Reliance-owned multibagger stock crashed over 50 per cent in 6 months; What went wrong?

The start of 2026 has brought a "bitter-salty" mix for the Reliance empire. In a rare double-whammy, Mukesh Ambani's conglomerate is facing a synchronised sell-off. On one side, the high-flying multibagger stock has seen its market value crumble by over 50 per cent in six months. On the other hand, the parent giant Reliance Industries (RIL) is bleeding market cap as geopolitical fires in Venezuela threaten its energy margins.

The stock that crashed by over 50 per cent in 6 months is Lotus Chocolate Company Ltd

The market rally following Reliance’s acquisition of Lotus Chocolate Company has officially turned into a nightmare for retail investors. In a brutal trading session on January 14, 2026, the stock plummeted 2 per cent and hit a 52-week low of Rs 665 per share, marking a staggering 56.4 per cent decline from its peak of Rs 1,525 per share.

What was once a high-flying "multibagger" is now a cautionary tale of premium valuations meeting deteriorating fundamentals.

The Financial Collapse: Profits Vanish

The primary driver for the current sell-off is a disastrous Q3FY26 earnings report that left little room for optimism. The numbers paint a picture of a company struggling to stay afloat:

• Profit After Tax (PAT): Collapsed by 96 per cent, falling to a negligible Rs 0.14 crore from Rs 3.72 crore in the prior year.
• Revenue: Shrank by 14 per cent, signalling a significant loss of business momentum or pricing power.
• Profit Before Tax (PBT): Disintegrated by 86 per cent, as the company failed to convert its turnover into meaningful earnings.

While management highlighted a marginal 20-basis-point "improvement" in EBITDA margins, the reality is that a 4 per cent margin is razor-thin for an FMCG player and offers no safety net against the current market volatility.

Mounting Red Flags: Debt and Cash Flow

Behind the headline numbers, deeper financial stresses are emerging. Analysts have pointed out several "critical red flags" that suggest the stock's troubles may be far from over:

1. High Debt Burdens: The company is grappling with rising interest expenses, which surged over 66 per cent in the first half of the year. Its Debt to EBITDA ratio is reportedly around 3.28 times—a level that restricts financial flexibility during downturns.
2. Negative Cash Flows: Operating cash flow has turned sharply negative, down approx. Rs 130 crore for the year. This indicates that despite any accounting profits, the company is effectively burning cash through its operations.
3. Liquidity Strains: Management explicitly admitted to a "constrained liquidity environment," making it difficult to navigate the expensive cocoa commodity cycle.

A Risky "Strategic Pivot"

To counter these failures, Lotus is attempting a "Strategic Pivot" from a commodity supplier to a consumer-facing (B2C) brand. While this sounds promising on paper, it comes with immense execution risk:

• Plant Disruptions: The ongoing modernisation of plants is expected to cause "planned production interruptions," which will likely lead to even more near-term business softness.
• Institutional Absence: Domestic Mutual Funds have largely stayed away from the stock, with zero holdings reported. This lack of institutional backing suggests that the "smart money" is wary of the current valuation-to-performance gap.

Valuation Reality Check

Even after losing 50 per cent of its value, Lotus Chocolate remains an expensive underperformer. Compared to industry giants like Nestle India (P/E 84x) or Britannia, Lotus has historically traded at astronomical multiples (frequently exceeding 100x) that its current 96 per cent profit drop simply cannot justify. The stock is trading well below its 50-day and 200-day moving averages. The "Reliance aura" seems to have worn off, leaving investors with a bitter taste and a massive capital loss!

Disclaimer: The article is for informational purposes only and not investment advice.