Mehul Colours Limited

Basic Materials — Specialty Chemicals · BSE

₹49.63+₹0.02 (+0.04%)

DalalBaazaar Score

66 / 100

🟢 Good

Verdict

NEUTRAL

Risk

Very High

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

In simple words: Strong business and financial position, though profits are falling even as sales grow. Debt is 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 Mehul Colours Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Mehul Colours Limited manufactures and exports masterbatches in India and internationally.

IndustrySpecialty Chemicals

SectorBasic Materials

Employees34

Annual revenue₹30 Cr

How does it make money?

Turns over ₹30 Cr a year. Of every ₹100 of sales, about ₹17 reaches shareholders as profit, with ₹23 left at the operating level before interest, tax and depreciation. Each of its 34 employees supports ₹89.4 lakh of revenue a year, the signature of a people-led business.

EBITDA margin22.9%

Net margin17.2%

Revenue / employee₹89.4 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?Some evidence

ROCE of 16.6% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

ROCE16.6%

ROE17.9%

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 +44% while net margin moved +24% 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+44%

Margin effect+24%

DalalBaazaar Score

66/ 100

Good

Weighted across six categories. Every point is explained below.

✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✗ High leverage magnifies any downturn in earnings
✗ Negative free cash flow means dependence on external funding

Quality vs. Valuation

Company Quality

68/ 100

Good

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

Valuation

88/ 100

Cheap

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

A good business currently available at an undemanding price — the combination this framework is built to look for.

Historical Valuation

Current P/E

9.0x

1.3Y Median

13.2x

16 monthly readings · mean 12.5x · range 9.5x–15.5x

Sector Median

40.4x

median of 4 sector peers

🟢Current valuation is approximately 32% below its 1.3y median of 13.2x. 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 78% below the peer median of 40.4x.

vs. its own history

Cheap

13.2x median over 16 months · -32%

vs. sector peers

Cheap

40.4x median of 4 peers · -78%

vs. generic bands

Cheap

Below 15x

P/E (Trailing)

9.0x

P/B

1.27x

EV/EBITDA

5.7x

PEG

0.43

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well3

Margins are improving
EBITDA margin is up from 20.7% to 22.9% over 3 years.
Valuation below its historical average
At 9.0x the stock trades 32% below its own median of 13.2x.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention4

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 35.2% to 12.7% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 48.0% to 16.6% — often a sign of competition or overexpansion.
Receivables growing faster than sales
Receivables are up 123% against revenue growth of 44% — customers are taking longer to pay.

Red Flags

3 items require attention · 2 high · 1 watch

🔴High leverageFinancial
Debt/Equity of 4.75x — earnings must service borrowings before shareholders see anything.
🔴Receivables growing faster than salesFinancial
Receivables up 123% against revenue up 44% — sales are being booked faster than they are collected.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹2 Cr in the latest year.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 20.7% to 22.9%. 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 78% 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?

Leverage amplifies any setback
Debt/Equity of 4.75x. Interest is payable whether or not the business has a good year.
Sales are being booked faster than collected
Receivables are up 123% against revenue up 44%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
Returns on shareholder capital are falling
ROE has dropped from 35.2% to 12.7%. 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

1Revenue growth stays above 10% a year✓ 12.8% CAGR
Latest reported year was 34.8%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 21%✓ 22.9%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹2 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 0.3x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 14%✓ 16.6%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

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 · 2 neutral · 3 weak

Market Cap

₹52 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

9.0x

Cheap

Cheap against the generic band

P/B Ratio

1.27x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹5.49

Profitable

Profitable on a per-share basis

ROE

17.9%

Strong

Strong capital efficiency

ROCE

16.6%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

4.75x

High

High leverage

Revenue Growth (YoY)

34.8%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-61.5%

Falling

Profits are shrinking

Dividend Yield

None

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

Free Cash Flow

-₹1 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹49.63

ROA

11.3%

Good

Assets are working hard

Operating Margin

10.5%

Average

Average margins

Net Margin

17.2%

Good

Strong bottom-line conversion

Current Ratio

9.92

Comfortable

Healthy short-term liquidity

52W Range Position

11%

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

49.3 / 51.5

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

44.7

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹21 Cr	₹22 Cr	₹23 Cr	₹30 Cr	+12.8%
EBITDA	₹4 Cr	₹5 Cr	₹8 Cr	₹7 Cr	+16.8%
EBITDA Margin	20.7%	21.0%	33.7%	22.9%	—
PAT (Net Profit)	₹3 Cr	₹3 Cr	₹6 Cr	₹5 Cr	+21.1%
EPS	₹2.79	₹3.05	₹5.22	—	—
ROE	35.2%	27.8%	32.3%	12.7%	—
ROCE	48.0%	37.0%	42.7%	16.6%	—
Total Debt	—	₹0 Cr	—	₹2 Cr	—
Free Cash Flow	₹4 Cr	₹1 Cr	₹1 Cr	-₹2 Cr	—

🟢 Revenue has grown at 12.8% a year over 3 years.

🟢 EBITDA has grown at 16.8% a year over 3 years.

🟢 EBITDA Margin has risen from 20.7% to 22.9% over 3 years (+2.2 pts).

🟢 PAT (Net Profit) has grown at 21.1% a year over 3 years.

🔴 ROE has fallen from 35.2% to 12.7% over 3 years (-22.5 pts).

🔴 ROCE has fallen from 48.0% to 16.6% over 3 years (-31.3 pts).

🔴 Free Cash Flow has turned negative, from ₹4 Cr to -₹2 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹45 Cr

Total Liabilities

₹4 Cr

Total Debt

₹2 Cr

Cash & Equivalents

₹14 Cr

Operating Cash Flow

₹0 Cr

Capex

-₹2 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

81.6%

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

6 general

Compare CLARIANT CHEMICALS with

Equitymaster, 17 Oct

MEHUL COLOURS LIMITED Share Price

Upstox, 05 May

Mehul Colours 31st AGM passes all resolutions unanimously

scanx.trade, 01 Oct

Mehul Colours sets Sept 30 AGM to appoint Tejas Joshi as director

scanx.trade, 05 Sept

Mehul Colours: Mehul Colours shares get listed at 18% premium!

Alice Blue, 06 Aug

Mehul Colours IPO: Check GMP, price band, issue size and other details

The Economic Times, 30 Jul

Watch Items

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

DalalBaazaar Thesis

🟢Business QualityStrong14.3/20

🟡Financial HealthAdequate10.6/20

🟢GrowthStrong16.1/20

🟡ProfitabilityModerate9.5/15

🟢ValuationAttractive13.2/15

🔴RiskHigh2.4/10

Attractive on both counts

A good business currently available at an undemanding price — the combination this framework exists to look for. The work left is qualitative: whether the advantage the numbers imply is one you can identify and expect to last. 2 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓Revenue growth stays above 10% a year12.8% CAGR
✓EBITDA margin holds above 21%22.9%
✗Free cash flow remains positive-₹2 Cr
✓Debt / EBITDA stays below 2x0.3x
✓ROCE stays above 14%16.6%