The quarter's results underscore a company in distress. Net sales of ₹3.12 crores in Q2 FY26 registered an 11.83% sequential improvement from Q1 FY26's ₹2.79 crores, yet the year-on-year decline of 29.73% highlights a troubling erosion of top-line momentum. The operating profit before depreciation, interest, tax, and other income stood at a meagre ₹0.02 crores, translating to an operating margin of just 0.64%—a catastrophic fall from the 32.88% margin achieved in Q2 FY25. With interest costs of ₹1.17 crores and depreciation of ₹0.62 crores overwhelming the company's operational earnings, Sri Havisha's financial structure appears increasingly unsustainable.
Following the results announcement, the stock traded at ₹2.06 on November 13, 2025, representing an 8.99% single-day gain. However, this uptick offers little solace for investors, as the share price remains 23.13% lower over the past year and 18.90% down year-to-date, significantly underperforming the Sensex's 9.25% annual return. The stock's technical indicators paint a bearish picture, with the price trading below all key moving averages and a high beta of 1.50 signalling elevated volatility.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Net Profit (₹ Cr) | PAT Margin (%) |
|---|---|---|---|---|---|
| Sep'25 | 3.12 | +11.83% | -29.73% | -1.51 | -48.40% |
| Jun'25 | 2.79 | -18.42% | +3.72% | -1.78 | -63.80% |
| Mar'25 | 3.42 | -15.14% | +2.09% | -1.90 | -55.56% |
| Dec'24 | 4.03 | -9.23% | — | -0.77 | -19.11% |
| Sep'24 | 4.44 | +65.06% | — | 0.07 | 1.58% |
| Jun'24 | 2.69 | -19.70% | — | -1.68 | -62.45% |
| Mar'24 | 3.35 | — | — | -2.39 | -71.34% |
Financial Performance: A Collapse in Profitability
The financial performance for Q2 FY26 reveals a company struggling to maintain even basic operational viability. Net sales of ₹3.12 crores, whilst showing an 11.83% sequential improvement from Q1 FY26's ₹2.79 crores, remain substantially below the ₹4.44 crores achieved in Q2 FY25—a 29.73% year-on-year decline. This revenue contraction has occurred despite a five-year sales compound annual growth rate (CAGR) of 73.41%, suggesting that recent operational challenges have overwhelmed historical growth trajectories.
Operating margins have deteriorated catastrophically. The operating profit before depreciation, interest, tax, and other income stood at just ₹0.02 crores in Q2 FY26, yielding an operating margin (excluding other income) of 0.64%. This represents a precipitous fall from the 32.88% margin recorded in Q2 FY25 and marks the company's weakest operational performance in recent quarters. Employee costs of ₹1.49 crores consumed 47.76% of revenues, indicating a cost structure misaligned with the company's revenue-generating capacity.
The profit before tax stood at a loss of ₹1.51 crores in Q2 FY26, weighed down by interest expenses of ₹1.17 crores and depreciation of ₹0.62 crores. Other income of ₹0.26 crores provided marginal support, but proved insufficient to offset the operational and financial burdens. The net loss of ₹1.51 crores translated to a PAT margin of -48.40%, underscoring the depth of the company's profitability crisis. Notably, the company paid no taxes in Q2 FY26, consistent with its loss-making status.
Operational Distress: Weak Returns and High Leverage
Sri Havisha's operational metrics reveal fundamental weaknesses that extend beyond cyclical challenges. The company's average return on equity (ROE) stands at a meagre 1.45%, whilst the latest quarterly ROE has plunged to -17.16%, reflecting the erosion of shareholder value. The average return on capital employed (ROCE) of -6.41% indicates that the company is destroying value rather than creating it, with the latest quarterly ROCE at -2.11%. These figures underscore a business model that has failed to generate adequate returns on invested capital.
The company's leverage profile compounds these operational challenges. With an average debt-to-EBITDA ratio of 18.58 and an average net debt-to-equity ratio of 1.38, Sri Havisha operates under a heavy debt burden that constrains financial flexibility. The average EBIT-to-interest coverage ratio of -0.47 indicates that earnings before interest and tax are insufficient to cover interest obligations—a red flag for financial sustainability. Interest expenses of ₹1.17 crores in Q2 FY26 consumed the entirety of operational earnings, leaving no buffer for debt servicing or growth investments.
The company's capital efficiency metrics further highlight structural inefficiencies. The average sales-to-capital-employed ratio of 0.21 suggests that Sri Havisha generates just ₹0.21 in sales for every rupee of capital employed—a strikingly low figure indicative of underutilised assets or capital misallocation. This inefficiency, combined with weak profitability and high leverage, paints a picture of a company struggling to optimise its operational and financial resources.
Critical Red Flags
Unsustainable Capital Structure: With EBIT-to-interest coverage at -0.47 and debt-to-EBITDA at 18.58, the company's ability to service debt from operational earnings is severely compromised. The latest quarterly ROE of -17.16% and ROCE of -2.11% signal acute value destruction for shareholders and capital providers alike.
Industry Context: Hospitality Sector Headwinds
The Hotels & Resorts sector has faced mixed conditions over the past year, with the sector index declining 13.19%. Sri Havisha's 23.13% annual decline significantly underperforms this benchmark, suggesting company-specific challenges beyond broader industry trends. Whilst larger hospitality players have benefited from post-pandemic travel recovery, micro-cap operators like Sri Havisha appear to have been left behind, struggling with operational scale, brand recognition, and financial resources necessary to compete effectively.
The company's competitive positioning within the hospitality sector is weak. With a market capitalisation of just ₹62.49 crores, Sri Havisha ranks as the fifth-largest among its immediate peer group—a position that limits access to capital, economies of scale, and negotiating power with suppliers and distribution channels. The absence of institutional investor interest, with FII and mutual fund holdings at 0.00% and total institutional holdings at just 0.39%, reflects a lack of confidence in the company's prospects among professional investors.
Peer Comparison: Lagging on Quality and Returns
A comparison with sector peers highlights Sri Havisha's relative underperformance across key financial and valuation metrics. The company's average ROE of 1.45% lags behind peers such as Jindal Hotels (5.47%), Royale Manor Hotels (4.32%), and even Blu.Coast Hospitality (0.61%). Whilst Sri Havisha's P/E ratio is not applicable due to its loss-making status, its price-to-book value of 2.25 appears elevated relative to Royale Manor's 1.33, particularly given the company's weak return profile and negative earnings.
| Company | P/E (TTM) | Price to Book | ROE (%) | Debt to Equity |
|---|---|---|---|---|
| Sri Havisha | NA (Loss Making) | 2.25 | 1.45% | 1.38 |
| Gujarat Hotels | 14.30 | — | — | — |
| Royale Manor | 28.27 | 1.33 | 4.32% | 0.03 |
| Blu.Coast Hotel. | NA (Loss Making) | -4.05 | 0.61% | -0.73 |
| Jindal Hotels | 22.51 | 2.46 | 5.47% | 2.19 |
The peer comparison reveals that Sri Havisha's valuation multiple of 2.25 times book value lacks fundamental support. Peers with superior ROE profiles and lower leverage command similar or lower P/BV multiples, suggesting that Sri Havisha's current valuation may not adequately reflect its operational and financial challenges. The company's debt-to-equity ratio of 1.38 is higher than most peers, further constraining its financial flexibility and growth prospects.
Valuation Analysis: Risky Profile with Limited Upside
Sri Havisha's valuation assessment is classified as "RISKY" by proprietary scoring models, reflecting the company's loss-making status, weak operational metrics, and high leverage. The P/E ratio is not applicable given the company's negative earnings, whilst the price-to-book value of 2.25 appears elevated for a business generating negative returns on equity. The EV-to-EBITDA multiple of 94.97 is exceptionally high, driven by minimal EBITDA generation relative to the company's enterprise value, which includes substantial debt.
The stock's 52-week range of ₹1.68 to ₹3.00 illustrates significant volatility, with the current price of ₹2.06 sitting 31.33% below the 52-week high and 22.62% above the 52-week low. This positioning suggests the stock has already experienced considerable downside, yet the absence of positive earnings momentum or operational improvement provides little basis for a near-term rebound. The valuation grade has deteriorated from "Very Expensive" to "Risky" over the past year, reflecting ongoing concerns about the company's financial sustainability.
Valuation Dashboard
P/E Ratio (TTM): NA (Loss Making) | Price to Book: 2.25x | EV/EBITDA: 94.97x | Dividend Yield: NA | Mojo Score: 12/100 (Strong Sell)
Shareholding: Stable Promoter Base, Absent Institutional Interest
The shareholding pattern for Q2 FY26 reveals a stable promoter holding of 34.03%, marginally down from 34.04% in Q1 FY26. The modest 0.01% sequential decline suggests no significant change in promoter commitment, though the relatively low promoter stake of just over one-third raises questions about alignment of interests. Positively, there is no promoter pledging, indicating that promoters have not leveraged their holdings to raise funds—a common red flag in distressed companies.
| Quarter | Promoter (%) | FII (%) | Mutual Funds (%) | Other DII (%) | Non-Institutional (%) |
|---|---|---|---|---|---|
| Sep'25 | 34.03% | 0.00% | 0.00% | 0.39% | 65.58% |
| Jun'25 | 34.04% | 0.00% | 0.00% | 0.39% | 65.57% |
| Mar'25 | 34.10% | 0.00% | 0.00% | 0.39% | 65.51% |
| Dec'24 | 34.10% | 0.00% | 0.00% | 0.39% | 65.51% |
| Sep'24 | 34.10% | 0.00% | 0.00% | 0.39% | 65.51% |
The complete absence of foreign institutional investor (FII) and mutual fund holdings is a glaring concern. With total institutional holdings at just 0.39% (comprising only "Other DII" category), the stock lacks the credibility and liquidity that institutional participation typically provides. The dominance of non-institutional shareholders at 65.58% suggests a retail-heavy shareholder base, which can contribute to higher volatility and lower price discovery efficiency. The absence of institutional interest reflects the company's weak fundamentals, limited disclosure quality, and lack of growth visibility.
Stock Performance: Persistent Underperformance and High Volatility
Sri Havisha's stock performance over multiple timeframes paints a picture of persistent underperformance and elevated risk. Over the past year, the stock has declined 23.13%, significantly underperforming the Sensex's 9.25% gain—resulting in a negative alpha of -32.38%. Year-to-date, the stock is down 18.90%, compared to the Sensex's 8.62% advance. Shorter-term performance has been mixed, with a 5.64% gain over the past week and an 8.99% single-day surge on November 13, 2025, though these upticks appear to be technical bounces rather than fundamental reversals.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | +8.99% | +0.49% | +8.50% |
| 1 Week | +5.64% | +1.88% | +3.76% |
| 1 Month | -2.83% | +3.10% | -5.93% |
| 3 Months | +3.52% | +5.38% | -1.86% |
| 6 Months | +0.98% | +4.59% | -3.61% |
| YTD | -18.90% | +8.62% | -27.52% |
| 1 Year | -23.13% | +9.25% | -32.38% |
| 2 Years | +15.08% | +30.71% | -15.63% |
| 3 Years | -5.07% | +37.35% | -42.42% |
The stock's risk-adjusted return profile is deeply concerning. With a one-year absolute return of -23.13% and a volatility of 54.59%, the risk-adjusted return stands at -0.42, indicating that investors are being penalised for taking on elevated risk. The Sharpe ratio is negative, confirming that the stock has failed to compensate investors for the volatility they have endured. The stock's beta of 1.50 classifies it as a high-beta stock, meaning it is 50% more volatile than the broader market—a characteristic that amplifies downside risk during market corrections.
Technical indicators reinforce the bearish outlook. The stock is trading below all key moving averages—5-day (₹1.98), 20-day (₹2.07), 50-day (₹2.03), 100-day (₹2.11), and 200-day (₹2.13)—signalling sustained downward momentum. The overall technical trend is classified as "BEARISH," with weekly MACD showing mildly bullish signals but monthly indicators remaining bearish. Bollinger Bands indicate bearish positioning on both weekly and monthly timeframes, whilst the Dow Theory and On-Balance Volume (OBV) suggest mildly bearish to no-trend conditions.
Investment Thesis: Weak Fundamentals, Bearish Technicals
Sri Havisha's investment thesis is undermined by a confluence of negative factors across valuation, quality, financial trends, and technical indicators. The company's proprietary Mojo Score stands at just 12 out of 100, placing it firmly in the "STRONG SELL" category. This score reflects weak long-term fundamental strength, with a five-year CAGR growth in operating profits of -31.57%, flat financial performance in the most recent quarter, and bearish technical trends.
The quality assessment classifies Sri Havisha as a "BELOW AVERAGE" quality company, based on long-term financial performance. Whilst the company has demonstrated healthy long-term sales growth (73.41% CAGR over five years) and maintains zero promoter pledging, these positives are overwhelmed by weak profitability metrics, high leverage, and negative cash generation. The average EBIT-to-interest ratio of -0.47 indicates that the company cannot cover its interest obligations from operational earnings, whilst the average debt-to-EBITDA ratio of 18.58 signals a precarious debt burden.
Mojo Parameters Dashboard
Valuation: Risky | Quality Grade: Below Average | Financial Trend: Flat | Technical Trend: Bearish | Overall Score: 12/100 (Strong Sell)
Key Strengths & Risk Factors
Key Strengths ✓
- Long-term Revenue Growth: Five-year sales CAGR of 73.41% demonstrates historical ability to grow top line, albeit from a low base.
- No Promoter Pledging: Zero pledged shares indicate promoters have not leveraged holdings, reducing risk of forced selling.
- Stable Promoter Holding: Promoter stake has remained relatively stable around 34%, suggesting no distress selling at promoter level.
- Recent Sequential Improvement: Q2 FY26 revenue improved 11.83% sequentially, and net loss narrowed from ₹1.78 crores to ₹1.51 crores.
Key Concerns ⚠
- Persistent Losses: Net loss of ₹1.51 crores in Q2 FY26, with negative PAT margin of -48.40%, reflecting deep unprofitability.
- Collapsing Margins: Operating margin (excl OI) fell to 0.64% from 32.88% in Q2 FY25, indicating severe operational deterioration.
- High Leverage: Debt-to-EBITDA of 18.58 and net debt-to-equity of 1.38 constrain financial flexibility and raise solvency concerns.
- Negative EBIT-to-Interest: EBIT-to-interest ratio of -0.47 means operational earnings cannot cover interest obligations.
- Weak Returns: Latest ROE of -17.16% and ROCE of -2.11% signal acute value destruction for shareholders.
- Zero Institutional Interest: FII and mutual fund holdings at 0.00% reflect lack of professional investor confidence.
- Bearish Technicals: Stock trading below all moving averages with overall bearish trend classification.
Outlook: What Lies Ahead
Positive Catalysts
- Sustained sequential revenue improvement beyond one quarter
- Material reduction in interest burden through debt restructuring
- Operating margin recovery to double-digit levels
- Return to profitability with positive PAT in consecutive quarters
Red Flags to Monitor
- Further year-on-year revenue declines in upcoming quarters
- Operating margins remaining below 5% for two more quarters
- Inability to generate positive EBITDA consistently
- Any increase in promoter pledging or decline in promoter holding
- Breach of debt covenants or credit rating downgrades
"With operational margins near zero, mounting losses, and a debt burden that dwarfs earnings capacity, Sri Havisha faces an uphill battle to restore financial health—a turnaround appears remote absent significant operational restructuring or capital infusion."
The path forward for Sri Havisha remains fraught with challenges. The company must demonstrate sustained revenue growth, material margin improvement, and a credible plan to address its debt burden. Without these developments, the current loss-making trajectory is likely to persist, further eroding shareholder value and limiting access to capital. The absence of institutional investor interest and weak technical indicators suggest that market confidence will remain subdued until tangible operational improvements materialise.
The Verdict: Avoid or Exit
Score: 12/100
For Fresh Investors: Avoid initiating positions. The company's persistent losses, collapsing margins, high leverage, and bearish technical setup present an unfavourable risk-reward profile with limited visibility on turnaround catalysts.
For Existing Holders: Consider exiting positions on any technical bounce. The fundamental deterioration, weak return metrics, and absence of institutional support suggest further downside risk. The stock's high volatility (beta 1.50) amplifies potential losses during market corrections.
Fair Value Estimate: ₹1.50 (27% downside from current price of ₹2.06), reflecting loss-making status, weak operational metrics, and elevated leverage. Any valuation premium is unjustified given negative earnings and poor return on equity.
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.
