The quarter's dismal performance was driven by a revenue collapse and operating losses, with net sales plummeting 33.35% year-on-year to ₹77.99 crores. Sequential performance was equally concerning, with revenue down 20.08% from Q1 FY26's ₹97.58 crores. Operating margins turned deeply negative at -3.97%, compared to a healthy 14.64% in Q2 FY25, whilst the company posted a pre-tax loss of ₹3.45 crores.
The pharmaceutical manufacturer's troubles extend beyond a single quarter. Over the first half of FY26, the company has recorded cumulative losses of ₹17.84 crores, compared to profits of ₹38.97 crores in H1 FY25. This represents a 145.79% year-on-year decline, signalling fundamental operational challenges rather than temporary headwinds. The stock has underperformed dramatically, delivering a 57.62% negative return over the past year against the Sensex's 8.59% gain—a concerning 66.21 percentage point underperformance.
Quarterly Performance Trend: A Downward Spiral
| Metric | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 77.99 | 97.58 | 71.70 | 93.81 | 117.01 |
| QoQ Growth | -20.08% | +36.09% | -23.57% | -19.83% | -4.86% |
| YoY Growth | -33.35% | -20.66% | -26.70% | — | — |
| Cons. Net Profit (₹ Cr) | -3.62 | -14.22 | -9.66 | 0.52 | 14.29 |
| QoQ Growth | -74.54% | +47.20% | -1957.69% | -96.36% | -42.10% |
| YoY Growth | -125.33% | -157.62% | -245.48% | — | — |
| Operating Margin % | -3.97% | -10.33% | -8.08% | 9.09% | 14.64% |
| PAT Margin % | -4.64% | -14.57% | -13.47% | 0.55% | 12.21% |
The quarterly trend reveals a company in severe distress. After posting robust operating margins of 23.73% in Q1 FY25, Themis Medicare has recorded negative operating profitability for three consecutive quarters. The pattern suggests structural issues rather than cyclical weakness, with revenue declining in four of the last five quarters and profitability evaporating entirely.
Financial Performance: Revenue Drought and Margin Collapse
In Q2 FY26, Themis Medicare's net sales of ₹77.99 crores represented the weakest quarterly performance in over two years, excluding the anomalous Q4 FY25 figure of ₹71.70 crores. The 33.35% year-on-year revenue decline far exceeds normal industry volatility, pointing to significant market share losses or product portfolio challenges. Sequential revenue fell 20.08% from Q1 FY26, suggesting deteriorating momentum rather than seasonal patterns.
Operating profitability has collapsed catastrophically. The company posted an operating loss (excluding other income) of ₹3.10 crores in Q2 FY26, compared to an operating profit of ₹17.13 crores in Q2 FY25—a margin compression of 1,861 basis points. Employee costs remained elevated at ₹24.93 crores, representing 31.97% of sales compared to 20.84% in the year-ago quarter, indicating severe operating deleverage. Total expenditure as a percentage of sales has ballooned, with the company unable to adjust its cost structure to match declining revenues.
The profit and loss account tells a grim story. After recording an operating loss, the company's interest burden of ₹2.76 crores and depreciation of ₹2.57 crores pushed pre-tax losses to ₹3.45 crores. Even with a minimal tax credit of ₹0.16 crores, the company posted a standalone net loss of ₹5.36 crores. The consolidated net loss of ₹3.62 crores suggests subsidiaries provided some cushion, but the overall picture remains deeply troubling. PAT margins contracted to -4.64% from a healthy 12.21% in Q2 FY25.
Critical Warning: Profitability Crisis
Three consecutive quarters of operating losses signal fundamental business model challenges. With revenue down 33% year-on-year and operating margins at -3.97%, Themis Medicare faces an urgent need for strategic restructuring. The company's inability to maintain pricing power or control costs suggests competitive pressures or product portfolio weaknesses that require immediate management attention.
Balance Sheet Concerns: Deteriorating Returns
Whilst Themis Medicare maintains a relatively healthy balance sheet with shareholder funds of ₹402.60 crores as of March 2025 and manageable debt levels, profitability metrics have deteriorated sharply. Return on Equity (ROE) for H1 FY26 has plummeted to -3.47%, a dramatic fall from the company's historical average of 15.48%. This represents the lowest ROE in the company's recent history, reflecting the severe erosion of shareholder value through sustained losses.
Return on Capital Employed (ROCE) has similarly collapsed to 8.28% from a historical average of 15.02%, indicating declining efficiency in capital utilisation. The company's average EBIT to interest coverage of 4.88x provides some comfort regarding debt servicing capability, but with current quarter operating losses, this metric becomes less relevant. The debt-to-EBITDA ratio of 1.40x appears manageable on paper, but with EBITDA turning negative in recent quarters, this calculation loses meaning.
Fixed assets stood at ₹172.36 crores as of March 2025, up from ₹168.37 crores the previous year, suggesting continued capital expenditure even as operations deteriorate. Current assets of ₹303.87 crores provide reasonable liquidity, though cash and cash equivalents for H1 FY26 fell to ₹12.75 crores—the lowest in recent periods. The company's investments of ₹94.77 crores offer some financial flexibility, but sustained losses will inevitably pressure the balance sheet.
Peer Comparison: Underperforming the Sector
| Company | P/E (TTM) | P/BV | ROE % | Div Yield |
|---|---|---|---|---|
| Themis Medicare | NA (Loss Making) | 2.72x | 15.48% | 0.42% |
| Syncom Formulations | 25.08x | 4.62x | 144.42% | — |
| Hester Biosciences | 33.18x | 4.31x | 11.93% | 0.41% |
| Bajaj Healthcare | 27.83x | 2.91x | 15.14% | 0.22% |
| Jagsonpal Pharma | 32.63x | 5.54x | 16.16% | 1.19% |
| Sigachi Industries | 22.03x | 2.66x | 14.08% | 0.28% |
Themis Medicare's current loss-making status places it at a significant disadvantage versus profitable peers. Whilst the company's price-to-book ratio of 2.72x appears reasonable compared to the peer average of approximately 4.0x, this reflects market recognition of deteriorating fundamentals rather than value. The company's historical ROE of 15.48% sits in line with peers like Bajaj Healthcare (15.14%) and Sigachi Industries (14.08%), but current negative returns destroy this comparison.
The pharmaceutical sector delivered a 3.67% return over the past year, whilst Themis Medicare plunged 57.62%—a massive 61.29 percentage point underperformance. This suggests company-specific challenges far exceeding sector headwinds. With a market capitalisation of ₹1,080.55 crores, Themis Medicare ranks sixth amongst its peer group, reflecting its small-cap status and limited institutional interest (just 0.07% institutional holdings).
Valuation Analysis: Risky at Any Price
Themis Medicare's valuation metrics paint a picture of a company in distress. The stock trades at NA (loss-making) on a trailing P/E basis, immediately disqualifying traditional earnings-based valuation approaches. The price-to-book ratio of 2.72x suggests the market values the company at 2.72 times its net asset value of ₹40.16 per share, despite ongoing losses eroding that book value quarter after quarter.
Enterprise value metrics appear distorted by negative earnings. The EV/EBITDA multiple of 119.14x reflects minimal trailing EBITDA generation, whilst the negative EV/EBIT of -1166.35x results from operating losses. The EV/Sales ratio of 3.07x appears elevated for a loss-making pharmaceutical company, suggesting the market has not fully repriced the stock for its deteriorating fundamentals.
The company's valuation grade has deteriorated to "Risky" as of August 2025, having previously oscillated between "Expensive," "Fair," and "Attractive" through mid-2025. This reflects the market's growing recognition of fundamental challenges. With the stock trading at ₹117.40, down 62.57% from its 52-week high of ₹313.65, significant value destruction has already occurred. However, the absence of near-term profitability visibility makes even current levels difficult to justify.
The dividend yield of 0.42% (based on the latest dividend of ₹0.50 per share) offers minimal compensation for the substantial risks. With a dividend payout ratio of just 10.57% historically, the company has retained most earnings, yet failed to generate returns for shareholders. The sustainability of even this modest dividend appears questionable given current losses.
Shareholding Pattern: Minimal Institutional Confidence
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 2.43% | 2.43% | 2.43% | 0.00% |
| FII | 0.06% | 0.10% | 0.14% | -0.04% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.01% | 0.01% | 0.01% | 0.00% |
| Non-Institutional | 32.78% | 32.74% | 32.70% | +0.04% |
The shareholding pattern reveals an alarming lack of institutional confidence. Promoter holding stands at an exceptionally low 2.43%, unchanged over recent quarters, suggesting minimal skin in the game from the founding group. This extraordinarily low promoter stake raises questions about management commitment and alignment with minority shareholders. Foreign Institutional Investors (FIIs) have been steadily reducing exposure, declining from 0.14% in March 2025 to just 0.06% in September 2025.
Perhaps most concerning is the complete absence of mutual fund and insurance company holdings—both at 0.00%. This suggests sophisticated institutional investors have entirely avoided the stock or exited positions, likely due to concerns about the business outlook. Other domestic institutional investors (DIIs) maintain a negligible 0.01% stake. The bulk of free float (32.78%) rests with non-institutional investors, primarily retail shareholders who may lack the resources to conduct deep fundamental analysis.
The pledged shares percentage of 2.43% equals the entire promoter holding, indicating the promoters have pledged their entire stake—a significant red flag suggesting financial stress or liquidity constraints at the promoter level. This pattern of minimal promoter holding, declining institutional interest, and full promoter pledging creates a toxic combination that typically precedes further value destruction.
Stock Performance: Catastrophic Wealth Destruction
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.29% | +1.24% | +0.05% |
| 1 Month | -5.82% | +2.70% | -8.52% |
| 3 Months | +15.84% | +4.52% | +11.32% |
| 6 Months | -13.10% | +3.58% | -16.68% |
| YTD | -55.39% | +7.81% | -63.20% |
| 1 Year | -57.62% | +8.59% | -66.21% |
| 2 Years | -28.22% | +29.74% | -57.96% |
| 3 Years | +30.30% | +36.71% | -6.41% |
Themis Medicare's stock performance over the past year ranks amongst the worst in the pharmaceutical sector. The 57.62% decline obliterates shareholder wealth, with the stock falling from approximately ₹277 a year ago to ₹117.40 currently. Year-to-date performance is equally disastrous, with a 55.39% decline against the Sensex's 7.81% gain—a 63.20 percentage point underperformance that reflects the market's loss of confidence in the company's prospects.
The stock trades 62.57% below its 52-week high of ₹313.65, reached in early 2025 before the extent of operational challenges became apparent. From its 52-week low of ₹98.00, the stock has recovered just 19.80%, suggesting limited buying interest even at distressed levels. Technical indicators paint a bleak picture, with the stock trading below all key moving averages—5-day (₹119.39), 20-day (₹123.67), 50-day (₹123.40), 100-day (₹119.99), and 200-day (₹139.45).
The stock's beta of 1.35 indicates higher volatility than the broader market, with a risk-adjusted return of -0.95 over the past year reflecting terrible performance even after accounting for volatility. The Sharpe ratio is deeply negative, confirming investors have been punished with losses despite taking on above-market risk. The three-month return of +15.84% represents a dead-cat bounce from severely oversold levels rather than any fundamental improvement.
"With three consecutive quarters of losses, collapsing margins, minimal institutional support, and fully pledged promoter holdings, Themis Medicare exemplifies a value trap—cheap for good reason."
Investment Thesis: Multiple Red Flags Converge
The investment case for Themis Medicare has deteriorated across all dimensions. The company's proprietary Mojo Score of just 23 out of 100 places it firmly in "STRONG SELL" territory, having fallen from 50 (HOLD) in July 2024. The valuation grade of "RISKY" reflects not cheapness but fundamental distress. Quality grading of "AVERAGE" appears generous given current operational performance. The financial trend is unambiguously "NEGATIVE," with key metrics deteriorating quarter after quarter.
Technical analysis offers no comfort, with a "MILDLY BEARISH" trend and the stock trading below all significant moving averages. Delivery volumes have spiked 80% over the past month, but this likely reflects distress selling rather than accumulation. The convergence of negative fundamental trends, technical weakness, deteriorating quality metrics, and risky valuation creates a perfect storm for continued underperformance.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Long Operating History: Established in 1969 with decades of pharmaceutical manufacturing experience
- Manageable Debt Levels: Debt-to-equity ratio of 0.17 provides financial flexibility
- Asset Base: Fixed assets of ₹172.36 crores and investments of ₹94.77 crores provide some cushion
- Historical Performance: Five-year sales CAGR of 13.85% demonstrates past growth capability
- Cash Flow Generation: Annual operating cash flow of ₹34.71 crores in FY25 shows some operational resilience
⚠ KEY CONCERNS
- Sustained Losses: Three consecutive quarters of operating and net losses with no turnaround visibility
- Revenue Collapse: 33% YoY decline in Q2 FY26 sales suggests severe market share loss or product issues
- Margin Destruction: Operating margins crashed from +14.64% to -3.97% year-on-year
- Promoter Concerns: Exceptionally low 2.43% promoter holding, fully pledged, signals lack of commitment
- Zero Institutional Interest: No mutual fund or insurance holdings; FIIs exiting steadily
- Negative Returns: ROE of -3.47% and ROCE of 8.28% reflect capital destruction
- Stock Devastation: 57.62% decline over past year with 66.21% underperformance vs Sensex
Outlook: What to Watch
POSITIVE CATALYSTS (Low Probability)
- Management announces comprehensive restructuring plan with credible execution roadmap
- Revenue stabilisation in Q3 FY26 with return to positive operating margins
- Strategic partnership or acquisition by larger pharmaceutical company
- Promoter increases stake significantly and un-pledges existing holdings
- New product launches or regulatory approvals that can drive revenue recovery
RED FLAGS (High Probability)
- Q3 FY26 results show continued revenue decline and operating losses
- Further deterioration in working capital or cash position requiring additional debt
- Additional promoter stake pledging or selling by institutional investors
- Dividend suspension or further reduction given loss-making status
- Regulatory issues, compliance failures, or product recalls
- Credit rating downgrade or covenant breaches on existing debt
The outlook for Themis Medicare remains deeply concerning. Without a clear turnaround plan, credible management communication, or stabilisation in operating metrics, the stock faces continued pressure. Investors should watch Q3 FY26 results (due January 2026) closely for any signs of revenue stabilisation or margin recovery. However, given the magnitude of recent deterioration, a quick turnaround appears unlikely. The company requires fundamental strategic restructuring, not just operational fine-tuning.
The Verdict: Exit Recommended
Score: 23/100
For Fresh Investors: Avoid entirely. The combination of sustained losses, collapsing revenues, minimal promoter commitment, zero institutional interest, and negative trends across all parameters makes this an uninvestable proposition. Even at ₹117.40, the stock offers no margin of safety given the absence of earnings visibility and continued value destruction.
For Existing Holders: Consider exiting on any relief rally. With three consecutive quarters of losses, operating margins at -3.97%, promoter holdings fully pledged at just 2.43%, and no institutional support, the probability of further downside significantly exceeds recovery potential. The 57.62% decline over the past year may be just the beginning if operational trends do not reverse quickly.
Fair Value Estimate: Not applicable given loss-making status. Book value of ₹40.16 per share provides a theoretical floor, but continued losses will erode this rapidly. Current price of ₹117.40 implies the market still values the company at 2.72x book value despite negative earnings—this premium appears unjustified and vulnerable to further compression.
Rationale: Themis Medicare exhibits all the hallmarks of a value trap—a stock that appears cheap but continues to destroy shareholder wealth. The convergence of operational losses, revenue decline, margin collapse, minimal promoter stake (fully pledged), zero institutional confidence, and negative trends across valuation, quality, financial, and technical parameters creates an overwhelmingly bearish case. Until management demonstrates concrete evidence of turnaround through stabilised revenues and positive operating margins, the stock should be avoided.
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 November 18, 2025, and may change with subsequent developments.
