Why is Sri Adhik. Bros. falling/rising?

Robust Short-Term Performance and Market Outperformance

The stock has demonstrated remarkable strength over the past week and month, delivering returns of 27.57% and 48.00% respectively, vastly outperforming the Sensex benchmarks of 0.79% and 0.95% over the same periods. This rally is further underscored by a 12-day consecutive gain streak, during which the stock has appreciated by 62.38%. On the day in question, the stock opened with a 5% gap up and maintained this level throughout trading, touching an intraday high of ₹1,245.45. Such price action indicates strong buying interest and positive sentiment among investors.

Investor participation has notably increased, with delivery volumes on 20 Nov rising by 118.98% compared to the five-day average, signalling heightened confidence and liquidity in the stock. Additionally, Sri Adhikari Brothers is trading above all key moving averages – 5-day, 20-day, 50-day, 100-day, and 200-day – which technical analysts often interpret as a bullish indicator.

Institutional Confidence Amidst Fundamental Concerns

One of the positive factors supporting the stock’s rise is the high institutional holding of 39.5%. Institutional investors typically possess superior analytical resources and tend to back companies with potential, which may be contributing to the current buying momentum. However, this optimism contrasts with the company’s weak long-term fundamentals.

Fundamental Challenges Tempering Long-Term Outlook

Sri Adhikari Brothers carries a high debt burden, with a debt-to-equity ratio of 10.91 times, indicating significant leverage. The company’s ability to service this debt is strained, as reflected by a poor average EBIT to interest ratio of -6.09. Profitability metrics also remain subdued, with an average return on equity of just 1.04%, signalling limited efficiency in generating returns from shareholders’ funds.

Financial results for the quarter ended September 2025 were flat, offering little impetus for a fundamental turnaround. The company’s return on capital employed (ROCE) stands at a modest 3.4%, yet it commands a very expensive valuation with an enterprise value to capital employed ratio of 270.3. This disparity suggests that the stock price may be factoring in expectations beyond current operational performance.

Over the past year, the stock has underperformed the broader market significantly, delivering a negative return of 26.70% compared to the BSE500’s positive 8.59%. Despite this, the company’s profits have doubled, rising by 102% over the same period, which may be encouraging investors to anticipate a potential recovery or re-rating.

Balancing Momentum with Caution

The recent price surge in Sri Adhikari Brothers Television Network Ltd is primarily driven by strong short-term technical factors, increased investor participation, and institutional backing. However, the company’s high leverage, weak debt servicing capacity, and expensive valuation metrics suggest that investors should approach with caution. The disconnect between rising profits and negative stock returns over the past year highlights the complexity of the company’s outlook.

For investors, the key consideration remains whether the current momentum can be sustained and if the company can leverage its improving profitability to address its fundamental weaknesses. Until then, the stock’s impressive short-term gains coexist with significant long-term risks.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →