The September 2025 quarter represents the company's worst operational performance in recent history, with operating profit before depreciation, interest, tax, and other income (PBDIT excl OI) plunging into negative territory at ₹-31.14 crores, compared to a positive ₹23.58 crores in Q1 FY26. This marks a sequential decline of 232.1% and represents the lowest operating profitability across all tracked quarters. The sharp deterioration in core operations, combined with negative profit margins across all metrics, has raised serious questions about the sustainability of Venky's business model in the current operating environment.
Despite modest revenue growth of 3.44% year-on-year, the company's inability to translate top-line expansion into profitability highlights fundamental issues with cost management and operational efficiency. The stock has now declined 19.65% over the past year and trades 31.24% below its 52-week high of ₹2,025.60, reflecting growing investor scepticism about near-term recovery prospects.
Financial Performance: A Quarter of Deterioration
Venky's (India) Q2 FY26 financial performance painted a troubling picture across virtually every metric. Net sales declined 7.50% quarter-on-quarter to ₹800.87 crores from ₹865.83 crores in Q1 FY26, though the company managed a modest 3.44% year-on-year improvement from ₹774.20 crores in Q2 FY25. However, this tepid revenue growth was completely overwhelmed by ballooning operational costs that drove margins deep into negative territory.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 800.87 | -7.50% | +3.44% | -26.53 | -3.31% |
| Jun'25 | 865.83 | +2.69% | +7.15% | 15.83 | 1.83% |
| Mar'25 | 843.16 | -4.36% | -5.89% | 13.30 | 1.58% |
| Dec'24 | 881.61 | +13.87% | — | 20.38 | 2.31% |
| Sep'24 | 774.20 | -4.19% | — | 7.76 | 1.00% |
| Jun'24 | 808.02 | -9.81% | — | 75.18 | 9.30% |
| Mar'24 | 895.94 | — | — | 33.51 | 3.74% |
The operating margin excluding other income collapsed to -3.89% in Q2 FY26 from a positive 2.72% in the previous quarter, representing a staggering 662 basis point deterioration. On an absolute basis, operating profit (PBDIT excl OI) swung from a positive ₹23.58 crores to a loss of ₹31.14 crores. The PAT margin followed a similar trajectory, plummeting to -3.31% from 1.83% quarter-on-quarter, whilst year-on-year comparison showed an even more dramatic decline from the 1.00% margin achieved in Q2 FY25.
The profit before tax (PBT) stood at ₹-35.08 crores in Q2 FY26, compared to a positive ₹21.77 crores in the preceding quarter and ₹11.00 crores in the year-ago period. Notably, the company recorded a tax credit of ₹8.55 crores (effective tax rate of 24.37%) due to the loss, providing marginal cushioning to the final net loss figure. Employee costs rose marginally to ₹64.24 crores from ₹63.23 crores quarter-on-quarter, whilst interest expenses increased slightly to ₹5.04 crores from ₹4.29 crores, reflecting relatively stable financial charges despite the operational turmoil.
Operational Challenges: Margin Pressure Intensifies
The core issue plaguing Venky's (India) in Q2 FY26 was a complete breakdown in operational efficiency. The operating profit before other income plunged to its lowest level across all tracked quarters at ₹-31.14 crores, representing a dramatic reversal from the company's historical ability to generate positive operating cash flows. This deterioration occurred despite relatively stable revenue, suggesting that cost pressures—likely from raw material inflation, feed costs, or operational inefficiencies—overwhelmed the business during the quarter.
Critical Operational Warning
Profit After Tax (Quarterly): At ₹-26.53 crores, PAT has fallen 285.3% compared to the previous four-quarter average, marking the lowest earnings per share (EPS) at ₹-18.83. The operating profit to net sales ratio of -3.89% represents the worst performance on record, whilst profit before tax less other income stood at ₹-45.44 crores, also the lowest tracked level. These metrics collectively signal severe operational distress requiring immediate management intervention.
On a half-yearly basis for H1 FY26 (April-September 2025), the company's performance showed mixed signals. Net sales for the six-month period totalled ₹1,666.70 crores, representing a 5.27% year-on-year increase from ₹1,582.22 crores in H1 FY25. However, the cumulative net profit for H1 FY26 stood at merely ₹-10.70 crores (combining Q1's ₹15.83 crores profit with Q2's ₹26.53 crores loss), compared to ₹82.94 crores in H1 FY25, representing an 87.1% year-on-year decline in profitability.
The company's return on equity (ROE) has deteriorated sharply to 3.88% as of the latest quarter from an average of 11.31% historically, whilst return on capital employed (ROCE) declined to 10.10% from a historical average of 13.01%. These metrics, whilst still positive, indicate weakening capital efficiency and diminishing returns on invested capital. The company's ability to generate adequate returns on shareholder equity has been compromised, raising questions about long-term value creation potential.
Balance Sheet Strength Remains Intact
Despite operational challenges, Venky's (India) maintains a relatively healthy balance sheet position. As of March 2025, the company held shareholder funds of ₹1,475.57 crores with zero long-term debt, making it a net cash company with a debt-to-equity ratio of -0.10. Current assets stood at ₹1,342.52 crores against current liabilities of ₹530.54 crores, providing a comfortable current ratio. The company's fixed assets base of ₹640.98 crores supports ongoing operations, whilst the absence of long-term borrowings provides financial flexibility to weather near-term operational challenges.
Industry Context: Poultry Sector Headwinds
Venky's (India) operates in the integrated poultry sector, a segment characterised by cyclical demand patterns, volatile input costs, and intense competition. The company's poor Q2 FY26 performance reflects broader challenges facing the poultry industry, including elevated feed costs (primarily maize and soybean meal), disease management concerns, and pricing pressures from organised retail chains. The negative operating margins suggest the company was unable to pass on rising input costs to customers, resulting in severe margin compression.
The company's five-year sales growth of just 3.04% annually underscores the challenging operating environment, whilst five-year EBIT growth of 21.41% (now under pressure) had previously demonstrated some operational leverage. However, the recent quarterly performance indicates this leverage has reversed, with fixed costs now overwhelming declining revenue per unit. The FMCG sector broadly has faced headwinds in FY26, but Venky's underperformance relative to the sector's -3.20% one-year return (compared to Venky's -19.65%) highlights company-specific issues beyond sectoral trends.
Peer Comparison: Valuation Discount Reflects Concerns
A comparison with FMCG sector peers reveals Venky's (India) trading at a relative valuation discount, though this appears justified given the operational challenges. The company's price-to-earnings (TTM) ratio of 37.41x sits below the peer average, whilst its price-to-book value of 1.45x is significantly lower than peers such as Vadilal Industries (5.47x), ADF Foods (4.95x), and Tasty Bite Eatables (7.30x). The return on equity of 11.31% (average) lags behind peers like Eveready Industries (26.38%) and Vadilal Industries (17.93%), indicating weaker profitability and capital efficiency.
| Company | P/E (TTM) | P/BV | ROE % | Div Yield % | Debt/Equity |
|---|---|---|---|---|---|
| Venky's (India) | 37.41 | 1.45 | 11.31 | 0.66 | -0.10 |
| Vadilal Industries | 27.21 | 5.47 | 17.93 | 0.40 | 0.23 |
| Eveready Industries | 29.65 | 0.56 | 26.38 | 0.41 | 0.38 |
| Prataap Snacks | NA (Loss Making) | 3.77 | 3.54 | 0.05 | 0.09 |
| ADF Foods | 34.79 | 4.95 | 15.39 | 0.54 | -0.22 |
| Tasty Bite Eatables | 60.63 | 7.30 | 11.79 | 0.02 | 0.18 |
Venky's dividend yield of 0.66% is amongst the highest in the peer group, supported by a conservative payout ratio of 12.47% and the company's recent ₹10 per share dividend (ex-date August 14, 2025). However, the sustainability of this dividend policy appears questionable given the recent quarterly loss and deteriorating profitability trends. The company's net cash position (debt-to-equity of -0.10) provides some comfort compared to leveraged peers, but this financial strength has not translated into operational excellence or shareholder returns.
Valuation Analysis: Fair Value Masks Operational Risks
At the current price of ₹1,392.75, Venky's (India) trades at a P/E (TTM) of 37.41x, representing a premium to some peers but a discount to others. The company's valuation grade has fluctuated significantly over the past year, moving from "Very Attractive" in April 2025 to "Fair" currently, reflecting both price movements and changing earnings expectations. The EV/EBITDA multiple of 21.78x and EV/Sales ratio of 0.59x suggest moderate valuation levels, though these metrics are based on trailing twelve-month figures that may not adequately reflect the recent quarterly deterioration.
The stock currently trades just 0.41% above its 52-week low of ₹1,387.00, having declined 31.24% from its 52-week high of ₹2,025.60. This proximity to multi-month lows reflects investor concerns about earnings sustainability and near-term recovery prospects. The book value per share of ₹1,047.44 provides some downside support, though the P/BV ratio of 1.45x suggests the market is still pricing in a modest premium to net asset value despite operational challenges.
Given the company's current operational trajectory, negative quarterly earnings, and deteriorating margins, the "Fair" valuation assessment appears optimistic. A more conservative fair value estimate would need to incorporate the risk of sustained margin pressure and potential earnings downgrades. Until the company demonstrates a clear path to restoring profitability and positive operating margins, the current valuation offers limited margin of safety for investors.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Venky's (India) shareholding pattern reveals a stable promoter holding of 56.11% that has remained unchanged over the past five quarters. The largest promoter entity, Venkateshwara Hatcheries Pvt Limited, holds 51.61% of the equity, whilst individual promoters including Anuradha Jitendra Desai (3.43%) and Banda Venkatesh Rao (0.47%) account for the remaining promoter stake. Importantly, there is zero promoter pledging, indicating confidence in the business despite recent operational challenges.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % | Non-Inst % |
|---|---|---|---|---|---|---|
| Sep'25 | 56.11 | 1.30 | 0.00 | 0.00 | 0.15 | 42.44 |
| Jun'25 | 56.11 | 1.35 | 0.00 | 0.00 | 0.16 | 42.37 |
| Mar'25 | 56.11 | 1.39 | 0.00 | 0.00 | 0.15 | 42.35 |
| Dec'24 | 56.11 | 1.34 | 0.10 | 0.00 | 0.15 | 42.30 |
| Sep'24 | 56.11 | 1.89 | 0.08 | 0.00 | 0.15 | 41.77 |
Institutional participation remains minimal, with total institutional holdings at just 1.45%. Foreign institutional investors (FIIs) hold 1.30%, down from 1.89% in September 2024, reflecting gradual disinvestment over the past year. Mutual fund holdings have declined to zero as of September 2025 from 0.10% in December 2024, whilst insurance companies maintain no exposure to the stock. The absence of institutional interest is concerning, as it suggests sophisticated investors are avoiding the stock due to perceived risks or limited growth visibility.
Non-institutional investors account for 42.44% of the shareholding, up marginally from 41.77% a year ago. This category includes retail investors and non-institutional entities. The gradual increase in non-institutional holdings, combined with declining FII and mutual fund participation, suggests a shift towards a more retail-dominated shareholder base. Such a composition typically results in higher volatility and reduced liquidity, as retail investors tend to be more sentiment-driven than institutional participants.
Stock Performance: Consistent Underperformance Across Timeframes
Venky's (India) stock performance has been disappointing across virtually all timeframes, with the shares underperforming both the Sensex benchmark and the broader FMCG sector. Over the past year, the stock declined 19.65% whilst the Sensex gained 4.62%, resulting in a negative alpha of -24.27 percentage points. The year-to-date performance is even worse, with shares down 23.39% compared to the Sensex's 6.50% gain, translating to a -29.89 percentage point underperformance.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | -8.44% | -0.11% | -8.33% |
| 1 Week | -8.03% | -0.86% | -7.17% |
| 1 Month | -8.02% | +1.57% | -9.59% |
| 3 Months | -6.53% | +3.22% | -9.75% |
| 6 Months | -19.04% | +3.06% | -22.10% |
| YTD | -23.39% | +6.50% | -29.89% |
| 1 Year | -19.65% | +4.62% | -24.27% |
| 2 Years | -31.52% | +28.14% | -59.66% |
| 3 Years | -30.97% | +36.01% | -66.98% |
The technical picture is equally concerning, with the stock in a "Mildly Bearish" trend that began on November 6, 2025. The shares trade below all key moving averages, including the 5-day (₹1,529.23), 20-day (₹1,483.89), 50-day (₹1,489.96), 100-day (₹1,521.46), and 200-day (₹1,596.31) moving averages. This alignment of moving averages in a descending order confirms the established downtrend and suggests further near-term weakness unless the company delivers positive operational surprises.
The stock's beta of 1.35 indicates higher volatility than the broader market, classifying it as a "High Beta" stock. With an annualised volatility of 26.08% over the past year, Venky's (India) exhibits significantly higher price fluctuations than the Sensex's 12.39% volatility. The risk-adjusted return of -0.75 over the past year (compared to Sensex's +0.37) places the stock in the "Medium Risk Low Return" category—an unfavourable combination for investors seeking either growth or stability.
"Venky's (India) faces a critical juncture: restore operational profitability quickly or risk further erosion of investor confidence and valuation support."
Investment Thesis: Quality Concerns Overshadow Balance Sheet Strength
The investment thesis for Venky's (India) is challenged by multiple headwinds that outweigh the company's balance sheet strengths. The proprietary Mojo Score of 31 out of 100 reflects a "SELL" rating, categorising the stock in the 30-50 score range that warrants consideration for exit. The overall quality grade of "Average" indicates middling long-term financial performance, whilst the negative short-term financial trend highlights recent operational deterioration.
The key concerns limiting the investment appeal include the stock's bearish technical trend, negative financial trajectory, poor long-term growth (3.04% five-year sales CAGR), and consistent underperformance against benchmarks over multiple timeframes. The company's inability to generate positive operating margins in the most recent quarter raises fundamental questions about business model viability in the current operating environment.
Key Strengths & Risk Factors
Key Strengths ✓
- Zero Debt Position: Net cash company with debt-to-equity ratio of -0.10, providing financial flexibility and eliminating refinancing risks.
- No Promoter Pledging: Stable 56.11% promoter holding with zero pledged shares demonstrates promoter confidence and eliminates governance concerns.
- Healthy Balance Sheet: Shareholder funds of ₹1,475.57 crores with current ratio above 2.5x provides cushion to absorb near-term operational challenges.
- Established Market Position: Part of the VH Group, one of Asia's integrated poultry groups with established distribution and brand recognition.
- Dividend Track Record: Recent ₹10 per share dividend payment (0.66% yield) demonstrates commitment to shareholder returns despite challenges.
- Positive Long-Term EBIT Growth: Five-year EBIT growth of 21.41% shows historical ability to improve operational efficiency, though recent trends are concerning.
- Adequate Interest Coverage: Average EBIT to interest ratio of 8.03x provides comfortable debt servicing capacity despite minimal borrowings.
Key Concerns ⚠
- Quarterly Loss: Q2 FY26 net loss of ₹26.53 crores represents a dramatic reversal from profitability and the worst quarterly performance on record.
- Negative Operating Margins: Operating margin of -3.89% (excl OI) indicates severe cost management issues and inability to pass on input cost inflation.
- Deteriorating ROE: Return on equity declined to 3.88% from historical average of 11.31%, signalling weakening capital efficiency and profitability.
- Weak Sales Growth: Five-year sales CAGR of just 3.04% indicates limited top-line momentum and market share challenges in a competitive industry.
- Minimal Institutional Interest: Total institutional holdings of just 1.45% with zero mutual fund exposure suggests sophisticated investors are avoiding the stock.
- Consistent Underperformance: Negative alpha across all timeframes (1-year: -24.27%, 3-year: -66.98%) demonstrates persistent value destruction relative to benchmarks.
- Technical Weakness: Stock trading below all key moving averages in "Mildly Bearish" trend with proximity to 52-week lows suggests further downside risk.
Outlook: What to Watch
Positive Catalysts
- Return to positive operating margins in Q3 FY26 would signal stabilisation of cost pressures and improved pricing power.
- Sequential revenue growth with margin expansion would demonstrate management's ability to navigate industry headwinds effectively.
- Increase in institutional holdings (FII/MF) would validate improving business fundamentals and attract broader investor interest.
- Announcement of strategic initiatives to improve operational efficiency or expand into higher-margin product categories.
Red Flags
- Further quarterly losses or deteriorating margins in Q3 FY26 would confirm structural profitability challenges rather than temporary headwinds.
- Additional decline in institutional holdings or promoter stake reduction would signal loss of confidence from key stakeholders.
- Dividend cut or suspension would eliminate a key investment rationale and signal cash flow concerns despite net cash position.
- Continued stock price weakness with breach of ₹1,387 (52-week low) would trigger technical selling and test investor patience.
The Verdict: Operational Crisis Warrants Caution
Score: 31/100
For Fresh Investors: Avoid initiating positions until the company demonstrates at least two consecutive quarters of positive operating margins and improving profitability trends. The current operational crisis, negative financial trajectory, and lack of institutional support create an unfavourable risk-reward profile.
For Existing Holders: Consider reducing exposure or exiting positions, particularly if the stock rallies towards ₹1,450-1,500 levels. The Q2 FY26 loss represents a serious deterioration in business fundamentals that may take multiple quarters to rectify. Maintain tight monitoring of Q3 FY26 results for signs of stabilisation.
Fair Value Estimate: ₹1,250-1,300 (10-12% downside risk from current levels), reflecting elevated execution risks, negative earnings momentum, and lack of near-term catalysts for re-rating.
Venky's (India) stands at a critical inflection point where management must demonstrate swift and decisive action to restore operational profitability. Whilst the company's debt-free balance sheet and established market position provide some downside protection, the severity of the Q2 FY26 operational breakdown cannot be understated. Until concrete evidence emerges of margin stabilisation and a credible path to sustained profitability, investors are better served waiting on the sidelines or deploying capital in companies with stronger operational momentum and clearer earnings visibility.
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, and all investments carry inherent risks including the potential loss of principal.
