The company's Q3 FY26 results reveal a business heavily dependent on non-operating income to sustain profitability. Whilst net sales reached a quarterly high of ₹17.57 crores in Q3 FY26, representing a 30.43% year-on-year increase, the quality of earnings remains questionable. Operating profit excluding other income stood at ₹1.98 crores with an 11.13% margin, a significant improvement from the 6.96% margin in Q3 FY23, yet this improvement follows a period of operating losses in previous quarters.
For the nine-month period ending December 2025, the company reported consolidated net profit of ₹3.15 crores compared to a loss of ₹1.36 crores in the corresponding period of FY23. This turnaround, however, is largely attributable to exceptional other income rather than fundamental operational improvements in the core tea business.
Financial Performance: Volatile Margins and Inconsistent Profitability
The Peria Karamalai Tea's financial trajectory over recent quarters paints a picture of extreme volatility. Net sales have fluctuated considerably, ranging from ₹11.10 crores in Q1 FY24 to ₹17.94 crores in Q3 FY23. In Q3 FY26, sales reached ₹17.57 crores, marking a 34.67% quarter-on-quarter increase from ₹13.05 crores in Q2 FY26 and a 30.43% year-on-year improvement.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Operating Margin (Excl OI) | Net Profit (₹ Cr) | YoY Change |
|---|---|---|---|---|---|
| Q3 FY26 | 17.57 | +34.67% | 11.13% | 0.88 | +2,833.33% |
| Q2 FY26 | 13.05 | — | — | -1.13 | — |
| Q1 FY24 | 11.10 | -5.37% | 36.58% | 1.96 | — |
| Q4 FY24 | 11.60 | -34.79% | 5.09% | 3.69 | -371.32% |
| Q3 FY24 | 17.79 | +34.67% | 11.13% | 0.82 | +2,833.33% |
| Q2 FY24 | 13.21 | +19.01% | -4.84% | -1.13 | -266.18% |
| Q3 FY23 | 13.64 | -23.97% | 6.96% | 0.03 | -95.59% |
| Q2 FY23 | 17.94 | — | 10.87% | 0.68 | — |
Operating margins excluding other income have oscillated dramatically, from a low of -4.84% in Q2 FY24 to a high of 36.58% in Q1 FY24. The Q3 FY26 margin of 11.13%, whilst positive, remains modest and raises questions about the sustainability of profitability without external income support. Employee costs, a significant burden for labour-intensive tea estates, stood at ₹6.87 crores in Q3 FY26, consuming 39.10% of net sales.
The PAT margin in Q3 FY26 was 4.61%, a substantial decline from the 17.66% achieved in Q1 FY24, highlighting the inconsistency in converting sales into bottom-line profits. For the full year FY24, the company reported net sales of ₹53.00 crores with a PAT margin of 9.40%, representing a modest 3.90% year-on-year revenue growth but a turnaround from the ₹3.00 crore loss in FY23.
Critical Concern: Other Income Dependency
In Q3 FY26, other income of ₹0.15 crores represented 41.19% of profit before tax. This heavy reliance on non-operating income to support profitability is a red flag, indicating that the core tea operations are barely breaking even. In Q4 FY24, other income surged to ₹5.21 crores, representing an extraordinary 113.51% of PBT, which artificially inflated that quarter's results.
Operational Challenges: Weak Return Metrics and Capital Inefficiency
The Peria Karamalai Tea's operational efficiency metrics paint a concerning picture. The company's average return on equity (ROE) stands at a meagre 1.88%, significantly below industry standards and indicating poor capital utilisation. The latest ROE for FY24 was 2.80%, barely improved from the average and far below what investors expect from a profitable enterprise.
Return on capital employed (ROCE) is equally underwhelming at an average of 2.55%, with the latest figure for FY24 at just 1.31%. For the half-year period of FY26, ROCE turned negative at -0.16%, marking the lowest level and signalling deteriorating operational returns. This metric is particularly troubling as it suggests the company is not generating adequate returns from the capital deployed in its tea estates and production facilities.
The company's balance sheet reveals modest leverage with a debt-to-equity ratio of 0.04 based on net debt, indicating low financial risk. Long-term debt has declined from ₹8.23 crores in FY23 to ₹5.79 crores in FY24, demonstrating some deleveraging. However, the average debt-to-EBITDA ratio of 7.12 times suggests that whilst absolute debt levels are manageable, earnings are insufficient to comfortably service obligations.
Sales-to-capital-employed efficiency stands at a weak 0.24 times on average, indicating that the company generates only ₹0.24 in sales for every rupee of capital employed. This low asset turnover ratio reflects the capital-intensive nature of tea cultivation but also highlights potential underutilisation of the company's 8,000 acres of tea estates.
Balance Sheet Snapshot
As of March 2024, shareholder funds stood at ₹191.22 crores, comprising ₹3.10 crores of share capital and ₹188.12 crores of reserves. The company holds substantial investments of ₹159.37 crores, up from ₹115.54 crores in FY23, which likely generate the other income that supports profitability. Fixed assets totalled ₹27.94 crores, representing the tea estates and processing facilities.
Cash Flow Analysis: Operational Strain and Investment Liquidation
The company's cash flow statement for FY24 reveals operational challenges. Cash flow from operations was a modest ₹1.00 crore, a significant recovery from the negative ₹29.00 crores in FY23 but still indicating weak operational cash generation. The FY23 figure was impacted by adverse changes in working capital of ₹25.00 crores.
Interestingly, cash flow from investing activities was positive at ₹5.00 crores in FY24, suggesting the company liquidated some investments to support operations. This follows a substantial positive cash flow from investing of ₹42.00 crores in FY23, further indicating asset monetisation rather than capital investment in growth.
Cash flow from financing activities was negative at ₹5.00 crores in FY24, reflecting debt repayment and dividend distribution. The company's closing cash position improved to ₹13.00 crores in FY24 from ₹12.00 crores in FY23, providing some liquidity buffer but raising questions about the sustainability of dividend payments given the weak operational cash generation.
Industry Leadership: How The Peria Karamalai Tea Compares to Peers
Within the FMCG sector's tea segment, The Peria Karamalai Tea's competitive positioning is weak. A comparison with peer companies reveals significant valuation and performance gaps that justify investor caution.
| Company | P/E Ratio (TTM) | P/BV Ratio | ROE % | Dividend Yield | Debt to Equity |
|---|---|---|---|---|---|
| The Peria Karamalai | 39.85x | 1.11x | 1.88% | 0.15% | 0.04 |
| Jay Shree Tea | 11.15x | 0.54x | 3.74% | 0.62% | 0.71 |
| Universus Photo | NA (Loss Making) | 0.25x | 10.81% | — | -0.32 |
| Jeyyam Global | 9.07x | 1.20x | 12.93% | — | 0.30 |
| Madhusudan Masala | 16.49x | 1.97x | 16.41% | — | 0.69 |
| Gillanders Arbuthnot | 13.58x | 0.73x | 2.28% | — | 0.57 |
The Peria Karamalai Tea trades at a substantial valuation premium with a P/E ratio of 39.85 times, significantly higher than peers like Jay Shree Tea (11.15x) and Jeyyam Global (9.07x). This premium is unjustified given the company's ROE of 1.88%, which is the lowest in the peer group excluding Gillanders Arbuthnot's 2.28%. Peers like Jeyyam Global and Madhusudan Masala deliver ROE of 12.93% and 16.41% respectively, demonstrating far superior capital efficiency.
The company's price-to-book ratio of 1.11 times is higher than most peers, with only Madhusudan Masala and Jeyyam Global trading at comparable or higher multiples. However, those companies justify their valuations with double-digit ROE figures. The Peria Karamalai Tea's dividend yield of 0.15% is the lowest among peers, with Jay Shree Tea offering 0.62%, further diminishing the investment case.
Valuation Analysis: Expensive Multiples for Weak Fundamentals
The company's current valuation is classified as "Very Expensive" based on proprietary assessment, a grade that has oscillated between "Expensive" and "Very Expensive" over recent months. At a P/E ratio of 39.85 times trailing twelve-month earnings, the stock trades at a significant premium to both its peer group and broader market multiples.
The EV-to-EBITDA multiple of 36.86 times is extraordinarily high, indicating that investors are paying a steep price for each rupee of operating earnings. The EV-to-EBIT ratio of 84.60 times is even more concerning, reflecting the company's weak operating profitability. The EV-to-sales ratio of 4.11 times suggests the market is valuing the company at over four times its annual revenue, a premium typically reserved for high-growth, high-margin businesses.
The price-to-book ratio of 1.11 times means the stock trades at a modest premium to book value of ₹617.66 per share. Whilst not excessive in absolute terms, this premium is difficult to justify given the company's weak return on equity. Typically, companies trading above book value should demonstrate ROE exceeding their cost of equity, which The Peria Karamalai Tea clearly does not.
The dividend yield of 0.15% is negligible, offering minimal income support to investors. The latest dividend of ₹1.00 per share represents a payout ratio of 128.41%, meaning the company distributed more in dividends than it earned in profits—a clearly unsustainable practice that depletes reserves.
Shareholding Pattern: Promoter Accumulation Amidst Weak Performance
The shareholding pattern reveals gradual promoter accumulation over recent quarters, with promoter holding increasing from 63.78% in December 2024 to 65.70% in December 2025. This represents a cumulative increase of 1.92 percentage points, with sequential increases of 0.41%, 0.59%, and 0.92% in the last three quarters.
| Quarter | Promoter % | QoQ Change | FII % | MF % | Insurance % | Non-Institutional % |
|---|---|---|---|---|---|---|
| Dec'25 | 65.70% | +0.92% | 0.00% | 0.00% | 3.29% | 30.29% |
| Sep'25 | 64.78% | +0.59% | 0.00% | 0.00% | 3.29% | 31.21% |
| Jun'25 | 64.19% | 0.00% | 0.00% | 0.00% | 3.29% | 31.80% |
| Mar'25 | 64.19% | +0.41% | 0.00% | 0.00% | 3.29% | 31.80% |
| Dec'24 | 63.78% | — | 0.00% | 0.00% | 3.29% | 32.21% |
The promoter group is led by Placid Limited with 38.80% stake, followed by Kiran Vyapar Limited (15.19%) and Maharaja Shree Umaid Mills Limited (3.92%). The steady increase in promoter holding could be interpreted as confidence in the business, though it also reflects the absence of institutional interest. Foreign institutional investors (FIIs) and mutual funds have zero exposure to the stock, a telling indicator of institutional scepticism.
Insurance companies hold a stable 3.29% stake, unchanged over the past five quarters, whilst other domestic institutional investors (DIIs) maintain 0.72%. The non-institutional shareholding has declined from 32.21% to 30.29%, mirroring the promoter accumulation. The complete absence of FII and mutual fund participation, combined with low institutional holdings of just 4.01%, suggests sophisticated investors are avoiding the stock due to fundamental concerns.
Stock Performance: Significant Underperformance Across Timeframes
The Peria Karamalai Tea's stock performance has been disappointing across most timeframes, with particularly severe underperformance in recent months. Year-to-date, the stock has declined 21.55% compared to the Sensex's 1.75% decline, representing negative alpha of 19.80 percentage points. The one-month return of -18.62% versus the Sensex's -2.37% decline highlights acute selling pressure.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 1.24% | 2.29% | -1.05% |
| 1 Month | -18.62% | -2.37% | -16.25% |
| 3 Month | 1.44% | -0.29% | +1.73% |
| 6 Month | 17.02% | 3.89% | +13.13% |
| YTD | -21.55% | -1.75% | -19.80% |
| 1 Year | 1.61% | 8.48% | -6.87% |
| 2 Years | 120.31% | 16.16% | +104.15% |
| 3 Years | 194.47% | 37.62% | +156.85% |
The one-year return of 1.61% significantly lags the Sensex's 8.48% gain, resulting in negative alpha of 6.87%. However, longer-term performance tells a different story. Over two years, the stock has delivered 120.31% returns versus the Sensex's 16.16%, generating positive alpha of 104.15 percentage points. The three-year return of 194.47% compared to the Sensex's 37.62% demonstrates exceptional historical outperformance.
This divergence between recent weakness and historical strength suggests the stock may have experienced a speculative rally in prior years that is now correcting. The stock currently trades at ₹692.00, down 31.75% from its 52-week high of ₹1,013.90 reached in recent months, but still 22.48% above its 52-week low of ₹565.00.
From a technical perspective, the stock is classified as "Mildly Bullish" as of February 02, 2026, having recently shifted from "Sideways" trend. However, the stock trades below all major moving averages including the 5-day (₹669.27), 20-day (₹696.39), 50-day (₹757.11), 100-day (₹754.02), and 200-day (₹746.51) moving averages, indicating weak momentum and overhead resistance.
The stock's beta of 1.50 indicates high volatility, moving 50% more than the market. Combined with a volatility measure of 60.23% over one year, the stock is classified as "High Risk Low Return," offering minimal returns relative to the substantial risk undertaken. The sector comparison shows the stock's 1.61% annual return significantly underperforms the FMCG sector's 12.45% return, highlighting sector-relative weakness.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
The investment thesis for The Peria Karamalai Tea is fundamentally challenged by structural weaknesses that outweigh any potential positives. The company's proprietary Mojo Score of 37 out of 100 places it firmly in "SELL" territory, with the recommendation to consider selling and look for exit opportunities.
The four key assessment parameters paint a concerning picture. Valuation is graded as "Very Expensive," with the stock trading at unjustifiable multiples relative to its operational performance. Quality is assessed as "Below Average," reflecting weak long-term financial performance characterised by negative five-year sales growth of -4.25% and EBIT growth of -160.80%. The financial trend is currently "Flat," indicating no meaningful improvement momentum. Technical indicators show "Mildly Bullish" trend, though the stock trades below all major moving averages.
Key Strengths ✓
- No Promoter Pledging: Zero pledged shares indicate promoter confidence and financial stability
- Gradual Promoter Accumulation: Promoter stake increased from 63.78% to 65.70% over past year
- Low Debt Levels: Net debt-to-equity of 0.04 indicates minimal financial leverage risk
- Consistent Dividend Payer: Company maintains dividend distribution despite weak earnings
- Established Heritage: Century-old company with tea estates in high-yielding zones
- Substantial Investment Portfolio: Investments of ₹159.37 crores provide asset backing and income support
Key Concerns ⚠
- Extremely Weak ROE: 1.88% return on equity indicates poor capital utilisation and value destruction
- Heavy Other Income Dependency: Core operations barely profitable; 41.19% of PBT from non-operating sources
- Negative Long-Term Growth: Five-year sales growth of -4.25% and EBIT growth of -160.80%
- Excessive Valuation: P/E of 39.85x and EV/EBITDA of 36.86x unjustified by fundamentals
- Zero Institutional Interest: No FII or mutual fund holdings indicate sophisticated investor avoidance
- Unsustainable Dividend: Payout ratio of 128.41% exceeds earnings, depleting reserves
- Weak Cash Generation: Operating cash flow of only ₹1.00 crore in FY24 indicates operational strain
Outlook: What Lies Ahead for Investors
The forward outlook for The Peria Karamalai Tea requires careful monitoring of several critical factors that could determine whether the company can achieve sustainable profitability or continues its pattern of earnings volatility.
Positive Catalysts
- Sustained improvement in operating margins above 15% for three consecutive quarters
- Reduction in other income dependency to below 20% of PBT
- Achievement of ROE above 10% indicating improved capital efficiency
- Institutional investor participation signalling quality recognition
- Consistent positive operating cash flow generation above ₹5 crores quarterly
Red Flags to Monitor
- Return to negative operating margins indicating core business deterioration
- Further increase in other income dependency above 50% of PBT
- ROE declining below 1% or turning negative
- Continued absence of institutional investors for more than two quarters
- Operating cash flow turning negative again
- Dividend payout ratio remaining above 100% for consecutive years
For the tea industry, key external factors include commodity price trends for tea leaves, labour cost inflation, weather patterns affecting crop yields, and export demand dynamics. The Peria Karamalai Tea's ability to navigate these industry headwinds whilst improving operational efficiency will determine its investment merit going forward.
The Verdict: Avoid This Value Trap
Score: 37/100
For Fresh Investors: Avoid initiating positions. The combination of weak fundamentals, excessive valuation, and structural operational challenges makes this an unattractive investment. Better opportunities exist within the FMCG sector with stronger earnings quality and reasonable valuations.
For Existing Holders: Consider exiting on any relief rallies. The stock's 21.55% year-to-date decline reflects deteriorating investor confidence. With ROE of just 1.88%, unsustainable dividend payout of 128.41%, and heavy dependence on other income, the risk-reward profile is unfavourable. The absence of institutional interest and "Very Expensive" valuation grade provide limited downside protection.
Fair Value Estimate: ₹450-500 (35% downside from current levels), based on normalised P/E of 12-15x applied to sustainable earnings excluding exceptional other income.
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 views expressed are based on data available as of February 03, 2026, and are subject to change.
