Shri Bajrang Alliance Q2 FY26: Profitability Rebounds Amid Revenue Headwinds

However, the revenue picture remained subdued, with net sales declining 2.17% quarter-on-quarter to ₹87.40 crores in Q2 FY26 from ₹89.34 crores in Q1 FY26. On a year-on-year basis, sales managed a modest 8.96% growth compared to ₹80.21 crores in Q2 FY25. Operating margins showed encouraging expansion, with PBDIT margin (excluding other income) reaching 3.57% in Q2 FY26, the highest in the trailing eight quarters, compared to 2.79% in the previous quarter.

The company's performance reflects a tale of two narratives: improving operational efficiency and profitability on one hand, and persistent revenue challenges on the other. For H1 FY26, consolidated net profit stood at ₹18.69 crores, registering a healthy 29.16% growth over the corresponding period last year. This profitability expansion occurred despite the iron and steel products sector facing headwinds from volatile raw material prices and fluctuating demand conditions.

Financial Performance: Margin Expansion Drives Bottom Line

In Q2 FY26, Shri Bajrang Alliance demonstrated notable improvement in profitability metrics despite the marginal revenue decline. Net sales of ₹87.40 crores represented an 8.96% year-on-year increase but fell 2.17% sequentially from Q1 FY26's ₹89.34 crores. The quarter-on-quarter revenue softness reflects the broader challenges facing the structural steel sector, including subdued construction activity and competitive pricing pressures.

The standout feature of Q2 FY26 was the significant margin expansion across the board. Operating profit (PBDIT excluding other income) reached ₹3.12 crores, the highest in eight quarters, translating to a margin of 3.57% versus 2.79% in Q1 FY26 and just 1.27% in Q2 FY25. This 230 basis point year-on-year improvement signals better cost management and operational efficiency. PAT margin similarly expanded to 1.89% from 1.29% in the previous quarter, reflecting the company's focus on protecting profitability in a challenging revenue environment.

Interest costs remained well-contained at ₹0.26 crores in Q2 FY26, marginally lower than ₹0.28 crores in Q1 FY26, reflecting prudent financial management. Depreciation was steady at ₹0.83 crores. The effective tax rate of 28.26% in Q2 FY26 was in line with Q1 FY26's 29.01%, normalising after the anomalous negative tax rates witnessed in Q4 FY25 and Q2 FY25.

On a half-yearly basis (H1 FY26), the company's consolidated net profit of ₹18.69 crores grew 29.16% compared to H1 FY25, demonstrating sustained profitability momentum. However, revenue for H1 FY26 totalled ₹176.74 crores, down from the prior year period, underscoring the ongoing top-line challenges that the management must address to sustain long-term growth.

Operational Challenges: Weak Returns on Capital Employed

While Shri Bajrang Alliance has demonstrated improving margins in recent quarters, the company's longer-term operational efficiency metrics paint a concerning picture. The average Return on Capital Employed (ROCE) stands at a meagre 1.87% over the trailing period, significantly below industry standards and indicating that the company generates minimal returns on the capital deployed in its business. The latest ROCE of 0.21% is particularly troubling, suggesting that operational profitability relative to capital employed has deteriorated further.

In stark contrast, the company's Return on Equity (ROE) tells a different story, with an average of 18.90% and a latest reading of 9.71%. While the average ROE of 18.90% appears healthy and suggests reasonable returns to shareholders, the gap between ROE and ROCE indicates that the company's equity returns are being supported more by financial leverage and other factors rather than core operational excellence. This divergence warrants careful monitoring, as sustainable value creation typically requires strong ROCE alongside healthy ROE.

The balance sheet reveals some concerning trends. Long-term debt increased to ₹15.00 crores in FY25 from zero in FY24, suggesting the company took on additional borrowings during the year. However, the debt-to-equity ratio remains manageable at 0.29, and the company maintains a reasonable financial position. Shareholder funds stood at ₹335.81 crores as of March 2025, up from ₹300.67 crores in the previous year, reflecting retained earnings and capital appreciation.

Sector Context: Navigating a Challenging Steel Environment

The iron and steel products sector has faced considerable headwinds through 2025, with fluctuating raw material costs, subdued construction activity, and intense competition compressing margins across the industry. Shri Bajrang Alliance's revenue decline of 30.1% in FY25 (₹398 crores versus ₹569 crores in FY24) reflects these broader sectoral challenges. The company's focus on structural steel products such as angles, channels, joists, beams, and rounds exposes it to the cyclical nature of infrastructure and construction spending.

The company's market positioning as a manufacturer of mild steel structurals and electric rail clips provides some product diversification, though the core business remains heavily dependent on construction and infrastructure demand. The sharp revenue volatility witnessed over recent quarters—ranging from ₹80.21 crores to ₹226.54 crores—suggests that order flow has been inconsistent, possibly reflecting project-based lumpiness or market share losses to larger, more established competitors.

Looking at the competitive landscape, the iron and steel products sector in India is highly fragmented with numerous small and medium-sized players competing on price and delivery. Shri Bajrang Alliance's micro-cap status (₹176.22 crores market capitalisation) positions it as a niche player with limited scale advantages. The company's ability to expand margins despite revenue pressures suggests some success in cost optimisation, but the sustainability of this margin improvement remains uncertain without accompanying revenue growth.

Valuation Analysis: Attractive Entry Point or Value Trap?

From a valuation perspective, Shri Bajrang Alliance trades at compelling multiples that appear attractive on the surface. The stock's price-to-earnings ratio of 5.10 times stands significantly below the iron and steel products sector average of 29 times, representing an 82% discount to sector peers. Similarly, the price-to-book value of 0.52 times suggests the stock trades at nearly half its book value, potentially offering a margin of safety for value investors.

However, these seemingly attractive valuations must be viewed in the context of the company's operational challenges. The EV-to-EBIT multiple of 100.01 times and EV-to-EBITDA of 45.64 times appear elevated, reflecting the company's weak operating profitability relative to its enterprise value. The EV-to-sales ratio of 0.76 times suggests modest revenue generation relative to the company's total valuation, whilst the EV-to-capital employed ratio of 0.63 times indicates the market values the business below its deployed capital—a reflection of the poor ROCE metrics discussed earlier.

The stock's valuation grade has fluctuated between "Attractive" and "Very Attractive" over recent months, currently standing at "Attractive" as of November 14, 2025. This assessment reflects the low P/E and P/BV multiples but must be balanced against the company's weak fundamental performance and deteriorating financial trends. The absence of dividend payments (last dividend of ₹1.00 per share was paid in September 2008) further reduces the investment appeal for income-focused investors.

Shareholding: Stable Promoter Base, Zero Institutional Interest

The shareholding pattern of Shri Bajrang Alliance has remained remarkably stable over the past five quarters, with promoter holding consistently at 63.97% and non-institutional investors holding the remaining 36.03%. This stability suggests strong promoter commitment to the business, and notably, there is zero pledging of promoter shares—a positive indicator of financial health and confidence.

However, the complete absence of institutional participation is striking and concerning. Foreign Institutional Investors (FIIs), Mutual Funds, Insurance Companies, and other Domestic Institutional Investors (DIIs) collectively hold 0.00% of the company's equity. This lack of institutional interest reflects the company's micro-cap status, limited liquidity, and perhaps concerns about the business's fundamental prospects and governance standards.

The promoter group is dominated by the Goel family, with Rajendra Goel And Sons holding 9.42%, Narendra Goel at 8.10%, and Suresh Goel at 6.29%, amongst other family members and HUFs. This concentrated family ownership structure provides management continuity but also raises questions about corporate governance, minority shareholder rights, and the potential for related-party transactions. The absence of independent institutional oversight means retail investors must rely heavily on regulatory disclosures and audited financials to assess the company's true financial position.

Stock Performance: Significant Underperformance Across Timeframes

Shri Bajrang Alliance's stock performance has been disappointing across most relevant timeframes, with the shares consistently underperforming both the Sensex benchmark and the iron and steel products sector. Trading at ₹195.80 as of November 14, 2025, the stock has declined 1.21% over the past year compared to the Sensex's 8.36% gain, resulting in a negative alpha of 9.57 percentage points. More concerning is the 18.80 percentage point underperformance versus the iron and steel products sector, which returned 17.59% over the same period.

On a year-to-date basis, the stock has fallen 9.69% whilst the Sensex advanced 7.58%, representing a 17.27 percentage point underperformance. The three-year track record is similarly poor, with the stock declining 1.19% compared to the Sensex's 36.41% gain—a massive 37.60 percentage point gap. This consistent underperformance reflects investor concerns about the company's weak operational metrics, volatile revenues, and uncertain growth prospects.

The stock's beta of 1.50 indicates high volatility relative to the market, with annualised volatility of 48.94% compared to the Sensex's 12.26%. This high-beta characteristic means the stock amplifies market movements, creating significant downside risk during market corrections whilst offering limited upside participation during rallies. The risk-adjusted return of -0.02 over the past year confirms that investors have not been compensated for taking on this elevated volatility.

From a technical perspective, the stock is currently in a "Mildly Bearish" trend, having shifted from "Mildly Bullish" on November 4, 2025. The stock trades below all key moving averages—5-day (₹191.30), 20-day (₹194.93), 50-day (₹198.29), 100-day (₹202.43), and 200-day (₹190.16)—suggesting weak momentum and a lack of buying support. The 52-week range of ₹133.15 to ₹250.35 shows the stock is currently 21.79% below its high and 47.05% above its low, positioning it in the middle of its annual trading range.

Investment Thesis: Fundamental Weaknesses Outweigh Valuation Appeal

The investment case for Shri Bajrang Alliance presents a complex picture of conflicting signals. On one hand, the company has demonstrated improving profitability in recent quarters, with Q2 FY26 consolidated net profit growing 34.62% year-on-year and operating margins expanding to multi-quarter highs. The stock trades at seemingly attractive valuation multiples—a P/E of 5.10 times and P/BV of 0.52 times—that appear cheap relative to both historical levels and sector peers.

However, these positives are overshadowed by significant fundamental concerns. The company's average ROCE of just 1.87% and latest ROCE of 0.21% indicate extremely poor capital efficiency, suggesting the business destroys value rather than creating it. The 30.1% revenue decline in FY25 and continued revenue volatility in recent quarters raise questions about demand sustainability and competitive positioning. The complete absence of institutional shareholders signals potential concerns about governance, liquidity, and growth prospects that sophisticated investors have chosen to avoid.

The company's quality assessment of "Below Average" reflects its weak long-term financial performance, with an average EBIT-to-interest coverage of only 1.95 times and debt-to-EBITDA of 10.09 indicating limited financial flexibility. The financial trend classification of "Flat" for Q2 FY26 suggests the recent margin improvements have not yet translated into a sustained positive trajectory. Combined with the "Mildly Bearish" technical trend, the overall investment picture appears challenging for both fresh investors and existing holders.

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