Garg Furnace Limited

Basic Materials — Steel · BSE

₹208.70+₹3.35 (+1.63%)

DalalBaazaar Score

52 / 100

🟡 Moderate

Verdict

CAUTION

Risk

Moderate

Driven by 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, 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 Garg Furnace Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Garg Furnace Limited manufactures and trades in iron and steel products in India. The company offers mild steel (MS) round, billet, ingot, and wire rod and round bar products; and alloy and non-alloy stainless steel products.

IndustrySteel

SectorBasic Materials

Employees55

Annual revenue₹289 Cr

How does it make money?

Turns over ₹289 Cr a year. Of every ₹100 of sales, about ₹4 reaches shareholders as profit, with ₹5 left at the operating level before interest, tax and depreciation. Each of its 55 employees supports ₹5.26 Cr of revenue a year, the signature of a capital- or asset-led business.

EBITDA margin4.6%

Net margin3.6%

Revenue / employee₹5.26 Cr

Who are its competitors?

The closest listed comparisons in its industry are TATA STEEL LIMITED, JSW STEEL LIMITED, JINDAL STEEL LIMITED, STEEL AUTHORITY OF INDIA. These are the companies its valuation and returns are measured against elsewhere in this report.

TATA STEEL LIMITEDP/E 19.8x · ROE 10.8%

JSW STEEL LIMITEDP/E 12.0x · ROE 24.7%

JINDAL STEEL LIMITEDP/E 39.1x · ROE 5.3%

STEEL AUTHORITY OF INDIAP/E 16.5x · ROE 7.1%

What is its competitive advantage?Little sign of one

Returns on capital of 8.0% 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.

ROCE8.0%

ROE10.4%

Peer median ROE10.8%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +21% 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+21%

Margin effect+43%

DalalBaazaar Score

52/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ ROCE of 8.0% is below 10% — capital is not working hard
✗ ROCE has fallen by 16.4 points — returns are eroding
✗ EBITDA margin of 4.6% is thin — little cushion if costs rise
✗ Net margin of 3.7% is slim
• Revenue has compounded at 6.7% a year, which is the base these returns are earned on

Quality vs. Valuation

Company Quality

48/ 100

Average

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

Valuation

77/ 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

11.7x

3Y Median

14.3x

40 monthly readings · mean 15.8x · range 8.0x–33.7x

Sector Median

18.2x

median of 4 sector peers

🟢Current valuation is approximately 19% below its 3y median of 14.3x. 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 36% below the peer median of 18.2x.

vs. its own history

Fair

14.3x median over 40 months · -19%

vs. sector peers

Cheap

18.2x median of 4 peers · -36%

vs. generic bands

Cheap

Below 15x

P/E (Trailing)

11.7x

P/B

1.43x

EV/EBITDA

8.8x

PEG

0.58

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well2

Very low debt
Debt/Equity of 0.13x leaves the balance sheet with plenty of headroom.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention4

Debt is rising
Total debt is up 270% over 3 years — worth checking what it funded.
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 28.7% to 10.4% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 24.4% to 8.0% — 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 270% over 3 years, from ₹5 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.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹49 Cr in the latest year.
🟡Shareholders have been dilutedOwnership
Shares outstanding are up 70% over 3 years — each existing share owns a smaller slice of the company.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Cheaper than its peers
It trades 36% 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?

Growth barely outpaces inflation
Revenue compounding at 6.7% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
Returns on shareholder capital are falling
ROE has dropped from 28.7% to 10.4%. 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

1EBITDA margin holds above 3%✓ 4.6%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✗ -₹49 Cr
Profit that never becomes cash eventually stops being profit.
3Revenue growth stays above 5% a year✓ 6.7% CAGR
Latest reported year was -1.7%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
4Debt / EBITDA stays below 2x✓ 1.3x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 8%✗ 8.0%
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

5 good · 3 neutral · 3 weak

Market Cap

₹105 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

11.7x

Cheap

Cheap against the generic band

P/B Ratio

1.43x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹17.86

Profitable

Profitable on a per-share basis

ROE

10.4%

Moderate

Moderate capital efficiency

ROCE

8.0%

Weak

Low return on total capital employed

Debt/Equity

0.13x

Low

Conservative leverage

Revenue Growth (YoY)

-1.7%

Shrinking

Sales are contracting

Profit Growth (YoY)

13.5%

Healthy

Profits growing at a healthy clip

Dividend Yield

None

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

Free Cash Flow

-₹49 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹208.7

Operating Margin

4.6%

Weak

Thin margins leave little room for error

Net Margin

3.7%

Average

Average bottom-line conversion

Current Ratio

4.08

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.98

Market-like

Moves roughly in line with the market

52W Range Position

68%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

215.9 / 177.6

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

35.4

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹238 Cr	₹258 Cr	₹262 Cr	₹289 Cr	+6.7%
EBITDA	₹8 Cr	₹7 Cr	₹9 Cr	₹13 Cr	+19.4%
EBITDA Margin	3.3%	2.8%	3.6%	4.6%	—
PAT (Net Profit)	₹6 Cr	₹6 Cr	₹8 Cr	₹10 Cr	+20.1%
EPS	₹14.82	₹11.6	₹14.16	₹16.36	+3.4%
ROE	28.7%	11.4%	12.3%	10.4%	—
ROCE	24.4%	11.4%	12.2%	8.0%	—
Total Debt	₹5 Cr	₹1 Cr	₹1 Cr	₹18 Cr	+54.7%
Free Cash Flow	₹6 Cr	-₹14 Cr	₹2 Cr	-₹49 Cr	—

🟢 Revenue has grown at 6.7% a year over 3 years.

🟢 EBITDA has grown at 19.4% a year over 3 years.

🟢 EBITDA Margin has risen from 3.3% to 4.6% over 3 years (+1.3 pts).

🟢 PAT (Net Profit) has grown at 20.1% a year over 3 years.

🟢 EPS has grown at 3.4% a year over 3 years.

🔴 ROE has fallen from 28.7% to 10.4% over 3 years (-18.3 pts).

🔴 ROCE has fallen from 24.4% to 8.0% over 3 years (-16.4 pts).

🔴 Total Debt has grown at 54.7% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹6 Cr to -₹49 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹165 Cr

Total Liabilities

₹34 Cr

Total Debt

₹18 Cr

Cash & Equivalents

₹4 Cr

Operating Cash Flow

-₹14 Cr

Capex

-₹35 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

72.3%

Peer Comparison

Company	P/E	ROE
TATA STEEL LIMITED	19.8x	10.8%
JSW STEEL LIMITED	12.0x	24.7%
JINDAL STEEL LIMITED	39.1x	5.3%
STEEL AUTHORITY OF INDIA	16.5x	7.1%

Recent News

1 mixed5 general

Garg Furnace Share Price near yearly high: price action view

Univest, 30 Sept

Garg Furnace allots 13.98 lakh warrants at ₹126.50 per share

scanx.trade, 12 Oct

Garg Furnace Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 04 Sept

Garg Furnace Ltd. Lower Circuit Today: Price, Data and Peers

Univest, 05 Oct

Vaswani Industries (NSEI:VASWANI) - Stock Analysis

Simply Wall Street, 13 Oct

Garg Furnace subsidiary Vaneera commissions 1,00,000 MT steel plant

scanx.trade, 25 AugCapacity

🟡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.

Watch Items

Revenue growth is negative (-1.7%) 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.

DalalBaazaar Thesis

🔴Business QualityWeak5.9/20

🟢Financial HealthStrong13/20

🟡GrowthModest11.3/20

🔴ProfitabilityWeak6/15

🟢ValuationAttractive11.8/15

🔴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

✓EBITDA margin holds above 3%4.6%
✗Free cash flow remains positive-₹49 Cr
✓Revenue growth stays above 5% a year6.7% CAGR
✓Debt / EBITDA stays below 2x1.3x
✗ROCE stays above 8%8.0%