Axita Cotton Limited

Consumer Cyclical — Textile Manufacturing · NSE

₹7.30−₹0.02 (−0.27%)

DalalBaazaar Score

38 / 100

🔴 Weak

Verdict

CAUTION

Risk

Moderate

Driven by micro-cap size, which brings thin liquidity, a very high earnings multiple, which leaves little margin for disappointment.

In simple words: The business is earning a fairly low return on the money invested in it, but sales are shrinking. Valuation 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 Axita Cotton Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Axita Cotton Limited engages in manufacturing, processing, finishing, and trading of cotton bales, yarns, seeds, and agri commodities in India and internationally.

IndustryTextile Manufacturing

SectorConsumer Cyclical

Employees22

Annual revenue₹369 Cr

How does it make money?

Turns over ₹369 Cr a year. Of every ₹100 of sales, about ₹1 reaches shareholders as profit, with ₹2 left at the operating level before interest, tax and depreciation. Each of its 22 employees supports ₹16.76 Cr of revenue a year, the signature of a capital- or asset-led business.

Revenue / employee₹16.76 Cr

Who are its competitors?

The closest listed comparisons in its industry are MARUTI SUZUKI INDIA LTD., TITAN COMPANY LIMITED, TRENT LTD, AVENUE SUPERMARTS 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?Little sign of one

Returns on capital of 7.0% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

Peer median ROE25.9%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved -32% while net margin moved -84% 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-32%

Margin effect-84%

DalalBaazaar Score

38/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ Revenue has contracted at 12.1% a year
✗ Profit has declined at 51.8% a year
✗ Latest-year revenue growth of -62.8% is below the longer-term trend — momentum is fading

Quality vs. Valuation

Company Quality

39/ 100

Weak

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

Valuation

36/ 100

Expensive

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

Weak on business quality and not cheap enough to compensate.

Historical Valuation

Current P/E

81.1x

3Y Median

36.8x

40 monthly readings · mean 115.5x · range 15.1x–393.6x

Sector Median

69.2x

median of 4 sector peers

⚠️Current valuation is approximately 120% above its 3y median of 36.8x. Paying more than usual needs a reason — faster growth, a better balance sheet, or a re-rating you believe in.

⚠️Against its sector it trades 17% above the peer median of 69.2x.

vs. its own history

Expensive

36.8x median over 40 months · +120%

vs. sector peers

Fair

69.2x median of 4 peers · +17%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

35.2x

PEG

—

What's Good / What's Bad

🟢 What's Going Well2

Very low debt
Debt/Equity of 0.28x leaves the balance sheet with plenty of headroom.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Return on equity is falling
ROE has dropped from 32.5% to 2.9% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 40.0% to 7.0% — often a sign of competition or overexpansion.

Red Flags

4 items require attention · 2 high · 2 watch

🔴Debt has risen sharplyFinancial
Total debt is up 200% over 3 years, from ₹6 Cr to ₹18 Cr.
🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🟡Profit is decliningFinancial
Net profit is down 89% over 3 years.
🟡Margins are compressingFinancial
EBITDA margin is down 2.3 points over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Self-funding with balance-sheet headroom
Positive free cash flow of ₹1 Cr alongside low debt means growth, buybacks or dividends need no outside money — and a downturn can be absorbed rather than refinanced.
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 4.4% to 2.2%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
The price already assumes success
The stock trades 120% above its own median multiple. At this level the business has to deliver just to stand still, and a stumble is repriced twice — lower earnings on a lower multiple.
Returns on shareholder capital are falling
ROE has dropped from 32.5% to 2.9%. 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.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
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.

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

1EBITDA margin holds above 0%✓ 2.2%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA stays below 2x✗ 2.3x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
3Interest cover stays above 3x✗ 2.6x
How much operating profit can fall before interest stops being comfortably covered.
4Free cash flow remains positive✓ ₹1 Cr
Profit that never becomes cash eventually stops being profit.
5ROCE stays above 8%✗ 7.0%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

5 / 11 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
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

4 good · 3 neutral · 4 weak

Market Cap

₹279 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

81.1x

Expensive

Expensive — verify against sector peers

P/B Ratio

4.30x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹0.09

Profitable

Profitable on a per-share basis

ROE

2.9%

Weak

Weak capital efficiency

ROCE

7.0%

Weak

Low return on total capital employed

Debt/Equity

0.28x

Low

Conservative leverage

Revenue Growth (YoY)

-62.8%

Shrinking

Sales are contracting

Profit Growth (YoY)

73.9%

Healthy

Profits growing at a healthy clip

Dividend Yield

0.68%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

₹1 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

Operating Margin

2.7%

Weak

Thin margins leave little room for error

Net Margin

1.4%

Weak

Very little revenue reaches the bottom line

Current Ratio

3.38

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

-0.11

Defensive

Steadier than the market

52W Range Position

13%

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

7.6 / 7.7

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

6.7

Oversold zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹543 Cr	₹1,101 Cr	₹648 Cr	₹369 Cr	-12.1%
EBITDA	₹24 Cr	₹29 Cr	₹4 Cr	₹8 Cr	-30.8%
EBITDA Margin	4.4%	2.6%	0.6%	2.2%	—
PAT (Net Profit)	₹17 Cr	₹20 Cr	₹1 Cr	₹2 Cr	-51.8%
EPS	₹0.44	₹0.53	₹0.03	₹0.05	-51.7%
ROE	32.5%	31.5%	1.7%	2.9%	—
ROCE	40.0%	39.8%	3.7%	7.0%	—
Total Debt	₹6 Cr	₹25 Cr	₹1 Cr	₹18 Cr	+44.3%
Free Cash Flow	₹6 Cr	-₹14 Cr	₹44 Cr	₹1 Cr	-52.5%

🔴 Revenue has shrunk at 12.1% a year over 3 years.

🔴 EBITDA has shrunk at 30.8% a year over 3 years.

🔴 EBITDA Margin has fallen from 4.4% to 2.2% over 3 years (-2.3 pts).

🔴 PAT (Net Profit) has shrunk at 51.8% a year over 3 years.

🔴 EPS has shrunk at 51.7% a year over 3 years.

🔴 ROE has fallen from 32.5% to 2.9% over 3 years (-29.6 pts).

🔴 ROCE has fallen from 40.0% to 7.0% over 3 years (-32.9 pts).

🔴 Total Debt has grown at 44.3% a year over 3 years.

🔴 Free Cash Flow has shrunk at 52.5% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹86 Cr

Total Liabilities

₹21 Cr

Cash & Equivalents

₹16 Cr

Operating Cash Flow

₹1 Cr

Capex

-₹0 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

46.1%

Corporate Actions

Dividend Rate

₹0.05

Ex-Dividend Date

11 Sept 2026

Peer Comparison

Company	P/E	ROE
MARUTI SUZUKI INDIA LTD.	25.2x	13.4%
TITAN COMPANY LIMITED	68.5x	36.7%
TRENT LTD	87.2x	25.9%
AVENUE SUPERMARTS LIMITED	69.9x	12.7%

Recent News

1 mixed5 general

Axita Cotton Share Price Forecast: 3 Year Outlook to 2030

Univest, 15 Jul

Penny stock under ₹10 to be in focus on Monday | Here's why

Livemint, 23 Aug

Some Axita Cotton Limited (NSE:AXITA) Shareholders Look For Exit As Shares Take 27% Pounding

Simply Wall Street, 21 Jan

Penny stock under Rs 10: Company Share Price Rise 5% After Filing EOI for Varidhi Cotspin CIRP

Dalal Street Investment Journal, 22 AugPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Penny Stock Under Rs 10: THIS Textile Stock In Focus Due to Business Update

Goodreturns, 22 Aug

Compare with

Equitymaster, 08 Oct

Watch Items

Revenue growth is negative (-62.8%) on the latest reported period — check if this is one-off or a trend.
Cross-check against the company's latest quarterly filing / investor presentation before acting.
RSI is in oversold territory — could mean either a bargain or a stock still falling for good reason. Check the 'why' before assuming reversal.

DalalBaazaar Thesis

StrongFinancial Health

WeakBusiness Quality · Growth · Profitability · Valuation · Risk

Points for each in the Score ↑

Weak on the fundamentals

Poor scores on business quality without a price low enough to compensate. There is no obvious argument for owning this over a stronger company at a similar valuation. 2 high-severity red flags sit above this conclusion and should be read first.

3 of 5 tripwires tripped — Debt / EBITDA stays below 2x; Interest cover stays above 3x; ROCE stays above 8% · see Key things to watch ↑