The Coimbatore-based textile manufacturer, which operates spinning mills with a combined installed capacity of 94,000 ring spindles and 1,440 rotors across three locations in Tamil Nadu and Andhra Pradesh, is grappling with severe operational headwinds. Net sales for Q3 FY26 plunged to ₹14.08 crores, down sharply from ₹20.35 crores in Q2 FY26, representing a 30.80% quarter-on-quarter contraction. This marks the lowest quarterly revenue figure in the company's recent operational history and underscores the severe demand weakness plaguing the textile spinning industry.
The company's nine-month performance for FY26 (April-December 2025) paints an equally concerning picture, with accumulated losses of ₹2.86 crores compared to the same period last year. The stock has significantly underperformed both the broader market and its sectoral peers, declining 16.18% over the past year against the Sensex's 8.73% gain, resulting in a negative alpha of 24.91 percentage points.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin (%) |
|---|---|---|---|---|---|
| Dec'21 | 11.82 | -2.39% | -0.85 | -132.20% | -7.19% |
| Sep'21 | 12.11 | +60.61% | 2.64 | -876.47% | 21.80% |
| Jun'21 | 7.54 | -25.64% | -0.34 | -168.00% | -4.51% |
| Mar'21 | 10.14 | +63.02% | 0.50 | -70.06% | 4.93% |
| Dec'20 | 6.22 | +39.78% | 1.67 | +659.09% | 26.85% |
Financial Performance: Revenue Collapse Triggers Deep Losses
The third quarter of FY26 witnessed a catastrophic deterioration in Sri Ramakrishna Mills' financial performance. Net sales of ₹14.08 crores represented not only a 30.80% sequential decline but also marked the company's weakest quarterly revenue generation in recent memory. The sharp revenue contraction, coupled with relatively fixed operating costs, resulted in severe margin compression and pushed the company into loss-making territory for the second consecutive quarter.
Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) turned deeply negative, reflecting the company's inability to cover even basic operational expenses at current revenue levels. The operating margin excluding other income deteriorated sharply, highlighting the fundamental weakness in the company's core textile spinning operations. Employee costs, whilst remaining relatively stable, consumed a disproportionately large share of revenues given the sharp sales decline, further pressuring profitability.
The company's nine-month accumulated loss of ₹2.86 crores for FY26 represents a 37.87% deterioration compared to the corresponding period, signalling that the operational challenges are structural rather than transitory. Interest costs continue to burden the income statement, with the company's high debt levels providing limited flexibility to navigate the current downturn. The company's earnings per share (EPS) for Q3 FY26 stood at ₹-1.53, the lowest in recent quarters, reflecting the severity of the loss-making situation.
Operational Challenges: Capacity Underutilisation and Weak Demand
The company's operational metrics reveal a textile spinning business under severe stress. With 94,000 ring spindles and 1,440 rotors spread across three manufacturing locations in Coimbatore, Nagari, and Sathyamangalam, Sri Ramakrishna Mills appears to be operating well below optimal capacity utilisation levels. The 30.80% quarter-on-quarter revenue decline suggests significant capacity idling, which in a capital-intensive textile spinning business translates directly into margin erosion and fixed cost absorption challenges.
The company's return on equity (ROE) has deteriorated sharply to -12.35% in the latest period, down from an average of 14.81% historically. This negative ROE indicates that the company is destroying shareholder value at current operational levels. The return on capital employed (ROCE) at 11.60% in the latest period, whilst positive, remains well below the cost of capital and reflects the company's struggle to generate adequate returns from its asset base. The company's average ROCE of 14.24% over the longer term, whilst modest, highlights that the current operational performance represents a significant deviation from historical norms.
Critical Operational Red Flags
Severe Capacity Underutilisation: The 30.80% revenue decline in Q3 FY26 suggests the company is operating its spinning capacity at significantly sub-optimal levels, resulting in poor fixed cost absorption and margin destruction.
Negative ROE: At -12.35%, the company is actively destroying shareholder value, with returns turning negative for the first time in recent quarters. This reflects both operational losses and deteriorating capital efficiency.
High Leverage Burden: With a debt-to-equity ratio averaging 1.75 times and net debt to equity at similar levels, the company's high financial leverage provides limited flexibility to weather the current downturn and amplifies losses during weak operational periods.
Balance Sheet Stress: High Debt Amplifies Operational Weakness
Sri Ramakrishna Mills' balance sheet reveals a highly leveraged capital structure that significantly constrains the company's ability to navigate the current operational downturn. As of March 2021 (the latest available annual data), the company carried long-term debt of ₹8.48 crores against shareholder funds of just ₹9.46 crores, resulting in a debt-to-equity ratio of approximately 0.90 times. However, when total liabilities are considered, the company's leverage position appears far more precarious, with current liabilities of ₹33.95 crores creating a substantial near-term repayment burden.
The company's debt-to-EBITDA ratio averages 6.54 times, indicating that the company would require more than six years of current EBITDA generation to repay its debt obligations—an uncomfortably high level that signals refinancing risk and limited financial flexibility. The EBIT-to-interest coverage ratio of just 1.70 times on average indicates that the company barely generates sufficient operating profit to cover its interest obligations, leaving no cushion for principal repayments or operational setbacks.
With fixed assets of ₹4.72 crores and current assets of ₹50.18 crores as of March 2021, the company's asset base is heavily weighted towards working capital, which in the textile spinning business typically comprises raw material inventory, work-in-progress, and receivables. The sharp revenue decline in recent quarters likely indicates stress in working capital management, with potential inventory build-up and slower receivables collection adding to liquidity pressures.
Industry Context: Textile Spinning Sector Under Pressure
The Indian textile spinning industry has faced significant headwinds over the past year, with demand weakness from downstream garment manufacturers, volatile cotton prices, and intense competition from cheaper imports creating a challenging operating environment. Sri Ramakrishna Mills' sharp revenue decline mirrors broader sectoral trends, with many small and mid-sized spinning mills struggling with capacity underutilisation and margin compression.
The company's long-term sales growth of 29.59% over five years, whilst appearing healthy in isolation, masks the severe cyclicality inherent in the textile spinning business. The company's EBIT growth over the same period shows a concerning -168.10% contraction, indicating that revenue growth has not translated into sustainable profitability improvement. This disconnect between top-line growth and bottom-line performance reflects the low-margin, commodity-like nature of textile spinning operations, where pricing power remains limited and operational efficiency is paramount.
The company's position as a micro-cap stock with a market capitalisation of just ₹31.00 crores limits its access to capital markets for refinancing or expansion, whilst also constraining institutional investor interest. With zero institutional holdings from foreign institutional investors (FIIs), mutual funds, or insurance companies, the stock lacks the support base that could provide stability during periods of operational weakness.
Sectoral Challenges Amplifying Company-Specific Weakness
The textile spinning industry is experiencing a perfect storm of challenges: weak demand from garment exporters facing global slowdown concerns, volatile raw material costs creating margin unpredictability, and intense competition from larger integrated players with better economies of scale. Sri Ramakrishna Mills, as a small standalone spinner, lacks the operational flexibility and financial resources to weather this downturn effectively.
| Company | Market Cap (₹ Cr) | P/E Ratio | P/BV Ratio | ROE (%) | Debt/Equity |
|---|---|---|---|---|---|
| Sri Ramakrishna Mills | 31.00 | NA (Loss Making) | 1.51 | 14.81 | 1.75 |
| STL Global | — | 341.51 | 1.29 | 4.76 | 0.56 |
| Anjani Synth. | — | 9.65 | 0.41 | 4.59 | 0.37 |
| K K Silk Mills | — | 7.14 | 0.84 | 0.00 | 0.00 |
| Marc Loire | — | 7.10 | 1.02 | 0.00 | -0.11 |
| Sparkle GoldRock | — | 23.06 | 14.35 | 62.92 | 0.09 |
Compared to garments and apparels sector peers, Sri Ramakrishna Mills trades at a price-to-book value of 1.51 times, which appears relatively reasonable given the company's current loss-making status. However, the company's inability to generate earnings renders traditional valuation metrics like P/E ratio meaningless. The company's ROE of 14.81% (average) compares favourably to some peers but is significantly below industry leaders like Sparkle GoldRock (62.92%), and the current negative ROE of -12.35% places it amongst the weakest performers in the peer group.
Valuation Analysis: Risky Classification Reflects Fundamental Weakness
Sri Ramakrishna Mills' current valuation grade of "RISKY" accurately reflects the company's precarious financial position and uncertain earnings outlook. With the stock trading at ₹43.50, down 32.97% from its 52-week high of ₹64.90, the market has already priced in significant distress. However, the absence of earnings makes traditional valuation metrics like P/E ratio inapplicable, whilst the price-to-book value of 1.51 times suggests the market is ascribing limited value to the company's asset base beyond liquidation value.
The company's enterprise value (EV) metrics paint a concerning picture. An EV/EBITDA multiple of 46.06 times appears extraordinarily high, but this largely reflects the company's minimal EBITDA generation at current operational levels rather than any premium valuation. The negative EV/EBIT ratio of -72.32 times underscores the company's operating losses, whilst the EV/Sales ratio of 0.89 times suggests the market values the entire enterprise at less than one year's revenue—a clear indication of severe distress.
The stock's valuation grade history shows a dramatic deterioration, having changed from "Very Attractive" to "Risky" in August 2025. This rapid downgrade reflects the sharp deterioration in the company's operational performance and the market's growing concerns about the sustainability of the business model. With no dividend yield and a zero payout ratio, the company offers no income support to shareholders, making the investment case entirely dependent on a highly uncertain operational turnaround.
Shareholding Pattern: Stable Promoter Base, Zero Institutional Interest
Sri Ramakrishna Mills' shareholding pattern reveals a highly concentrated ownership structure with promoter holding steady at 64.01% across the past five quarters. The promoter group, comprising the Lakshminarayanaswamy family and related entities including Suhasini Spinners Ltd., Swathy Processors Ltd., and Sri Ramakrishna Yarn Carriers Ltd., has maintained its stake without any increase or decrease, suggesting neither distress selling nor additional capital infusion.
| Quarter | Promoter (%) | FII (%) | MF (%) | Insurance (%) | Non-Institutional (%) |
|---|---|---|---|---|---|
| Dec'25 | 64.01 | 0.00 | 0.00 | 0.00 | 35.99 |
| Sep'25 | 64.01 | 0.00 | 0.00 | 0.00 | 35.99 |
| Jun'25 | 64.01 | 0.00 | 0.00 | 0.00 | 35.99 |
| Mar'25 | 64.01 | 0.00 | 0.00 | 0.00 | 35.99 |
| Dec'24 | 64.01 | 0.00 | 0.00 | 0.00 | 35.99 |
The complete absence of institutional investors—with zero holdings from FIIs, mutual funds, insurance companies, and other domestic institutional investors (DIIs)—is a significant red flag. This lack of institutional participation indicates that professional investors have either exited their positions or never established meaningful stakes in the company, likely due to concerns about liquidity, governance, operational performance, or growth prospects. The 35.99% non-institutional holding comprises retail investors and potentially high-net-worth individuals, but the lack of institutional support limits the stock's liquidity and price stability.
Positively, the company reports zero promoter pledging, indicating that the promoter group has not leveraged their shareholding to raise debt. This suggests that whilst operational performance is weak, there is no immediate financial distress at the promoter level that would force distress selling. However, the stable shareholding pattern also indicates that promoters are not infusing additional capital to support the business during this challenging period.
Stock Performance: Severe Underperformance Across All Timeframes
Sri Ramakrishna Mills' stock performance over the past year reflects the market's loss of confidence in the company's ability to navigate current sectoral challenges. The stock has declined 16.18% over the past 12 months, significantly underperforming the Sensex's 8.73% gain and resulting in a negative alpha of 24.91 percentage points. The stock's 7.27% single-day decline following the Q3 FY26 results announcement underscores the market's disappointment with the company's deteriorating operational metrics.
| Period | Stock Return (%) | Sensex Return (%) | Alpha (%) |
|---|---|---|---|
| 1 Day | -7.27 | -1.06 | -6.21 |
| 1 Week | +0.09 | -0.95 | +1.04 |
| 1 Month | +2.06 | -1.00 | +3.06 |
| 3 Months | -12.98 | -2.00 | -10.98 |
| 6 Months | -14.97 | +2.79 | -17.76 |
| YTD | +2.02 | -2.86 | +4.88 |
| 1 Year | -16.18 | +8.73 | -24.91 |
| 2 Years | -3.93 | +15.70 | -19.63 |
| 3 Years | +179.74 | +36.99 | +142.75 |
The stock's three-month return of -12.98% and six-month return of -14.97% indicate accelerating downward momentum, with the underperformance versus the Sensex widening to 17.76 percentage points over the six-month period. Interestingly, the stock has shown modest positive returns over one week (+0.09%) and one month (+2.06%), suggesting some short-term technical bounce, but this appears to be a temporary relief rally rather than a sustainable trend reversal.
On a longer-term basis, the stock's three-year return of 179.74% significantly outperformed the Sensex's 36.99% gain, delivering a positive alpha of 142.75 percentage points. However, this strong historical performance reflects the company's recovery from the COVID-19 pandemic lows and does not reflect current operational realities. The five-year return of 429.84% similarly captures the company's emergence from an earlier distressed period, but recent quarters suggest the company is reverting to its cyclical weak phase.
From a technical perspective, the stock is currently in a "MILDLY BEARISH" trend, having changed from bearish on February 6, 2026. The stock trades below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating persistent selling pressure and lack of support levels. The immediate support lies at ₹36.00 (the 52-week low), whilst resistance is seen at ₹42.59 (20-day moving average area). With a high beta of 1.50, the stock exhibits significantly higher volatility than the broader market, amplifying both gains and losses.
Investment Thesis: High Risk, Limited Reward
Sri Ramakrishna Mills presents a highly challenged investment proposition characterised by deteriorating fundamentals, weak operational performance, and limited near-term catalysts for recovery. The company's proprietary Mojo Score of just 9 out of 100 and "STRONG SELL" rating accurately reflect the severe risks facing investors at current levels.
Key Strengths & Risk Factors
✓ Key Strengths
- Long-term Growth Track Record: Five-year sales CAGR of 29.59% demonstrates the company's ability to grow during favourable industry conditions.
- No Promoter Pledging: Zero promoter pledging indicates no immediate distress at the promoter level and reduces risk of forced stake sales.
- Established Manufacturing Base: Three operational spinning mills with 94,000 ring spindles and 1,440 rotors provide scale and diversification across locations.
- Stable Promoter Holding: Consistent 64.01% promoter stake over recent quarters indicates commitment to the business despite operational challenges.
- Historical Recovery Capability: Three-year stock return of 179.74% demonstrates the company's ability to recover from cyclical downturns when conditions improve.
⚠ Key Concerns
- Consecutive Quarterly Losses: Second straight quarter of losses with Q3 FY26 net loss of ₹1.09 crores signals severe operational distress.
- Sharp Revenue Contraction: 30.80% QoQ revenue decline to ₹14.08 crores indicates severe demand weakness and capacity underutilisation.
- Negative ROE: Latest ROE of -12.35% indicates active destruction of shareholder value with no immediate path to profitability.
- High Financial Leverage: Debt-to-equity of 1.75 times and debt-to-EBITDA of 6.54 times limit financial flexibility during downturns.
- Zero Institutional Support: Complete absence of FII, mutual fund, and insurance holdings signals lack of professional investor confidence.
- Weak Interest Coverage: EBIT-to-interest ratio of just 1.70 times provides minimal cushion for operational setbacks.
- Bearish Technical Trend: Stock trading below all moving averages with high beta of 1.50 amplifying downside volatility.
Outlook: What to Watch
Positive Catalysts
- Revenue Stabilisation: Any signs of quarterly revenue stabilisation or sequential growth would indicate demand recovery.
- Return to Profitability: Achieving positive operating margins and net profit in upcoming quarters.
- Debt Reduction: Successful deleveraging through asset sales or operational cash flow improvement.
- Capacity Utilisation Improvement: Increase in production volumes indicating better demand conditions.
- Sectoral Recovery: Broader textile spinning industry recovery driven by improved garment export demand.
Red Flags
- Further Revenue Decline: Continued sequential revenue contraction in Q4 FY26 would signal deepening crisis.
- Widening Losses: Increasing quarterly losses indicating inability to control costs or improve realisation.
- Working Capital Stress: Signs of inventory build-up or receivables deterioration affecting liquidity.
- Debt Servicing Issues: Any delays in interest or principal payments signalling financial distress.
- Promoter Stake Reduction: Any decrease in promoter holding would signal loss of confidence in recovery prospects.
The Verdict: Exit Recommended
Score: 9/100
For Fresh Investors: Avoid initiation entirely. The company faces severe operational challenges with consecutive quarterly losses, sharply declining revenues, negative ROE, and high financial leverage. The absence of institutional investors and bearish technical trend further underscore the high-risk profile. No entry point appears attractive given the lack of visibility on operational turnaround and potential for further deterioration.
For Existing Holders: Consider exiting positions at current levels despite recent losses. The company's deteriorating financial trend, negative quality assessment, and risky valuation grade suggest limited probability of near-term recovery. The textile spinning sector faces structural headwinds, and the company's small scale and high leverage position it poorly to weather the downturn. Any relief rallies should be used as exit opportunities.
Fair Value Estimate: Given current loss-making status and negative operational trends, traditional valuation approaches are not applicable. The stock's price-to-book value of 1.51 times suggests the market is already pricing in significant distress. Downside risk to ₹36.00 (52-week low) remains material if operational performance continues to deteriorate.
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.
