Megastar Foods Limited

Consumer Defensive — Packaged Foods · NSE

₹263.10−₹13.31 (−4.82%)

DalalBaazaar Score

46 / 100

🟡 Moderate

Verdict

NEUTRAL

Risk

Moderate

Driven by moderate debt load, micro-cap size, which brings thin liquidity.

In simple words: Strong business and financial position, with both sales and profits growing well. Thin profit margins are 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 Megastar Foods Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Megastar Foods Limited engages in the bulk food processing and producing a range of wholesome wheat flour products in India. The company offers wheat and allied flour products, such as refined flour, semolina, bran, etc.

IndustryPackaged Foods

SectorConsumer Defensive

Employees265

Annual revenue₹533 Cr

How does it make money?

Turns over ₹533 Cr a year. Of every ₹100 of sales, about ₹2 reaches shareholders as profit, with ₹7 left at the operating level before interest, tax and depreciation. Each of its 265 employees supports ₹2.01 Cr of revenue a year, the signature of a capital- or asset-led business.

Revenue / employee₹2.01 Cr

Who are its competitors?

The closest listed comparisons in its industry are NESTLE INDIA LIMITED, BRITANNIA INDUSTRIES LTD, TATA CONSUMER PRODUCT LTD, DABUR INDIA 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?Some evidence

ROCE of 15.6% 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 ROE51.0%

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 +75% while net margin moved -47% 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+75%

Margin effect-47%

DalalBaazaar Score

46/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ ROE of 9.0% is weak
✗ ROE has fallen by 12.8 points over the period

Quality vs. Valuation

Company Quality

43/ 100

Weak

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

Valuation

74/ 100

Cheap

What you are being asked to pay, ignoring how good the business is.

Optically cheap, but the underlying business scores poorly. Cheap-and-weak is what a value trap looks like from the outside — the low price may be deserved.

Historical Valuation

Current P/E

30.0x

3Y Median

38.2x

40 monthly readings · mean 48.1x · range 24.6x–108.4x

Sector Median

51.7x

median of 4 sector peers

🟢Current valuation is approximately 21% below its 3y median of 38.2x. 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 42% below the peer median of 51.7x.

vs. its own history

Cheap

38.2x median over 40 months · -21%

vs. sector peers

Cheap

51.7x median of 4 peers · -42%

vs. generic bands

Fair

15x–35x

EV/EBITDA

12.2x

PEG

1.26

What's Good / What's Bad

🟢 What's Going Well2

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 Attention2

Return on equity is falling
ROE has dropped from 21.9% to 9.0% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 26.2% to 15.6% — often a sign of competition or overexpansion.

Red Flags

3 items require attention · 2 high · 1 watch

🔴Debt has risen sharplyFinancial
Total debt is up 127% over 3 years, from ₹58 Cr to ₹131 Cr.
🔴Thin interest coverageFinancial
Operating profit covers interest only 1.9x — little room if earnings dip.
🟡Inventory building faster than salesFinancial
Inventory up 134% against revenue up 75% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Priced below its own history
The stock trades 21% 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 42% 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?

The debt load needs earnings to hold up
Debt is 3.8x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
Returns on shareholder capital are falling
ROE has dropped from 21.9% to 9.0%. 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.
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 15% a year✓ 20.5% CAGR
Latest reported year was 23.5%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 5%✓ 6.5%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Debt / EBITDA falls below 3x✗ 3.8x
Already stretched, so this is a reduction target rather than a level to hold. Around 3x is where lenders typically start attaching conditions.
4Interest cover stays above 3x✗ 1.9x
How much operating profit can fall before interest stops being comfortably covered.
5Free cash flow remains positive✓ ₹19 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

5 good · 6 neutral · 0 weak

Market Cap

₹297 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

30.0x

Fair

Fairly valued against the generic band

P/B Ratio

2.89x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹8.78

Profitable

Profitable on a per-share basis

ROE

9.0%

Moderate

Moderate capital efficiency

ROCE

15.6%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

1.28x

Moderate

Moderate leverage

Revenue Growth (YoY)

23.5%

Healthy

Healthy top-line growth

Profit Growth (YoY)

23.8%

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

₹19 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

Operating Margin

3.9%

Weak

Thin margins leave little room for error

Net Margin

1.8%

Weak

Very little revenue reaches the bottom line

Current Ratio

1.15

Adequate

Adequate, but no real cushion

Beta (vs Nifty)

-0.43

Defensive

Steadier than the market

52W Range Position

31%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

275.3 / 293.0

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

55.1

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹304 Cr	₹275 Cr	₹361 Cr	₹533 Cr	+20.5%
EBITDA	₹22 Cr	₹15 Cr	₹22 Cr	₹35 Cr	+16.9%
EBITDA Margin	7.1%	5.4%	6.0%	6.5%	—
PAT (Net Profit)	₹10 Cr	₹6 Cr	₹4 Cr	₹9 Cr	-2.7%
EPS	₹10.08	₹6.19	₹3.36	₹8.23	-6.5%
ROE	21.9%	6.9%	4.0%	9.0%	—
ROCE	26.2%	9.1%	10.1%	15.6%	—
Total Debt	₹58 Cr	₹57 Cr	₹132 Cr	₹131 Cr	+31.5%
Free Cash Flow	-₹17 Cr	-₹36 Cr	-₹60 Cr	₹19 Cr	—

🟢 Revenue has grown at 20.5% a year over 3 years.

🟢 EBITDA has grown at 16.9% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 6.5% over 3 years.

🔴 PAT (Net Profit) has shrunk at 2.7% a year over 3 years.

🔴 EPS has shrunk at 6.5% a year over 3 years.

🔴 ROE has fallen from 21.9% to 9.0% over 3 years (-12.8 pts).

🔴 ROCE has fallen from 26.2% to 15.6% over 3 years (-10.7 pts).

🔴 Total Debt has grown at 31.5% a year over 3 years.

🟢 Free Cash Flow has turned positive, from -₹17 Cr to ₹19 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹268 Cr

Total Liabilities

₹165 Cr

Cash & Equivalents

₹4 Cr

Operating Cash Flow

₹27 Cr

Capex

-₹8 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

79.3%

Peer Comparison

Company	P/E	ROE
NESTLE INDIA LIMITED	59.8x	79.9%
BRITANNIA INDUSTRIES LTD	44.1x	51.0%
TATA CONSUMER PRODUCT LTD	59.3x	7.5%
DABUR INDIA LTD	34.7x	17.2%

Recent News

1 mixed5 general

Megastar Foods vs Nifty 50: Share Price Performance Compared

Univest, 07 Oct

Megastar Foods (MEGASTAR.NS) Holds Near ₹276 as Traders Watch ₹262 Support Zone - IV Expansion Alert

https://www.siam.in/, 22 SeptCapacity

🟡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.

Megastar Foods Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 30 Aug

Is Megastar Foods the Best Stock in Its Sector? A Look at the Numbers

Univest, 01 Oct

Megastar Foods Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 30 Aug

Megastar Foods appoints Harsh Sharma as Company Secretary

scanx.trade, 09 Jun

Watch Items

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

DalalBaazaar Thesis

MiddlingFinancial Health · Growth · Valuation

WeakBusiness Quality · Profitability · Risk

Points for each in the Score ↑

Cheap, but for a reason

The low price is the whole case here, and the business underneath scores poorly. Cheap-and-weak is what a value trap looks like from the outside — it needs a specific reason the numbers are about to improve, not just the observation that they are low. 2 high-severity red flags sit above this conclusion and should be read first.

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