At a Glance
Sarup Industries, the Jalandhar-based footwear manufacturer, pulled off a Q1 FY26 net profit of ₹0.12 Cr (yes, lakhs, not crores) on a revenue of ₹3.93 Cr. The stock trades at ₹103 with a ridiculous P/E of 46 – for a company whose book value is negative (-₹9.25). Promoters have pledged 100% of their stake, debtors take 218 days to pay, and the business is running on fumes. Yet the stock is up 108% in one year. Mr. Market, are you drunk?
Introduction
Sarup Industries, once a proud exporter of leather shoes, is now like that pair of torn sneakers you can’t throw away because of nostalgia. The company has been limping for years, oscillating between tiny profits and losses, while investors cheer as if it’s Nike. Q1 FY26 shows a slight profit, but when your P&L looks like a medical report of a patient in the ICU, one good quarter doesn’t mean a marathon victory.
Business Model (WTF Do They Even Do?)
Sarup makes shoes, uppers, soles, and leather products mainly for export markets. It supplies to some international brands but lacks the scale, branding, or financial muscle to compete with big players like Bata or Metro. Its operations are concentrated in Northern India, with limited retail presence. In short, it’s a small OEM with big dreams, currently running on survival mode.
Financials Overview
Q1 FY26 Highlights:
- Revenue: ₹3.93 Cr (-19% YoY)
- Operating Profit: ₹0.52 Cr (OPM 13%)
- PAT: ₹0.12 Cr (flat vs ₹0.13 Cr Q4 FY25)
- EPS: ₹0.37
FY25 Recap:
- Revenue: ₹16 Cr
- PAT: ₹4.87 Cr (boosted by other income ₹4.16 Cr)
- Book Value: Negative
- ROCE: 5.25%
- ROE: Not meaningful (negative net worth).
Fresh P/E using annualized Q1 EPS: ₹103 / ₹1.5 ≈ 68.6 – absurd for a company barely alive.
Valuation
- P/E Method
- Industry avg: ~25
- Sarup P/E: 69
- Fair value: ₹20–₹30.
- EV/EBITDA
- FY25 EBITDA ~₹2.3 Cr, EV ~₹36 Cr
- EV/EBITDA ~15x
- Fair value: ₹30–₹40.
- DCF
- Assuming heroic growth, fair value still ₹40.
Fair Value Range: ₹25–₹40. At ₹103, the stock is priced for a turnaround that doesn’t exist yet.
What’s Cooking – News, Triggers, Drama
- Q1 PAT positive – but negligible.
- High other income in FY25 saved the bottom line.
- 100% promoter pledge – lenders practically own the company.
- Risks: Poor sales growth, high debtor days, negative net worth.
Balance Sheet
| (₹ Cr) | Mar 25 |
|---|---|
| Assets | 65.7 |
| Liabilities | 72 |
| Net Worth | -6.3 |
| Borrowings | 36.8 |
Auditor’s Roast:
Negative net worth, high debt, and pledges – the financials scream distress.
Cash Flow – Sab Number Game Hai
| (₹ Cr) | 2023 | 2024 | 2025 |
|---|---|---|---|
| Operating Cash | 1.65 | 15.0 | 1.6 |
| Investing Cash | 0.00 | -16.2 | 6.0 |
| Financing Cash | -1.8 | 1.6 | -7.6 |
Comment:
Cash flow swings like a pendulum – survival depends on external funding.
Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | NA |
| ROCE | 5.25% |
| P/E | 69 |
| PAT Margin | 2% |
| D/E | 0.55 |
Verdict:
ROE undefined, P/E absurd, and leverage dangerous. Not sexy, just stressy.
P&L Breakdown – Show Me the Money
| (₹ Cr) | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | 9.1 | 11.6 | 16.0 |
| EBITDA | 0.1 | 1.2 | 2.3 |
| PAT | -2.5 | -1.7 | 4.9 |
Comment:
FY25 profit came almost entirely from other income, not operations.
Peer Comparison
| Company | Revenue (Cr) | PAT (Cr) | P/E |
|---|---|---|---|
| Titan | 60,456 | 3,336 | 88 |
| P N Gadgil | 7,586 | 219 | 36 |
| Ethos | 1,252 | 96 | 74 |
| Sarup | 16 | 4.9* | 69 |
Comment:
Sarup’s P/E is in the league of Titan – without the brand, scale, or financial health.
Miscellaneous – Shareholding, Promoters
- Promoters: 74.36% (100% pledged).
- DIIs: 0%
- Public: 25.6%
- Shareholders: ~1,500 loyal (or trapped) investors.
EduInvesting Verdict™
Sarup Industries is a classic turnaround or trap story. Yes, sales grew 17% TTM, and PAT turned positive in FY25. But this is more of an accounting mirage than a business revival. The company has negative net worth, high debt, pledged promoter holdings, and weak operational cash flows.
SWOT Snapshot:
- Strengths: Niche expertise in leather footwear, export relationships.
- Weaknesses: Negative net worth, poor sales history, pledged shares.
- Opportunities: Leather exports rebound, cost restructuring.
- Threats: Debt burden, working capital stress, market delisting risk.
Final Take:
Sarup is not for the faint-hearted. It’s a speculative penny disguised as a mid-cap. Traders may ride momentum, but investors should demand a real turnaround before stepping in.
Written by EduInvesting Team | 01 August 2025
SEO Tags: Sarup Industries, Q1 FY26 Results, Leather Footwear Stocks, Turnaround Stories
