H.P. Cotton Textile Mills Limited

Consumer Cyclical — Textile Manufacturing · BSE

₹87.99+₹3.99 (+4.75%)

DalalBaazaar Score

60 / 100

🟢 Good

Verdict

NEUTRAL

Risk

High

Driven by high debt relative to equity, micro-cap size, which brings thin liquidity.

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

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:46 pm

Understanding the Business

Company site ↗

The 60-second version of H.P. Cotton Textile Mills Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

H.P. Cotton Textile Mills Limited manufactures and sells cotton specialty yarns and cotton sewing threads in India and internationally.

IndustryTextile Manufacturing

SectorConsumer Cyclical

Employees1,641

Annual revenue₹124 Cr

How does it make money?

Turns over ₹124 Cr a year. Of every ₹100 of sales, about ₹2 reaches shareholders as profit, with ₹11 left at the operating level before interest, tax and depreciation. Each of its 1,641 employees supports ₹7.6 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹7.6 lakh

Who are its competitors?

The closest listed comparisons in its industry are MARUTI SUZUKI INDIA LTD., TITAN COMPANY LIMITED, TRENT LTD, AVENUE SUPERMARTS 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?Some evidence

ROCE of 25.9% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

Peer median ROE25.9%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +61% while net margin moved -110% 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+61%

Margin effect-110%

DalalBaazaar Score

60/ 100

Good

Weighted across six categories. Every point is explained below.

✓ Beta of 0.21 — historically steadier than the index
✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✗ High leverage magnifies any downturn in earnings
✗ Profits have swung sharply from year to year — earnings are hard to forecast

Quality vs. Valuation

Company Quality

59/ 100

Average

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

Valuation

86/ 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

11.5x

2Y Median

17.0x

28 monthly readings · mean 30.4x · range 11.4x–67.1x

Sector Median

69.2x

median of 4 sector peers

🟢Current valuation is approximately 32% below its 2y median of 17.0x. 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 83% below the peer median of 69.2x.

vs. its own history

Cheap

17.0x median over 28 months · -32%

vs. sector peers

Cheap

69.2x median of 4 peers · -83%

vs. generic bands

Cheap

Below 15x

EV/EBITDA

5.6x

PEG

0.58

What's Good / What's Bad

🟢 What's Going Well6

Margins are improving
EBITDA margin is up from -12.4% to 10.6% over 3 years.
Debt is being paid down
Total debt is down 13% over 3 years.
Cash flow has turned positive
Free cash flow moved from negative to positive over 3 years.
Return on equity is rising
ROE has improved from -139.2% to 15.4%.
Return on capital is rising
ROCE has improved from -47.6% to 25.9%.
High return on capital employed
ROCE of 25.9% is the mark of a business that converts capital into profit efficiently.

🔴 What Needs Attention0

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

Red Flags

2 items require attention · 2 high

🔴High leverageFinancial
Debt/Equity of 2.03x — earnings must service borrowings before shareholders see anything.
🔴Thin interest coverageFinancial
Operating profit covers interest only 1.8x — little room if earnings dip.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 25.9% 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 -12.4% to 10.6%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Priced below its own history
The stock trades 32% 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 83% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.

🔴 Bear CaseWhat could go wrong?

Leverage amplifies any setback
Debt/Equity of 2.03x. Interest is payable whether or not the business has a good year.
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.
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 13% a year✓ 17.3% CAGR
Latest reported year was -13.2%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 9%✓ 10.6%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Debt / EBITDA stays below 2x✗ 3.0x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
4Interest cover stays above 3x✗ 1.8x
How much operating profit can fall before interest stops being comfortably covered.
5Free cash flow remains positive✓ ₹7 Cr
Profit that never becomes cash eventually stops being profit.

Investment Checklist

7 / 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

6 good · 3 neutral · 2 weak

Market Cap

₹35 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

11.5x

Cheap

Cheap against the generic band

P/B Ratio

1.78x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹7.65

Profitable

Profitable on a per-share basis

ROE

15.4%

Strong

Strong capital efficiency

ROCE

25.9%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

2.03x

High

High leverage

Revenue Growth (YoY)

-13.2%

Shrinking

Sales are contracting

Profit Growth (YoY)

19.8%

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

₹7 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

Operating Margin

7.4%

Average

Average margins

Net Margin

2.5%

Weak

Very little revenue reaches the bottom line

Current Ratio

1.02

Adequate

Adequate, but no real cushion

Beta (vs Nifty)

0.21

Defensive

Steadier than the market

52W Range Position

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

87.3 / 94.7

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

56.8

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹77 Cr	₹89 Cr	₹121 Cr	₹124 Cr	+17.3%
EBITDA	-₹10 Cr	₹5 Cr	₹13 Cr	₹13 Cr	—
EBITDA Margin	-12.4%	5.7%	10.9%	10.6%	—
PAT (Net Profit)	-₹18 Cr	₹1 Cr	₹3 Cr	₹3 Cr	—
EPS	₹-46.71	₹2.31	₹6.56	₹7.56	—
ROE	-139.2%	6.6%	15.8%	15.4%	—
ROCE	-47.6%	5.9%	28.6%	25.9%	—
Total Debt	₹45 Cr	₹39 Cr	₹40 Cr	₹39 Cr	-4.7%
Free Cash Flow	-₹1 Cr	₹12 Cr	₹6 Cr	₹7 Cr	—

🟢 Revenue has grown at 17.3% a year over 3 years.

🟢 EBITDA has turned positive, from -₹10 Cr to ₹13 Cr.

🟢 EBITDA Margin has risen from -12.4% to 10.6% over 3 years (+23.0 pts).

🟢 PAT (Net Profit) has turned positive, from -₹18 Cr to ₹3 Cr.

🟢 EPS has turned positive, from ₹-46.71 to ₹7.56.

🟢 ROE has risen from -139.2% to 15.4% over 3 years (+154.5 pts).

🟢 ROCE has risen from -47.6% to 25.9% over 3 years (+73.5 pts).

🟢 Total Debt has shrunk at 4.7% a year over 3 years.

🟢 Free Cash Flow has turned positive, from -₹1 Cr to ₹7 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹93 Cr

Total Liabilities

₹74 Cr

Cash & Equivalents

₹0 Cr

Operating Cash Flow

₹8 Cr

Capex

-₹1 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

79.3%

Corporate Actions

Ex-Dividend Date

20 Sept 2022

Peer Comparison

Company	P/E	ROE
MARUTI SUZUKI INDIA LTD.	25.2x	13.4%
TITAN COMPANY LIMITED	68.5x	36.7%
TRENT LTD	87.2x	25.9%
AVENUE SUPERMARTS LIMITED	69.9x	12.7%

Recent News

1 mixed5 general

H.P. Cotton Textile Mills closes trading window ahead of Q2FY27 results

scanx.trade, 29 SeptResults

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

HP Cotton Textile Mills (BSE: 502873) - Business and Sector Overview

Kalkine India, 16 Sept

Cotton Spinning Mills Penny Stocks India 2027: 5 Picks

Univest, 17 Sept

HP Cotton Textile Mills seeks settlement of ₹21.20 lakh entry tax demand

scanx.trade, 29 Sept

Panchatv Bharat (BSE:544926) - Stock Analysis

Simply Wall Street, 18 Sept

HP Cotton Textile Mills shareholders approve director re-appointments at AGM

scanx.trade, 18 Sept

Watch Items

Revenue growth is negative (-13.2%) on the latest reported period — check if this is one-off or a trend.
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.

DalalBaazaar Thesis

StrongGrowth · Profitability · Valuation

MiddlingBusiness Quality · Financial Health

WeakRisk

Points for each in the Score ↑

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.

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