Despite modest revenue growth, the company's profitability metrics collapsed during the quarter, with operating profit before depreciation, interest, and tax (excluding other income) plunging to a loss of ₹1.17 crores compared to a profit of ₹0.71 crores in Q2 FY25. The operating margin contracted dramatically to negative 38.74% from positive 27.52% a year earlier, reflecting fundamental challenges in cost management and operational efficiency.
The stock, trading at ₹53.20 as of November 4, 2025, remains 42.39% below its 52-week high of ₹92.35, though it has recovered 32.47% from its 52-week low of ₹40.16. The company's proprietary Mojo Score stands at a dismal 12 out of 100, firmly in "Strong Sell" territory, reflecting weak fundamentals across valuation, quality, and financial trend parameters.
Financial Performance: Revenue Growth Masks Profitability Crisis
Net sales for Q2 FY26 reached ₹3.02 crores, representing a 17.05% increase year-on-year from ₹2.58 crores in Q2 FY25. On a sequential basis, revenue improved 6.34% from ₹2.84 crores in Q1 FY26. However, this top-line expansion failed to translate into bottom-line improvement, as the company grappled with escalating costs and operational inefficiencies.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Net Profit (₹ Cr) | Operating Margin |
|---|---|---|---|---|---|
| Jun'25 (Q2 FY26) | 3.02 | +6.34% | +17.05% | -1.99 | -38.74% |
| Mar'25 (Q1 FY26) | 2.84 | -43.43% | -14.71% | -0.03 | -47.54% |
| Dec'24 (Q4 FY25) | 5.02 | +49.40% | +109.17% | 1.78 | 41.04% |
| Sep'24 (Q3 FY25) | 3.36 | +30.23% | — | 24.18 | 17.26% |
| Jun'24 (Q2 FY25) | 2.58 | -22.52% | — | 0.24 | 27.52% |
| Mar'24 (Q1 FY25) | 3.33 | +38.75% | — | 3.81 | -191.89% |
The quarterly performance reveals extreme volatility, with the company oscillating between substantial profits and significant losses. The exceptional ₹24.18 crores profit in Q3 FY25 (September 2024 quarter) appears to be an anomaly, potentially driven by one-time gains, as subsequent quarters have reverted to loss-making territory.
Employee costs rose to ₹0.71 crores in Q2 FY26 from ₹0.54 crores in Q2 FY25, representing a 31.48% year-on-year increase that outpaced revenue growth. Interest expenses climbed to ₹0.23 crores from ₹0.15 crores, whilst depreciation surged to ₹0.96 crores from ₹0.65 crores, reflecting the capital-intensive nature of the crane rental business.
Operational Challenges: Structural Weakness in Core Business
The company's return on equity (ROE) stands at a negligible 0.0%, whilst return on capital employed (ROCE) is negative at -4.03%, highlighting the inability to generate adequate returns on invested capital. These metrics underscore fundamental operational inefficiencies that have persisted across multiple quarters.
Starlog's five-year sales growth trajectory paints a concerning picture, with revenue declining at a compound annual rate of 47.15%. The company's sales plummeted from ₹191.00 crores in FY20 to just ₹12.00 crores in FY24, representing a 93.72% collapse over the period. This dramatic contraction reflects both industry headwinds and company-specific challenges in maintaining market share and operational scale.
Critical Concern: Chronic Profitability Issues
The company has reported operating losses in four of the last six quarters, with operating margins turning negative in Q2 FY26 at -38.74%. The five-year EBIT growth rate of -241.24% reflects sustained deterioration in operational performance. With average EBIT to interest coverage at -1.63x, the company struggles to generate sufficient operating profits to cover even its modest interest obligations.
On a positive note, the balance sheet reveals minimal debt burden, with long-term debt completely eliminated as of March 2025. The company maintains a net cash position, with average net debt to equity at -0.04, providing some financial flexibility despite operational challenges. Shareholder funds improved to ₹60.63 crores in FY25 from ₹34.47 crores in FY24, bolstered by reserves growing to ₹48.66 crores.
Industry Context: Transport Infrastructure Under Pressure
The transport infrastructure sector has faced headwinds in recent periods, with the broader industry index declining 22.33% over the past year. However, Starlog has significantly outperformed this benchmark, delivering a 16.69% return over the same period, suggesting some investor confidence despite operational challenges.
The crane rental and infrastructure logistics business operates in a highly competitive, capital-intensive environment characterised by cyclical demand patterns tied to construction and infrastructure activity. With equipment capacity up to 600 metric tonnes, Starlog competes in a market dominated by larger, better-capitalised players with more diversified service offerings.
Competitive Positioning
Starlog's micro-cap status (₹78.00 crores market capitalisation) places it at a significant disadvantage relative to larger transport infrastructure peers. The company's inability to scale operations efficiently, as evidenced by negative operating margins and declining revenues, suggests fundamental challenges in competing for contracts and maintaining pricing power in a commoditised market.
Peer Comparison: Lagging on All Key Metrics
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Market Cap |
|---|---|---|---|---|---|
| Starlog Enterprises | NA (Loss Making) | 1.31x | 0.0% | -0.04x | ₹78 Cr |
| Shreeji Shipping | 36.75x | 17.42x | 47.39% | 0.56x | — |
| BF Utilities | 18.21x | 20.50x | 0.0% | 6.44x | — |
| Allcargo Terminals | 22.60x | 3.13x | 16.30% | 1.71x | — |
| Dreamfolks Services | 9.77x | 2.26x | 32.41% | -0.39x | — |
| Atlantaa | 13.80x | 1.81x | 7.17% | 0.66x | — |
Starlog's valuation metrics reflect its challenged fundamentals. With a price-to-book value of 1.31x, the stock trades at a discount to most peers, but this appears justified given the zero ROE and persistent losses. The company's inability to generate positive earnings renders traditional P/E comparisons meaningless, whilst peers like Shreeji Shipping command premium valuations based on superior ROE of 47.39%.
The peer group average ROE stands at approximately 21% (excluding zero-return companies), highlighting Starlog's significant underperformance on capital efficiency. The company's minimal debt position provides some differentiation, but this advantage is overshadowed by operational weaknesses.
Valuation Analysis: Risk Premium Insufficient for Fundamentals
Trading at ₹53.20, Starlog's valuation appears elevated relative to its operational performance. The stock's price-to-book ratio of 1.31x suggests investors are paying a premium above net asset value for a company generating negative returns on equity. The EV/EBITDA multiple of 77.28x appears distorted by minimal EBITDA generation, whilst the negative EV/EBIT of -17.02x reflects operating losses.
The company's valuation grade stands at "Risky," a classification maintained since April 2023, reflecting fundamental concerns about business sustainability and profitability. With an industry P/E of 35x, Starlog's loss-making status places it at a significant disadvantage in attracting value-oriented investors.
The absence of dividend payments (last dividend of ₹5 per share paid in November 2011) further diminishes the investment case for income-focused investors. With no near-term path to profitability visible and deteriorating operating metrics, the current valuation fails to offer an adequate margin of safety.
Shareholding Pattern: Promoter Stake Reduction Raises Questions
| Quarter | Promoter % | QoQ Change | FII % | MF % | Non-Institutional % |
|---|---|---|---|---|---|
| Sep'25 | 51.52% | — | 0.00% | 0.00% | 48.48% |
| Jun'25 | 51.52% | — | 0.00% | 0.00% | 48.48% |
| Apr'25 | 51.52% | -12.92% | 0.00% | 0.00% | 48.48% |
| Mar'25 | 64.44% | — | 0.00% | 0.00% | 35.56% |
| Dec'24 | 64.44% | — | 0.00% | 0.00% | 35.56% |
A notable development occurred in April 2025 when promoter holding declined sharply by 12.92 percentage points from 64.44% to 51.52%, with non-institutional holding increasing correspondingly. This reduction in promoter stake during a period of operational challenges raises questions about management confidence in the company's near-term prospects.
The complete absence of institutional participation—with zero holdings from foreign institutional investors, mutual funds, and insurance companies—reflects the lack of confidence from sophisticated investors. The single mutual fund counted in institutional activity appears to hold minimal or no meaningful position. This institutional vacuum amplifies liquidity risk and limits the stock's appeal to serious investors.
Stock Performance: Short-Term Resilience Masks Long-Term Decline
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +4.29% | -1.38% | +5.67% |
| 1 Month | +0.13% | +2.77% | -2.64% |
| 3 Month | -22.57% | +3.01% | -25.58% |
| 6 Month | -33.88% | +3.67% | -37.55% |
| YTD | +14.51% | +6.81% | +7.70% |
| 1 Year | +16.69% | +5.94% | +10.75% |
| 3 Years | +296.13% | +36.93% | +259.20% |
| 5 Years | +495.08% | +105.48% | +389.60% |
The stock's performance reveals a tale of two timelines. Over longer horizons, Starlog has delivered exceptional returns, with three-year gains of 296.13% and five-year returns of 495.08%, massively outperforming the Sensex. However, this stellar long-term performance appears driven by recovery from extremely depressed levels rather than fundamental improvement.
Recent performance tells a more concerning story. The stock has declined 22.57% over three months and 33.88% over six months, significantly underperforming the benchmark. Trading below all key moving averages—5-day (₹52.02), 20-day (₹53.13), 50-day (₹56.55), 100-day (₹63.57), and 200-day (₹64.33)—the technical picture remains decidedly bearish.
With a beta of 1.50, Starlog exhibits 50% higher volatility than the broader market, amplifying both gains and losses. The stock's 57.45% volatility over the past year places it firmly in the "high risk, high return" category, though recent returns have skewed decidedly towards the risk side of that equation.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
The company's proprietary Mojo Score of 12 out of 100 reflects the confluence of negative factors across all assessment parameters. The "Strong Sell" rating, maintained since late September 2025, underscores the fundamental challenges facing the business.
"With operating margins in negative territory, zero return on equity, and no institutional support, Starlog presents a high-risk proposition with limited near-term catalysts for turnaround."
Key Strengths & Risk Factors
Limited Strengths
- Debt-Free Balance Sheet: Complete elimination of long-term debt provides financial flexibility and reduces bankruptcy risk.
- No Promoter Pledging: Zero pledged shares indicates promoters have not leveraged holdings for personal borrowing.
- Sector Outperformance: One-year return of 16.69% beats transport infrastructure sector decline of 22.33%.
- Improved Shareholder Funds: Reserves grew to ₹48.66 crores in FY25 from ₹22.50 crores in FY24.
- Specialised Equipment: Crane capacity up to 600 MT positions company for heavy-lift infrastructure projects.
Critical Risk Factors
- Persistent Losses: Net loss of ₹1.99 crores in Q2 FY26 represents 929.17% deterioration year-on-year.
- Negative Operating Margins: Operating margin of -38.74% reflects fundamental inability to generate profits from operations.
- Revenue Collapse: Five-year sales CAGR of -47.15% shows sustained business contraction.
- Zero Institutional Interest: Complete absence of FII, mutual fund, and insurance holdings signals lack of confidence.
- Promoter Stake Reduction: 12.92% decrease in promoter holding raises questions about management confidence.
- Weak Returns: ROE of 0.0% and ROCE of -4.03% demonstrate capital inefficiency.
- Technical Weakness: Bearish trend with stock below all major moving averages suggests continued downside.
- High Volatility: Beta of 1.50 and 57.45% volatility amplify downside risk in adverse market conditions.
- Micro-Cap Liquidity: ₹78 crores market cap limits institutional participation and increases exit risk.
Outlook: What Lies Ahead
Potential Catalysts (Low Probability)
- Return to positive operating margins in upcoming quarters
- Significant contract wins driving revenue acceleration
- Strategic restructuring or asset monetisation initiatives
- Improved capacity utilisation rates for crane fleet
- Entry of institutional investors providing validation
Red Flags to Monitor
- Further deterioration in operating margins below -40%
- Continued quarterly losses extending loss-making streak
- Additional promoter stake reduction signalling exit intent
- Breach of 52-week low at ₹40.16 indicating capitulation
- Inability to generate positive cash flows from operations
- Emergence of debt to fund working capital requirements
The path to recovery requires demonstrable improvement in operational metrics, particularly a return to positive operating margins and sustained profitability. However, the five-year trend of declining revenues and persistent losses suggests structural challenges that cannot be easily reversed. The absence of institutional interest and recent promoter stake reduction further dampen optimism about near-term turnaround prospects.
The Verdict: Avoid This High-Risk Turnaround Story
Score: 12/100
For Fresh Investors: Stay away. The combination of negative operating margins, zero return on equity, declining revenues, and complete lack of institutional support makes this an extremely risky proposition with limited upside visibility. The stock's recent 4.44% daily gain appears to be noise rather than signal of fundamental improvement.
For Existing Holders: Consider exiting on any strength. The deteriorating Q2 FY26 results confirm that operational challenges are intensifying rather than improving. With the stock in a confirmed bearish technical trend and trading below all major moving averages, the path of least resistance remains downward. The 12.92% promoter stake reduction in April 2025 raises red flags about management's confidence in near-term recovery prospects.
Fair Value Estimate: Given the persistent losses, negative operating margins, and structural revenue decline, the stock appears overvalued even at current levels. A conservative fair value estimate of ₹35-40 per share (30-35% downside) better reflects the fundamental risks, assuming no material operational improvement materialises in coming quarters.
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 securities mentioned herein may not be suitable for all investors. The author and publisher are not registered investment advisors and do not purport to provide investment advice.
