With a market capitalisation of just ₹97.00 crores, Vikram Kamats operates in the competitive leisure services sector, running a chain of restaurants under the Kamats brand. The company's latest quarterly performance reveals a troubling disconnect between revenue growth and profitability, with an alarming tax rate of 90.00% in Q2 FY26 virtually wiping out pre-tax profits. The micro-cap stock has underperformed significantly, delivering a negative 24.01% return over the past year against the Sensex's 9.01% gain, translating to an alpha of -33.02%.
Financial Performance: Revenue Growth Masks Profitability Crisis
In Q2 FY26, Vikram Kamats reported net sales of ₹12.00 crores, representing a 7.34% sequential decline from ₹12.95 crores in Q1 FY26 but a robust 42.18% year-on-year increase from ₹8.44 crores in Q2 FY25. However, the revenue growth story loses its lustre when examined alongside profitability metrics. The company's profit before tax stood at a mere ₹0.20 crores in Q2 FY26, down from ₹0.38 crores in the previous quarter, with an exceptionally high tax rate of 90.00% reducing net profit to just ₹0.01 crores on a standalone basis.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 (Q2 FY26) | 12.00 | -7.34% | 0.03 | -72.73% | 21.0% |
| Jun'25 (Q1 FY26) | 12.95 | +11.54% | 0.11 | +10.00% | 21.85% |
| Mar'25 (Q4 FY25) | 11.61 | +12.28% | 0.10 | -56.52% | 16.19% |
| Dec'24 (Q3 FY25) | 10.34 | +22.51% | 0.23 | +91.67% | 20.12% |
| Sep'24 (Q2 FY25) | 8.44 | -0.94% | 0.12 | -20.00% | 17.54% |
| Jun'24 (Q1 FY25) | 8.52 | -0.35% | 0.15 | +200.00% | 18.19% |
| Mar'24 (Q4 FY24) | 8.55 | — | 0.05 | — | 11.7% |
The operating margin excluding other income stood at 21.0% in Q2 FY26, down 85 basis points from 21.85% in Q1 FY26, though still significantly improved from the 11.7% recorded in Mar'24. Operating profit (PBDIT excluding other income) came in at ₹2.52 crores, declining from ₹2.83 crores sequentially. Employee costs remained relatively stable at ₹3.68 crores, whilst interest expenses declined to ₹0.69 crores from ₹0.90 crores in the previous quarter. Depreciation increased to ₹2.01 crores from ₹1.85 crores, reflecting the company's ongoing capital expenditure programme.
The most alarming aspect of Q2 FY26 results was the tax rate of 90.00%, which appears to be an anomaly compared to the 65.79% in Q1 FY26 and the historical average. This excessive tax burden compressed the already thin profit after tax margin to a mere 0.08%, down from 1.0% in the previous quarter. On a half-yearly basis (H1 FY26), the company posted consolidated net profit of ₹0.14 crores on revenues of ₹24.95 crores, representing a PAT margin of just 0.56%.
Operational Challenges: Weak Returns and High Leverage
Beyond the quarterly volatility, Vikram Kamats faces structural challenges in operational efficiency and capital productivity. The company's average return on capital employed (ROCE) stands at just 6.25%, whilst the latest ROCE has deteriorated to 2.01%, signalling weak capital efficiency. The average return on equity (ROE) of 6.38% is equally underwhelming, with the latest ROE at a concerning 0.81%. These metrics place the company firmly in the "below average" quality category, reflecting its struggle to generate adequate returns on invested capital.
Critical Concern: Capital Efficiency Deterioration
ROCE collapsed to 2.01% in the latest period, down from an already weak 6.25% average. This indicates the company is generating barely any operating profit relative to the capital employed in the business. Combined with an ROE of just 0.81%, shareholders are experiencing minimal returns on their equity investment, raising serious questions about the sustainability of the business model.
The company's balance sheet reveals significant leverage, with long-term debt of ₹23.90 crores as of Mar'25, up from ₹18.19 crores in Mar'24. The debt-to-EBITDA ratio averages 4.76 times, whilst net debt to equity stands at 1.06, indicating high financial leverage. Shareholder funds stood at ₹44.67 crores as of Mar'25, with fixed assets at ₹17.18 crores. The EBIT to interest coverage ratio averages just 1.30 times, suggesting limited headroom to service debt obligations, particularly concerning given the current profitability pressures.
Cash flow analysis for FY25 shows the company generated negative ₹1.00 crore from operations, despite posting a profit before tax of ₹1.00 crore. Changes in working capital absorbed ₹8.00 crores, whilst investing activities consumed ₹20.00 crores, primarily for capital expenditure. The company relied on financing activities that brought in ₹22.00 crores to fund operations and expansion. Closing cash stood at ₹6.00 crores as of Mar'25.
Industry Context: Underperforming the Leisure Services Sector
The leisure services sector has faced headwinds over the past year, with the sector delivering a negative 9.71% return. However, Vikram Kamats has significantly underperformed this benchmark, posting a negative 24.01% return over the same period, representing an underperformance of 14.30 percentage points versus its sector peers. This relative weakness suggests company-specific challenges beyond broader industry trends.
The stock's beta of 1.50 indicates it is 50% more volatile than the broader market, classified as a high-beta stock. This elevated volatility, combined with negative returns, places Vikram Kamats in the "high risk, low return" category. The risk-adjusted return of -0.54 over the past year, with volatility of 44.64%, contrasts unfavourably with the Sensex's risk-adjusted return of 0.78 and volatility of 11.54%.
Peer Comparison: Premium Valuation Despite Weak Fundamentals
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Vikram Kamats | 200.53 | 1.62 | 6.38 | 1.06 | 0.50 |
| Delta Corp | 20.08 | 0.82 | 6.97 | -0.18 | 1.79 |
| United Foodbrand | NA (Loss Making) | 3.12 | 1.67 | 2.45 | — |
| Speciality Rest. | 24.82 | 1.61 | 13.60 | -0.09 | 0.90 |
Vikram Kamats trades at a P/E ratio of 200.53 times trailing twelve-month earnings, representing a substantial premium to peers such as Delta Corp (20.08x) and Speciality Restaurants (24.82x). This valuation appears unjustified given the company's ROE of 6.38%, which lags behind Speciality Restaurants' 13.60% and is only marginally below Delta Corp's 6.97%. The price-to-book ratio of 1.62x is nearly double that of Delta Corp (0.82x), whilst the dividend yield of 0.50% is less than half of Delta Corp's 1.79%.
The elevated P/E multiple is particularly concerning given the company's deteriorating profitability trajectory. With a market capitalisation of just ₹97.00 crores, Vikram Kamats ranks sixth amongst its peer group, yet commands valuation multiples more aligned with high-growth, high-quality operators rather than a struggling micro-cap with structural profitability challenges.
Valuation Analysis: Expensive Despite Declining Fundamentals
At the current price of ₹55.00, Vikram Kamats trades at stretched valuation multiples across most parameters. The P/E ratio of 200.53x compares unfavourably to the industry P/E of 47x, representing a premium of over 300%. The EV/EBITDA multiple of 16.75x and EV/EBIT of 64.72x appear elevated given the company's weak return profile. The price-to-book ratio of 1.62x offers little margin of safety, particularly with book value per share at ₹26.94.
Valuation Dashboard
P/E Ratio (TTM): 200.53x (vs Industry 47x)
Price to Book: 1.62x
EV/EBITDA: 16.75x
Dividend Yield: 0.50%
Overall Grade: FAIR (recently downgraded from Attractive)
The company's valuation grade currently stands at "Fair," having oscillated between "Fair" and "Attractive" in recent months. The 52-week price range of ₹52.10 to ₹74.45 shows the current price near the lower end, down 26.12% from the 52-week high. However, this decline appears justified given deteriorating fundamentals rather than representing a compelling entry point. The stock trades below all major moving averages, with the 200-day moving average at ₹61.43 representing a significant resistance level.
Shareholding: Stable Promoter Base, Minimal Institutional Interest
| Quarter | Promoter (%) | FII (%) | MF (%) | Insurance (%) | Other DII (%) |
|---|---|---|---|---|---|
| Dec'25 | 49.95 | 1.07 | 0.00 | 0.00 | 1.00 |
| Nov'25 | 49.95 | 0.93 | 0.00 | 0.00 | 0.00 |
| Oct'25 | 49.95 | 0.79 | 0.00 | 0.00 | 0.33 |
| Sep'25 | 54.26 | 0.86 | 0.00 | 0.00 | 0.36 |
| Jun'25 | 49.95 | 0.79 | 0.00 | 0.00 | 0.33 |
Promoter holding has remained stable at 49.95% for the past three quarters, following a brief spike to 54.26% in Sep'25. The promoter group comprises Kamats Worldwide Food Services Private Limited (22.09%), Vits Hotels Worldwide Private Limited (12.02%), Vidhi Vikram Kamat (8.40%), and Vikram Vithal Kamat (7.45%). Importantly, there is no promoter pledging, which removes one potential risk factor.
Institutional interest remains negligible, with total institutional holdings at just 2.08%. Foreign institutional investors hold a minimal 1.07%, whilst mutual funds and insurance companies have zero exposure. Other domestic institutional investors hold 1.00% as of Dec'25. The lack of institutional participation reflects the stock's micro-cap status and likely concerns about liquidity, governance, and financial performance. Non-institutional investors hold 47.97% of the equity.
Stock Performance: Persistent Underperformance Across Timeframes
| Period | Stock Return (%) | Sensex Return (%) | Alpha (%) |
|---|---|---|---|
| 1 Week | -3.17 | +0.64 | -3.81 |
| 1 Month | -4.05 | +0.83 | -4.88 |
| 3 Months | -3.73 | +0.88 | -4.61 |
| 6 Months | -10.22 | +5.53 | -15.75 |
| YTD | -2.83 | -1.11 | -1.72 |
| 1 Year | -24.01 | +9.01 | -33.02 |
| 2 Years | -30.68 | +17.71 | -48.39 |
| 3 Years | +42.86 | +38.88 | +3.98 |
The stock's performance has been dismal across nearly all recent timeframes. Over the past year, Vikram Kamats has declined 24.01%, significantly underperforming the Sensex's 9.01% gain by 33.02 percentage points. The two-year performance shows an even starker divergence, with the stock down 30.68% against the Sensex's 17.71% gain, representing a negative alpha of 48.39%. Short-term trends are equally concerning, with negative returns across one-week (-3.17%), one-month (-4.05%), three-month (-3.73%), and six-month (-10.22%) periods.
Only when extending the timeframe to three years does the stock show positive absolute returns of 42.86%, marginally ahead of the Sensex's 38.88% gain with an alpha of 3.98%. The five-year return of 313.53% appears impressive but must be contextualised against a very low base and the company's early-stage growth phase. Recent momentum has turned decisively negative, with the stock trading in a bearish technical trend since February 6, 2026.
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
Mojo Investment Parameters
Overall Score: 23/100 (Strong Sell category)
Valuation: Fair
Quality Grade: Below Average
Financial Trend: Flat
Technical Trend: Bearish
Vikram Kamats receives an overall investment score of just 23 out of 100, firmly in the "Strong Sell" category. The company's quality grade of "Below Average" reflects its weak return on capital employed (6.25% average, 2.01% latest) and return on equity (6.38% average, 0.81% latest). The financial trend is classified as "Flat" for the latest quarter, with key negatives including the lowest ROCE, lowest inventory turnover ratio, and lowest profit before tax excluding other income. The technical trend remains bearish, with the stock trading below all major moving averages.
Key Strengths
- Revenue Growth: 42.18% YoY sales growth in Q2 FY26 demonstrates top-line momentum
- Long-term Growth: 5-year sales CAGR of 41.26% shows historical expansion capability
- No Pledging: Zero promoter pledging removes one risk factor
- Stable Promoters: 49.95% promoter holding provides management continuity
- Dividend Payer: Latest dividend of ₹0.30 per share with 35.48% payout ratio
Key Concerns
- Profitability Collapse: Net profit down 72.73% QoQ and 75.00% YoY in Q2 FY26
- Excessive Tax Rate: 90.00% tax rate in Q2 FY26 decimated bottom line
- Weak Returns: ROCE at 2.01% and ROE at 0.81% indicate poor capital efficiency
- High Leverage: Debt-to-EBITDA of 4.76x and net debt-to-equity of 1.06
- Negative Cash Flow: Operating cash flow of -₹1.00 crore in FY25
- Expensive Valuation: P/E of 200.53x vs industry 47x despite weak fundamentals
- No Institutional Support: Just 2.08% institutional holding signals lack of confidence
Outlook: What to Watch
Positive Catalysts
- Normalisation of tax rate to historical 25-35% range
- Sustained revenue growth translating to profitability
- Improvement in ROCE above 10% threshold
- Successful deleveraging reducing debt-to-EBITDA below 3x
- Positive operating cash flow generation
Red Flags
- Continuation of 70%+ tax rates in coming quarters
- Further deterioration in ROCE and ROE metrics
- Sequential revenue decline becoming a trend
- Inability to generate positive operating cash flow
- Breach of debt covenants due to weak profitability
The Verdict: Exit Recommended
Score: 23/100
For Fresh Investors: Avoid entirely. The combination of collapsing profitability, weak return ratios (ROCE 2.01%, ROE 0.81%), high leverage, and expensive valuation (P/E 200.53x) presents an unfavourable risk-reward profile. The 90% tax rate in Q2 FY26 raises questions about earnings quality and sustainability.
For Existing Holders: Consider exiting at current levels. The stock has delivered negative returns of 24.01% over the past year with negative alpha of 33.02% versus the Sensex. The bearish technical trend, below-average quality grade, and flat financial trend suggest limited near-term catalysts for recovery. The lack of institutional support (2.08% holding) indicates professional investors lack confidence in the turnaround story.
Fair Value Estimate: ₹35-40 (29-36% downside from current ₹55), based on normalised earnings and peer P/E multiples of 20-25x applied to sustainable PAT margins of 1-2%.
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.
