ERP Soft Systems Limited

Technology — Information Technology Services · BSE

₹60.00−₹2.00 (−3.23%)

DalalBaazaar Score

44 / 100

🟡 Moderate

Verdict

CAUTION

Risk

Very High

Driven by high debt relative to equity, 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. Debt is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:01 pm

Understanding the Business

Company site ↗

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

What does this company do?

ERP Soft Systems Limited engages in the provision of software support and maintenance services to clients primarily in the United States.

IndustryInformation Technology Services

SectorTechnology

Employees7

Annual revenue₹10 Cr

How does it make money?

Turns over ₹10 Cr a year. Of every ₹100 of sales, about ₹2 reaches shareholders as profit, with ₹2 left at the operating level before interest, tax and depreciation. Each of its 7 employees supports ₹1.36 Cr of revenue a year, the signature of a capital- or asset-led business.

Revenue / employee₹1.36 Cr

Who are its competitors?

The closest listed comparisons in its industry are TATA CONSULTANCY SERV LT, INFOSYS LIMITED, HCL TECHNOLOGIES LTD, WIPRO 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 1.2% 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 ROE32.0%

What has been driving growth?

Sales and margins have both contributed to where profit is now. Over 3 years revenue moved -59% while net margin moved +43% 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-59%

Margin effect+43%

DalalBaazaar Score

44/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Revenue has contracted at 26.0% a year
✗ Profit has declined at 16.6% a year
✗ Latest-year revenue growth of -46.2% is below the longer-term trend — momentum is fading
✗ Profit fell 27.3% in the latest year

Quality vs. Valuation

Company Quality

41/ 100

Weak

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

Valuation

39/ 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

157.9x

3Y Median

156.5x

40 monthly readings · mean 186.0x · range 84.6x–354.5x

Sector Median

16.5x

median of 4 sector peers

🟡Currently trading close to its 3y median of 156.5x — the market is paying about what it usually pays for this company.

⚠️Against its sector it trades 854% above the peer median of 16.5x.

vs. its own history

Fair

156.5x median over 40 months · +1%

vs. sector peers

Expensive

16.5x median of 4 peers · +854%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

112.2x

PEG

—

What's Good / What's Bad

🟢 What's Going Well3

Debt is being paid down
Total debt is down 56% over 3 years.
Cash flow has turned positive
Free cash flow moved from negative to positive over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

Nothing stands out as clearly deteriorating on the years of data available.

Red Flags

2 items require attention · 1 high · 1 watch

🔴High leverageFinancial
Debt/Equity of 4.51x — earnings must service borrowings before shareholders see anything.
🟡Profit is decliningFinancial
Net profit is down 42% over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Deleveraging frees up earnings
Debt is down 56% over 3 years. Every rupee of interest not paid drops to the bottom line, so profit can grow even if revenue does not.
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 3.9x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
A premium to the sector to defend
It trades 854% above the peer median. That premium needs a reason that persists, or it closes.
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%✓ 2.3%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 3.9x
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✓ ₹1 Cr
Profit that never becomes cash eventually stops being profit.
4ROCE stays above 8%✗ 1.2%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.
5Valuation vs its own median of 156.5x✓ 157.9x today
A re-rating above its own history needs a reason; without one it is just a higher price.

Investment Checklist

4 / 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 · 2 neutral · 6 weak

Market Cap

₹24 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

157.9x

Expensive

Expensive — verify against sector peers

P/B Ratio

1.30x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹0.38

Profitable

Profitable on a per-share basis

ROE

1.0%

Weak

Weak capital efficiency

ROCE

1.2%

Weak

Low return on total capital employed

Debt/Equity

4.51x

High

High leverage

Revenue Growth (YoY)

-46.2%

Shrinking

Sales are contracting

Profit Growth (YoY)

-27.3%

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

₹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

2.1%

Weak

Very little revenue reaches the bottom line

Current Ratio

5.75

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.02

Defensive

Steadier than the market

52W Range Position

25%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

70.4 / 69.4

Bullish alignment (short > long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

0.0

Oversold zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹24 Cr	₹12 Cr	₹10 Cr	₹10 Cr	-26.0%
EBITDA	₹0 Cr	₹0 Cr	₹0 Cr	₹0 Cr	-22.6%
EBITDA Margin	2.0%	2.7%	3.6%	2.3%	—
PAT (Net Profit)	₹0 Cr	₹0 Cr	₹0 Cr	₹0 Cr	-16.6%
EPS	₹0.79	₹0.44	₹0.48	₹0.46	-16.5%
ROE	1.8%	1.0%	1.0%	1.0%	—
ROCE	2.2%	1.5%	1.6%	1.2%	—
Total Debt	₹2 Cr	₹2 Cr	₹2 Cr	₹1 Cr	-23.9%
Free Cash Flow	-₹0 Cr	-₹0 Cr	-₹5 Cr	₹1 Cr	—

🔴 Revenue has shrunk at 26.0% a year over 3 years.

🔴 EBITDA has shrunk at 22.6% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 2.3% over 3 years.

🔴 PAT (Net Profit) has shrunk at 16.6% a year over 3 years.

🔴 EPS has shrunk at 16.5% a year over 3 years.

🟡 ROE has held roughly flat at 1.0% over 3 years.

🔴 ROCE has fallen from 2.2% to 1.2% over 3 years (-1.0 pts).

🟢 Total Debt has shrunk at 23.9% a year over 3 years.

🟢 Free Cash Flow has turned positive, from -₹0 Cr to ₹1 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹22 Cr

Total Liabilities

₹3 Cr

Cash & Equivalents

₹0 Cr

Operating Cash Flow

₹1 Cr

Capex

-₹0 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

94.2%

Peer Comparison

Company	P/E	ROE
TATA CONSULTANCY SERV LT	17.3x	45.6%
INFOSYS LIMITED	15.8x	32.0%
HCL TECHNOLOGIES LTD	20.4x	24.6%
WIPRO LTD	14.5x	15.9%

Recent News

1 mixed5 general

ERP Soft Systems Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 31 Aug

ERP Soft Systems schedules 32nd AGM for September 29, 2026

scanx.trade, 07 Sept

ERP Software Market Size, Statistics | CAGR of 10.9%

Market.us, 16 Jul

ERP Software Development Cost in 2026: Real Numbers From Clockwise Software

Modern Diplomacy, 06 May

Why Is Ramco Systems Share Price Falling Key Reasons 2026

Univest, 24 JunPrice move

🟡Mixed / dependsA price move rather than a change in the business. If the figures on this page have not moved, the fall is either an opportunity or news they have yet to catch up with.

ERP Soft Systems appoints Anapu as independent director

scanx.trade, 05 Sept

Watch Items

Revenue growth is negative (-46.2%) 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

MiddlingValuation · Risk

WeakBusiness Quality · Growth · Profitability

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. 1 high-severity red flag sits above this conclusion and should be read first.

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