Why is TARC Ltd falling/rising?

Recent Price Movement and Market Context

TARC Ltd has experienced a notable short-term rally, with the stock gaining 2.58% over the past week, significantly outperforming the Sensex’s 0.56% rise during the same period. This recent upswing is further highlighted by a four-day consecutive gain, delivering an 8.8% return in that span. Such momentum suggests renewed investor interest, possibly driven by improved trading volumes and positive sentiment around the company’s latest financial results.

However, this short-term strength contrasts with the stock’s longer-term performance. Over the past month, TARC Ltd’s shares have declined by 3.5%, while the Sensex advanced 1.27%. More strikingly, the stock has underperformed the broader market substantially over the year-to-date and one-year periods, falling 21.86% and 36.29% respectively, whereas the Sensex has gained 9.68% and 8.43% in those intervals. This divergence underscores persistent concerns about the company’s fundamentals despite recent price gains.

Investor Participation and Liquidity

One of the key drivers behind the recent price rise appears to be a surge in investor participation. On 27 Nov, delivery volume soared to 16.29 lakh shares, marking an increase of nearly 199% compared to the five-day average. This heightened trading activity indicates stronger demand and confidence among market participants, which has supported the stock’s upward trajectory. Additionally, the stock’s liquidity remains adequate, with a trade size capacity of approximately ₹0.37 crore based on 2% of the five-day average traded value, facilitating smoother transactions for investors.

Financial Performance and Fundamental Challenges

Despite the recent price appreciation, TARC Ltd’s financial fundamentals present a mixed picture. The company reported higher net sales of ₹82.76 crore and a profit after tax (PAT) of ₹38.47 crore in the latest six-month period ending September 2025, signalling operational improvements. These positive results may have contributed to the recent investor optimism and the stock’s short-term gains.

Nevertheless, the company continues to grapple with significant long-term weaknesses. It is burdened by operating losses and a weak ability to service debt, as evidenced by a high Debt to EBITDA ratio of -1.00 times. This negative ratio indicates that earnings before interest, taxes, depreciation, and amortisation are insufficient to cover debt obligations, raising concerns about financial stability. Furthermore, the average return on equity (ROE) stands at a mere 0.32%, reflecting low profitability relative to shareholders’ funds.

Adding to the risk profile, the stock is trading at valuations that are considered risky compared to its historical averages. Although profits have risen by 48.3% over the past year, the stock price has declined sharply by 36.29%, suggesting a disconnect between earnings growth and market valuation. This disparity may reflect investor caution due to the company’s negative EBITDA and overall weak fundamentals.

Market Underperformance and Shareholder Structure

TARC Ltd has underperformed not only the Sensex but also the broader BSE500 index, which generated a 5.87% return over the last year. The stock’s significant lag in performance highlights investor concerns about its growth prospects and financial health. The majority shareholding by promoters may provide some stability, but it has not yet translated into sustained market confidence.

Conclusion: Short-Term Gains Amid Long-Term Caution

In summary, TARC Ltd’s recent stock price rise on 28-Nov is primarily driven by increased investor participation, improved short-term financial results, and a series of consecutive gains that have outpaced sector performance. However, the company’s weak long-term fundamentals, including operating losses, negative EBITDA, and poor debt servicing capacity, continue to weigh heavily on investor sentiment. The stock’s significant underperformance relative to market benchmarks over the past year further emphasises the cautious stance investors maintain despite recent positive momentum.

Investors considering TARC Ltd should weigh the short-term price strength against the underlying financial risks and valuation concerns. While the current rally may offer trading opportunities, the company’s fundamental challenges suggest a need for careful analysis before committing to a long-term position.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →