The December 2025 quarter results paint a concerning picture for Team India Guaranty, as the company's profitability metrics deteriorated sharply despite maintaining revenue momentum. The net profit of ₹0.17 crores represents the lowest quarterly earnings in recent history, raising questions about operational efficiency and cost management. With the stock trading at an elevated P/E ratio of 96x and commanding a "Very Expensive" valuation grade, investors are increasingly scrutinising whether the current premium can be justified given the deteriorating financial trends.
Financial Performance: Sharp Margin Contraction Undermines Growth
Team India Guaranty's Q3 FY26 financial performance presents a stark contrast between top-line growth and bottom-line deterioration. Net sales for the quarter stood at ₹1.36 crores, declining marginally by 0.73% quarter-on-quarter from ₹1.37 crores in Q2 FY26, but demonstrating robust 60.00% year-on-year growth from ₹0.85 crores in Q3 FY25. However, this revenue expansion failed to translate into profitability gains, as operating margins collapsed from 58.39% in Q2 FY26 to just 32.35% in Q3 FY26.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 1.36 | -0.73% | 0.17 | -74.63% | 12.50% |
| Sep'25 | 1.37 | +8.73% | 0.67 | +19.64% | 48.91% |
| Jun'25 | 1.26 | +28.57% | 0.56 | -22.22% | 44.44% |
| Mar'25 | 0.98 | +15.29% | 0.72 | +24.14% | 73.47% |
| Dec'24 | 0.85 | -1.16% | 0.58 | +16.00% | 68.24% |
| Sep'24 | 0.86 | +1.18% | 0.50 | -10.71% | 58.14% |
The most alarming aspect of Q3 FY26 results is the dramatic spike in the effective tax rate to 61.36%, up from 16.25% in the previous quarter. This abnormally high tax burden consumed ₹0.27 crores of the ₹0.44 crores profit before tax, leaving just ₹0.17 crores as net profit. The PAT margin consequently plummeted to 12.50% from 48.91% in Q2 FY26, representing a 36.41 percentage point contraction. Employee costs also surged to ₹0.45 crores in Q3 FY26 from ₹0.08 crores in Q2 FY26, suggesting either one-time compensation adjustments or a significant expansion in workforce without corresponding revenue growth.
Operational Challenges: Weak Fundamentals and Low Returns
Beyond the quarterly volatility, Team India Guaranty's operational fundamentals reveal deeper structural concerns. The company's average return on equity (ROE) stands at just 5.90%, significantly below the threshold for quality NBFC performance. The latest ROE of 5.16% indicates that the company generates barely ₹5.16 of profit for every ₹100 of shareholder equity, reflecting inefficient capital utilisation. This weak ROE places Team India Guaranty at a substantial disadvantage compared to industry standards and raises questions about management's ability to deploy capital effectively in a competitive NBFC landscape.
⚠️ Critical Concern: Deteriorating Profitability
Key Issue: The company's profit before tax (excluding other income) hit a multi-quarter low of ₹0.44 crores in Q3 FY26, while the abnormally high tax rate of 61.36% suggests potential one-time adjustments or unresolved tax matters. The operating profit margin compression from 58.39% to 32.35% quarter-on-quarter indicates serious cost management challenges or revenue quality issues. With the financial trend classified as "Flat" and key profitability metrics at their lowest levels, the company faces significant headwinds in restoring margin strength.
The balance sheet, while relatively clean with zero long-term debt and minimal current liabilities of ₹0.18 crores, shows limited scale for a financial services company. Shareholder funds stood at ₹47.77 crores as of March 2025, with current assets of ₹47.41 crores. However, the company's ability to generate adequate returns on this capital base remains questionable given the low ROE profile. The five-year sales growth of just 2.72% and EBIT growth of 8.62% further underscore the company's struggle to achieve meaningful scale and operational leverage.
Valuation Analysis: Expensive Premium Unjustified by Fundamentals
Team India Guaranty's valuation metrics present a stark disconnect between market pricing and underlying fundamentals. Trading at a P/E ratio of 96x—more than four times the industry average P/E of 23x—the stock commands a significant premium that appears increasingly difficult to justify. The price-to-book value ratio of 4.95x is also elevated, particularly given the company's weak ROE profile. When a company generates only 5.16% returns on equity but trades at nearly 5 times book value, it suggests either excessive market optimism or a valuation correction waiting to happen.
| Valuation Metric | Team India Guaranty | Assessment |
|---|---|---|
| P/E Ratio (TTM) | 96.00x | Very High vs Industry (23x) |
| Price to Book Value | 4.95x | Premium Despite Low ROE |
| EV/EBITDA | 76.69x | Significantly Elevated |
| PEG Ratio | 3.15x | High Relative to Growth |
| Book Value per Share | ₹53.06 | Current Price: ₹269.45 |
The PEG ratio of 3.15 indicates that investors are paying a substantial premium for each unit of earnings growth, which is particularly concerning given the company's "Flat" financial trend designation and recent profit decline. The EV/EBITDA multiple of 76.69x and EV/Sales ratio of 50.90x further confirm the expensive valuation. With the stock currently rated as "Very Expensive" and trading 74.97% above its 52-week low of ₹154.00 but 19.50% below its 52-week high of ₹334.70, the valuation appears stretched relative to both historical levels and fundamental performance.
Peer Comparison: Underperforming on Key Metrics
When benchmarked against peers in the NBFC sector, Team India Guaranty's relative positioning reveals significant underperformance on critical financial metrics. The company's ROE of 5.90% lags substantially behind several peers, while its P/E ratio of 95.78x is the highest in the comparison set. This combination of weak returns and premium valuation creates an unfavourable risk-reward profile for investors.
| Company | P/E (TTM) | ROE | Debt/Equity | Price/Book |
|---|---|---|---|---|
| Team India Guaranty | 95.78x | 5.90% | 0.00 | 4.95x |
| Stellant Securities | 9.08x | 33.26% | 0.00 | 7.25x |
| Sera Investments | 10.73x | 17.27% | -1.19 | 0.62x |
| Trishakti Industries | 39.37x | 15.45% | 1.25 | 6.71x |
| Regency Fincorp | 19.64x | 4.78% | 0.84 | 1.97x |
| Alfred Herbert | 7.38x | 1.59% | -0.11 | 0.41x |
While Team India Guaranty maintains zero leverage—a positive from a risk perspective—this conservative balance sheet structure has not translated into superior returns. Stellant Securities, for instance, generates an ROE of 33.26% with similar zero debt, demonstrating that capital efficiency is achievable without leverage. The peer comparison underscores that Team India Guaranty's premium valuation is not supported by operational superiority or financial performance leadership within its sector.
Shareholding Pattern: Stable Promoter Base, Limited Institutional Interest
The shareholding structure of Team India Guaranty reveals a highly promoter-dominated ownership pattern with minimal institutional participation. Promoter holding has remained stable at 74.92% across the last five quarters, indicating strong insider control but also limited free float for market liquidity. The promoter group, led by Team India Managers Ltd. (45.31%) and the Saraogi family members, has maintained consistent ownership without any pledging of shares—a positive indicator of promoter confidence.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 74.92% | 74.92% | 74.92% | 74.92% | 0.00% |
| FII | 2.03% | 1.69% | 1.92% | 1.92% | +0.34% |
| Mutual Funds | 0.01% | 0.01% | 0.01% | 0.01% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.05% | 0.05% | 0.05% | 0.05% | 0.00% |
| Non-Institutional | 23.00% | 23.34% | 23.11% | 23.11% | -0.34% |
Foreign institutional investor (FII) holdings increased marginally to 2.03% in December 2025 from 1.69% in September 2025, suggesting some tentative interest from overseas investors. However, the overall institutional holding of just 2.08% (combining FII, mutual funds, and other domestic institutional investors) reflects limited confidence from professional money managers. The negligible mutual fund presence of 0.01% and complete absence of insurance company holdings indicate that quality-focused institutional investors are avoiding the stock, likely due to concerns about scale, profitability, and valuation.
Stock Performance: Strong Long-Term Gains Mask Recent Weakness
Team India Guaranty's stock price performance presents a tale of two narratives: exceptional long-term returns offset by recent weakness and heightened volatility. Over the past year, the stock has delivered a 53.97% return, significantly outperforming the Sensex's 8.52% gain and generating an impressive alpha of 45.45 percentage points. The three-year performance is even more remarkable, with the stock surging 447.66% compared to the Sensex's 36.73% advance, translating to an extraordinary alpha of 410.93 percentage points.
| Period | Stock Return | Sensex Return | Alpha | Assessment |
|---|---|---|---|---|
| 1 Week | 4.80% | -1.14% | +5.94% | Strong |
| 1 Month | -5.46% | -1.20% | -4.26% | Underperformance |
| 3 Months | 7.35% | -2.19% | +9.54% | Outperformance |
| 6 Months | -6.89% | 2.59% | -9.48% | Significant Lag |
| YTD | -8.38% | -3.04% | -5.34% | Weakness |
| 1 Year | 53.97% | 8.52% | +45.45% | Strong Alpha |
| 3 Years | 447.66% | 36.73% | +410.93% | Exceptional |
However, recent performance reveals concerning momentum loss. The stock is down 8.38% year-to-date and has declined 5.46% over the past month, underperforming the broader market during both periods. The six-month return of -6.89% against the Sensex's 2.59% gain highlights deteriorating relative strength. Technical indicators classify the current trend as "Mildly Bullish," but the stock remains below multiple moving averages, suggesting ongoing consolidation or potential distribution. With a high beta of 1.50 and volatility of 58.37%, the stock exhibits significantly higher risk than the broader market, making it suitable only for investors with high risk tolerance.
Investment Assessment: Quality and Valuation Concerns Dominate
Team India Guaranty's overall investment profile is characterised by significant quality deficiencies and valuation concerns that outweigh any potential growth narrative. The company's proprietary Mojo score of 37 out of 100 places it firmly in "SELL" territory, reflecting weak fundamentals across multiple dimensions. The quality grade of "Below Average" underscores long-term financial performance challenges, while the "Very Expensive" valuation rating highlights the premium pricing relative to delivered results.
The financial trend classification of "Flat" indicates stagnating operational momentum, with Q3 FY26 results marking the lowest profit before tax (excluding other income) in recent quarters. The technical trend of "Mildly Bullish" provides limited comfort given the fundamental deterioration. The company's PEG ratio of 3.15 suggests investors are paying an excessive premium for modest growth prospects, particularly concerning given the recent profit decline and margin compression.
Key Strengths & Risk Factors
✓ Key Strengths
- Zero Debt Structure: Completely debt-free balance sheet eliminates financial leverage risk and interest burden
- Strong Revenue Growth: 60.00% year-on-year revenue expansion demonstrates market traction
- Stable Promoter Holding: Consistent 74.92% promoter stake with no pledging indicates insider confidence
- Exceptional Long-Term Returns: 447.66% three-year stock price appreciation rewards long-term shareholders
- Clean Asset Base: Current assets of ₹47.41 crores against minimal liabilities provides financial flexibility
⚠ Key Risk Factors
- Collapsing Profitability: 74.63% QoQ net profit decline to ₹0.17 crores raises serious operational concerns
- Abnormal Tax Rate: 61.36% effective tax rate in Q3 FY26 suggests potential tax adjustments or compliance issues
- Weak ROE Profile: 5.90% average ROE indicates poor capital efficiency and value creation
- Extreme Valuation: 96x P/E ratio and 4.95x P/BV unsupported by fundamental performance
- Margin Erosion: PAT margin compression from 48.91% to 12.50% QoQ signals deteriorating economics
- Limited Scale: ₹231 crore market cap and minimal institutional interest reflect lack of market confidence
- High Volatility: 58.37% volatility and 1.50 beta create significant downside risk
Outlook: Critical Monitoring Points for Investors
Positive Catalysts to Watch
- Normalisation of tax rate to historical 16-17% range in Q4 FY26
- Recovery in operating margins towards 50%+ levels
- Sustained revenue growth above 40% YoY
- Improvement in ROE towards double-digit levels
- Increased institutional investor participation
Red Flags Requiring Attention
- Further deterioration in quarterly profitability below ₹0.17 crores
- Continued high tax rates suggesting structural tax issues
- Additional employee cost increases without revenue justification
- Margin compression extending into Q4 FY26
- Stock price breakdown below ₹200 support level
The path forward for Team India Guaranty hinges critically on management's ability to restore profitability and demonstrate sustainable earnings power. The Q4 FY26 results will be crucial in determining whether Q3's profit collapse was an aberration driven by one-time factors or the beginning of a more serious deterioration. Investors should closely monitor whether the abnormally high tax rate normalises and whether operating margins can recover to previous levels. Without clear evidence of improving fundamentals, the current valuation premium appears increasingly untenable.
The Verdict: Avoid at Current Valuation
Score: 37/100
For Fresh Investors: Avoid initiating positions at current levels. The combination of deteriorating quarterly performance, weak ROE profile, and extreme valuation multiples (96x P/E, 4.95x P/BV) creates an unfavourable risk-reward equation. The 61.36% tax rate and collapsing margins raise serious questions about earnings quality and sustainability. Wait for substantial valuation correction and clear evidence of operational improvement before considering entry.
For Existing Holders: Consider reducing exposure and booking profits from the exceptional multi-year rally. While the stock has delivered 447.66% returns over three years, the fundamental deterioration in Q3 FY26 and "Very Expensive" valuation grade suggest limited upside and significant downside risk. The "Flat" financial trend and "Below Average" quality grade provide little support for maintaining positions at current premium valuations. Consider exiting on any technical strength.
Fair Value Estimate: ₹160-180 per share (40-50% downside from current levels), based on normalised earnings, peer P/E multiples of 15-20x, and the company's below-average quality profile. Current pricing appears to discount an optimistic growth scenario that recent results do not support.
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.
