The company's performance in Q2 FY26 reflects a confluence of deteriorating operational metrics that extend well beyond typical cyclical pressures. Net sales plunged 19.27% quarter-on-quarter to ₹0.88 crores, whilst the year-on-year decline of 69.86% underscores the severity of demand contraction facing this specialised steel products manufacturer. Operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) turned sharply negative at ₹0.28 crores, translating to an alarming operating margin of -31.82%—a dramatic deterioration from the already weak -4.59% margin posted in Q1 FY26. This operational distress has persisted across multiple quarters, with the company failing to generate sustainable profitability since early 2024.
The technical picture reinforces the fundamental weakness, with the stock firmly entrenched in bearish territory. Trading at ₹19.95, Shree Steel Wire Ropes has declined 48.78% over the past year, massively underperforming both the Sensex's 7.18% gain and the broader Iron & Steel Products sector's 22.79% return. The stock currently trades below all key moving averages—5-day (₹21.18), 20-day (₹23.04), 50-day (₹24.73), 100-day (₹26.24), and 200-day (₹28.71)—signalling sustained selling pressure and deteriorating investor sentiment. With a beta of 1.50, the stock exhibits significantly higher volatility than the broader market, amplifying downside risk during periods of market stress.
Financial Performance: Revenue Collapse Drives Margin Implosion
The second quarter of FY26 marked a critical inflection point for Shree Steel Wire Ropes, with revenue declining to ₹0.88 crores from ₹1.09 crores in Q1 FY26—a sequential contraction of 19.27%. More concerning is the year-on-year comparison, which reveals a catastrophic 69.86% revenue decline from the ₹2.92 crores recorded in Q2 FY25. This represents the lowest quarterly revenue figure in the trailing twelve-quarter dataset, signalling severe demand weakness or potential loss of key customer accounts in the company's core steel wire ropes and railway equipment segments.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Operating Margin | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 0.88 | -19.27% | -31.82% | -0.29 | -32.95% |
| Jun'25 | 1.09 | -63.79% | -4.59% | -0.19 | -17.43% |
| Mar'25 | 3.01 | +5.99% | -9.30% | -0.22 | -7.31% |
| Dec'24 | 2.84 | -2.74% | 1.41% | -0.03 | -1.06% |
| Sep'24 | 2.92 | +14.51% | 2.05% | -0.03 | -1.03% |
| Jun'24 | 2.55 | -22.49% | 3.14% | 0.03 | 1.18% |
| Mar'24 | 3.29 | — | 0.91% | 0.02 | 0.61% |
The margin profile has deteriorated catastrophically. Operating margin (excluding other income) collapsed to -31.82% in Q2 FY26 from -4.59% in the previous quarter, indicating that for every rupee of revenue, the company is now losing 31.82 paise at the operating level before accounting for depreciation and interest. This represents the worst operating margin performance in the available quarterly history. The PAT margin of -32.95% reflects similar distress, with net losses consuming nearly one-third of the quarter's already depressed revenue base. Employee costs of ₹0.41 crores, whilst declining marginally from ₹0.45 crores in Q1 FY26, still represented 46.59% of quarterly revenue—an unsustainable cost structure that highlights severe operating leverage challenges.
The quality of earnings remains deeply concerning. Depreciation charges of ₹0.05 crores in Q2 FY26, whilst lower than the ₹0.09 crores in Q1 FY26, still consumed a significant portion of the company's negative operating profit. Other income of ₹0.05 crores provided minimal cushioning against operational losses. The tax credit of ₹0.01 crores (representing a negative tax rate of -3.57%) suggests the company is utilising accumulated losses to offset any residual taxable income, though this provides little comfort given the persistent loss-making trajectory.
Operational Challenges: Return Ratios Signal Deep-Seated Weakness
Shree Steel Wire Ropes' return metrics paint a picture of a business struggling with fundamental profitability challenges. The latest return on equity (ROE) stands at -5.68%, a stark deterioration from the already weak five-year average of 2.21%. This negative ROE indicates that the company is actively destroying shareholder value, with each rupee of equity capital generating a loss rather than a return. The average ROE of 2.21% over the past five years—well below the cost of equity for even the safest investments—underscores chronic underperformance that predates the current quarter's difficulties.
Critical Operational Red Flags
Return on Capital Employed (ROCE): The latest ROCE of -9.46% (versus a five-year average of 3.63%) indicates the company is generating negative returns on the total capital deployed in the business. This metric is particularly alarming for a capital-intensive manufacturing operation, suggesting that fixed assets are underutilised or that the business model itself may no longer be viable at current scale.
Sales to Capital Employed: At an average of 1.11x, the company generates just ₹1.11 of revenue for every rupee of capital employed—a ratio that signals poor asset productivity and inefficient capital allocation. Combined with negative operating margins, this creates a value-destructive cycle where even modest revenue cannot cover the cost of capital.
EBIT to Interest Coverage: With an average EBIT to interest coverage of just 0.16x, the company's operating earnings are insufficient to cover even minimal interest obligations. Whilst current debt levels are negligible, this metric highlights the fragility of the operating model and the company's inability to support any meaningful leverage.
The balance sheet, whilst showing minimal debt, offers limited reassurance. Shareholder funds stood at ₹13.29 crores as of March 2025, marginally lower than the ₹13.44 crores a year earlier. The company operates with zero long-term debt and minimal current liabilities of ₹0.88 crores, suggesting a conservative financial structure. However, this debt-free status is a function of necessity rather than choice—with negative returns on capital, the company would struggle to service any material debt load. Fixed assets of ₹4.69 crores and current assets of ₹7.62 crores indicate a reasonably balanced asset base, but the inability to generate positive returns from these assets remains the critical concern.
Working capital management has deteriorated alongside operational performance. Current assets declined from ₹8.66 crores in March 2024 to ₹7.62 crores in March 2025, whilst current liabilities fell from ₹1.19 crores to ₹0.88 crores. Trade payables compressed from ₹0.69 crores to ₹0.29 crores, potentially indicating strained supplier relationships or reduced business activity. The cash flow statement for FY25 revealed a net cash outflow of ₹1.00 crore, with closing cash position falling to near-zero levels from ₹2.00 crores a year earlier—a concerning liquidity trend that limits the company's ability to weather extended operational challenges.
Industry Context: Underperformance Amidst Sector Strength
The broader Iron & Steel Products sector delivered a robust 22.79% return over the past year, driven by infrastructure spending, manufacturing growth, and resilient demand from railways and construction sectors—end markets that should theoretically benefit a steel wire rope manufacturer. Shree Steel Wire Ropes' catastrophic 48.78% decline over the same period represents a staggering 71.57 percentage point underperformance versus its sector peers, suggesting company-specific challenges far beyond normal cyclical pressures.
The company's core products—steel wire ropes, strands, slings, and railway equipment—serve critical infrastructure and industrial applications. Major customers historically included Indian Railways, port trusts, ONGC, Oil India, defence establishments, and steel plants. The precipitous revenue decline from ₹2.92 crores in Q2 FY25 to ₹0.88 crores in Q2 FY26 suggests either significant customer losses, pricing pressures, or operational disruptions that have severely impaired the company's ability to compete for and fulfil orders in these segments.
Market Positioning Concerns
With a market capitalisation of just ₹7.00 crores, Shree Steel Wire Ropes ranks fifth amongst its peer group—a micro-cap position that reflects both its operational scale and deteriorating investor confidence. The company's inability to generate positive returns whilst operating from a modern facility in Khopoli raises questions about market share erosion, pricing power, and competitive positioning within the specialised steel wire ropes segment. The absence of any institutional shareholding (0.0% FII, mutual fund, and insurance holdings) further underscores the lack of professional investor interest in the current business trajectory.
Peer Comparison: Valuation Reflects Distress
A comparison with sector peers reveals Shree Steel Wire Ropes trading at a significant discount, though this valuation gap reflects fundamental weakness rather than opportunity. The company's price-to-book ratio of 0.51x—meaning the stock trades at roughly half its stated book value—appears superficially attractive but is justified by negative return on equity and persistent losses. Peers with positive earnings command higher valuations, whilst loss-making comparables trade at similarly depressed multiples.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Mkt Cap (₹ Cr) |
|---|---|---|---|---|---|
| Sh. Steel Wire | NA (Loss Making) | 0.51 | 2.21 | -0.24 | 7.00 |
| Trans Freight | 8.04 | 0.34 | 0.00 | -0.73 | — |
| Eastcoast Steel | 18.84 | — | — | — | — |
| P.M. Telelinnks | 371.77 | 1.29 | 0.00 | 0.00 | — |
| MFS Intercorp | NA (Loss Making) | 6.22 | 0.00 | -0.17 | — |
The company's ROE of 2.21% (five-year average) marginally exceeds some peers but remains wholly inadequate for generating shareholder value. The negative debt-to-equity ratio of -0.24 indicates the company holds net cash, but this conservative balance sheet structure provides little competitive advantage when the core business cannot generate positive operating margins. The price-to-book discount of 0.51x reflects market scepticism about the realisable value of the company's assets and its ability to generate future cash flows.
Valuation Analysis: Deep Discount Justified by Deteriorating Fundamentals
Shree Steel Wire Ropes' current valuation metrics reflect a business in severe distress. With the company loss-making on a trailing twelve-month basis, traditional earnings multiples (P/E ratio) are not applicable. The price-to-book ratio of 0.51x suggests the market values the company's equity at roughly half its stated book value of ₹40.28 per share—a significant discount that typically signals either asset impairment concerns or expectations of continued value destruction.
The enterprise value multiples paint an equally concerning picture. With an EV/EBITDA of -3.48x and EV/Sales of 0.44x, the company's enterprise value (factoring in minimal debt and cash) stands at less than half its annual revenue—a valuation typically reserved for businesses facing existential challenges or potential liquidation scenarios. The valuation grade of "RISKY" (changed from "Very Expensive" on January 31, 2024) reflects the dramatic deterioration in business fundamentals over the past year.
The stock's 52-week range of ₹18.85 to ₹40.00 illustrates the magnitude of value destruction, with the current price of ₹19.95 trading just 5.84% above the yearly low and 50.12% below the high. This price action reflects sustained selling pressure and absence of meaningful buying interest even at deeply discounted levels. The dividend yield is not applicable given the company's loss-making status, eliminating any income component that might otherwise cushion total returns.
Shareholding: Stable Promoter Base Amidst Retail Exodus
The shareholding pattern reveals a stable promoter holding of 30.77% across the past five quarters, with no sequential changes. Bholenath Developers Private Limited holds the largest stake at 14.81%, followed by various members of the Sajnani family holding smaller percentages. The absence of any pledged shares (0.0%) provides some comfort regarding promoter financial stability, though this offers little insight into their commitment to operational turnaround or capital infusion.
| Quarter | Promoter % | FII % | MF % | Insurance % | Non-Inst % |
|---|---|---|---|---|---|
| Dec'25 | 30.77 | 0.00 | 0.00 | 0.00 | 69.23 |
| Sep'25 | 30.77 | 0.00 | 0.00 | 0.00 | 69.23 |
| Jun'25 | 30.77 | 0.00 | 0.00 | 0.00 | 69.23 |
| Mar'25 | 30.77 | 0.00 | 0.00 | 0.00 | 69.23 |
| Dec'24 | 30.77 | 0.00 | 0.00 | 0.00 | 69.23 |
The complete absence of institutional shareholding—0.0% across FIIs, mutual funds, insurance companies, and other domestic institutional investors—is particularly telling. Professional investors have shown zero interest in the stock, likely due to the combination of micro-cap size, persistent losses, and lack of visibility on turnaround prospects. The non-institutional holding of 69.23% comprises largely retail investors who have witnessed their holdings decline dramatically in value over the past year. This shareholder base lacks the resources or influence to drive operational improvements or strategic changes.
Stock Performance: Relentless Downtrend Across All Timeframes
Shree Steel Wire Ropes has delivered catastrophic returns across virtually every meaningful timeframe, with negative alpha versus both the Sensex and its sector peers. The one-year return of -48.78% compares unfavourably to the Sensex's 7.18% gain, resulting in negative alpha of -55.96 percentage points. The three-year return of -30.24% versus the Sensex's 38.27% gain translates to -68.51 percentage points of underperformance, whilst the five-year return of -12.69% lags the Sensex's 77.74% advance by a staggering 90.43 percentage points.
| Period | Stock Return | Sensex Return | Alpha | Sector Return |
|---|---|---|---|---|
| 1 Day | -4.22% | -0.36% | -3.86% | — |
| 1 Week | -6.34% | 0.90% | -7.24% | — |
| 1 Month | -16.88% | -2.84% | -14.04% | — |
| 3 Month | -30.37% | -2.53% | -27.84% | — |
| 6 Month | -32.19% | 0.97% | -33.16% | — |
| 1 Year | -48.78% | 7.18% | -55.96% | 22.79% |
| 2 Years | -49.43% | 15.65% | -65.08% | — |
| 3 Years | -30.24% | 38.27% | -68.51% | — |
| 5 Years | -12.69% | 77.74% | -90.43% | — |
The technical trend remains firmly bearish, with the stock changing to "BEARISH" on December 10, 2025 at ₹26.97 from "Mildly Bearish." All major technical indicators—MACD, RSI, Bollinger Bands, and KST—signal bearish or neutral readings on both weekly and monthly timeframes. The stock trades below all key moving averages, with the 200-day moving average at ₹28.71 serving as strong overhead resistance 43.96% above current levels. The risk-adjusted return of -0.97 (versus the Sensex's 0.64) combined with volatility of 50.19% (versus the Sensex's 11.21%) classifies the stock as "HIGH RISK LOW RETURN"—the worst possible combination for investors.
The beta of 1.50 indicates the stock is 50% more volatile than the broader market, amplifying both upside and downside movements. However, given the persistent downtrend, this high beta has primarily served to magnify losses during market corrections whilst providing minimal upside capture during market rallies. Delivery volumes have shown some recent increase, with the one-month delivery change at 9.17%, though this likely reflects forced selling rather than accumulation by informed investors.
Investment Thesis: Multiple Red Flags Overwhelm Limited Positives
The investment case for Shree Steel Wire Ropes is severely compromised by multiple structural challenges. The company's proprietary Mojo Score of just 12 out of 100 places it firmly in "STRONG SELL" territory, with the advisory explicitly recommending exit. The score declined from 23 in January 2025 and 33 in November 2024, reflecting accelerating fundamental deterioration. The four-parameter Mojo framework reveals weaknesses across all critical dimensions: valuation (RISKY), quality (BELOW AVERAGE), financial trend (FLAT), and technical trend (BEARISH).
"With operating margins of -31.82%, negative return on equity, and revenue declining 69.86% year-on-year, Shree Steel Wire Ropes faces existential challenges that extend well beyond normal cyclical pressures in the steel products sector."
Key Strengths & Risk Factors
Key Strengths
- Debt-Free Balance Sheet: Zero long-term debt and minimal current liabilities provide financial flexibility, though this reflects inability to support leverage rather than strategic choice.
- No Promoter Pledging: The absence of pledged shares (0.0%) eliminates one source of financial risk, suggesting promoters are not using shares as collateral for personal borrowings.
- Established Infrastructure: Modern manufacturing facility at Khopoli with capabilities across steel wire ropes, strands, and railway equipment provides potential platform for recovery if demand returns.
- Historical Customer Base: Past relationships with Indian Railways, port trusts, ONGC, and defence establishments could potentially be reactivated with improved execution.
- Valuation Discount: Trading at 0.51x book value offers theoretical upside if the company can return to profitability, though current fundamentals justify the discount.
Key Concerns
- Catastrophic Revenue Decline: Q2 FY26 revenue of ₹0.88 crores represents a 69.86% year-on-year collapse, suggesting severe customer losses or market share erosion.
- Negative Operating Margins: Operating margin of -31.82% indicates fundamental business model breakdown, with losses accelerating despite reduced scale.
- Persistently Negative ROE: Latest ROE of -5.68% (versus five-year average of 2.21%) demonstrates chronic value destruction and inability to generate returns on shareholder capital.
- Weak Return on Capital: ROCE of -9.46% signals poor asset productivity and inefficient capital deployment across the business.
- Zero Institutional Interest: Complete absence of FII, mutual fund, and insurance holdings reflects professional investors' assessment that the business lacks turnaround potential.
- Deteriorating Liquidity: Cash position declined from ₹2.00 crores to near-zero in FY25, limiting ability to fund operations or invest in growth initiatives.
- Technical Breakdown: Bearish trend across all timeframes with stock trading below all major moving averages signals sustained selling pressure and negative sentiment.
Outlook: Critical Monitoring Points
Positive Catalysts to Watch
- Revenue Stabilisation: Any quarter showing sequential revenue growth above ₹2.00 crores would signal demand recovery and potential customer re-engagement.
- Margin Improvement: Return to positive operating margins (even low single digits) would demonstrate cost restructuring success and operational viability.
- Customer Wins: Announcements of new orders from railways, defence, or infrastructure sectors could validate competitive positioning and market relevance.
- Cost Rationalisation: Reduction in employee costs as percentage of revenue below 30% would indicate right-sizing efforts and improved operating leverage.
Red Flags Requiring Immediate Attention
- Further Revenue Decline: Any quarter with revenue below ₹0.80 crores would signal accelerating business deterioration and potential viability concerns.
- Cash Depletion: Complete exhaustion of cash reserves would force difficult decisions around asset sales, promoter infusion, or operational wind-down.
- Promoter Stake Reduction: Any decline in the stable 30.77% promoter holding would signal loss of confidence in turnaround prospects.
- Asset Impairment: Write-downs of fixed assets or inventory would further erode book value and reduce net worth available to absorb future losses.
- Working Capital Stress: Inability to pay suppliers or employees would indicate acute liquidity crisis and potential operational shutdown.
The Verdict: Exit Recommended—Fundamental Deterioration Justifies Deep Discount
Score: 12/100
For Fresh Investors: Avoid entirely. The combination of negative operating margins (-31.82%), catastrophic revenue decline (-69.86% YoY), and negative return on equity (-5.68%) indicates a business in severe distress with no visible path to profitability. The absence of institutional shareholding and bearish technical trend across all timeframes underscore the lack of professional investor confidence. Whilst the stock trades at 0.51x book value, this discount is fully justified by deteriorating fundamentals and existential business challenges.
For Existing Holders: Exit on any technical bounce towards ₹23-24 levels to minimise further losses. The company has delivered -48.78% returns over the past year versus the sector's +22.79% gain, representing 71.57 percentage points of underperformance. With operating losses accelerating, cash reserves depleting, and no signs of demand recovery, continued holding exposes investors to significant downside risk including potential further value destruction or business wind-down scenarios. The micro-cap size (₹7.00 crores market cap) and complete lack of liquidity (374 shares traded on latest day) make exit challenging but necessary.
Fair Value Estimate: Not applicable given current loss-making status and absence of positive cash flows. Any valuation exercise would require visibility on return to profitability, which is not evident in current operational trends. The stock's intrinsic value is highly uncertain and likely below current book value of ₹40.28 per share given persistent value destruction.
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, and all investments carry risk of loss. The analysis presented herein is based on publicly available information and may not reflect the complete financial picture of the company.
