Deepak Chemtex Limited

Basic Materials — Specialty Chemicals · BSE

₹95.51+₹1.17 (+1.24%)

DalalBaazaar Score

60 / 100

🟢 Good

Verdict

CAUTION

Risk

High

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

In simple words: Strong business and financial position, but sales are shrinking. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:09 pm

Caution warranted. Multiple fundamental metrics — flagged in red below — point to either valuation stretch, leverage risk, or weakening profitability. This doesn't mean avoid the stock outright, but it does mean the burden of proof is on the growth story to justify the current price.

Understanding the Business

Company site ↗

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

What does this company do?

Deepak Chemtex Limited engages in the manufacturing and sale of specialty chemicals, colourants, and related products in India.

IndustrySpecialty Chemicals

SectorBasic Materials

Employees70

Annual revenue₹68 Cr

How does it make money?

Turns over ₹68 Cr a year. Of every ₹100 of sales, about ₹12 reaches shareholders as profit, with ₹21 left at the operating level before interest, tax and depreciation. Each of its 70 employees supports ₹96.6 lakh of revenue a year, the signature of a people-led business.

EBITDA margin21.2%

Net margin12.2%

Revenue / employee₹96.6 lakh

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.

ASIAN PAINTS LIMITEDP/E 46.9x · ROE 22.3%

PIDILITE INDUSTRIES LTDP/E 57.8x · ROE 24.4%

SRF LTDP/E 33.8x · ROE 15.4%

UPL LIMITEDP/E 21.5x · ROE 6.1%

What is its competitive advantage?Some evidence

ROCE of 18.1% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

ROCE18.1%

ROE14.2%

Peer median ROE22.3%

What has been driving growth?

Growth has come mainly from selling more, rather than from keeping more of each sale. Over 3 years revenue moved +45% while net margin moved -7% 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+45%

Margin effect-7%

DalalBaazaar Score

60/ 100

Good

Weighted across six categories. Every point is explained below.

• Beta of 1.18 — moves roughly with the market
✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✗ Negative free cash flow means dependence on external funding

Quality vs. Valuation

Company Quality

61/ 100

Average

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

Valuation

75/ 100

Cheap

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

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

12.6x

3Y Median

14.6x

36 monthly readings · mean 13.5x · range 6.1x–24.3x

Sector Median

40.4x

median of 4 sector peers

🟢Current valuation is approximately 14% below its 3y median of 14.6x. 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 69% below the peer median of 40.4x.

vs. its own history

Fair

14.6x median over 36 months · -14%

vs. sector peers

Cheap

40.4x median of 4 peers · -69%

vs. generic bands

Cheap

Below 15x

P/E (Trailing)

12.6x

P/B

1.64x

EV/EBITDA

7.0x

PEG

1.20

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well3

Margins are improving
EBITDA margin is up from 18.9% to 21.2% over 3 years.
Debt is being paid down
Total debt is down 48% over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention4

Free cash flow is negative
The business is not currently covering its capital spending from operations.
Return on equity is falling
ROE has dropped from 39.0% to 13.0% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 51.3% to 18.1% — often a sign of competition or overexpansion.
Inventory building faster than sales
Inventory is up 378% against revenue growth of 45% — stock may not be moving.

Red Flags

2 items require attention · 2 high

🔴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.
🔴Inventory building faster than salesFinancial
Inventory up 378% against revenue up 45% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 18.1% means each rupee reinvested earns well above what capital costs. If the company can keep deploying at this rate, growth creates value rather than just consuming cash.
Margin expansion has further to run
EBITDA margin has risen from 18.9% to 21.2%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Deleveraging frees up earnings
Debt is down 48% over 3 years. Every rupee of interest not paid drops to the bottom line, so profit can grow even if revenue does not.
Cheaper than its peers
It trades 69% 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?

Returns on shareholder capital are falling
ROE has dropped from 39.0% to 13.0%. 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 10% a year✓ 13.1% CAGR
Latest reported year was -9.4%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 19%✓ 21.2%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹6 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 0.0x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 15%✓ 18.1%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

6 / 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

3 good · 5 neutral · 3 weak

Market Cap

₹104 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

12.6x

Cheap

Cheap against the generic band

P/B Ratio

1.64x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹7.59

Profitable

Profitable on a per-share basis

ROE

14.2%

Moderate

Moderate capital efficiency

ROCE

18.1%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

1.11x

Moderate

Moderate leverage

Revenue Growth (YoY)

-9.4%

Shrinking

Sales are contracting

Profit Growth (YoY)

-41.5%

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

-₹8 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹95.51

ROA

8.3%

Good

Assets are working hard

Operating Margin

12.4%

Average

Average margins

Net Margin

12.1%

Good

Strong bottom-line conversion

Current Ratio

4.45

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

1.18

Market-like

Moves roughly in line with the market

52W Range Position

33%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

83.5 / 83.3

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

79.5

Overbought zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹47 Cr	₹49 Cr	₹79 Cr	₹68 Cr	+13.1%
EBITDA	₹9 Cr	₹9 Cr	₹19 Cr	₹14 Cr	+17.5%
EBITDA Margin	18.9%	18.6%	24.0%	21.2%	—
PAT (Net Profit)	₹6 Cr	₹6 Cr	₹12 Cr	₹8 Cr	+10.5%
EPS	₹5.63	₹6.71	₹11.38	—	—
ROE	39.0%	14.2%	22.4%	13.0%	—
ROCE	51.3%	19.7%	30.0%	18.1%	—
Total Debt	₹1 Cr	₹2 Cr	₹1 Cr	₹1 Cr	-19.8%
Free Cash Flow	₹1 Cr	-₹20 Cr	-₹5 Cr	-₹6 Cr	—

🟢 Revenue has grown at 13.1% a year over 3 years.

🟢 EBITDA has grown at 17.5% a year over 3 years.

🟢 EBITDA Margin has risen from 18.9% to 21.2% over 3 years (+2.3 pts).

🟢 PAT (Net Profit) has grown at 10.5% a year over 3 years.

🔴 ROE has fallen from 39.0% to 13.0% over 3 years (-26.0 pts).

🔴 ROCE has fallen from 51.3% to 18.1% over 3 years (-33.2 pts).

🟢 Total Debt has shrunk at 19.8% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹1 Cr to -₹6 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹75 Cr

Total Liabilities

₹11 Cr

Total Debt

₹1 Cr

Cash & Equivalents

₹4 Cr

Operating Cash Flow

₹6 Cr

Capex

-₹12 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

73.0%

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

1 negative5 general

Deepak Chemtex Limited Clarifies Recent Stock Price Movement to BSE

scanx.trade, 08 Apr

Deepak Chemtex stock lists at 99.5% premium over IPO price on BSE SME

Moneycontrol.com, 06 Dec

Deepak Chemtex IPO: GMP, issue details,10 things to Know about this SME IPO

Livemint, 29 Nov

Deepak Share Price

Upstox, 25 Mar

Deepak Chemtex FY26 profit falls 32% on lower revenue

scanx.trade, 29 MayResults

🔴Potentially negativeReported deterioration, which feeds the growth and margin inputs on this page directly.

BSE Revises Price Bands Of 69 Stocks With Effect From Aug 4 — Check Details

NDTV Profit, 03 Aug

Watch Items

Revenue growth is negative (-9.4%) 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 overbought territory — momentum entries here carry more short-term pullback risk.

DalalBaazaar Thesis

🟢Business QualityStrong13.1/20

🟡Financial HealthAdequate12.9/20

🟡GrowthModest11.5/20

🟡ProfitabilityModerate8.2/15

🟢ValuationAttractive10.4/15

🔴RiskHigh3.7/10

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you. 2 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓Revenue growth stays above 10% a year13.1% CAGR
✓EBITDA margin holds above 19%21.2%
✗Free cash flow remains positive-₹6 Cr
✓Debt / EBITDA stays below 2x0.0x
✓ROCE stays above 15%18.1%