The results paint a stark picture of a company in severe operational difficulty. Nine-month FY26 revenue stands at just ₹5.45 crores, representing a 36.11% decline from the corresponding period last year. With negative operating margins, mounting losses, and rapidly eroding revenue base, Venlon Enterprises faces fundamental questions about business viability. The company's proprietary Mojo score of 17/100 and "Strong Sell" rating reflect these deep-seated concerns, whilst technical indicators signal a mildly bearish trend following the stock's transition from sideways movement on February 3, 2026.
Financial Performance: A Deepening Crisis
The Q3 FY26 performance represents a dramatic deterioration across all key metrics. Net sales of ₹1.30 crores declined 48.82% quarter-on-quarter from ₹2.54 crores in Q2 FY26 and plunged 57.24% year-on-year from ₹3.04 crores in Q3 FY25. This marks the lowest quarterly revenue in recent history, raising serious concerns about demand conditions, competitive positioning, and operational capability.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|
| Dec'25 | 1.30 | -48.82% | -0.70 | -53.85% |
| Sep'25 | 2.54 | +57.76% | -0.46 | -18.11% |
| Jun'25 | 1.61 | -42.70% | -0.99 | -61.49% |
| Mar'25 | 2.81 | -7.57% | -11.72 | -417.08% |
| Dec'24 | 3.04 | -2.25% | -0.44 | -14.47% |
| Sep'24 | 3.11 | +30.67% | -0.42 | -13.50% |
| Jun'24 | 2.38 | — | -0.60 | -25.21% |
Operating profitability has collapsed entirely. The operating profit margin (excluding other income) turned deeply negative at -14.62% in Q3 FY26 compared to a marginally positive 0.66% in Q3 FY25. Operating losses before depreciation, interest, and tax stood at ₹0.19 crores, representing a stark reversal from the ₹0.02 crores operating profit achieved a year earlier. After accounting for depreciation of ₹0.58 crores, the loss before tax widened to ₹0.70 crores from ₹0.44 crores in the year-ago quarter.
The gross profit margin deteriorated to -8.46% in Q3 FY26 from 4.61% in Q3 FY25, indicating that the company is now selling products below their direct cost of production. This unsustainable situation suggests either severe pricing pressure in the market, operational inefficiencies, or a combination of both. PAT margin of -53.85% reflects the complete absence of profitability at any level of operations.
Balance Sheet Distress: Negative Net Worth Concerns
Whilst the quarterly results are alarming, the company's balance sheet position as of March 2025 reveals equally troubling structural issues. Shareholder funds stood at just ₹7.49 crores, a dramatic improvement from the negative ₹80.68 crores in March 2024, primarily driven by reserves and surplus moving from -₹106.80 crores to -₹18.63 crores. However, this improvement appears to have been achieved through debt restructuring rather than operational recovery.
Critical Balance Sheet Concerns
Long-term debt eliminated: The company reduced long-term debt from ₹101.10 crores in March 2024 to zero in March 2025, suggesting a significant debt restructuring or write-off. Whilst this improved the net worth position, it raises questions about the terms and implications of such restructuring.
Book value per share: At ₹-3.84, the negative book value indicates that liabilities exceed assets on a per-share basis, a red flag for equity investors.
Fixed assets declining: Fixed assets fell from ₹35.72 crores to ₹22.63 crores, suggesting asset sales or significant depreciation without corresponding capital expenditure.
The company's return on equity (ROE) of -209.38% for the latest period reflects the severe erosion of shareholder value. Return on capital employed (ROCE) stood at -79.80%, indicating that the company is destroying value on every rupee of capital deployed. These metrics are among the worst in the commodity chemicals sector and signal fundamental business model challenges.
Debt-to-EBITDA ratio of 27.19 times (on an average basis) is exceptionally high, though the recent elimination of long-term debt may improve this metric going forward. The average net debt-to-equity ratio of 1.76 reflects historically high leverage, though current figures may differ following the debt restructuring. With EBIT-to-interest coverage averaging -5.99 times, the company has been unable to service debt obligations from operating profits.
Operational Collapse: Revenue Sustainability in Question
The 57.24% year-on-year revenue decline in Q3 FY26 is not an isolated incident but part of a concerning trend. Nine-month FY26 revenue of ₹5.45 crores represents a 36.11% decline from the corresponding period last year. At this run rate, full-year FY26 revenue would approximate ₹7-8 crores, significantly below the ₹11.00 crores achieved in FY25.
| Financial Year | Revenue (₹ Cr) | YoY Growth | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|
| FY25 | 11.00 | +37.50% | -13.00 | -118.18% |
| FY24 | 8.00 | +700.00% | -1.00 | -12.50% |
| FY23 | 1.00 | -66.67% | -33.00 | -3300.00% |
| FY22 | 3.00 | +200.00% | 2.00 | 66.67% |
| FY21 | 1.00 | -66.67% | -4.00 | -400.00% |
The company's five-year sales growth of 33.48% masks extreme volatility and operational instability. Revenue has swung wildly from ₹1.00 crores to ₹11.00 crores and now appears to be declining again. This pattern suggests an inability to maintain consistent operations or customer relationships. The five-year EBIT growth of -230.21% confirms that revenue growth, when achieved, has not translated into operational profitability.
Sales-to-capital-employed ratio of just 0.15 times indicates extremely poor asset utilisation. For every rupee of capital employed, the company generates only 15 paise of revenue, amongst the lowest efficiency metrics in the manufacturing sector. The debtors turnover ratio of 15.38 times for the half-year period, whilst seemingly healthy, must be viewed in context of the sharply declining revenue base.
Peer Comparison: Significantly Underperforming Industry Standards
When compared to commodity chemicals peers, Venlon Enterprises' financial metrics highlight the severity of its operational challenges. The company's zero return on equity and negative operating margins stand in stark contrast to industry standards, whilst its valuation premium appears unjustified given the weak fundamentals.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity |
|---|---|---|---|---|
| Venlon Enterprises | NA (Loss Making) | 4.07 | 0.00% | 1.76 |
| TCM | NA (Loss Making) | 1.44 | 0.11% | 0.74 |
| Camex | 20.18 | 0.74 | 4.87% | 0.05 |
| Omkar Pharmachem | 157.15 | 3.00 | 0.00% | 0.00 |
| Haryana Leather | 14.28 | 0.67 | 5.84% | -0.16 |
| Deco-Mica | 17.69 | 1.00 | 8.48% | 0.87 |
Venlon Enterprises trades at a price-to-book ratio of 4.07 times, significantly higher than the peer average of approximately 1.40 times, despite having zero return on equity. This valuation disconnect is particularly troubling given that profitable peers like Deco-Mica (ROE: 8.48%) and Haryana Leather (ROE: 5.84%) trade at substantially lower P/BV multiples of 1.00x and 0.67x respectively.
The company's debt-to-equity ratio of 1.76 is amongst the highest in the peer group, though this reflects historical leverage prior to the recent debt restructuring. Most concerning is the complete absence of profitability whilst peers demonstrate varying degrees of operational success. With a market capitalisation of just ₹27.69 crores, Venlon Enterprises ranks fifth amongst its peer group, reflecting investor scepticism about the business's viability.
Valuation Analysis: Premium Unjustified by Fundamentals
Despite the dire operational performance, Venlon Enterprises trades at valuation multiples that appear divorced from fundamental reality. The price-to-book ratio of 4.07 times implies investors are paying ₹4.07 for every rupee of book value, even as the company generates negative returns and mounting losses. This premium is particularly puzzling given the negative book value per share of ₹-3.84.
The enterprise value-to-sales ratio of 3.79 times appears elevated for a company with declining revenue and negative margins. EV/EBITDA and EV/EBIT multiples are negative due to operating losses, rendering traditional valuation frameworks meaningless. The company's overall valuation grade of "Risky" appropriately captures the fundamental concerns, having been downgraded from "Does Not Qualify" status in April 2023.
With no dividend yield and zero dividend payout ratio, there is no income component to justify holding the stock. The proprietary Mojo score of 17/100 places Venlon Enterprises firmly in "Strong Sell" territory, reflecting the confluence of poor quality (below average grade), risky valuation, flat financial trend, and mildly bearish technical indicators.
Shareholding Pattern: Stable but Minimal Institutional Interest
The shareholding pattern reveals a stable but concerning ownership structure. Promoter holding has remained unchanged at 60.38% across the last five quarters, demonstrating commitment but also raising questions about the promoters' ability or willingness to infuse additional capital to support turnaround efforts.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % |
|---|---|---|---|---|---|
| Dec'25 | 60.38% | 0.00% | 0.01% | 0.00% | 0.01% |
| Sep'25 | 60.38% | 0.00% | 0.01% | 0.00% | 0.01% |
| Jun'25 | 60.38% | 0.00% | 0.01% | 0.00% | 0.01% |
| Mar'25 | 60.38% | 0.00% | 0.01% | 0.00% | 0.01% |
| Dec'24 | 60.38% | 0.00% | 0.01% | 0.00% | 0.01% |
Institutional participation is virtually non-existent, with total institutional holdings of just 0.02%. Foreign institutional investors hold no stake, whilst mutual funds and other domestic institutional investors maintain token positions of 0.01% each. This absence of institutional interest is telling – sophisticated investors have clearly assessed the company's prospects and chosen to stay away. The non-institutional shareholding of 39.60% has remained static, suggesting retail investors are neither accumulating nor exiting in significant numbers.
Positively, there is no promoter pledging, which eliminates one potential risk factor. However, with just one mutual fund holding shares and no insurance company participation, the company lacks the institutional support that could provide capital or credibility for a turnaround effort.
Stock Performance: Volatility Without Direction
Venlon Enterprises' stock performance reflects the underlying business volatility, with extreme swings across different time horizons. The stock has declined 13.11% over the past year, underperforming the Sensex's 9.66% gain by 22.77 percentage points. This negative alpha is consistent across most timeframes, indicating systematic underperformance relative to the broader market.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.92% | -0.94% | +2.86% |
| 1 Month | -12.69% | -0.35% | -12.34% |
| 3 Month | -25.14% | -1.52% | -23.62% |
| 6 Month | +9.28% | +3.32% | +5.96% |
| YTD | -17.19% | -2.28% | -14.91% |
| 1 Year | -13.11% | +9.66% | -22.77% |
| 3 Years | +1.92% | +35.81% | -33.89% |
| 5 Years | +140.91% | +59.83% | +81.08% |
The stock's technical profile is mildly bearish, having transitioned from sideways movement on February 3, 2026 at ₹5.73. Currently trading at ₹5.30, the stock sits below all key moving averages – 5-day (₹5.22), 20-day (₹5.57), 50-day (₹6.20), 100-day (₹6.20), and 200-day (₹5.84). This alignment of moving averages above the current price typically signals downward momentum.
The stock's beta of 1.50 indicates high volatility, with movements 50% more pronounced than the broader market. With annualised volatility of 73.42%, Venlon Enterprises falls into the "high risk, low return" category – precisely the combination investors seek to avoid. The risk-adjusted return of -0.18 over one year compares unfavourably with the Sensex's 0.84, confirming that the stock has delivered poor returns even after accounting for its elevated risk profile.
Investment Thesis: Multiple Red Flags, No Clear Catalysts
The investment case for Venlon Enterprises is severely compromised by multiple structural and operational challenges. The company's below-average quality grade reflects weak long-term financial performance, characterised by negative returns on equity and capital, inconsistent revenue generation, and persistent losses. The risky valuation grade highlights the disconnect between price and fundamentals, with elevated multiples unsupported by business performance.
The flat financial trend designation for Q3 FY26 understates the severity of the situation. Whilst technically classified as "flat," the actual performance shows dramatic deterioration with revenue collapsing 57% year-on-year and losses deepening substantially. The nine-month FY26 revenue decline of 36.11% and the lowest debtors turnover ratio in recent history compound these concerns.
Key Concerns
- Revenue collapsed 57.24% YoY to ₹1.30 crores in Q3 FY26
- Operating margin deeply negative at -14.62% vs +0.66% last year
- Nine-month revenue down 36.11%, signalling sustained weakness
- Gross margin negative at -8.46%, selling below cost
- Negative book value per share of ₹-3.84
- Zero institutional interest with just 0.02% holdings
- High volatility (73.42%) with negative risk-adjusted returns
Limited Positives
- Long-term debt eliminated from ₹101 crores to zero
- No promoter pledging of shares
- Stable promoter holding at 60.38%
- Five-year return of 140.91% vs Sensex 59.83%
- Small market cap may offer turnaround optionality
Outlook: Survival Questions Overshadow Growth Prospects
The immediate outlook for Venlon Enterprises centres on fundamental questions of business viability rather than growth prospects. With revenue running at an annualised rate of approximately ₹7-8 crores and operating losses mounting, the company faces critical challenges in maintaining operations. The elimination of long-term debt, whilst improving the balance sheet optics, raises questions about the terms of restructuring and whether operational issues have been addressed.
Critical Red Flags
- Sustained revenue decline with no stabilisation visible
- Operating losses in seven of last seven quarters
- Negative gross margins indicating below-cost selling
- Working capital deterioration and asset base shrinkage
- Complete absence of institutional investor confidence
Turnaround Requirements
- Revenue stabilisation above ₹3 crores quarterly
- Return to positive gross margins
- Clear articulation of business strategy and market positioning
- Capital infusion to support working capital needs
- Demonstrable improvement in asset utilisation metrics
For the company to merit investment consideration, it would need to demonstrate consistent quarterly revenue above ₹3 crores, return to positive operating margins, and provide transparent communication about strategic direction. The current trajectory suggests none of these conditions are likely to be met in the near term. The commodity chemicals sector's modest 3.99% return over the past year provides little tailwind, whilst Venlon's 17.10 percentage point underperformance versus the sector highlights company-specific challenges.
The Verdict: Avoid – Operational Crisis Without Clear Path to Recovery
Score: 17/100
For Fresh Investors: Avoid entirely. The combination of collapsing revenue, negative operating margins, mounting losses, and absence of institutional confidence creates an exceptionally risky investment profile. The 57% year-on-year revenue decline in Q3 FY26 and negative gross margins indicate fundamental business model challenges that require substantial restructuring. With no clear catalysts for improvement and a mildly bearish technical trend, fresh capital deployment carries unacceptable risk.
For Existing Holders: Seriously consider exiting on any price strength. The Q3 FY26 results confirm that operational challenges are intensifying rather than improving. The nine-month revenue decline of 36% and deepening losses suggest the business may be approaching a critical juncture. Whilst the elimination of long-term debt provides temporary balance sheet relief, it does not address the underlying revenue and profitability crisis. The stock's high beta of 1.50 and elevated volatility of 73.42% mean further downside could be swift and severe.
Fair Value Estimate: Given persistent losses, negative returns on capital, and deteriorating operations, establishing a meaningful fair value is challenging. The current price of ₹5.30 appears elevated relative to fundamentals, with significant downside risk if operational trends continue.
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. Investments in equity markets are subject to market risks, and investors may lose their entire capital.
