The company, which operates in the diversified commercial services sector, has experienced wild swings in operational performance. After reporting zero revenue for multiple consecutive quarters through FY24 and Q1 FY25, the sudden emergence of ₹236.27 crores in sales during Q2 FY26 represents either a genuine business revival or a one-off transaction that may not be repeatable. The stock has responded enthusiastically, gaining 66.08% over the past year and currently trading at its 52-week high, yet this optimism appears disconnected from the company's balance sheet reality of negative shareholder funds of ₹276.42 crores as of March 2025.
Financial Performance: A Quarter of Extremes
The Q2 FY26 results present a study in contrasts. Revenue of ₹236.27 crores marks a sequential surge of 157.88% from Q1 FY26's ₹91.62 crores and a year-on-year explosion of 105.65%. More impressively, the operating profit margin (excluding other income) reached 45.38%, the highest in the company's recent history, generating ₹107.21 crores in PBDIT. This represents a remarkable improvement from the 10.57% margin achieved in Q2 FY25 when revenues stood at ₹114.89 crores.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 236.27 | +157.88% | 74.60 | 45.38% | 31.87% |
| Jun'25 | 91.62 | — | 0.40 | 14.76% | -1.98% |
| Mar'25 | 0.00 | — | -51.78 | — | — |
| Dec'24 | 0.00 | -100.00% | -5.54 | — | — |
| Sep'24 | 114.89 | — | -11.72 | 10.57% | -11.65% |
| Jun'24 | 0.00 | — | -5.28 | — | — |
The profit after tax margin of 31.87% in Q2 FY26 demonstrates strong earnings quality on the surface, converting nearly one-third of revenues into bottom-line profit. However, this needs contextualisation against the company's historical pattern of sporadic revenue generation. The tax rate of 27.12% in Q2 FY26, while appearing normal, contrasts sharply with the 125.49% tax rate in Q1 FY26 and negative tax rates in prior quarters, suggesting complex accounting treatments that warrant scrutiny.
Employee costs have remained relatively stable at ₹53.57 crores in Q2 FY26 compared to ₹50.80 crores in Q1 FY26, indicating a consistent operational base. Interest expenses of ₹14.68 crores, whilst elevated 72.71% from the previous quarter, remain manageable relative to operating profits, yielding an interest coverage ratio of 7.30 times—the highest recorded in recent quarters. Depreciation of ₹9.52 crores suggests minimal capital intensity, consistent with a services-oriented business model.
Revenue Pattern Concerns
The company's revenue trajectory raises fundamental questions about business sustainability. After reporting zero sales for Mar'25, Dec'24, and Jun'24 quarters, the sudden reappearance of significant revenues in Jun'25 (₹91.62 crores) and Sep'25 (₹236.27 crores) suggests either project-based lumpy revenues or one-off transactions rather than recurring business streams. This pattern has persisted over multiple years, with FY24, FY23, and FY22 all showing minimal or zero annual sales.
Balance Sheet Reality: Negative Equity Overshadows Quarterly Gains
The most critical concern for Yaari Digital lies not in its quarterly profit statement but in its balance sheet structure. As of March 2025, the company reported shareholder funds of negative ₹276.42 crores, comprising share capital of ₹19.74 crores offset by reserves and surplus of negative ₹296.16 crores. This negative net worth situation represents accumulated losses that have eroded the entire equity base, a red flag that cannot be ignored regardless of quarterly profitability.
The company's long-term debt stood at ₹25.14 crores as of March 2025, down dramatically from ₹240.38 crores in March 2024, suggesting significant debt reduction or restructuring. Current liabilities of ₹274.91 crores, however, dwarf current assets of ₹20.70 crores, creating a severe working capital deficit. This liquidity mismatch, combined with negative equity, places the company in a precarious financial position despite recent profitable quarters.
Fixed assets have dwindled to just ₹0.05 crores as of March 2025, down from ₹0.13 crores the previous year, indicating minimal tangible asset backing. Investments of ₹2.64 crores, substantially reduced from ₹31.30 crores in March 2024, suggest asset monetisation efforts. The book value per share of negative ₹28.01 means that theoretically, shareholders would receive nothing if the company were liquidated at book values—a sobering counterpoint to the current market price of ₹20.91.
Critical Solvency Warning
With negative shareholder equity of ₹276.42 crores and current liabilities exceeding current assets by ₹254.21 crores, Yaari Digital faces fundamental solvency questions. The company's ability to continue as a going concern depends entirely on its capacity to generate sustained profitable operations or secure additional capital. The dramatic quarterly profit, whilst encouraging, represents only a small step toward addressing this structural imbalance.
Profitability Metrics: Outstanding Quarter Versus Dismal Track Record
The company's five-year average return on capital employed (ROCE) stands at negative 27.77%, reflecting years of capital destruction rather than creation. Return on equity calculations become meaningless given the negative equity base, officially recorded as 0.0% but effectively incalculable. These metrics underscore that Q2 FY26's profitability, however impressive in isolation, represents an outlier rather than a trend reversal.
The five-year sales growth of negative 100.00% tells the story of a business that has essentially ceased operations compared to its FY20 peak of ₹225.00 crores in annual revenue. Whilst five-year EBIT growth shows 12.71%, this statistic proves misleading given the company's losses in most recent years. The average debt-to-EBITDA ratio of 10.89 times indicates high leverage relative to operational cash generation capacity, though recent debt reduction has improved this metric.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY25 | Assessment |
|---|---|---|---|---|
| Operating Margin (Excl OI) | 45.38% | 14.76% | 10.57% | Strong Improvement |
| PAT Margin | 31.87% | -1.98% | -11.65% | Turnaround |
| Interest Coverage | 7.30x | 1.59x | 1.09x | Comfortable |
| Tax Rate | 27.12% | 125.49% | -68.64% | Normalising |
The average EBIT to interest ratio of negative 1.52 times over recent years highlights the company's historical inability to service debt from operations. Whilst Q2 FY26 shows dramatic improvement with interest coverage of 7.30 times, this single quarter cannot erase years of operational struggles. The company's net debt to equity ratio of negative 0.88 technically indicates a net cash position, but this metric loses relevance when equity itself is negative.
Peer Comparison: Structural Disadvantage Evident
Within the diversified commercial services sector, Yaari Digital occupies the weakest position amongst its peer group. The company's return on equity of 0.0% (effectively negative given negative equity) compares unfavourably to peers like Silicon Rental's 29.34%, Pro Fin Capital's 6.41%, and Sellwin Traders' 4.54%. This ROE differential reflects not merely underperformance but fundamental business model challenges.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Market Cap (₹ Cr) |
|---|---|---|---|---|---|
| Yaari Digital | NA (Loss Making) | -0.76 | 0.0% | -0.88 | 210.00 |
| Silicon Rental | 16.17 | 2.18 | 29.34% | -0.25 | — |
| Pro Fin Capital | 74.61 | 9.44 | 6.41% | 9.20 | — |
| Sellwin Traders | 48.63 | 4.13 | 4.54% | 0.07 | — |
| Mercantile Ventures | 27.67 | 0.96 | 2.54% | 0.00 | — |
| NSB BPO | 25.89 | 1.64 | 0.0% | 0.00 | — |
The negative price-to-book ratio of -0.76x for Yaari Digital reflects the market's recognition that the company trades despite having negative book value. Peers typically trade between 0.96x to 9.44x book value, highlighting the valuation discount (or rather, valuation impossibility) that Yaari Digital faces. The absence of a meaningful P/E ratio due to historical losses further distinguishes Yaari Digital from its peer group, most of whom maintain profitable operations.
Whilst Yaari Digital benefits from minimal debt with a debt-to-equity ratio of -0.88 (technically net cash), this advantage pales against the negative equity base. Peers like Silicon Rental and Mercantile Ventures also maintain low leverage whilst generating consistent returns on equity, demonstrating that capital efficiency matters more than mere debt levels. The company's market capitalisation of ₹210.00 crores positions it at the lower end of the peer group, reflecting investor scepticism about sustainability.
Valuation Analysis: Risky Classification Justified
The stock's valuation assessment as "RISKY" by traditional metrics appears entirely appropriate given the fundamental challenges. With negative book value, conventional valuation multiples like P/E and P/BV become either meaningless or misleading. The enterprise value to EBITDA of -52.77x and EV to EBIT of -52.41x reflect the market's struggle to value a company with negative equity and erratic earnings.
At the current price of ₹20.91, the stock trades at its 52-week high, having appreciated 74.25% from its 52-week low of ₹12.00. This price movement appears driven more by momentum and speculative interest than fundamental valuation support. The absence of dividend payments (last dividend of ₹1.00 per share paid in May 2018) removes any income component from the investment thesis, leaving investors entirely dependent on capital appreciation hopes.
Valuation Impossibility
Traditional valuation frameworks break down for Yaari Digital. With negative equity of ₹276.42 crores and a market capitalisation of ₹210.00 crores, investors effectively value the company's ability to generate future profits rather than any existing asset base or book value. The Q2 FY26 results provide a glimpse of potential profitability, but without sustained revenue visibility and balance sheet repair, any fair value estimate remains speculative at best.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Promoter holding has remained rock-solid at 27.46% for the past five quarters through September 2025, with zero pledging of shares. This stability provides some comfort that controlling shareholders maintain confidence in the business, though the relatively low promoter stake of 27.46% raises questions about commitment levels. Key promoters include Kritikka Infrastructure Private Limited (17.27%) and Karanbhumi Estates Private Limited (10.04%).
| Quarter | Promoter % | FII % | MF % | DII % | Public % |
|---|---|---|---|---|---|
| Sep'25 | 27.46% | 1.29% | 0.00% | 0.05% | 71.20% |
| Jun'25 | 27.46% | 0.53% | 0.00% | 0.05% | 71.96% |
| Mar'25 | 27.46% | 0.50% | 0.00% | 0.00% | 72.04% |
| Dec'24 | 27.46% | 0.01% | 0.00% | 0.00% | 72.53% |
| Sep'24 | 27.46% | 0.00% | 0.00% | 0.00% | 72.54% |
Foreign institutional investor (FII) holding has increased from 0.00% in September 2024 to 1.29% in September 2025, representing growing but still minimal international interest. The sequential increase of 0.76 percentage points in Q2 FY26 coincides with the strong quarterly results, suggesting some institutional investors are taking speculative positions. However, the total institutional holding of just 1.35% (including FIIs and DIIs) reflects widespread institutional scepticism about the investment case.
The complete absence of mutual fund holdings (0.00%) and negligible insurance company participation speaks volumes about institutional risk assessment. Mutual funds, which typically conduct rigorous due diligence, have chosen to avoid Yaari Digital entirely despite the recent operational turnaround. The dominant non-institutional shareholding of 71.20% suggests the stock remains primarily a retail-driven investment, vulnerable to sentiment swings and lacking institutional support during market downturns.
Stock Performance: Momentum Surge Defies Fundamentals
Yaari Digital's stock has delivered exceptional returns across multiple timeframes, gaining 66.08% over one year, 59.98% over six months, and 42.24% over three months. These returns have dramatically outpaced the Sensex, generating alpha of 60.72%, 55.64%, and 38.03% respectively across these periods. The stock currently trades above all key moving averages—5-day (₹19.29), 20-day (₹18.14), 50-day (₹16.63), 100-day (₹16.40), and 200-day (₹15.59)—indicating strong technical momentum.
| Period | Stock Return | Sensex Return | Alpha | Assessment |
|---|---|---|---|---|
| 1 Week | 15.65% | -0.93% | +16.58% | Strong Outperformance |
| 1 Month | 20.31% | 3.43% | +16.88% | Significant Alpha |
| 3 Months | 42.24% | 4.21% | +38.03% | Exceptional |
| 6 Months | 59.98% | 4.34% | +55.64% | Outstanding |
| 1 Year | 66.08% | 5.36% | +60.72% | Remarkable |
| 2 Years | 105.81% | 30.50% | +75.31% | Stellar |
| 3 Years | -42.16% | 38.06% | -80.22% | Underperformance |
| 5 Years | -53.69% | 108.62% | -162.31% | Severe Lag |
However, longer-term performance reveals a different picture. Over three years, the stock has declined 42.16% whilst the Sensex gained 38.06%, generating negative alpha of 80.22%. Over five years, the underperformance intensifies with a 53.69% decline versus the Sensex's 108.62% gain, producing negative alpha of 162.31%. This long-term underperformance reflects the company's operational struggles and balance sheet deterioration over these periods.
The stock's beta of 1.50 classifies it as high-beta, meaning it tends to move 50% more than the market in either direction. With volatility of 59.74% compared to the Sensex's 12.50%, Yaari Digital presents a high-risk, high-return profile. The risk-adjusted return of 1.11 over one year appears attractive, but this metric reflects recent momentum rather than sustainable performance. The technical trend classification of "MILDLY BULLISH" as of October 31, 2025, suggests some caution creeping into the momentum-driven rally.
"A single quarter's profitability, however spectacular, cannot erase years of accumulated losses and negative equity. Investors must distinguish between momentum-driven price appreciation and fundamental value creation."
Investment Thesis: Speculative Turnaround Play with Substantial Risks
The investment case for Yaari Digital rests entirely on the company's ability to sustain Q2 FY26's operational performance and use future profits to rebuild shareholder equity. The financial trend classification of "OUTSTANDING" for Q2 FY26 reflects genuine operational improvement, with the highest net sales (₹236.27 crores), PBDIT (₹107.21 crores), operating margin (45.38%), and PAT (₹74.60 crores) in recent history. The interest coverage ratio of 7.30 times demonstrates improved debt servicing capacity.
Technical indicators support near-term momentum, with the stock trading above all major moving averages and showing "MILDLY BULLISH" trend characteristics. MACD remains bullish on weekly and monthly timeframes, whilst Bollinger Bands, KST, and OBV all signal bullish conditions. This technical strength, combined with low trading volumes (229 shares on November 3rd), suggests the stock could experience sharp moves in either direction.
However, the quality assessment of "BELOW AVERAGE" based on long-term financial performance cannot be ignored. Five-year sales growth of negative 100.00%, average ROCE of negative 27.77%, and accumulated losses leading to negative equity of ₹276.42 crores represent fundamental weaknesses that one profitable quarter cannot resolve. The valuation grade of "RISKY" appropriately captures the precarious financial position and uncertainty surrounding business sustainability.
Key Strengths & Risk Factors
Key Strengths
- Exceptional Q2 Performance: Net profit of ₹74.60 crores represents genuine operational turnaround with strong margins
- Operating Leverage: 45.38% operating margin demonstrates potential profitability when revenues materialise
- Interest Coverage: 7.30x coverage ratio shows comfortable debt servicing from operations
- Debt Reduction: Long-term debt declined from ₹240.38 crores to ₹25.14 crores, reducing financial burden
- Zero Pledging: Promoters maintain unpledged stakes, indicating confidence
- Technical Momentum: Stock above all moving averages with bullish indicators across timeframes
- Recent Alpha Generation: 60.72% alpha over one year demonstrates strong relative performance
Key Concerns
- Negative Equity: Shareholder funds of negative ₹276.42 crores represent fundamental solvency concern
- Revenue Volatility: Erratic quarterly revenues (₹0 to ₹236 crores) suggest unsustainable, project-based business
- Working Capital Crisis: Current liabilities (₹274.91 crores) vastly exceed current assets (₹20.70 crores)
- Long-term Underperformance: Negative 53.69% return over five years versus Sensex's 108.62% gain
- Minimal Institutional Support: Just 1.35% institutional holding reflects widespread scepticism
- Asset Base Erosion: Fixed assets of only ₹0.05 crores provide no tangible backing
- Historical Losses: Years of negative ROCE (-27.77% average) indicate capital destruction
- Business Model Uncertainty: Unclear revenue sources and sustainability concerns
Outlook: What to Watch
Positive Catalysts
- Q3 FY26 Results: Sustained revenue above ₹150 crores would confirm business revival
- Equity Rebuilding: Consecutive profitable quarters could begin repairing negative net worth
- Revenue Visibility: Long-term contracts or order book disclosure would reduce uncertainty
- Institutional Entry: Mutual fund or FII accumulation would validate turnaround thesis
- Working Capital Improvement: Reduction in current liability overhang would ease liquidity concerns
Red Flags
- Revenue Collapse: Return to zero or minimal sales in Q3 FY26 would confirm unsustainability fears
- Margin Compression: Operating margins falling below 20% would question profitability viability
- Liquidity Crisis: Inability to meet current liabilities could trigger insolvency proceedings
- Promoter Reduction: Any decline in promoter holding would signal loss of confidence
- Technical Breakdown: Break below ₹16.40 (100-day MA) would trigger momentum reversal
The Verdict: High-Risk Speculation, Not Investment
Score: 50/100
For Fresh Investors: Avoid initiating positions. Whilst Q2 FY26 results appear spectacular, the company's negative equity of ₹276.42 crores, erratic revenue patterns, and severe working capital deficit create fundamental solvency risks that far outweigh one quarter's profitability. The absence of institutional participation (1.35% holding) and long-term capital destruction (negative 27.77% average ROCE) indicate this remains a speculative turnaround play rather than a sound investment. Wait for at least three consecutive quarters of sustained revenues above ₹150 crores and visible progress toward positive equity before considering entry.
For Existing Holders: Consider partial profit booking given the stock's position at 52-week highs and 66.08% one-year gain. Retain a small position only if you have high risk tolerance and can afford total capital loss. Set a strict stop-loss at ₹16.40 (100-day moving average) to protect against momentum reversal. Monitor Q3 FY26 results critically—any return to minimal revenues or losses would warrant immediate exit. The current price of ₹20.91 offers an opportunity to de-risk, as the stock trades on momentum rather than fundamental support.
Fair Value Estimate: Not calculable due to negative book value and uncertain revenue sustainability. Current price of ₹20.91 appears disconnected from balance sheet reality and depends entirely on unproven ability to generate sustained profits.
