Higher ROE justifies higher P/BV multiples, as investors pay for superior capital efficiency and wealth creation capability.
The company's debt profile also compares favourably, with a debt-to-equity ratio of 0.04—amongst the lowest in the peer group. This conservative leverage provides financial flexibility unavailable to more indebted competitors. However, the absence of dividend payments (dividend yield: NA) means investors rely entirely on capital appreciation for returns, typical for growth-oriented micro-cap companies reinvesting profits for expansion.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Shree Rama Multi-Tech | 13.39 | 4.51 | 11.07 | 0.04 | NA |
| Cosmo First | 10.36 | 0.98 | 17.89 | 0.86 | 0.69% |
| Huhtamaki India | 14.03 | 1.13 | 6.99 | -0.11 | 1.09% |
| Cropster Agro | 96.95 | 12.31 | 10.45 | -0.03 | NA |
| Oricon Enterprises | 40.14 | 0.80 | 1.58 | -0.09 | 0.77% |
| Ester Industries | 241.42 | 1.17 | 8.80 | 0.71 | 0.63% |
Valuation Analysis: Expensive Territory Despite Reasonable Multiples
Despite a seemingly reasonable P/E ratio of 13.39 times, Shree Rama Multi-Tech's overall valuation assessment stands at "Very Expensive" according to comprehensive multi-factor analysis. This classification reflects the company's elevated Price-to-Book Value of 4.51 times and EV/EBITDA multiple of 19.01 times, both substantially above historical averages and peer medians. The valuation has progressively moved from "Fair" to "Very Expensive" over the past year, tracking the stock's impressive 44.68% one-year return.
The company's PEG ratio of 0.05 appears exceptionally attractive, suggesting the stock trades at a significant discount to its growth rate. However, this metric should be interpreted cautiously given the volatility in recent earnings (particularly the Q4 FY25 anomaly) and the recent margin compression. The EV/Sales ratio of 3.32 times and EV/Capital Employed of 4.39 times indicate investors are paying a premium for the company's asset base and revenue generation capability.
From a historical perspective, the stock currently trades 22.15% below its 52-week high of ₹71.55 but remains 80.26% above its 52-week low of ₹30.90. This positioning suggests the market has already priced in substantial growth expectations, leaving limited margin for disappointment. The stock's valuation grade history shows it moved from "Expensive" to "Very Expensive" in August 2025, coinciding with peak price levels, and has maintained this classification despite the recent correction.
Fair value estimation based on peer multiples and growth trajectory suggests a target range of ₹52-58, implying limited upside from current levels of ₹55.70. The company would need to demonstrate sustained margin recovery and accelerated earnings growth to justify further valuation expansion. For value-conscious investors, the current price offers minimal margin of safety, particularly given the operational headwinds evident in recent quarters.
Shareholding Pattern: Stable Promoter Base, Negligible Institutional Interest
The shareholding structure of Shree Rama Multi-Tech has remained remarkably stable over the past five quarters, with promoter holding consistently maintained at 61.57%. This unwavering promoter commitment signals confidence in the company's long-term prospects and eliminates concerns about insider selling that often plague micro-cap stocks. The promoter group, led by Nirma Chemical Works Private Limited (56.53%) and Nirma Industries Private Limited (5.04%), provides strategic backing and industry expertise.
Foreign Institutional Investor (FII) participation remains negligible at 0.02% as of December 2025, showing marginal fluctuations between 0.00% and 0.04% over recent quarters. This minimal institutional presence reflects the company's micro-cap status and limited liquidity, which typically fall outside the investment universe of large institutional investors. The absence of mutual fund holdings (0.00%) and insurance company participation (0.00%) further underscores the retail-dominated shareholder base.
Non-institutional investors hold 38.41% of equity, representing primarily retail shareholders and high-net-worth individuals. This stable retail base has shown minimal quarterly movement, fluctuating between 38.39% and 38.43%. The absence of institutional investors creates both opportunity and risk: whilst there is substantial room for institutional buying to drive future appreciation, the stock also faces liquidity constraints and higher volatility during market corrections.
| Quarter | Promoter % | FII % | MF % | Insurance % | Non-Inst % |
|---|---|---|---|---|---|
| Dec'25 | 61.57 | 0.02 | 0.00 | 0.00 | 38.41 |
| Sep'25 | 61.57 | 0.00 | 0.00 | 0.00 | 38.43 |
| Jun'25 | 61.57 | 0.04 | 0.00 | 0.00 | 38.39 |
| Mar'25 | 61.57 | 0.00 | 0.00 | 0.00 | 38.43 |
| Dec'24 | 61.57 | 0.01 | 0.00 | 0.00 | 38.42 |
Stock Performance: Exceptional Long-Term Returns, Recent Weakness
Shree Rama Multi-Tech's stock performance presents a striking contrast between long-term wealth creation and recent momentum loss. Over the past year, the stock delivered 44.68% returns, substantially outperforming the Sensex's 5.37% gain and generating alpha of 39.31 percentage points. This outperformance extends across multiple timeframes: two-year returns of 69.66% (alpha: 56.37%), three-year returns of 545.48% (alpha: 509.21%), and an extraordinary five-year return of 806.90% (alpha: 742.90%).
However, recent performance tells a more concerning story. The stock has declined 1.64% in the past day, 4.05% over the past week, and a sharp 17.68% over the past month, significantly underperforming the Sensex which fell only 4.77% during the same period. Year-to-date performance stands at -18.03%, suggesting the stock has given back a substantial portion of its 2025 gains. The three-month return of -3.67% indicates the weakness is not merely a short-term blip but reflects sustained selling pressure.
Technical indicators paint a mixed picture. The stock trades below all key moving averages: 5-day MA (₹58.14), 20-day MA (₹60.51), 50-day MA (₹57.92), 100-day MA (₹58.11), and 200-day MA (₹50.21). The overall technical trend classification of "Mildly Bullish" (changed from "Bullish" on January 30, 2026) suggests weakening momentum. MACD shows "Mildly Bearish" signals on weekly timeframes, whilst Bollinger Bands indicate "Bearish" positioning, reflecting the stock's descent from recent highs.
The stock's high beta of 1.09 (adjusted) classifies it as more volatile than the broader market, contributing to sharp swings in both directions. Volatility of 50.34% over the past year (versus Sensex volatility of 11.36%) places the stock in the "High Risk High Return" category. The risk-adjusted return of 0.89 (Sharpe ratio) compares favourably to the Sensex's 0.47, indicating that despite high volatility, returns have adequately compensated investors for the additional risk undertaken.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -4.05% | +0.16% | -4.21% |
| 1 Month | -17.68% | -4.77% | -12.91% |
| 3 Month | -3.67% | -2.70% | -0.97% |
| 6 Month | +37.70% | +1.33% | +36.37% |
| YTD | -18.03% | -4.17% | -13.86% |
| 1 Year | +44.68% | +5.37% | +39.31% |
| 2 Years | +69.66% | +13.29% | +56.37% |
| 3 Years | +545.48% | +36.27% | +509.21% |
Investment Thesis: Quality Company at Stretched Valuation
Shree Rama Multi-Tech's investment thesis rests on three pillars: exceptional long-term growth trajectory, superior capital efficiency metrics, and strategic positioning in the essential packaging segment. The company's 5-year EBIT CAGR of 47.44% demonstrates management's ability to scale operations whilst improving profitability. The latest ROE of 33.67% and ROCE of 17.18% place the company amongst the top performers in capital efficiency, validating its operational excellence.
However, several factors temper enthusiasm. The company's overall Mojo Score of 52/100 results in a "HOLD" rating, reflecting concerns about valuation stretch and recent operational performance. The financial trend classification of "Flat" for the latest quarter, driven by a 60.8% decline in quarterly PAT versus the previous four-quarter average, raises questions about earnings sustainability. The margin compression from 20.21% to 17.03% represents a significant headwind that could persist if input cost pressures continue.
The "Very Expensive" valuation grade limits upside potential from current levels. Whilst the P/E ratio of 13.39 times appears reasonable in isolation, the elevated P/BV of 4.51 times and EV/EBITDA of 19.01 times suggest the market has already priced in substantial growth expectations. The stock's 18.03% year-to-date decline and positioning below all major moving averages indicate technical weakness that could persist until fundamental catalysts emerge.
Key Strengths & Risk Factors
✅ KEY STRENGTHS
- Exceptional Capital Efficiency: Latest ROE of 33.67% and ROCE of 17.18% demonstrate superior wealth creation capability and efficient capital deployment
- Strong Revenue Momentum: 17.34% YoY revenue growth in Q2 FY26 significantly outpaces sector performance, indicating market share gains
- Robust Long-Term Track Record: 5-year EBIT CAGR of 47.44% and sales CAGR of 13.48% validate sustainable growth model
- Conservative Financial Structure: Net debt-to-equity of 0.04 and zero promoter pledging provide financial flexibility and governance comfort
- Stable Promoter Commitment: Unwavering 61.57% promoter holding backed by Nirma group demonstrates long-term confidence
- Sector Outperformance: 44.68% one-year return versus -12.90% sector return reflects competitive advantages and superior execution
- Improving Cash Generation: Operating cash flow of ₹19.00 crores in FY25 demonstrates ability to convert profits into cash
⚠️ KEY CONCERNS
- Margin Compression: Operating margin contracted 318 bps QoQ from 20.21% to 17.03%, raising sustainability concerns
- Rising Cost Pressures: Employee costs surged 18.07% QoQ, outpacing revenue growth and suggesting structural cost inflation
- Stretched Valuation: "Very Expensive" grade with P/BV of 4.51x and EV/EBITDA of 19.01x limits upside potential
- Recent Price Weakness: 18.03% YTD decline and positioning below all moving averages indicate technical deterioration
- Minimal Institutional Interest: 0.02% institutional holding creates liquidity constraints and limits discovery by larger investors
- High Volatility Profile: Beta of 1.09 and volatility of 50.34% expose investors to sharp price swings
- Elevated Debt-to-EBITDA: Average ratio of 7.33 appears high, though mitigated by low net leverage
Outlook: What to Watch in Coming Quarters
✅ POSITIVE CATALYSTS
- Margin Recovery: Stabilisation of operating margins above 18% would signal successful navigation of cost pressures
- Sustained Revenue Growth: Maintaining double-digit topline expansion would validate market positioning
- Institutional Discovery: Entry of mutual funds or FIIs could drive re-rating and improve liquidity
- Capacity Utilisation: Improved efficiency from recent capital investments could boost profitability
- Technical Reversal: Reclaiming 20-day MA at ₹60.51 would signal trend improvement
🚨 RED FLAGS
- Further Margin Erosion: Operating margins falling below 15% would indicate structural profitability challenges
- Revenue Growth Deceleration: Quarterly sales growth slipping into single digits would signal competitive pressures
- Rising Debt Levels: Significant increase in leverage without corresponding EBITDA growth would strain finances
- Promoter Stake Dilution: Any reduction in 61.57% promoter holding would raise confidence concerns
- Technical Breakdown: Break below 52-week low of ₹30.90 would trigger capitulation selling
The Verdict: Quality Company at a Crossroads
Score: 52/100
For Fresh Investors: Not recommended for fresh purchases at current levels. The "Very Expensive" valuation grade, recent margin compression, and technical weakness suggest waiting for a better entry point. Consider accumulating only on substantial corrections below ₹48-50, where risk-reward becomes more favourable. The company's long-term growth trajectory and capital efficiency make it worth monitoring for opportunistic entry.
For Existing Holders: Continue to hold with a watchful eye on margin trends. The company's exceptional ROE of 33.67%, stable promoter backing, and strong long-term track record justify maintaining positions despite near-term headwinds. However, consider booking partial profits if the stock rallies back above ₹65, as valuation constraints limit significant upside from current levels. Set a stop-loss at ₹45 to protect against further deterioration.
Fair Value Estimate: ₹52-58 (7% downside to 4% upside from current price of ₹55.70)
The investment case hinges on management's ability to restore operating margins above 18% whilst maintaining revenue momentum. Success on this front could justify valuation premiums and drive re-rating; failure would necessitate multiple compression. The next two quarters will be critical in determining whether recent margin weakness represents temporary investment or structural deterioration.
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 February 02, 2026, and are subject to change.
