The September quarter results present a mixed picture for Skipper, with revenue momentum continuing but profitability coming under pressure. Whilst the company achieved its highest-ever quarterly operating profit of ₹130.69 crores, the sequential decline in net profit reflects rising interest costs and tax expenses that compressed bottom-line margins. The company's journey from a steel-focused entity to a diversified electrical equipment manufacturer continues, but execution challenges remain evident in the quarterly performance.
Financial Performance: Growth Momentum Meets Margin Headwinds
In Q2 FY26, Skipper posted net sales of ₹1,261.79 crores, representing modest sequential growth of 0.63% from Q1 FY26's ₹1,253.86 crores and a more robust 13.70% year-on-year expansion from ₹1,109.74 crores in Q2 FY25. This marks the company's highest quarterly revenue to date, demonstrating sustained demand for its transmission towers, conductors, and polymer products.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Operating Profit (₹ Cr) | Op. Margin % | Net Profit (₹ Cr) | PAT Margin % |
|---|---|---|---|---|---|---|
| Sep'25 | 1,261.79 | +0.63% | 130.69 | 10.36% | 37.03 | 2.93% |
| Jun'25 | 1,253.86 | -2.63% | 127.16 | 10.14% | 45.26 | 3.61% |
| Mar'25 | 1,287.75 | +13.43% | 123.65 | 9.60% | 47.91 | 3.72% |
| Dec'24 | 1,135.25 | +2.30% | 110.91 | 9.77% | 36.09 | 3.18% |
| Sep'24 | 1,109.74 | +1.65% | 112.44 | 10.13% | 32.93 | 2.97% |
| Jun'24 | 1,091.74 | -5.35% | 104.66 | 9.59% | 32.42 | 2.97% |
| Mar'24 | 1,153.51 | — | 108.54 | 9.41% | 25.16 | 2.18% |
The operating performance shows encouraging signs, with operating profit (excluding other income) reaching ₹130.69 crores, up 2.77% sequentially and 16.23% year-on-year. Operating margins expanded to 10.36%, the highest in the trailing seven quarters, reflecting improved operational efficiency and better product mix. This represents a 22 basis points improvement from Q1 FY26 and a 23 basis points gain over Q2 FY25.
However, the bottom-line narrative diverges sharply from the operating story. Net profit declined 18.18% quarter-on-quarter to ₹37.03 crores from ₹45.26 crores, despite the revenue growth. The culprit lies in the financial expenses and tax line items. Interest costs remained elevated at ₹53.56 crores, marginally higher than Q1's ₹52.96 crores, whilst tax expenses rose to ₹14.62 crores with an effective tax rate of 28.31%, up from 25.05% in the previous quarter. This combination compressed PAT margins to 2.93% from 3.61% in Q1 FY26.
On a half-yearly basis (H1 FY26), Skipper reported consolidated net sales of ₹2,515.65 crores, up 14.27% from ₹2,201.48 crores in H1 FY25. Net profit for the half-year stood at ₹82.29 crores, representing a 26.05% year-on-year increase from ₹65.35 crores. This demonstrates that despite the Q2 sequential decline, the company maintains positive momentum on an annual comparison basis.
Operational Challenges: The Debt Burden Question
Whilst Skipper's operating performance has shown steady improvement, the company's capital structure continues to exert pressure on profitability. The interest burden of ₹53.56 crores in Q2 FY26 represents 4.25% of net sales, a significant drag on margins. On an annualised basis, interest costs are running at approximately ₹213 crores, consuming a substantial portion of operating profits.
Leverage Concerns Persist
Skipper's debt-to-EBITDA ratio stands at 2.81 times on average, whilst the net debt-to-equity ratio of 0.52 indicates moderate leverage. The company's EBIT-to-interest coverage of 1.61 times remains weak, suggesting limited cushion for interest payment obligations. As of March 2025, long-term debt stood at ₹231.75 crores, down from ₹300.81 crores in March 2024, showing some deleveraging progress.
The balance sheet reveals a working capital-intensive business model. Trade payables surged to ₹1,221.78 crores as of March 2025, nearly unchanged from ₹1,220.58 crores in the previous year but significantly higher than historical levels. Current assets stood at ₹2,288.75 crores against current liabilities of ₹1,814.62 crores, providing a current ratio of 1.26, which offers reasonable short-term liquidity but requires careful management.
Return on equity (ROE) averaged just 6.54% over the assessment period, significantly below the peer group average of approximately 14%. This weak return profile reflects the company's struggle to generate adequate returns on shareholder capital despite revenue growth. The latest ROE of 12.52% shows improvement but remains below industry standards. Return on capital employed (ROCE) averaged 13.23%, with the latest reading improving to 21.43%, suggesting better asset utilisation in recent periods.
Capital Efficiency Improving
Despite historical challenges, Skipper's ROCE for H1 FY26 reached 21.28%, the highest level recorded. The operating profit-to-interest coverage improved to 2.44 times in Q2 FY26, also a peak level. These metrics suggest the company is gradually improving its capital efficiency, though it remains early to declare a sustained turnaround.
Industry Context: Heavy Electrical Equipment Sector Dynamics
The heavy electrical equipment sector has witnessed robust demand driven by India's infrastructure push, particularly in power transmission and renewable energy integration. Government initiatives such as the National Infrastructure Pipeline and focus on grid modernisation have created favourable conditions for companies like Skipper that manufacture transmission towers, conductors, and related infrastructure equipment.
However, the sector faces headwinds from volatile raw material prices, particularly steel and aluminium, which constitute significant input costs. Competition remains intense, with pricing power limited due to the project-based nature of business and the presence of multiple players. Working capital requirements are typically high due to long project execution cycles and delayed payment realisation from government and utility customers.
Skipper's diversification into polymer products through its subsidiary provides some insulation from pure-play infrastructure cyclicality. The company manufactures PVC pipes and other polymer products, adding a consumer-facing dimension to its business portfolio. This diversification strategy aims to reduce dependence on lumpy project-based revenues and improve margin stability over time.
Peer Comparison: Valuation and Quality Metrics
| Company | P/E Ratio (TTM) | Price/Book | ROE % | Debt/Equity | Div Yield % |
|---|---|---|---|---|---|
| Skipper | 36.13 | 4.91 | 6.54 | 0.52 | 0.02 |
| Azad Engineering | 93.61 | 0.71 | 5.79 | -0.15 | — |
| Transrail Lighting | 27.84 | 4.86 | 17.21 | 0.01 | 0.12 |
| Quality Power Electricals | 109.33 | 17.05 | 15.59 | -0.55 | 0.11 |
| Voltamp Transformers | 22.01 | 4.51 | 17.76 | -0.10 | 1.41 |
Skipper trades at a P/E ratio of 36.13 times trailing twelve-month earnings, positioned between the sector extremes. Whilst this appears reasonable compared to Quality Power Electricals (109.33x) or Azad Engineering (93.61x), it represents a premium to Voltamp Transformers (22.01x) and Transrail Lighting (27.84x). The sector average P/E stands around 64 times, suggesting Skipper trades at a discount to the broader peer group.
However, the valuation discount appears justified when examining quality metrics. Skipper's ROE of 6.54% significantly lags peers like Transrail Lighting (17.21%) and Voltamp Transformers (17.76%). The price-to-book ratio of 4.91 times sits in the middle of the pack, but the weak return profile suggests limited justification for a premium valuation. The company's debt-to-equity ratio of 0.52 is higher than most peers, adding financial risk to the investment proposition.
"Skipper's valuation discount to peers reflects its weaker return profile and higher leverage, though improving operational metrics suggest potential for re-rating if execution sustains."
Valuation Analysis: Fair but Not Compelling
At the current market price of ₹508.15, Skipper commands a market capitalisation of ₹5,830 crores. The stock trades at 36.13 times trailing earnings, 4.91 times book value, and an EV/EBITDA multiple of 13.66 times. These multiples position the stock in "fair value" territory according to proprietary valuation models, having recently moved from an "attractive" rating in October 2025.
The PEG ratio of 0.71 suggests the stock may offer value relative to its growth rate, as readings below 1.0 typically indicate potential undervaluation. However, this metric should be interpreted cautiously given the company's inconsistent earnings trajectory and working capital challenges. The enterprise value-to-capital employed ratio of 3.58 times appears reasonable but not particularly attractive given the moderate ROCE profile.
Historical valuation patterns show volatility, with the stock oscillating between "attractive" and "fair" grades multiple times in recent months. The 52-week range of ₹341.55 to ₹665.00 illustrates significant price volatility, with the current price sitting 23.59% below the high and 48.78% above the low. This wide trading range reflects market uncertainty about the company's earnings sustainability and growth trajectory.
Shareholding Pattern: Stable Promoter Base, Growing FII Interest
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter Holding | 66.48% | 66.48% | 66.48% | 66.48% | — |
| FII Holding | 6.66% | 5.42% | 5.13% | 4.82% | +1.24% |
| Mutual Fund Holding | 0.12% | 0.11% | 0.09% | 0.14% | +0.01% |
| Insurance Holdings | 0.00% | 0.00% | 0.00% | 0.00% | — |
| Other DII Holdings | 0.28% | 0.14% | 0.21% | 0.34% | +0.14% |
| Non-Institutional | 26.47% | 27.85% | 28.08% | 28.22% | -1.38% |
The shareholding pattern reveals a stable promoter base at 66.48%, unchanged over the past four quarters. The promoter group, led by the S.K. Bansal family through various trusts and group entities, demonstrates strong commitment with zero pledging of shares. This provides governance comfort and suggests confidence in the company's long-term prospects.
More intriguingly, foreign institutional investor (FII) holdings have risen consistently from 4.46% in November 2024 to 6.66% in September 2025, representing a cumulative increase of 220 basis points. The sequential jump of 124 basis points in Q2 FY26 indicates growing foreign investor interest, possibly driven by India's infrastructure story and Skipper's improving operational metrics. Currently, 57 FII accounts hold stakes in the company.
Domestic institutional participation remains minimal, with mutual funds holding just 0.12% across five funds and insurance companies maintaining zero exposure. Other domestic institutional investors increased their stake to 0.28% from 0.14%, but overall institutional ownership of 7.05% remains low. The non-institutional category, which includes retail and high-net-worth individuals, declined to 26.47% from 27.85%, suggesting some profit-booking by retail participants.
Stock Performance: Stellar Long-Term, Challenging Near-Term
| Period | Skipper Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.14% | -0.86% | -2.28% |
| 1 Month | -1.29% | +1.57% | -2.86% |
| 3 Months | -1.06% | +3.22% | -4.28% |
| 6 Months | +11.27% | +3.06% | +8.21% |
| Year-to-Date | -6.59% | +6.50% | -13.09% |
| 1 Year | -12.88% | +4.62% | -17.50% |
| 2 Years | +130.52% | +28.14% | +102.38% |
| 3 Years | +638.87% | +36.01% | +602.86% |
| 5 Years | +984.81% | +98.64% | +886.17% |
Skipper's stock performance presents a tale of two timeframes. Over the long term, the stock has delivered extraordinary returns, with 5-year gains of 984.81% representing a near 10-bagger performance. The 3-year return of 638.87% and 2-year return of 130.52% demonstrate sustained wealth creation for patient investors. These returns massively outpaced the Sensex, generating alpha of 886 percentage points over five years.
However, near-term performance has been disappointing. The stock has declined 12.88% over the past year, underperforming the Sensex by 17.50 percentage points. Year-to-date returns stand at -6.59% against the Sensex's +6.50%, creating negative alpha of 13.09 percentage points. The past three months have seen the stock decline 1.06% whilst the Sensex gained 3.22%, and the one-month performance shows a 1.29% drop versus a 1.57% market gain.
Technical indicators paint a mixed picture. The stock currently trades in a "mildly bullish" trend after transitioning from "bullish" on September 25, 2025. It sits below all key moving averages—5-day (₹520.24), 20-day (₹515.56), 50-day (₹527.16), 100-day (₹513.44), and 200-day (₹481.68)—suggesting technical weakness. The stock's beta of 1.35 indicates high volatility, with movements typically 35% more pronounced than the broader market.
The risk-adjusted return profile for the past year stands at -0.29, with volatility of 45.03%, classifying Skipper as a "high risk, low return" investment over this timeframe. The Sensex, by contrast, delivered a risk-adjusted return of 0.37 with volatility of just 12.39%. This elevated volatility reflects the stock's sensitivity to infrastructure policy announcements, order inflows, and raw material price movements.
Investment Thesis: Quality Concerns Offset Growth Potential
The investment case for Skipper rests on several pillars. The company has demonstrated impressive long-term revenue growth, with sales expanding at a 30.34% compound annual rate over five years and operating profit growing at 43.87% annually. This growth trajectory reflects successful market share gains in transmission towers and conductors, coupled with diversification into polymer products. The current order book and ongoing infrastructure investments suggest revenue visibility for the near term.
However, quality concerns temper the growth narrative. The average ROE of 6.54% and ROCE of 13.23% indicate weak capital efficiency, though recent improvements to 12.52% and 21.43% respectively offer hope. The interest coverage ratio of 1.61 times remains uncomfortably low, leaving limited margin for error if operating performance falters. Debt levels, whilst moderating, continue to burden profitability through high interest costs that consume a significant portion of operating profits.
The company's quality grade has improved from "below average" to "average" as of August 2025, recognising better operational execution and financial discipline. The financial trend assessment remains "positive," with Q2 FY26 marking the highest operating profit-to-interest coverage at 2.44 times and peak operating margins of 10.36%. These improvements suggest management's efforts to enhance profitability are bearing fruit, albeit gradually.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Robust Revenue Growth: 30.34% sales CAGR over five years demonstrates strong market position and execution capability in core segments.
- Improving Operating Margins: Q2 FY26 operating margin of 10.36% represents highest level in recent quarters, suggesting better cost management.
- Diversified Product Portfolio: Presence across transmission towers, conductors, and polymer products reduces dependence on single segment cyclicality.
- Zero Promoter Pledging: Stable 66.48% promoter holding with no pledged shares provides governance comfort and demonstrates promoter confidence.
- Growing FII Interest: FII stake increased from 4.46% to 6.66% over past year, indicating rising foreign investor confidence.
- Improving Interest Coverage: Operating profit-to-interest ratio reached 2.44 times in Q2 FY26, highest level achieved, reducing financial risk.
- Infrastructure Tailwinds: Positioned to benefit from India's power transmission expansion and grid modernisation initiatives.
KEY CONCERNS ⚠
- Weak Return Profile: Average ROE of 6.54% significantly lags peer group average of ~14%, indicating poor capital efficiency.
- High Debt Burden: Interest costs of ₹213 crores annually consume substantial operating profits, limiting bottom-line growth.
- Sequential Profit Decline: Q2 FY26 net profit fell 18.18% QoQ despite revenue growth, raising concerns about margin sustainability.
- Working Capital Intensive: Trade payables of ₹1,222 crores and high current assets indicate significant working capital requirements.
- Low Institutional Ownership: Total institutional holding of just 7.05% suggests limited professional investor confidence.
- High Volatility: Beta of 1.35 and 45.03% volatility classify stock as high risk with significant price swings.
- Minimal Dividend: Dividend yield of 0.02% with 1.29% payout ratio provides no income attraction for investors.
Outlook: What to Watch in Coming Quarters
POSITIVE CATALYSTS
- Sustained Margin Expansion: If operating margins hold above 10% consistently, it would validate improved cost structure.
- Debt Reduction Progress: Further decline in debt levels and interest costs would significantly improve earnings quality.
- Large Order Wins: Announcement of significant transmission or infrastructure orders would provide revenue visibility.
- ROE Improvement: Sustained ROE above 15% would justify higher valuation multiples and attract institutional investors.
RED FLAGS
- Continued Profit Declines: Another quarter of sequential profit decline would signal structural margin pressures.
- Rising Interest Costs: Any increase in interest burden despite stable debt would indicate refinancing challenges.
- Working Capital Deterioration: Further increase in trade payables or receivables days would stress cash flows.
- Promoter Stake Reduction: Any decline in stable 66.48% promoter holding would raise governance concerns.
The near-term outlook hinges on Skipper's ability to sustain operating margin improvements whilst managing its debt burden. The company faces headwinds from potential raw material price volatility and competitive intensity in the transmission equipment space. However, government focus on power infrastructure and renewable energy integration provides a supportive demand environment.
Management's execution on deleveraging and working capital optimisation will be critical watchpoints. The company needs to demonstrate consistent quarterly profit growth to rebuild investor confidence after the Q2 sequential decline. Order inflow announcements and project execution timelines will provide insights into revenue sustainability beyond the current fiscal year.
The Verdict: Quality Concerns Warrant Caution
Score: 67/100
For Fresh Investors: Not recommended for fresh purchases at current levels. The weak return profile (ROE of 6.54%), high debt burden, and sequential profit decline in Q2 FY26 despite revenue growth raise concerns about earnings quality. Whilst long-term growth prospects remain intact given infrastructure tailwinds, the risk-reward at 36x trailing earnings appears unfavourable. Wait for sustained margin improvement and debt reduction before initiating positions.
For Existing Holders: Continue to hold but monitor quarterly performance closely. The improving operating metrics (highest operating margin of 10.36%, interest coverage of 2.44x) and growing FII interest provide reasons for patience. However, set strict exit criteria: any further sequential profit decline or deterioration in interest coverage would warrant reconsideration. The stock's spectacular 5-year returns of 984.81% justify giving management time to execute on margin expansion and deleveraging, but vigilance is essential.
Fair Value Estimate: ₹480-500 (5-6% downside from current levels), based on 32-34x forward earnings assuming 15% profit growth and margin stability.
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 author and publisher are not responsible for any investment decisions made based on the information provided in this article.
