ARCL Organics Ltd.

Basic Materials — Specialty Chemicals · NSE

₹223.00−₹3.67 (−1.62%)

DalalBaazaar Score

45 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by moderate debt load, negative free cash flow, micro-cap size, which brings thin liquidity.

In simple words: The business is earning a fairly low return on the money invested in it, though profits are falling even as sales grow. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:46 pm

Understanding the Business

Company site ↗

The 60-second version of ARCL Organics Ltd. — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

ARCL Organics Ltd. manufactures and sells resins, additives, hardeners, and specialized one-shot resins in India. The company offers amino and melamine resins, phenolic resins, and formaldehydes.

IndustrySpecialty Chemicals

SectorBasic Materials

Annual revenue₹270 Cr

How does it make money?

Turns over ₹270 Cr a year. Of every ₹100 of sales, about ₹2 reaches shareholders as profit, with ₹10 left at the operating level before interest, tax and depreciation.

Who are its competitors?

The closest listed comparisons in its industry are ASIAN PAINTS LIMITED, PIDILITE INDUSTRIES LTD, SRF LTD, UPL LIMITED. These are the companies its valuation and returns are measured against elsewhere in this report.

Compared side by side in Peers ↓

What is its competitive advantage?Some evidence

ROCE of 17.7% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

Peer median ROE22.3%

What has been driving growth?

Sales and margins have both contributed to where profit is now. Over 3 years revenue moved +64% while net margin moved -73% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+64%

Margin effect-73%

DalalBaazaar Score

45/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ ROE of 6.3% is weak
✗ ROE has fallen by 15.2 points over the period

Quality vs. Valuation

Company Quality

41/ 100

Weak

How good the business is, ignoring the share price entirely.

Valuation

71/ 100

Cheap

What you are being asked to pay, ignoring how good the business is.

Optically cheap, but the underlying business scores poorly. Cheap-and-weak is what a value trap looks like from the outside — the low price may be deserved.

Historical Valuation

Current P/E

17.4x

Sector Median

40.4x

median of 4 sector peers

🟢Against its sector it trades 57% below the peer median of 40.4x.

vs. its own history

Not enough price and earnings history

vs. sector peers

Cheap

40.4x median of 4 peers · -57%

vs. generic bands

Fair

15x–35x

EV/EBITDA

8.8x

PEG

—

What's Good / What's Bad

🟢 What's Going Well1

Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Return on equity is falling
ROE has dropped from 21.5% to 6.3% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 26.1% to 17.7% — often a sign of competition or overexpansion.

Red Flags

5 items require attention · 2 high · 3 watch

🔴Debt has risen sharplyFinancial
Total debt is up 249% over 3 years, from ₹20 Cr to ₹71 Cr.
🔴Free cash flow negative for 3 yearsFinancial
The business has not covered its capital spending from operations for several years running, which has to be funded externally.
🟡Profit is decliningFinancial
Net profit is down 56% over 3 years.
🟡Margins are compressingFinancial
EBITDA margin is down 2.4 points over 3 years.
🟡Inventory building faster than salesFinancial
Inventory up 93% against revenue up 64% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Cheaper than its peers
It trades 57% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Margins are being competed away
EBITDA margin has fallen from 12.8% to 10.4%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Returns on shareholder capital are falling
ROE has dropped from 21.5% to 6.3%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.
Several serious flags at once
2 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 14% a year✓ 18.0% CAGR
Latest reported year was 8.7%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 8%✓ 10.4%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Debt / EBITDA stays below 2x✗ 2.5x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
4Free cash flow remains positive✗ -₹39 Cr
Profit that never becomes cash eventually stops being profit.
5ROCE stays above 15%✓ 17.7%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

6 / 10 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✓ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✗ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high

Price history

Quick Metrics

2 good · 6 neutral · 3 weak

Market Cap

₹178 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

17.4x

Fair

Fairly valued against the generic band

P/B Ratio

Not available

No data

Source didn't return this field

EPS (TTM)

₹12.78

Profitable

Profitable on a per-share basis

ROE

6.3%

Weak

Weak capital efficiency

ROCE

17.7%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.86x

Moderate

Moderate leverage

Revenue Growth (YoY)

8.7%

Modest

Modest growth

Profit Growth (YoY)

-57.9%

Falling

Profits are shrinking

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹39 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

0.0%

Weak

Thin margins leave little room for error

Net Margin

0.0%

Weak

Very little revenue reaches the bottom line

Current Ratio

1.25

Comfortable

Healthy short-term liquidity

52W Range Position

17%

Mid-range

Technical Snapshot

RSI (14)

37.7

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹164 Cr	₹189 Cr	₹248 Cr	₹270 Cr	+18.0%
EBITDA	₹21 Cr	₹21 Cr	₹25 Cr	₹28 Cr	+10.1%
EBITDA Margin	12.8%	11.2%	10.2%	10.4%	—
PAT (Net Profit)	₹12 Cr	₹11 Cr	₹12 Cr	₹5 Cr	-23.7%
EPS	₹14.59	₹14.12	₹15.42	₹6.49	-23.7%
ROE	21.5%	17.3%	15.9%	6.3%	—
ROCE	26.1%	19.0%	19.8%	17.7%	—
Total Debt	₹20 Cr	₹29 Cr	₹34 Cr	₹71 Cr	+51.7%
Free Cash Flow	₹3 Cr	-₹8 Cr	-₹5 Cr	-₹39 Cr	—

🟢 Revenue has grown at 18.0% a year over 3 years.

🟢 EBITDA has grown at 10.1% a year over 3 years.

🔴 EBITDA Margin has fallen from 12.8% to 10.4% over 3 years (-2.4 pts).

🔴 PAT (Net Profit) has shrunk at 23.7% a year over 3 years.

🔴 EPS has shrunk at 23.7% a year over 3 years.

🔴 ROE has fallen from 21.5% to 6.3% over 3 years (-15.2 pts).

🔴 ROCE has fallen from 26.1% to 17.7% over 3 years (-8.4 pts).

🔴 Total Debt has grown at 51.7% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹3 Cr to -₹39 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹220 Cr

Total Liabilities

₹138 Cr

Cash & Equivalents

₹1 Cr

Operating Cash Flow

-₹4 Cr

Capex

-₹35 Cr

Shareholding (proxy)

Institutional Holding

10.0%

Insider Holding

72.3%

Peer Comparison

Company	P/E	ROE
ASIAN PAINTS LIMITED	46.9x	22.3%
PIDILITE INDUSTRIES LTD	57.8x	24.4%
SRF LTD	33.8x	15.4%
UPL LIMITED	21.5x	6.1%

Recent News

2 positive4 general

ARCL Organics Ltd Q1 Results: Net profit surges 134% YoY to ₹8.9 crore

scanx.trade, 12 AugResults

🟢Potentially positiveReported improvement. Check whether it came from volume, price or a one-off item before treating it as a trend.

ARCL Organics Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 04 Sept

Compare with

Equitymaster, 11 Oct

ARCL Organics Upper Circuit Today: Price, Data and Peers

Univest, 06 Oct

ARCL Organics secures DRT order disposing of ₹8.23 crore debt claim

scanx.trade, 07 OctOrder win

🟢Potentially positiveAn order or contract win, which adds to future revenue. How much depends on its size against annual sales and on when it is executed.

Compare with

Equitymaster, 09 Oct

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.
1 metric couldn't be retrieved for this stock — this is more common for smaller or thinly-covered listings.

DalalBaazaar Thesis

StrongValuation

MiddlingFinancial Health

WeakBusiness Quality · Growth · Profitability · Risk

Points for each in the Score ↑

Cheap, but for a reason

The low price is the whole case here, and the business underneath scores poorly. Cheap-and-weak is what a value trap looks like from the outside — it needs a specific reason the numbers are about to improve, not just the observation that they are low. 2 high-severity red flags sit above this conclusion and should be read first.

2 of 5 tripwires tripped — Debt / EBITDA stays below 2x; Free cash flow remains positive · see Key things to watch ↑