Indokem Limited

Basic Materials — Specialty Chemicals · NSE

₹701.00+₹17.60 (+2.58%)

DalalBaazaar Score

42 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by negative free cash flow, 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, with both sales and profits growing well. 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 Indokem Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Indokem Limited, together with its subsidiaries, manufactures, exports, and sells dyes, sizing chemicals, and auxiliaries in India. It operates through two segments, Textile Dyes and Chemicals; and Electrical Capacitors.

IndustrySpecialty Chemicals

SectorBasic Materials

Employees193

Annual revenue₹169 Cr

How does it make money?

Turns over ₹169 Cr a year. Of every ₹100 of sales, about ₹1 reaches shareholders as profit, with ₹5 left at the operating level before interest, tax and depreciation. Each of its 193 employees supports ₹87.5 lakh of revenue a year, the signature of a people-led business.

EBITDA margin5.5%

Net margin1.1%

Revenue / employee₹87.5 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?Little sign of one

Returns on capital of 5.6% 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.

ROCE5.6%

ROE2.9%

Peer median ROE22.3%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +5% while net margin moved -234% 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+5%

Margin effect-234%

DalalBaazaar Score

42/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ P/E of 865.4x is demanding — it needs sustained high growth to justify
✗ P/B of 29.27x is a steep premium to book

Quality vs. Valuation

Company Quality

46/ 100

Average

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

Valuation

24/ 100

Expensive

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

865.4x

Sector Median

40.4x

median of 4 sector peers

⚠️Against its sector it trades 2044% above the peer median of 40.4x.

vs. its own history

Not enough price and earnings history

vs. sector peers

Expensive

40.4x median of 4 peers · +2044%

vs. generic bands

Expensive

Above 35x

P/E (Trailing)

865.4x

P/B

29.27x

EV/EBITDA

214.4x

PEG

—

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well3

Margins are improving
EBITDA margin is up from 2.8% to 5.5% over 3 years.
Return on equity is rising
ROE has improved from -2.1% to 2.9%.
Return on capital is rising
ROCE has improved from 2.0% to 5.6%.

🔴 What Needs Attention3

Free cash flow is negative
The business is not currently covering its capital spending from operations.
Receivables growing faster than sales
Receivables are up 37% against revenue growth of 5% — customers are taking longer to pay.
Inventory building faster than sales
Inventory is up 60% against revenue growth of 5% — stock may not be moving.

Red Flags

4 items require attention · 1 high · 3 watch

🔴Thin interest coverageFinancial
Operating profit covers interest only 1.6x — little room if earnings dip.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹7 Cr in the latest year.
🟡Receivables growing faster than salesFinancial
Receivables up 37% against revenue up 5% — sales are being booked faster than they are collected.
🟡Inventory building faster than salesFinancial
Inventory up 60% against revenue up 5% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 2.8% to 5.5%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.

🔴 Bear CaseWhat could go wrong?

Sales are being booked faster than collected
Receivables are up 37% against revenue up 5%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
A premium to the sector to defend
It trades 2044% above the peer median. That premium needs a reason that persists, or it closes.
Growth barely outpaces inflation
Revenue compounding at 1.8% 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.
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.

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

1EBITDA margin holds above 3%✓ 5.5%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA stays below 2x✗ 2.9x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
3Free cash flow remains positive✗ -₹7 Cr
Profit that never becomes cash eventually stops being profit.
4Interest cover stays above 3x✗ 1.6x
How much operating profit can fall before interest stops being comfortably covered.
5Revenue growth stays above 4% a year✗ 1.8% CAGR
Latest reported year was 12.2%. The bar is set below the established compounding rate, so ordinary variation does not trip it.

Investment Checklist

5 / 10 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

Price history

Quick Metrics

4 good · 2 neutral · 5 weak

Market Cap

₹1,955 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

865.4x

Expensive

Expensive — verify against sector peers

P/B Ratio

29.27x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹0.81

Profitable

Profitable on a per-share basis

ROE

2.9%

Weak

Weak capital efficiency

ROCE

5.6%

Weak

Low return on total capital employed

Debt/Equity

0.42x

Low

Conservative leverage

Revenue Growth (YoY)

12.2%

Healthy

Healthy top-line growth

Profit Growth (YoY)

52.0%

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 burning

Spending more cash than the operations bring in

More Metrics

CMP

₹701

Operating Margin

3.5%

Weak

Thin margins leave little room for error

Net Margin

1.3%

Weak

Very little revenue reaches the bottom line

Current Ratio

1.78

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.22

Defensive

Steadier than the market

52W Range Position

84%

Mid-range

Technical Snapshot

RSI (14)

61.9

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹160 Cr	₹165 Cr	₹177 Cr	₹169 Cr	+1.8%
EBITDA	₹4 Cr	₹0 Cr	₹9 Cr	₹9 Cr	+27.5%
EBITDA Margin	2.8%	0.2%	5.1%	5.5%	—
PAT (Net Profit)	-₹1 Cr	-₹6 Cr	₹3 Cr	₹2 Cr	—
EPS	₹-0.47	₹-2.23	₹1.13	₹0.67	—
ROE	-2.1%	-10.5%	5.1%	2.9%	—
ROCE	2.0%	-4.0%	7.6%	5.6%	—
Total Debt	₹22 Cr	₹22 Cr	₹22 Cr	₹27 Cr	+6.3%
Free Cash Flow	-₹1 Cr	₹3 Cr	₹4 Cr	-₹7 Cr	—

🟡 Revenue has been broadly flat over 3 years (1.8% a year).

🟢 EBITDA has grown at 27.5% a year over 3 years.

🟢 EBITDA Margin has risen from 2.8% to 5.5% over 3 years (+2.7 pts).

🟢 PAT (Net Profit) has turned positive, from -₹1 Cr to ₹2 Cr.

🟢 EPS has turned positive, from ₹-0.47 to ₹0.67.

🟢 ROE has risen from -2.1% to 2.9% over 3 years (+5.0 pts).

🟢 ROCE has risen from 2.0% to 5.6% over 3 years (+3.7 pts).

🔴 Total Debt has grown at 6.3% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹145 Cr

Total Liabilities

₹81 Cr

Total Debt

₹27 Cr

Cash & Equivalents

₹3 Cr

Operating Cash Flow

-₹4 Cr

Capex

-₹3 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

71.5%

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

2 mixed4 general

INDOKEM Stock Price and Chart — NSE:INDOKEM

TradingView, 17 Aug

Indokem Share Price update with price action and valuation

Univest, 08 Oct

Fino Payments Bank, Firstsource Solutions, Indokem shares rally up to 20% on volume spike amid weak market; check list

Upstox, 08 OctPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Indokem hits 5% lower circuit as MPCB orders closure of Ambernath unit

Business Standard, 18 Nov

Indokem closes trading window from July 1 till Q1FY26 results

scanx.trade, 22 JunResults

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

Indokem - Multibagger watchlist: 10 stocks surge over 20% for 3 straight quarters in FY26. Do you own any?

The Economic Times, 09 Jan

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🔴Business QualityWeak8.7/20

🟡Financial HealthAdequate10.9/20

🔴GrowthWeak7.6/20

🟡ProfitabilityModerate7.1/15

🔴ValuationDemanding3.2/15

🔴RiskHigh4/10

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

This thesis breaks if

✓EBITDA margin holds above 3%5.5%
✗Debt / EBITDA stays below 2x2.9x
✗Free cash flow remains positive-₹7 Cr
✗Interest cover stays above 3x1.6x
✗Revenue growth stays above 4% a year1.8% CAGR