Davangere Sugar Company Limited

Consumer Defensive — Confectioners · NSE

₹2.08−₹0.04 (−1.89%)

DalalBaazaar Score

44 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by negative free cash flow, micro-cap size, which brings thin liquidity, falling profits.

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, 7:49 pm

Understanding the Business

Company site ↗

The 60-second version of Davangere Sugar Company Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Davangere Sugar Company Limited manufactures and sells sugar and molasses primarily in India. The company operates through four segments: Sugar, Co-Generation, Aviation, and Distillery.

IndustryConfectioners

SectorConsumer Defensive

Employees382

Annual revenue₹235 Cr

How does it make money?

Turns over ₹235 Cr a year. Of every ₹100 of sales, about ₹4 reaches shareholders as profit, with ₹21 left at the operating level before interest, tax and depreciation. Each of its 382 employees supports ₹61.6 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹61.6 lakh

Who are its competitors?

The closest listed comparisons in its industry are HINDUSTAN UNILEVER LTD., ITC LTD, NESTLE INDIA LIMITED, BRITANNIA INDUSTRIES LTD. 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 6.2% 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 ROE51.0%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved -14% while net margin moved -25% 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-14%

Margin effect-25%

DalalBaazaar Score

44/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Revenue has contracted at 5.0% a year
✗ Profit has declined at 13.7% a year
✗ Profit fell 95.0% in the latest year

Quality vs. Valuation

Company Quality

34/ 100

Weak

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

Valuation

83/ 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

9.9x

3Y Median

34.7x

35 monthly readings · mean 41.4x · range 25.3x–74.0x

Sector Median

43.3x

median of 4 sector peers

🟢Current valuation is approximately 71% below its 3y median of 34.7x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

🟢Against its sector it trades 77% below the peer median of 43.3x.

vs. its own history

Cheap

34.7x median over 35 months · -71%

vs. sector peers

Cheap

43.3x median of 4 peers · -77%

vs. generic bands

Cheap

Below 15x

EV/EBITDA

13.1x

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 Attention1

Return on capital is falling
ROCE has declined from 10.3% to 6.2% — often a sign of competition or overexpansion.

Red Flags

6 items require attention · 4 high · 2 watch

🔴Thin interest coverageFinancial
Operating profit covers interest only 1.4x — little room if earnings dip.
🔴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.
🔴Receivables growing faster than salesFinancial
Receivables up 64% against revenue up -14% — sales are being booked faster than they are collected.
🔴Inventory building faster than salesFinancial
Inventory up 130% against revenue up -14% — stock may not be moving.
🟡Profit is decliningFinancial
Net profit is down 36% over 3 years.
🟡Shareholders have been dilutedOwnership
Shares outstanding are up 47% over 3 years — each existing share owns a smaller slice of the company.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Priced below its own history
The stock trades 71% below its own median multiple. If the business performs as it has and simply re-rates back to normal, that gap is return on its own.
Cheaper than its peers
It trades 77% 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?

The debt load needs earnings to hold up
Debt is 6.1x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
Sales are being booked faster than collected
Receivables are up 64% against revenue up -14%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
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
4 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

1EBITDA margin holds above 19%✓ 21.1%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 6.1x
Already stretched, so this is a reduction target rather than a level to hold. Around 3x is where lenders typically start attaching conditions.
3Free cash flow remains positive✗ -₹47 Cr
Profit that never becomes cash eventually stops being profit.
4Interest cover stays above 3x✗ 1.4x
How much operating profit can fall before interest stops being comfortably covered.
5ROCE stays above 8%✗ 6.2%
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

₹353 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

9.9x

Cheap

Cheap against the generic band

P/B Ratio

0.80x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹0.21

Profitable

Profitable on a per-share basis

ROE

1.7%

Weak

Weak capital efficiency

ROCE

6.2%

Weak

Low return on total capital employed

Debt/Equity

0.60x

Moderate

Moderate leverage

Revenue Growth (YoY)

44.2%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-95.0%

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

-₹47 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

23.0%

Good

Healthy core-business profitability

Net Margin

3.3%

Average

Average bottom-line conversion

Current Ratio

1.96

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.49

Defensive

Steadier than the market

52W Range Position

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

2.3 / 2.4

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

28.2

Oversold zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹274 Cr	₹211 Cr	₹204 Cr	₹235 Cr	-5.0%
EBITDA	₹55 Cr	₹50 Cr	₹52 Cr	₹50 Cr	-3.4%
EBITDA Margin	20.1%	23.6%	25.5%	21.1%	—
PAT (Net Profit)	₹13 Cr	₹12 Cr	₹11 Cr	₹9 Cr	-13.7%
EPS	₹0.14	₹0.13	₹0.12	₹0.06	-25.2%
ROE	4.2%	3.6%	3.1%	1.7%	—
ROCE	10.3%	8.4%	8.2%	6.2%	—
Total Debt	₹259 Cr	₹311 Cr	₹357 Cr	₹304 Cr	+5.5%
Free Cash Flow	₹61 Cr	-₹46 Cr	-₹8 Cr	-₹47 Cr	—

🔴 Revenue has shrunk at 5.0% a year over 3 years.

🔴 EBITDA has shrunk at 3.4% a year over 3 years.

🟢 EBITDA Margin has risen from 20.1% to 21.1% over 3 years (+1.0 pts).

🔴 PAT (Net Profit) has shrunk at 13.7% a year over 3 years.

🔴 EPS has shrunk at 25.2% a year over 3 years.

🔴 ROE has fallen from 4.2% to 1.7% over 3 years (-2.6 pts).

🔴 ROCE has fallen from 10.3% to 6.2% over 3 years (-4.1 pts).

🔴 Total Debt has grown at 5.5% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹61 Cr to -₹47 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹839 Cr

Total Liabilities

₹335 Cr

Cash & Equivalents

₹7 Cr

Operating Cash Flow

-₹47 Cr

Capex

-₹0 Cr

Shareholding (proxy)

Institutional Holding

3.2%

Insider Holding

49.9%

Peer Comparison

Company	P/E	ROE
HINDUSTAN UNILEVER LTD.	42.5x	21.5%
ITC LTD	16.6x	27.4%
NESTLE INDIA LIMITED	59.8x	79.9%
BRITANNIA INDUSTRIES LTD	44.1x	51.0%

Recent News

1 positive2 mixed3 general

Davangere Sugar Stock Jumps 6%: What’s Driving This Sugar Stock Rally As Ethanol Expansion Plans Gather Pace?

Goodreturns, 16 OctCapacity

🟡Mixed / dependsCapacity additions can raise revenue over two to three years, but the capital spend usually pressures free cash flow first. Worth checking whether the capex is funded from operations or from borrowing.

Davangere Sugar to convert Rs 40.12 crore promoter loan into equity warrants, doubles authorised capital

ChiniMandi, 20 Aug

Sugar stock under ₹5 Davangere Sugar Company jumps over 7% | What's fueling the stock

Livemint, 22 Sept

Earnings Not Telling The Story For Davangere Sugar Company Limited (NSE:DAVANGERE) After Shares Rise 28%

Simply Wall Street, 14 JanPrice 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.

Davangere Sugar Company allots 26.59 cr equity shares on conversion of FCCBs

Business Standard, 25 Aug

Davangere Sugar revenue rises 11% in FY26; net profit drops 32%

scanx.trade, 20 AugResults

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

Watch Items

Trading very close to its 52-week low — worth checking whether this reflects a temporary setback or a structural problem.
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

StrongValuation

MiddlingFinancial Health · Risk

WeakBusiness Quality · Growth · Profitability

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. 4 high-severity red flags sit above this conclusion and should be read first.

4 of 5 tripwires tripped — Debt / EBITDA falls below 3x; Free cash flow remains positive; Interest cover stays above 3x; ROCE stays above 8% · see Key things to watch ↑