Sri Lakshmi Saraswathi Textiles Q3 FY26: Mounting Losses Deepen as Textile Maker Struggles

The stock, trading at ₹28.53 on February 12, 2026, has plummeted 32.23% over the past year, significantly underperforming both the Sensex (up 9.85%) and its sector peers in Garments & Apparels (down 2.35%). With negative operating margins persisting for eight consecutive quarters and a deeply negative book value of ₹-205.79 per share, the company faces existential challenges that have prompted a "Strong Sell" rating from analysts.

Financial Performance: A Deepening Crisis

Sri Lakshmi Saraswathi Textiles' Q3 FY26 results paint a grim picture of a company in severe distress. Net sales declined 9.66% quarter-on-quarter to ₹21.14 crores, representing the lowest quarterly revenue since June 2024. On a year-on-year basis, the contraction was even more pronounced at 20.65%, reflecting fundamental demand weakness and operational inefficiencies.

The company's operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) stood at a negative ₹2.89 crores in Q3 FY26, translating to an operating margin of -13.67%—the worst performance in five quarters. This represents a significant deterioration from the -6.54% margin recorded in Q2 FY26 and compares unfavourably with the -12.99% margin in Q3 FY25. The company has now posted negative operating margins for eight consecutive quarters, underscoring deep-rooted structural problems.

Employee costs remained elevated at ₹5.06 crores in Q3 FY26, declining marginally from ₹5.43 crores in the previous quarter but still representing 23.94% of net sales. The inability to align workforce expenses with shrinking revenues reflects operational inflexibility and poor cost management.

Interest expenses remained substantial at ₹1.66 crores in Q3 FY26, up marginally from ₹1.60 crores in Q2 FY26, despite the company's relatively modest debt levels. The combination of operating losses and interest burden pushed the pre-tax loss to ₹4.88 crores, with no tax liability due to the loss-making status.

On a nine-month basis for FY26 (April-December 2025), the company has accumulated losses of ₹11.95 crores on revenues of ₹66.52 crores, compared to losses of ₹14.93 crores on revenues of ₹73.36 crores in the corresponding period of FY25. While the year-on-year comparison shows marginal improvement in loss magnitude, the absolute performance remains deeply concerning.

Operational Challenges: Structural Weakness Persists

The company's operational metrics reveal fundamental challenges across multiple dimensions. The gross profit margin in Q3 FY26 stood at -21.14%, indicating that the company is unable to cover even its direct production costs. This represents a significant deterioration from the -12.31% gross margin in Q2 FY26 and suggests either severe pricing pressure, rising raw material costs, or operational inefficiencies—likely a combination of all three.

Sri Lakshmi Saraswathi Textiles operates with 56,784 ring spindles and 336 rotors in its yarn manufacturing facility, selling primarily in Maharashtra, Gujarat, and West Bengal. The company also produces surgical face masks and generates electricity from windmills for captive consumption. However, none of these business segments appear to be generating positive returns, as evidenced by the persistent negative margins.

The balance sheet structure highlights the company's precarious financial position. As of March 2025, total current liabilities stood at ₹105.63 crores, dominated by trade payables of ₹47.27 crores and other current liabilities of ₹15.47 crores. Against this, current assets totalled just ₹21.30 crores, resulting in a severe working capital deficit. This imbalance suggests the company is heavily reliant on vendor credit and faces potential liquidity stress.

Long-term debt increased to ₹7.37 crores in FY25 from ₹2.21 crores in FY24, indicating the company has been forced to borrow to sustain operations despite mounting losses. Fixed assets have been gradually declining, from ₹15.43 crores in FY24 to ₹14.28 crores in FY25, suggesting limited capital investment and potential asset deterioration.

Industry Context: Textile Sector Headwinds

The Indian textile industry has faced significant headwinds over the past two years, with subdued global demand, rising input costs, and intense competition from neighbouring countries. Sri Lakshmi Saraswathi Textiles' performance, however, significantly lags even this challenging sectoral backdrop. While the Garments & Apparels sector index declined 2.35% over the past year, the company's stock plummeted 32.23%, underperforming its sector by 29.88 percentage points.

The company's five-year sales growth of 7.08% compares unfavourably with the broader industry, particularly considering the base effect from the pandemic-depressed FY21 levels. More concerning is the five-year EBIT growth of -6.45%, indicating the company has been destroying value consistently over the medium term.

The surgical face mask segment, which saw demand surge during the COVID-19 pandemic, has normalised significantly, eliminating what was potentially a temporary revenue cushion. The company's core yarn business faces structural challenges including fragmented market structure, low pricing power, and vulnerability to cotton price volatility.

Peer Comparison: Bottom of the Barrel

A comparison with industry peers underscores Sri Lakshmi Saraswathi Textiles' relative weakness. While the company's market capitalisation of ₹10.00 crores ranks it as the second-smallest in its peer group, the valuation metrics tell a story of severe distress.

The company's price-to-book value of -0.13x reflects the negative shareholder equity position. While several peers also exhibit negative book values, indicating widespread distress in this segment of the textile industry, Sri Lakshmi Saraswathi Textiles stands out for its persistent operational losses and lack of any turnaround signs.

Valuation Analysis: A Value Trap, Not a Bargain

At a market capitalisation of ₹10.00 crores and a share price of ₹28.53, Sri Lakshmi Saraswathi Textiles might appear superficially cheap. However, traditional valuation metrics are largely meaningless for a loss-making company with negative book value. The P/E ratio is not applicable due to losses, whilst the negative P/BV of -0.13x simply reflects the fact that the company's liabilities exceed its assets.

The enterprise value to EBITDA multiple of -4.59x and EV to EBIT of -3.94x are distorted by negative earnings figures. The EV to sales ratio of 0.49x might suggest the company is trading below its revenue base, but this metric ignores the fact that those revenues are generating substantial losses rather than profits.

The stock has declined 44.92% from its 52-week high of ₹51.80, reached in better times, and currently trades just 14.62% above its 52-week low of ₹24.89. The technical chart shows the stock trading below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating sustained bearish momentum.

Shareholding Pattern: Promoters Hold Firm Despite Losses

The shareholding pattern has remained remarkably stable over the past five quarters, with promoter holding steady at 55.09% and non-institutional investors holding the remaining 44.91%. Notably, there is zero institutional participation—no FII, mutual fund, insurance company, or other DII holdings—which is highly unusual and reflects institutional investors' complete lack of confidence in the company's prospects.

The promoter group, led by S Balakrishna (23.54%), R Thirumalai (6.78%), and R. Padmanabhan (6.72%), has maintained its stake despite the mounting losses. Positively, there is no promoter pledging, indicating the promoters are not using their shares as collateral for borrowings. However, the absence of any institutional buying or promoter stake increase suggests limited confidence in a turnaround.

Stock Performance: Severe Underperformance Across All Timeframes

Sri Lakshmi Saraswathi Textiles' stock performance has been dismal across virtually all timeframes, with particularly severe underperformance against the benchmark Sensex. Over the past year, the stock has declined 32.23% whilst the Sensex gained 9.85%, resulting in a negative alpha of 42.08 percentage points.

The stock's beta of 1.50 indicates it is 50% more volatile than the broader market, amplifying downside movements during market corrections. With a volatility of 79.90%—nearly seven times the Sensex volatility of 11.44%—the stock carries extreme risk. The risk-adjusted return of -0.40 over the past year, compared to the Sensex's +0.86, underscores the poor risk-reward profile.

Technical indicators uniformly point to bearish sentiment. The MACD shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate mildly bearish conditions. The stock trades below all major moving averages, with the 200-day moving average at ₹37.11 serving as a distant resistance level 30.09% above current prices.

Investment Thesis: Multiple Red Flags

The investment thesis for Sri Lakshmi Saraswathi Textiles is overwhelmingly negative across all key parameters. The company's proprietary Mojo Score stands at just 9 out of 100, firmly in the "Strong Sell" category. This assessment reflects the convergence of poor fundamentals, deteriorating financials, bearish technicals, and risky valuation.

The quality grade is rated "Below Average," based on the company's long-term financial underperformance. The five-year sales growth of 7.08% is modest, whilst the five-year EBIT growth of -6.45% indicates consistent value destruction. The average ROCE of 15.88% appears deceptively reasonable but is distorted by the negative capital employed in recent periods.

The financial trend is classified as "Negative," with Q3 FY26 marking yet another quarter of deteriorating performance. Key negative factors include ROCE at the lowest level, PAT declining 15.3% versus the previous four-quarter average, debtors' turnover ratio at its lowest, and net sales at the lowest quarterly level in recent history.

Outlook: What to Watch