The third quarter of FY26 marked a watershed moment for STEL Holdings, with net sales rocketing to ₹17.20 crores from a mere ₹0.30 crores in the corresponding quarter last year. This phenomenal 5,633.33% year-on-year surge represents the highest quarterly revenue in the company's recent history. On a sequential basis, revenue jumped 85.54% from Q2 FY26's ₹9.27 crores, demonstrating strong momentum through the fiscal year.
The profit trajectory mirrors the revenue explosion, with consolidated net profit of ₹12.58 crores representing a staggering 13,877.78% increase year-on-year and an 89.17% sequential gain. This performance translates to earnings per share of ₹6.81 for the quarter, the highest on record for the company. The PAT margin remained robust at 74.26%, consistent with the company's historical performance range and significantly outpacing industry norms.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 17.20 | +85.54% | 12.58 | +89.17% | 74.26% |
| Sep'25 | 9.27 | +1872.34% | 6.65 | +1800.00% | 73.32% |
| Jun'25 | 0.47 | -96.50% | 0.35 | -96.49% | 74.47% |
| Mar'25 | 13.44 | +4380.00% | 9.98 | +10988.89% | 74.26% |
| Dec'24 | 0.30 | -96.14% | 0.09 | -98.43% | 30.00% |
| Sep'24 | 7.78 | +1894.87% | 5.72 | +6255.56% | 73.52% |
| Jun'24 | 0.39 | — | 0.09 | — | 23.08% |
Financial Performance: Lumpy Revenue Pattern Raises Questions
Whilst the headline numbers appear spectacular, a deeper analysis reveals a highly volatile revenue pattern that characterises STEL Holdings' business model. The quarterly revenue trajectory shows extreme fluctuations, with alternating quarters of massive growth and sharp contractions. For instance, Q1 FY26 recorded just ₹0.47 crores in revenue (down 96.50% quarter-on-quarter), only to see Q2 FY26 surge 1,872.34% to ₹9.27 crores, followed by another 85.54% jump in Q3 FY26.
This lumpy revenue recognition pattern suggests the company's earnings are highly dependent on specific transactions or events rather than recurring business streams. The operating profit margin of 100.71% excluding other income in Q3 FY26 indicates minimal operating expenses, with employee costs remaining negligible at ₹0.04 crores. The company's tax rate of 26.22% for the quarter aligns with standard corporate tax obligations.
On an annual basis, STEL Holdings has demonstrated more stable growth, with FY25 revenue reaching ₹21.00 crores, up 16.70% from ₹18.00 crores in FY24. The company's profit after tax for FY25 stood at ₹15.00 crores, representing a PAT margin of 71.40%. Over the five-year period from FY20 to FY25, the company achieved a sales compound annual growth rate of 15.39% and EBIT growth of 15.99%, indicating steady long-term expansion despite quarterly volatility.
The Return Ratio Conundrum: Quality Concerns Persist
Despite impressive top-line growth and healthy margins, STEL Holdings faces significant challenges in capital efficiency metrics. The company's average return on equity stands at a modest 1.14%, whilst return on capital employed registers at 1.23%—both figures substantially below industry standards and indicative of capital-intensive operations with limited return generation.
⚠️ Critical Quality Concern
Weak Return Ratios: With ROE at 1.14% and ROCE at 1.23%, STEL Holdings generates minimal returns on shareholder capital and deployed funds. This suggests that despite strong revenue growth, the company's asset-heavy structure or investment portfolio is not translating into proportionate shareholder value creation. The latest ROE of 0.92% for the most recent period shows further deterioration, raising questions about the sustainability of the business model and efficient capital allocation.
The company's balance sheet reveals shareholder funds of ₹1,753.15 crores as of March 2025, comprising equity capital of ₹18.46 crores and reserves of ₹1,734.69 crores. The substantial reserves-to-equity ratio indicates years of retained earnings, yet the poor return metrics suggest these accumulated profits are not being deployed effectively to generate adequate returns.
On the positive side, STEL Holdings maintains a debt-free balance sheet with zero long-term borrowings and minimal current liabilities of ₹293.49 crores. The company holds investments worth ₹1,884.21 crores as of March 2025, representing the bulk of its asset base. This investment-heavy structure explains the company's classification as an NBFC, though the exact nature and performance of these investments remain opaque from the available financial statements.
Shareholding Dynamics: Steady Promoter Accumulation
The shareholding pattern reveals a gradual increase in promoter stake, rising from 69.15% in December 2024 to 71.33% in December 2025, with a 0.50% sequential increase in the latest quarter. This steady accumulation signals promoter confidence in the company's prospects and aligns management interests with minority shareholders.
| Quarter | Promoter % | QoQ Change | FII % | MF % | Insurance % |
|---|---|---|---|---|---|
| Dec'25 | 71.33% | +0.50% | 0.00% | 0.04% | 0.10% |
| Sep'25 | 70.83% | +1.36% | 0.01% | 0.04% | 0.12% |
| Jun'25 | 69.47% | 0.00% | 0.00% | 0.04% | 0.12% |
| Mar'25 | 69.47% | +0.32% | 0.02% | 0.04% | 0.12% |
| Dec'24 | 69.15% | — | 0.08% | 0.04% | 0.12% |
The promoter group is dominated by Rainbow Investments Ltd. (24.50%), Instant Holdings Ltd. (8.70%), and Harsh Vardhan Goenka as trustee of Secura India Trust (7.82%), amongst others—all entities connected to the RPG Group. Notably, there is no promoter pledging, eliminating concerns about leveraged ownership structures.
Institutional participation remains negligible, with foreign institutional investors holding virtually zero stake (0.00% in December 2025), mutual funds at 0.04%, and insurance companies at 0.10%. The total institutional holding of just 0.16% reflects limited interest from professional investors, possibly due to the company's micro-cap status, illiquid trading volumes, and opaque business operations. Non-institutional investors hold 28.51%, down from 30.60% a year ago, suggesting some retail exodus.
Peer Comparison: Premium Valuation, Inferior Returns
When benchmarked against NBFC peers, STEL Holdings' valuation metrics reveal a significant premium relative to operational performance. The company trades at a price-to-earnings ratio of 44.98x, substantially higher than peers like Indl. & Prud. Inv. (14.33x) and Aryaman Fin. Serv. (19.71x), though lower than Arunis Abode's elevated 161.73x multiple.
| Company | P/E (TTM) | Price to Book | ROE % | Div Yield | Debt to Equity |
|---|---|---|---|---|---|
| STEL Holdings | 44.98 | 0.41 | 1.14% | — | -0.02 |
| Arunis Abode | 161.73 | 6.87 | 28.88% | 0.04% | 0.00 |
| Indl. & Prud. Inv. | 14.33 | 1.05 | 6.79% | 2.10% | 0.00 |
| VLS Finance | NA (Loss Making) | 0.31 | 8.41% | 0.62% | 0.00 |
| Aryaman Fin. Serv. | 19.71 | 5.34 | 15.68% | — | 0.00 |
The comparison becomes more concerning when examining return metrics. STEL Holdings' ROE of 1.14% pales in comparison to Arunis Abode's 28.88%, Aryaman Fin. Serv.'s 15.68%, and even VLS Finance's 8.41%. This stark disparity indicates that despite commanding a premium valuation, STEL Holdings delivers substantially inferior returns on shareholder equity.
The price-to-book ratio of 0.41x appears attractive on the surface, suggesting the stock trades below its book value of ₹950 per share. However, this metric must be viewed in context of the company's poor return generation—a low P/BV multiple often reflects market scepticism about the quality and earning power of the underlying assets rather than representing a value opportunity.
"A 45x P/E multiple on 1.14% ROE represents one of the most stretched valuation-to-quality disconnects in the NBFC universe—investors are paying premium prices for distinctly sub-premium returns."
Valuation Analysis: Expensive on All Metrics
STEL Holdings carries a "Very Expensive" valuation grade, a classification it has held since November 2020 with only brief interruptions. At the current price of ₹416.00, the stock trades at 44.98x trailing twelve-month earnings, nearly double the NBFC industry average P/E of 25x. The premium valuation extends across multiple metrics, with EV/EBITDA at 32.71x and EV/Sales at 31.75x—both substantially elevated for a company with modest growth prospects.
The PEG ratio of 5.95 particularly highlights the valuation concern. With five-year operating profit growth of 15.99%, investors are paying nearly six times the growth rate, well above the traditional threshold of 1-2x that characterises fairly valued growth stocks. This suggests the market is either pricing in a dramatic acceleration in growth that hasn't materialised in the financials, or the stock has become disconnected from fundamental value.
The stock's 52-week range of ₹310.20 to ₹635.00 shows significant volatility, with the current price 34.49% below the peak and 34.11% above the trough. This wide trading band reflects the uncertainty surrounding the company's lumpy earnings pattern and the difficulty in establishing a clear fair value anchor.
Stock Performance: Long-Term Outperformance, Recent Weakness
STEL Holdings has delivered exceptional long-term returns, with the stock generating 1,404.52% gains over ten years compared to the Sensex's 236.52% return—a remarkable 1,168 percentage points of alpha. The five-year return of 401.20% versus the Sensex's 75.67% further demonstrates the stock's ability to create substantial wealth for patient investors.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +7.13% | +0.53% | +6.60% |
| 1 Month | -19.43% | -3.17% | -16.26% |
| 3 Months | +1.43% | -2.70% | +4.13% |
| 6 Months | +4.00% | +1.80% | +2.20% |
| YTD | -15.75% | -3.37% | -12.38% |
| 1 Year | +13.51% | +8.49% | +5.02% |
| 3 Years | +195.66% | +38.79% | +156.87% |
| 5 Years | +401.20% | +75.67% | +325.53% |
However, recent performance reveals concerning momentum loss. The stock has declined 19.43% over the past month and is down 15.75% year-to-date, significantly underperforming the Sensex's more modest declines. This recent weakness has pushed the stock below all major moving averages—trading 9.06% below the 20-day MA (₹457.46), 16.06% below the 50-day MA (₹495.61), and 11.35% below the 100-day MA (₹469.27).
The technical picture shows a "Sideways" trend as of January 27, 2026, following a shift from "Mildly Bearish" the previous day. With a beta of 1.50, the stock exhibits 50% more volatility than the broader market, classified as a "High Beta Stock" suitable only for risk-tolerant investors. The one-year volatility of 46.75% substantially exceeds the Sensex's 11.24%, resulting in a risk-adjusted return of just 0.29 compared to the Sensex's 0.76—indicating inferior returns relative to the risk undertaken.
Investment Thesis: Quality Concerns Overshadow Growth
The investment case for STEL Holdings presents a classic dichotomy between impressive headline growth and concerning underlying fundamentals. The company's Mojo Score of 47/100 translates to a "SELL" rating, reflecting the algorithm's assessment that current valuation levels are not justified by operational quality and return generation.
Mojo 4 Dots Analysis
Near-Term Drivers: NEUTRAL – Quarterly financial trend rated "Outstanding" but technical indicators show "Sideways" momentum, creating mixed signals.
Quality: AVERAGE – Company qualifies as "Average quality" based on long-term financial performance, with debt-free status as primary positive.
Valuation: VERY EXPENSIVE – Trading at significant premium across all metrics with PEG ratio of 5.95x indicating expensive relative to growth.
Overall Assessment: CAUTIOUS – Mixed signals across parameters with valuation concerns dominating the narrative.
The financial trend analysis shows an "Outstanding" rating for Q3 FY26, driven by record-high quarterly metrics across revenue, operating profit, and net profit. However, this rating must be contextualised within the company's highly volatile quarterly pattern, where exceptional quarters are often followed by sharp contractions. The sustainability of Q3's performance remains uncertain given the historical precedent of lumpy revenue recognition.
Key Strengths & Risk Factors
✅ KEY STRENGTHS
- Zero Debt Structure: Completely debt-free balance sheet eliminates financial risk and interest burden
- RPG Group Backing: Part of one of India's largest conglomerates provides credibility and potential strategic support
- Strong Promoter Holding: 71.33% promoter stake with steady accumulation demonstrates management confidence
- Healthy Margins: PAT margins consistently above 70% indicate efficient operations
- No Pledging: Zero promoter pledging eliminates governance concerns
- Long-Term Returns: Exceptional 10-year return of 1,404.52% rewards patient investors
- Substantial Reserves: ₹1,734.69 crores in reserves provides financial cushion
⚠️ KEY CONCERNS
- Abysmal Return Ratios: ROE of 1.14% and ROCE of 1.23% indicate poor capital efficiency
- Lumpy Revenue Pattern: Extreme quarterly volatility raises sustainability questions
- Elevated Valuation: P/E of 44.98x and PEG of 5.95x represent significant premium
- Minimal Institutional Interest: Just 0.16% institutional holding signals lack of professional investor confidence
- High Volatility: Beta of 1.50 and 46.75% annual volatility unsuitable for conservative investors
- Opaque Business Model: Investment-heavy structure lacks transparency on underlying asset performance
- Recent Momentum Loss: Down 19.43% in one month and 15.75% YTD
Outlook: What to Watch
POSITIVE CATALYSTS
- Consistent quarterly revenue above ₹10 crores for three consecutive quarters
- Improvement in ROE above 5% indicating better capital deployment
- Disclosure of investment portfolio composition and performance
- Institutional investor participation increasing above 1%
- Dividend initiation to return cash to shareholders
RED FLAGS
- Return to sub-₹5 crore quarterly revenue pattern
- Further deterioration in ROE below 1%
- Promoter stake reduction or any pledging activity
- Stock breaking below ₹310 (52-week low)
- Continued institutional exodus or retail selling pressure
The Verdict: Valuation Disconnect Warrants Caution
Score: 47/100
For Fresh Investors: Avoid initiating positions at current levels. The 44.98x P/E multiple on 1.14% ROE represents an unjustifiable valuation-to-quality disconnect. Wait for either significant price correction (below ₹350) or sustained improvement in return ratios before considering entry.
For Existing Holders: Continue holding given the long-term wealth creation track record, but consider partial profit booking if the stock rallies above ₹500. Monitor quarterly results closely for revenue sustainability and any improvement in capital efficiency metrics. Set a trailing stop-loss at ₹350 to protect against further downside.
Fair Value Estimate: ₹280-320 (25-32% downside from current levels) based on normalised earnings and peer comparison P/E of 20-25x applied to sustainable earnings base.
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 does not guarantee future results. The stock market involves substantial risk, and investors may lose their entire investment.
