Hilltone Software and Gases Limited

Basic Materials — Specialty Chemicals · BSE

₹39.00−₹0.30 (−0.76%)

DalalBaazaar Score

36 / 100

🔴 Weak

Verdict

CAUTION

Risk

Very High

Driven by high debt relative to equity, 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, with both sales and profits growing well. Debt is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:03 pm

Understanding the Business

Company site ↗

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

What does this company do?

Hilltone Software and Gases Limited produces and markets industrial and medical gases in India. It offers oxygen, nitrogen, LPG, argon, carbon dioxide, acetylene, hydrogen, helium, and other gases; mixed gases; and liquid oxygen, carbon dioxide, and nitrogen gases.

IndustrySpecialty Chemicals

SectorBasic Materials

Annual revenue₹14 Cr

How does it make money?

Turns over ₹14 Cr a year. Of every ₹100 of sales, about ₹1 reaches shareholders as profit, with ₹6 left at the operating level before interest, tax and depreciation.

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.

Compared side by side in Peers ↓

What is its competitive advantage?Little sign of one

Returns on capital of 0.6% 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 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 +159% while net margin moved -93% 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+159%

Margin effect-93%

DalalBaazaar Score

36/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ ROCE of 0.6% is below 10% — capital is not working hard
✗ ROCE has fallen by 16.3 points — returns are eroding
✗ EBITDA margin of 6.0% is thin — little cushion if costs rise
✗ The business is lossmaking at the net level
• Revenue has compounded at 37.3% a year, which is the base these returns are earned on

Quality vs. Valuation

Company Quality

34/ 100

Weak

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

Valuation

44/ 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

63.9x

2Y Median

105.9x

24 monthly readings · mean 146.1x · range 43.5x–333.6x

Sector Median

40.4x

median of 4 sector peers

🟢Current valuation is approximately 40% below its 2y median of 105.9x. 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 58% above the peer median of 40.4x.

vs. its own history

Cheap

105.9x median over 24 months · -40%

vs. sector peers

Expensive

40.4x median of 4 peers · +58%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

58.4x

PEG

—

What's Good / What's Bad

🟢 What's Going Well0

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

🔴 What Needs Attention2

Return on equity is falling
ROE has dropped from 14.0% to 0.6% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 16.9% to 0.6% — often a sign of competition or overexpansion.

Red Flags

10 items require attention · 7 high · 3 watch

🔴Debt has risen sharplyFinancial
Total debt is up 131% over 3 years, from ₹1 Cr to ₹2 Cr.
🔴High leverageFinancial
Debt/Equity of 8.14x — earnings must service borrowings before shareholders see anything.
🔴Thin interest coverageFinancial
Operating profit covers interest only 0.6x — 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.
🔴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.
🔴Significant margin compressionFinancial
EBITDA margin has fallen 13.6 points, from 19.6% to 6.0%.
🔴Inventory building faster than salesFinancial
Inventory up 651% against revenue up 159% — stock may not be moving.
🟡Interest coverage is deterioratingFinancial
Cover has fallen from 3.3x to 0.6x.
🟡Profit is decliningFinancial
Net profit is down 81% over 3 years.
🟡Shareholders have been dilutedOwnership
Shares outstanding are up 21% 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 40% 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.

🔴 Bear CaseWhat could go wrong?

Margins are being competed away
EBITDA margin has fallen from 19.6% to 6.0%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Leverage amplifies any setback
Debt/Equity of 8.14x. Interest is payable whether or not the business has a good year.
A premium to the sector to defend
It trades 58% above the peer median. That premium needs a reason that persists, or it closes.
Returns on shareholder capital are falling
ROE has dropped from 14.0% to 0.6%. 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.

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

1Revenue growth stays above 28% a year✓ 37.3% CAGR
Latest reported year was 88.6%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 4%✓ 6.0%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Debt / EBITDA stays below 2x✗ 2.2x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
4Free cash flow remains positive✗ -₹9 Cr
Profit that never becomes cash eventually stops being profit.
5Interest cover stays above 3x✗ 0.6x
How much operating profit can fall before interest stops being comfortably covered.

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 · 3 neutral · 5 weak

Market Cap

₹51 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

63.9x

Expensive

Expensive — verify against sector peers

P/B Ratio

Not available

No data

Source didn't return this field

EPS (TTM)

₹0.61

Profitable

Profitable on a per-share basis

ROE

0.6%

Weak

Weak capital efficiency

ROCE

0.6%

Weak

Low return on total capital employed

Debt/Equity

8.14x

High

High leverage

Revenue Growth (YoY)

88.6%

Healthy

Healthy top-line growth

Profit Growth (YoY)

186.7%

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

-₹9 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

0.0%

Weak

Thin margins leave little room for error

Net Margin

0.0%

Weak

Very little revenue reaches the bottom line

Current Ratio

5.91

Comfortable

Healthy short-term liquidity

52W Range Position

10%

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

37.7 / 39.1

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

61.8

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹5 Cr	₹7 Cr	₹8 Cr	₹14 Cr	+37.3%
EBITDA	₹1 Cr	₹1 Cr	₹1 Cr	₹1 Cr	-7.5%
EBITDA Margin	19.6%	13.5%	6.7%	6.0%	—
PAT (Net Profit)	₹1 Cr	₹1 Cr	-₹0 Cr	₹0 Cr	-42.9%
EPS	₹0.67	₹0.46	₹-0.14	₹0.12	-43.6%
ROE	14.0%	3.7%	-1.1%	0.6%	—
ROCE	16.9%	5.3%	2.2%	0.6%	—
Total Debt	₹1 Cr	₹1 Cr	₹2 Cr	₹2 Cr	+32.2%
Free Cash Flow	₹0 Cr	-₹8 Cr	-₹1 Cr	-₹9 Cr	—

🟢 Revenue has grown at 37.3% a year over 3 years.

🔴 EBITDA has shrunk at 7.5% a year over 3 years.

🔴 EBITDA Margin has fallen from 19.6% to 6.0% over 3 years (-13.6 pts).

🔴 PAT (Net Profit) has shrunk at 42.9% a year over 3 years.

🔴 EPS has shrunk at 43.6% a year over 3 years.

🔴 ROE has fallen from 14.0% to 0.6% over 3 years (-13.5 pts).

🔴 ROCE has fallen from 16.9% to 0.6% over 3 years (-16.3 pts).

🔴 Total Debt has grown at 32.2% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹0 Cr to -₹9 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹27 Cr

Total Liabilities

₹4 Cr

Cash & Equivalents

₹4 Cr

Operating Cash Flow

-₹4 Cr

Capex

-₹4 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

53.8%

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 positive1 mixed4 general

Hilltone Software & Gases Ltd. Peer Comparison – Compare with Others

Value Research, 30 Aug

Hilltone Software & Gases adopts new Articles of Association at AGM

scanx.trade, 25 Sept

Bulk deals: Bandhan Mutual Fund picks up 0.57% stake in Updater Services

Moneycontrol.com, 07 May

Hilltone Software & Gases Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 30 Aug

Hilltone Software closes trading window until Q2FY27 results

scanx.trade, 28 SeptResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Shanti Gold International standalone net profit rises 104.87% in the June 2026 quarter

Business Standard, 14 AugResults

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

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.
1 metric couldn't be retrieved for this stock — this is more common for smaller or thinly-covered listings.

DalalBaazaar Thesis

MiddlingGrowth · Valuation

WeakBusiness Quality · Financial Health · Profitability · 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. 7 high-severity red flags sit above this conclusion and should be read first.

3 of 5 tripwires tripped — Debt / EBITDA stays below 2x; Free cash flow remains positive; Interest cover stays above 3x · see Key things to watch ↑