The December 2025 quarter represents a continuation of the company's troubling trajectory. Whilst Sunshine Capital managed to maintain profitability, the magnitude of revenue contraction and sequential deterioration raise serious questions about business sustainability. On a sequential basis, net profit declined 33.33% from ₹0.63 crores in Q2 FY26, whilst revenue fell 13.64% quarter-on-quarter, indicating worsening momentum.
The broader context is equally concerning. For the nine-month period ending December 2025, the company reported net profit of ₹30.50 crores on revenue of ₹4.50 crores. However, this figure is heavily distorted by an extraordinary ₹29.45 crores profit in Q1 FY26, masking the underlying operational weakness evident in subsequent quarters. Excluding this one-time gain, the company has generated merely ₹1.05 crores in profit over the past six months on revenue of ₹2.46 crores.
Financial Performance: A Pattern of Deterioration
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 1.14 | -13.64% | 0.42 | -33.33% | 36.84% |
| Sep'25 | 1.32 | -35.29% | 0.63 | -97.86% | 47.73% |
| Jun'25 | 2.04 | -201.49% | 29.45 | -474.21% | 1443.63% |
| Mar'25 | -2.01 | -187.77% | -7.87 | -516.40% | 391.54% |
| Dec'24 | 2.29 | -59.61% | 1.89 | -42.73% | 82.53% |
| Sep'24 | 5.67 | +96.88% | 3.30 | +65.00% | 58.20% |
| Jun'24 | 2.88 | — | 2.00 | — | 69.44% |
The quarterly trend table reveals a business in severe distress. Revenue has collapsed from ₹5.67 crores in September 2024 to just ₹1.14 crores in the latest quarter, representing an 80% decline over five quarters. The erratic pattern, including negative revenue in March 2025, suggests fundamental operational challenges rather than cyclical weakness.
Operating profit margins, whilst appearing robust at 36.84% in Q3 FY26, have compressed sharply from 83.41% in the year-ago quarter. More concerning is the sequential decline from 47.73% in Q2 FY26, indicating deteriorating operational efficiency even as the business contracts. The company's operating profit before depreciation, interest, and tax stood at ₹0.42 crores in Q3 FY26, down from ₹1.91 crores a year earlier.
Critical Revenue Erosion
Sunshine Capital's revenue has declined in seven of the past eight quarters, with the latest quarter marking a 50.22% year-on-year collapse. The company generated merely ₹1.14 crores in Q3 FY26 compared to ₹2.29 crores in the year-ago period, raising serious questions about the sustainability of its NBFC operations and ability to generate meaningful business volumes.
Operational Challenges: Weak Capital Efficiency Compounds Concerns
Beyond the topline contraction, Sunshine Capital's capital efficiency metrics paint a troubling picture. The company's return on equity stands at a meagre 3.45%, significantly below acceptable standards for financial services companies. This weak ROE reflects poor capital deployment and indicates the company is destroying shareholder value rather than creating it. For context, healthy NBFCs typically generate ROE in the 12-18% range, making Sunshine Capital's 3.45% particularly concerning.
The company's balance sheet reveals a dramatic restructuring over the past year. Shareholder funds surged from ₹55.36 crores in March 2024 to ₹724.68 crores in March 2025, driven primarily by a massive increase in share capital from ₹104.17 crores to ₹522.92 crores. This five-fold increase in equity capital, without commensurate business growth, has significantly diluted existing shareholders whilst failing to translate into improved operational performance.
Current liabilities declined sharply from ₹718.81 crores to ₹49.05 crores, suggesting the company has substantially deleveraged its balance sheet. Whilst reduced leverage typically improves financial stability, in Sunshine Capital's case, it coincides with collapsing revenues and profits, indicating the company may have wound down significant portions of its lending operations.
Asset Quality Concerns
Fixed assets remained largely stagnant at ₹8.43 crores in March 2025, whilst current assets stood at merely ₹3.04 crores. For an NBFC with shareholder funds of ₹724.68 crores, this suggests the vast majority of capital remains undeployed or is held in non-productive assets. The company's inability to deploy capital effectively into revenue-generating activities represents a fundamental operational failure.
Cash Flow Analysis: Operational Distress Evident
The cash flow statement for FY25 reveals severe operational stress. Cash flow from operations was negative ₹75.00 crores, indicating the company consumed significant cash in its core business activities. This was partially offset by ₹74.00 crores from investing activities, resulting in net cash remaining flat at ₹3.00 crores. The negative operating cash flow, combined with declining revenues and profits, underscores fundamental business viability concerns.
| Cash Flow Component | FY25 (₹ Cr) | FY24 (₹ Cr) | FY23 (₹ Cr) |
|---|---|---|---|
| Operating Cash Flow | -75.00 | -212.00 | 1.00 |
| Investing Cash Flow | 74.00 | -362.00 | 3.00 |
| Financing Cash Flow | 0.00 | 565.00 | 0.00 |
| Net Cash Change | 0.00 | -9.00 | 5.00 |
Peer Comparison: Significant Underperformance Across Metrics
When compared to other micro-cap NBFCs, Sunshine Capital's operational weakness becomes starkly apparent. The company's ROE of 4.66% (average) trails peers significantly, with companies like Escorp Asset Management generating 37.17% ROE and Arunjyoti Bio achieving 29.81%. This 25-30 percentage point gap reflects fundamental differences in business quality and management capability.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt to Equity |
|---|---|---|---|---|
| Sunshine Capital | 4.82 | 0.17 | 4.66 | 0.00 |
| Arunjyoti Bio | NA (Loss Making) | 4.08 | 29.81 | 0.71 |
| Escorp Asset Mgt | 8.16 | 1.88 | 37.17 | 0.00 |
| Assam Entrade | 88.57 | 2.06 | 2.88 | 0.03 |
| Worth Investment | 67.54 | 3.04 | 6.89 | 0.40 |
| Tilak Ventures | 20.24 | 0.91 | 4.74 | 0.06 |
Sunshine Capital's price-to-book ratio of 0.17x represents a massive discount to peers, who trade at an average of 2.40x. However, this discount reflects justified concerns about asset quality and earnings power rather than representing value. The company's weak ROE means it is trading below book value because the market doubts its ability to generate adequate returns on that book value.
Valuation Analysis: Discount Reflects Fundamental Concerns
At the current price of ₹0.23, Sunshine Capital trades at a P/E ratio of 4.82x and price-to-book of 0.17x, representing steep discounts to historical norms and peer valuations. The company's valuation grade has fluctuated wildly, currently classified as "Very Attractive" after being marked "Very Expensive" in June 2025. However, this attractive valuation multiple is misleading given the deteriorating fundamentals.
The stock trades 77.67% below its 52-week high of ₹1.03, reached before the extent of operational challenges became apparent. With a market capitalisation of merely ₹120.27 crores and book value per share of ₹1.39, the stock trades at a significant discount to book value. However, given the company's inability to generate adequate returns on equity and collapsing revenues, this discount appears justified rather than representing an opportunity.
Valuation Dashboard
P/E Ratio: 4.82x (Discount reflects quality concerns)
P/BV Ratio: 0.17x (83% discount to book value)
ROE: 3.45% (Significantly below cost of equity)
Mojo Score: 31/100 (SELL category)
Shareholding Pattern: Stable but Concerning Institutional Absence
The shareholding pattern reveals a concentrated ownership structure with minimal institutional participation. Promoter holding has remained stable at 19.02% over the past five quarters, indicating no change in management commitment. However, the complete absence of mutual fund and insurance holdings, combined with zero FII participation (down from 0.53% in March 2025), signals institutional investors have abandoned the stock.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 19.02% | 19.02% | 19.02% | 19.02% | 0.00% |
| FII | 0.00% | 0.00% | 0.00% | 0.53% | 0.00% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Non-Institutional | 80.98% | 80.98% | 80.98% | 80.45% | 0.00% |
The dramatic shift in Other DII holdings from 72.99% in December 2024 to 0.00% by March 2025, with corresponding increase in non-institutional holdings, suggests significant institutional exit during FY25. This exodus coincides with the company's operational deterioration and raises serious concerns about institutional confidence in the business.
Stock Performance: Severe Wealth Destruction
Sunshine Capital's stock performance has been catastrophic across all meaningful timeframes. The stock has declined 75.53% over the past year, significantly underperforming the Sensex's 6.56% gain by 82.09 percentage points. This represents severe wealth destruction for investors who maintained positions through the downturn.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Month | -4.17% | -2.38% | -1.79% |
| 3 Months | -17.86% | -0.07% | -17.79% |
| 6 Months | -11.54% | +3.34% | -14.88% |
| YTD | -8.00% | -2.13% | -5.87% |
| 1 Year | -75.53% | +6.56% | -82.09% |
| 2 Years | -87.76% | +16.27% | -104.03% |
| 3 Years | +18.86% | +37.08% | -18.22% |
The stock's volatility of 60.03% over the past year, combined with negative returns, places it firmly in the "high risk, low return" category. The beta of 1.50 indicates the stock is 50% more volatile than the broader market, amplifying downside risk during market corrections. Technical indicators remain firmly bearish, with the stock trading below all key moving averages and the overall trend classified as "Mildly Bearish."
The NBFC sector has delivered 18.41% returns over the past year, making Sunshine Capital's 75.53% decline particularly stark. The company has underperformed its sector by 93.94 percentage points, reflecting company-specific issues rather than sector headwinds.
Investment Thesis: Multiple Red Flags Outweigh Valuation Discount
Sunshine Capital's investment thesis is severely compromised by deteriorating fundamentals across all key parameters. The company's Mojo Score of 31 out of 100 places it firmly in "SELL" territory, reflecting concerns about financial trends, quality, and technical momentum despite attractive valuation multiples.
The quality assessment of "Below Average" reflects the company's weak long-term financial performance, with 5-year sales growth at 0.00% and average ROE of merely 4.66%. The financial trend is classified as "Flat" despite the nine-month profit figure, as this is distorted by the one-time Q1 FY26 gain. Excluding this aberration, the underlying trend is decidedly negative.
Key Strengths & Risk Factors
KEY STRENGTHS
- Zero debt on balance sheet eliminates financial leverage risk
- Maintained profitability despite severe revenue contraction
- Significant equity capital base of ₹724.68 crores provides cushion
- Attractive valuation multiples at 0.17x P/BV and 4.82x P/E
- Stable promoter holding at 19.02% with no pledging
KEY CONCERNS
- Revenue collapsed 50.22% YoY to ₹1.14 crores in Q3 FY26
- Net profit declined 77.78% YoY despite operating leverage
- ROE at 3.45% indicates severe capital inefficiency
- Complete absence of institutional investor participation
- Negative operating cash flow of ₹75 crores in FY25
- Stock down 75.53% over past year with high 60% volatility
- Quality grade downgraded to "Below Average"
Outlook: Critical Monitoring Points
POSITIVE CATALYSTS
- Revenue stabilisation above ₹2 crores per quarter
- ROE improvement towards 10-12% range
- Deployment of idle capital into productive assets
- Return of institutional investor interest
RED FLAGS TO MONITOR
- Further revenue decline below ₹1 crore quarterly
- Continued negative operating cash flows
- Additional institutional investor exits
- Inability to deploy capital productively
- ROE remaining below 5% for extended period
The outlook for Sunshine Capital remains highly uncertain. The company faces fundamental challenges in generating meaningful business volumes, deploying capital effectively, and achieving acceptable returns on equity. Without clear signs of operational turnaround, including revenue stabilisation and margin improvement, the investment case remains weak despite attractive valuation multiples.
For the company to merit a more constructive view, investors would need to see: (1) revenue stabilising above ₹2 crores per quarter for at least three consecutive quarters, (2) ROE improving towards double digits, (3) positive operating cash flows, and (4) some degree of institutional investor participation. Currently, none of these conditions are met, and trends continue to deteriorate.
The Verdict: Avoid This Value Trap
Score: 31/100
For Fresh Investors: Avoid initiation. The combination of collapsing revenues, weak capital efficiency (3.45% ROE), institutional abandonment, and deteriorating financial trends makes this an unattractive investment despite low valuation multiples. The discount to book value reflects justified concerns about earnings power and business sustainability rather than representing opportunity.
For Existing Holders: Consider exit on any price recovery. With revenues declining 50% year-on-year, ROE at unacceptable levels, and no visible catalysts for turnaround, the risk-reward remains unfavourable. The stock has destroyed 75% of shareholder wealth over the past year, and fundamental trends suggest further downside risk.
Fair Value Estimate: ₹0.18-0.20 (12-17% downside from current levels) based on 0.13-0.15x P/BV multiple, reflecting below-average quality and weak ROE profile.
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.
