With a modest market capitalisation of ₹299.00 crores and trading at ₹301.00 per share as of November 14, 2025, Starteck Finance finds itself at a critical juncture where operational excellence must catch up with accounting gains. The stock has declined 0.94% in the latest trading session, reflecting investor caution despite the strong quarterly numbers.
| Quarter | Net Sales (₹ Cr) | QoQ % | Net Profit (₹ Cr) | QoQ % | PAT Margin % |
|---|---|---|---|---|---|
| Sep'25 | 9.44 | +20.72% | 7.36 | +107.91% | 77.97% |
| Jun'25 | 7.82 | -7.89% | 3.54 | +151.06% | 45.27% |
| Mar'25 | 8.49 | -3.08% | 1.41 | -61.16% | 16.61% |
| Dec'24 | 8.76 | +3.91% | 3.63 | +1.11% | 41.44% |
| Sep'24 | 8.43 | +20.09% | 3.59 | +109.94% | 42.59% |
| Jun'24 | 7.02 | -35.77% | 1.71 | -50.43% | 24.36% |
| Mar'24 | 10.93 | — | 3.45 | — | 31.56% |
Financial Performance: Profit Surge Driven by Non-Core Income
In Q2 FY26, Starteck Finance reported net sales of ₹9.44 crores, marking a healthy 20.72% sequential growth from ₹7.82 crores in Q1 FY26 and an 11.98% year-on-year increase from ₹8.43 crores in Q2 FY25. Whilst this top-line expansion appears encouraging, the more remarkable story lies in the profit trajectory. Net profit more than doubled to ₹7.36 crores from ₹3.54 crores in the previous quarter, translating to an extraordinary PAT margin of 77.97%.
However, this stellar margin expansion warrants scrutiny. Operating profit excluding other income (PBDIT excl OI) stood at ₹7.67 crores with a margin of 81.25%, a modest improvement from 91.69% in Q1 FY26. The dramatic profit boost was primarily fuelled by other income, which surged to ₹6.68 crores in Q2 FY26 from ₹2.40 crores in the previous quarter. This non-operating income constituted a staggering 78.50% of profit before tax (PBT) of ₹8.51 crores, raising concerns about the quality and sustainability of earnings.
Interest expenses rose to ₹5.70 crores in Q2 FY26 from ₹5.33 crores in Q1 FY26, reflecting a 6.94% sequential increase. On a year-on-year basis, interest costs climbed 24.73% from ₹4.57 crores in Q2 FY25, indicating rising borrowing costs that could pressure margins in future quarters. Employee costs remained relatively stable at ₹0.26 crores compared to ₹0.18 crores in the previous quarter, whilst depreciation held steady at ₹0.14 crores.
The tax rate for Q2 FY26 stood at 13.51%, marginally lower than 13.87% in Q1 FY26, suggesting some tax optimisation benefits. The effective tax burden of ₹1.15 crores on a PBT of ₹8.51 crores appears reasonable, though the low tax rate warrants monitoring for sustainability.
Operational Challenges: Weak Capital Efficiency Persists
Despite the impressive profit growth, Starteck Finance's operational metrics reveal underlying weaknesses that cannot be ignored. The company's average return on equity (ROE) stands at a modest 10.06%, significantly below the standards expected from a well-managed financial services firm. This weak capital efficiency indicates that the company is generating inadequate returns relative to the equity capital deployed by shareholders.
The latest ROE of 4.81% for the most recent period represents a further deterioration, signalling that recent profitability gains have not translated into improved shareholder value creation. For context, leading NBFCs typically deliver ROE in excess of 15-18%, making Starteck Finance's single-digit ROE particularly concerning for long-term investors seeking capital appreciation.
Critical Concern: Non-Operating Income Dependence
Other income at 78.50% of PBT: The company's reliance on non-operating income to drive quarterly profits raises serious questions about earnings sustainability. Whilst one-off gains can boost short-term results, investors should focus on the underlying operating performance, which tells a more sobering story about the business's core profitability.
Debt-Equity Ratio Alert: The half-yearly debt-to-equity ratio reached 1.08 times, the highest in recent periods, indicating rising leverage that could constrain financial flexibility and increase vulnerability to interest rate fluctuations.
The company's return on capital employed (ROCE) stands at 6.11%, another indicator of suboptimal asset utilisation. This metric suggests that Starteck Finance is generating relatively weak returns from the total capital deployed in its business, including both equity and debt. The combination of low ROE and ROCE points to fundamental operational inefficiencies that require management attention.
On the balance sheet front, shareholder funds increased to ₹234.35 crores as of March 2025 from ₹206.39 crores in the previous year, driven by retained earnings. However, current liabilities surged to ₹306.89 crores from ₹253.51 crores, reflecting increased short-term obligations. The company maintains investments of ₹212.30 crores, up from ₹146.95 crores, suggesting capital allocation towards marketable securities rather than core lending operations.
Industry Context: Underperformance Against Sector Peers
Within the broader NBFC landscape, Starteck Finance occupies a niche position as a micro-cap player with limited institutional following. The company's institutional holding stands at a mere 0.08%, comprising two foreign institutional investors (FIIs) with negligible stakes. This absence of institutional participation reflects concerns about liquidity, governance, and growth visibility that typically attract sophisticated investors.
The stock's one-year return of 11.69% trails the NBFC sector's 24.77% return by a significant margin of 13.08 percentage points. This underperformance relative to peers underscores the market's scepticism about the company's growth trajectory and competitive positioning. Whilst Starteck Finance has delivered impressive long-term returns—with a five-year gain of 508.08% far exceeding the Sensex's 92.64%—recent momentum has clearly waned.
Market Positioning Insight
Starteck Finance's micro-cap status (₹299 crores market capitalisation) places it in the highly speculative segment of the NBFC universe. The company's 5-year sales growth of just 3.18% contrasts sharply with its 22.38% EBIT growth, suggesting that profit expansion has come more from margin improvement and non-operating gains rather than sustainable business expansion.
The company operates in a competitive environment dominated by larger, well-capitalised NBFCs with diversified lending portfolios and robust risk management frameworks. Starteck Finance's limited scale and narrow operating focus make it vulnerable to sector-specific headwinds and regulatory changes that could disproportionately impact smaller players.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield % |
|---|---|---|---|---|---|
| Starteck Finance | 23.18 | 1.30 | 10.06 | 0.97 | 0.07 |
| Akme Fintrade | 9.29 | 0.83 | 8.50 | 0.74 | — |
| U. Y. Fincorp | 17.96 | 0.90 | 7.34 | 0.01 | — |
| Emerald Finance | 25.99 | 3.41 | 8.90 | 0.17 | — |
| Leading Leasing Finance | 39.28 | 2.39 | 10.68 | 3.99 | — |
Compared to peers, Starteck Finance trades at a P/E ratio of 23.18x, which appears reasonable relative to Leading Leasing Finance (39.28x) and Emerald Finance (25.99x), but commands a premium over Akme Fintrade (9.29x). However, the company's ROE of 10.06% ranks second-highest among the peer group, marginally below Leading Leasing Finance's 10.68%. The price-to-book ratio of 1.30x sits in the middle of the pack, suggesting neither significant undervaluation nor excessive premium.
Valuation Analysis: Fair Value with Limited Upside
At the current market price of ₹301.00 per share, Starteck Finance trades at a P/E ratio of 23.18x based on trailing twelve-month earnings. The company's valuation grade stands at "Fair," having oscillated between "Expensive" and "Very Expensive" in recent weeks before settling at current levels. This suggests the stock is reasonably priced relative to its earnings power, though not attractively undervalued.
The price-to-book value of 1.30x indicates the market is willing to pay a modest premium over the company's net asset value of ₹216.19 per share. This valuation multiple appears justified given the company's below-average quality grade and weak return ratios. For comparison, higher-quality NBFCs with superior ROE typically command P/BV multiples in the range of 2.0-3.0x, underscoring the market's recognition of Starteck Finance's operational limitations.
The enterprise value to EBITDA ratio of 17.71x and EV to EBIT of 18.05x suggest the stock is trading at moderate multiples relative to its operating performance. However, given the heavy reliance on other income to boost profits, these metrics may overstate the true earnings quality. The EV to sales ratio of 15.82x appears elevated for a company with modest top-line growth, indicating that much of the valuation is predicated on margin expansion rather than revenue scaling.
The stock currently trades 17.31% below its 52-week high of ₹364.00 and 19.92% above its 52-week low of ₹251.00, positioning it in the middle of its recent trading range. The negligible dividend yield of 0.07% offers virtually no income component for investors, with the latest dividend of ₹0.20 per share representing minimal shareholder returns.
"Whilst headline profit growth appears impressive, the heavy dependence on non-operating income and weak return ratios suggest limited room for valuation expansion without fundamental operational improvements."
Shareholding: Stable Promoter Base, Minimal Institutional Interest
The shareholding pattern of Starteck Finance reveals a highly promoter-dominated structure with limited institutional participation. As of September 2025, promoters held 73.10% of the equity, unchanged from the previous quarter but marginally higher than 72.76% in September 2024. This stable promoter holding indicates strong insider confidence, though the high concentration also limits free float and liquidity for public shareholders.
| Quarter | Promoter % | FII % | MF % | Insurance % | DII % | Public % |
|---|---|---|---|---|---|---|
| Sep'25 | 73.10 | 0.08 | 0.00 | 0.00 | 0.00 | 26.82 |
| Jun'25 | 73.10 | 0.00 | 0.00 | 0.00 | 0.00 | 26.90 |
| Mar'25 | 72.95 | 0.00 | 0.00 | 0.00 | 0.00 | 27.05 |
| Dec'24 | 72.76 | 0.00 | 0.00 | 0.00 | 0.00 | 27.24 |
| Sep'24 | 72.76 | 0.00 | 0.00 | 0.00 | 0.00 | 27.24 |
Foreign institutional investors made a marginal entry in Q2 FY26, acquiring a 0.08% stake compared to zero holdings in previous quarters. Whilst this represents a positive development, the quantum remains negligible and unlikely to materially impact stock liquidity or discovery. The complete absence of mutual fund holdings (0.00%), insurance company participation (0.00%), and other domestic institutional investors (0.00%) signals a lack of confidence from sophisticated institutional players.
The non-institutional shareholding stood at 26.82% in September 2025, declining marginally from 26.90% in the previous quarter. This segment comprises primarily retail investors and high-net-worth individuals, who may lack the analytical resources to thoroughly evaluate the company's operational challenges. The absence of institutional scrutiny could mean that governance and operational issues may not receive the attention they warrant.
Positively, there is no promoter pledging reported, eliminating concerns about potential distress selling or loss of management control. The promoter group is led by trusts associated with Kamal Khetan and Manisha Khetan, along with various corporate entities, suggesting a family-controlled business structure typical of many micro-cap Indian companies.
Stock Performance: Long-Term Outperformance, Recent Weakness
Starteck Finance has delivered extraordinary long-term returns, with the stock surging 508.08% over the past five years compared to the Sensex's 92.64% gain—an alpha of 415.44 percentage points. This exceptional outperformance reflects the stock's journey from relative obscurity to its current valuation, rewarding early investors handsomely. The three-year return of 121.49% and four-year gain of 151.88% further underscore the stock's strong historical trajectory.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 0.05% | 1.02% | -0.97% |
| 1 Month | -2.92% | 2.48% | -5.40% |
| 3 Months | -8.16% | 4.30% | -12.46% |
| 6 Months | 3.44% | 3.36% | +0.08% |
| YTD | 0.33% | 7.58% | -7.25% |
| 1 Year | 11.69% | 8.36% | +3.33% |
| 3 Years | 121.49% | 36.41% | +85.08% |
| 5 Years | 508.08% | 92.64% | +415.44% |
However, recent performance tells a more sobering story. The stock has declined 2.92% over the past month, underperforming the Sensex's 2.48% gain by 5.40 percentage points. The three-month return of -8.16% versus the Sensex's +4.30% represents a significant underperformance of 12.46 percentage points, suggesting that momentum has clearly shifted against the stock. Year-to-date returns of just 0.33% trail the Sensex's 7.58% gain by 7.25 percentage points, indicating that 2025 has been a challenging year for shareholders.
The stock's high beta of 1.50 indicates significantly higher volatility than the broader market, with annualised volatility of 60.44% compared to the Sensex's 12.26%. This elevated risk profile makes Starteck Finance unsuitable for conservative investors seeking stable returns. The risk-adjusted return of 0.19 over the past year, whilst positive, pales in comparison to the Sensex's 0.68, suggesting that the excess volatility has not been adequately compensated by returns.
From a technical perspective, the stock currently exhibits a "Mildly Bullish" trend, having changed from "Sideways" on November 6, 2025, at ₹299.45. However, most technical indicators paint a mixed picture, with MACD showing "Mildly Bearish" signals on both weekly and monthly timeframes, whilst Bollinger Bands suggest "Mildly Bearish" weekly but "Bullish" monthly trends. The stock trades below all major moving averages—5-day (₹303.25), 20-day (₹302.25), 50-day (₹311.39), 100-day (₹309.17), and 200-day (₹301.51)—indicating technical weakness across timeframes.
Investment Thesis: Below-Average Quality, Fair Valuation
The investment case for Starteck Finance rests on four key pillars that collectively point towards a cautious stance. The company's overall Mojo Score of 47 out of 100 translates to a "SELL" rating, reflecting concerns that outweigh positives in the current assessment.
The valuation parameter shows "Fair" status, indicating the stock is neither significantly cheap nor expensive at current levels. The P/E ratio of 23.18x and P/BV of 1.30x appear reasonable given the company's operational profile, though limited upside potential exists without fundamental improvements in return metrics.
Quality assessment reveals the most significant concern: a "Below Average" grade driven by weak long-term financial performance. The average ROE of 10.06% falls well short of standards expected from quality financial services firms, indicating suboptimal capital allocation and operational efficiency. The 5-year sales growth of just 3.18% further underscores limited business momentum, whilst institutional holdings of 0.08% reflect sophisticated investors' lack of confidence.
On the positive side, the financial trend shows "Positive" status based on Q2 FY26 results, with net sales, PBDIT, PAT, and EPS all reaching quarterly highs. However, this improvement is significantly tempered by the concerning dependence on non-operating income and the rising debt-equity ratio of 1.08 times in the half-year period.
Technical indicators show a "Mildly Bullish" trend, though this must be viewed with caution given the stock's recent underperformance and position below all major moving averages. The mixed signals from various technical indicators (MACD bearish, Bollinger Bands mixed, OBV bullish) suggest uncertainty about near-term direction.
Key Strengths
- Impressive Long-Term Returns: 508.08% five-year gain demonstrates strong historical wealth creation for patient investors.
- Strong Q2 Profit Growth: Net profit doubled QoQ and YoY, reaching ₹7.36 crores with 77.97% PAT margin.
- Stable Promoter Holding: 73.10% promoter stake with zero pledging indicates strong insider confidence and alignment.
- Positive Financial Trend: Recent quarterly performance shows improvement across key metrics including sales and profitability.
- Reasonable Valuation: P/E of 23.18x and P/BV of 1.30x appear fair relative to earnings and book value.
- Moderate Leverage: Debt-to-equity ratio of 0.97 remains manageable compared to highly leveraged peers.
Key Concerns
- Weak Return on Equity: Average ROE of 10.06% and latest ROE of 4.81% indicate poor capital efficiency and shareholder value creation.
- Non-Operating Income Dependence: Other income at 78.50% of PBT raises serious sustainability concerns about earnings quality.
- Rising Leverage: Debt-equity ratio reached 1.08 times in H1 FY26, the highest in recent periods, constraining financial flexibility.
- Zero Institutional Interest: Absence of mutual fund, insurance, and meaningful FII holdings signals lack of sophisticated investor confidence.
- Recent Underperformance: Three-month decline of 8.16% and YTD gain of just 0.33% show waning momentum versus market.
- High Volatility: Beta of 1.50 and 60.44% volatility make the stock unsuitable for risk-averse investors.
- Limited Scale: Micro-cap status (₹299 crores) and 3.18% five-year sales growth indicate constrained business expansion.
Outlook: What Lies Ahead
The forward outlook for Starteck Finance hinges on management's ability to address fundamental operational weaknesses whilst sustaining the recent profit momentum. Investors should closely monitor several key developments that could materially impact the investment thesis in either direction.
Positive Catalysts
- Operating Income Growth: Sustained top-line expansion in core lending activities without reliance on non-operating gains.
- ROE Improvement: Concrete steps to enhance capital efficiency and deliver returns above 15% threshold.
- Institutional Entry: Meaningful participation from mutual funds or quality FIIs signalling improved governance and transparency.
- Margin Stabilisation: Maintaining operating margins above 80% through efficient cost management and pricing discipline.
- Balance Sheet Optimisation: Reduction in debt-equity ratio and improved asset quality metrics.
Red Flags to Monitor
- Declining Core Income: Further deterioration in operating profit excluding other income would confirm sustainability concerns.
- Rising Interest Costs: Continued increase in borrowing expenses could severely pressure already-thin core margins.
- Asset Quality Issues: Any signs of stress in the loan book or rising provisioning requirements.
- Promoter Stake Reduction: Decline in promoter holding or introduction of pledging would signal insider concern.
- Technical Breakdown: Breach of ₹251 support (52-week low) would confirm bearish trend continuation.
For the company to merit a rating upgrade, investors need to see consistent improvement in return ratios, reduced dependence on non-operating income, and evidence of sustainable business growth. Until these fundamental improvements materialise, the stock remains a speculative proposition suitable only for high-risk-tolerant investors with a long-term horizon.
The Verdict: Sell on Structural Weaknesses
Score: 47/100
For Fresh Investors: Avoid initiating positions at current levels. The combination of weak return ratios (10.06% average ROE), heavy reliance on non-operating income (78.50% of PBT), and absence of institutional validation presents significant fundamental risks that outweigh the recent profit surge. The "Below Average" quality grade and fair valuation offer limited margin of safety for new entrants.
For Existing Holders: Consider reducing exposure or exiting positions, particularly if sitting on substantial long-term gains. Whilst the stock has delivered exceptional five-year returns of 508.08%, recent momentum has clearly waned with year-to-date gains of just 0.33%. The deteriorating ROE trend (latest at 4.81%) and rising leverage (debt-equity of 1.08x) suggest the best days may be behind. Use any technical rallies towards ₹310-315 as exit opportunities.
Fair Value Estimate: ₹280 (7% downside from current levels), reflecting concerns about earnings quality and weak capital efficiency that warrant a valuation discount.
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. Investments in securities markets are subject to market risks; investors should carefully read all related documents before investing.
