Padam Cotton Yarns Limited

Industrials — Consulting Services · BSE

₹0.92₹0.00 (0.00%)

DalalBaazaar Score

67 / 100

🟢 Good

Verdict

NEUTRAL

Risk

High

Driven by negative free cash flow, micro-cap size, which brings thin liquidity, falling profits.

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

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:10 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 Padam Cotton Yarns Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Padam Cotton Yarns Limited engages in lending and investment business in India. The company also trades in yarns and textile products, as well as involves in financing activities. Padam Cotton Yarns Limited was incorporated in 1994 and is based in Ahmedabad, India.

IndustryConsulting Services

SectorIndustrials

Employees10

Annual revenue₹73 Cr

How does it make money?

Turns over ₹73 Cr a year. Of every ₹100 of sales, about ₹15 reaches shareholders as profit, with ₹20 left at the operating level before interest, tax and depreciation. Each of its 10 employees supports ₹7.34 Cr of revenue a year, the signature of a capital- or asset-led business.

EBITDA margin20.1%

Net margin14.9%

Revenue / employee₹7.34 Cr

Who are its competitors?

The closest listed comparisons in its industry are LARSEN & TOUBRO LTD., SIEMENS LTD, ABB INDIA LIMITED. These are the companies its valuation and returns are measured against elsewhere in this report.

LARSEN & TOUBRO LTD.P/E 30.1x · ROE 15.2%

SIEMENS LTDP/E 88.8x · ROE 10.5%

ABB INDIA LIMITEDP/E 92.6x · ROE 19.1%

What is its competitive advantage?The numbers suggest a real one

ROCE has stayed above 15% in every year available and stands at 32.6%. Returns that high normally get competed away; when they persist, something is protecting them, and its ROE of 24.5% against a peer median of 15.2% is consistent with that. What that something is — brand, scale, switching costs, regulation — the accounts cannot tell you.

ROCE32.6%

ROE24.5%

Peer median ROE15.2%

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 +2367194% while net margin moved -100% 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+2367194%

Margin effect-100%

DalalBaazaar Score

67/ 100

Good

Weighted across six categories. Every point is explained below.

✓ Beta of -0.74 — historically steadier than the index
✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✗ Profits have swung sharply from year to year — earnings are hard to forecast
✗ 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

87/ 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

0.3x

3Y Median

8.8x

40 monthly readings · mean 21.3x · range 1.3x–90.9x

Sector Median

88.8x

median of 3 sector peers

🟢Current valuation is approximately 97% below its 3y median of 8.8x. 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 100% below the peer median of 88.8x.

vs. its own history

Cheap

8.8x median over 40 months · -97%

vs. sector peers

Cheap

88.8x median of 3 peers · -100%

vs. generic bands

Cheap

Below 15x

P/E (Trailing)

0.3x

P/B

0.45x

EV/EBITDA

1.4x

PEG

0.00

Dividend Yield

19.57%

What's Good / What's Bad

🟢 What's Going Well3

High return on capital employed
ROCE of 32.6% is the mark of a business that converts capital into profit efficiently.
Valuation below its historical average
At 0.3x the stock trades 97% below its own median of 8.8x.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention4

Margins are compressing
EBITDA margin has slipped from 654.8% to 20.1% over 3 years.
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 47.0% to 24.5% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 63.5% to 32.6% — often a sign of competition or overexpansion.

Red Flags

4 items require attention · 2 high · 2 watch

🔴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 634.7 points, from 654.8% to 20.1%.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹18 Cr in the latest year.
🟡Shareholders have been dilutedOwnership
Shares outstanding are up 56% over 3 years — each existing share owns a smaller slice of the company.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 32.6% 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.
Priced below its own history
The stock trades 97% 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 100% 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?

Margins are being competed away
EBITDA margin has fallen from 654.8% to 20.1%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Returns on shareholder capital are falling
ROE has dropped from 47.0% to 24.5%. 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 2079% a year✓ 2771.3% CAGR
Latest reported year was -4.2%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 18%✓ 20.1%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹18 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 0.0x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 30%✓ 32.6%
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

₹20 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

0.3x

Cheap

Cheap against the generic band

P/B Ratio

0.45x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹3.32

Profitable

Profitable on a per-share basis

ROE

24.5%

Strong

Strong capital efficiency

ROCE

32.6%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.77x

Moderate

Moderate leverage

Revenue Growth (YoY)

-4.2%

Shrinking

Sales are contracting

Profit Growth (YoY)

-68.2%

Falling

Profits are shrinking

Dividend Yield

19.57%

Healthy

Meaningful cash return while you hold the stock

Free Cash Flow

-₹18 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹0.92

Operating Margin

5.7%

Average

Average margins

Net Margin

13.6%

Good

Strong bottom-line conversion

Current Ratio

1.85

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

-0.74

Defensive

Steadier than the market

52W Range Position

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

0.9 / 1.0

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

40.9

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹0 Cr	₹0 Cr	₹14 Cr	₹73 Cr	+2771.3%
EBITDA	₹0 Cr	-₹0 Cr	₹3 Cr	₹15 Cr	+799.6%
EBITDA Margin	654.8%	-495.7%	20.9%	20.1%	—
PAT (Net Profit)	₹2 Cr	₹2 Cr	₹11 Cr	₹11 Cr	+66.7%
EPS	₹0.17	₹0.12	₹0.75	₹0.08	-21.8%
ROE	47.0%	23.6%	62.8%	24.5%	—
ROCE	63.5%	31.7%	75.8%	32.6%	—
Total Debt	—	—	₹0 Cr	₹0 Cr	—
Free Cash Flow	-₹0 Cr	₹5 Cr	-₹15 Cr	-₹18 Cr	—

🟢 Revenue has grown at 2771.3% a year over 3 years.

🟢 EBITDA has grown at 799.6% a year over 3 years.

🔴 EBITDA Margin has fallen from 654.8% to 20.1% over 3 years (-634.7 pts).

🟢 PAT (Net Profit) has grown at 66.7% a year over 3 years.

🔴 EPS has shrunk at 21.8% a year over 3 years.

🔴 ROE has fallen from 47.0% to 24.5% over 3 years (-22.6 pts).

🔴 ROCE has fallen from 63.5% to 32.6% over 3 years (-30.9 pts).

Balance Sheet & Cash Flow — FY2026

Total Assets

₹98 Cr

Total Liabilities

₹53 Cr

Total Debt

₹0 Cr

Cash & Equivalents

₹0 Cr

Operating Cash Flow

-₹18 Cr

Capex

-₹0 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

18.2%

Corporate Actions

Dividend Rate

₹0.18

Ex-Dividend Date

23 Sept 2025

Peer Comparison

Company	P/E	ROE
LARSEN & TOUBRO LTD.	30.1x	15.2%
SIEMENS LTD	88.8x	10.5%
ABB INDIA LIMITED	92.6x	19.1%

Recent News

1 positive1 mixed4 general

Padam Cotton Yarns board to consider Q4FY26 results, dividend

scanx.trade, 13 OctCapital return

🟢Potentially positiveCash or shares returned to holders. A buyback is only good value if the shares were cheap when bought.

Padam Cotton Yarns plans rights issue of up to Rs 27 crore after March fund raise

Dalal Street Investment Journal, 10 OctFunding

🟡Mixed / dependsNew funding changes the capital structure. Debt raises leverage; an equity raise dilutes existing holders.

Padam Cotton Yarns Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 01 Sept

Padam Cotton Yarns - 13 penny stocks plunge up to 70% in CY26. Are you affected?

The Economic Times, 19 Apr

Sachin Modi Further Reduces Shareholding in Padam Cotton Yarns to 2.27%

scanx.trade, 11 Oct

Padam Cotton Yarns to consider rights issue draft on Oct 9

scanx.trade, 09 Oct

Watch Items

Revenue growth is negative (-4.2%) 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

🟢Business QualityStrong13.9/20

🟢Financial HealthStrong13.3/20

🟡GrowthModest12.9/20

🟢ProfitabilityStrong10.4/15

🟢ValuationAttractive12.8/15

🔴RiskHigh4/10

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 2079% a year2771.3% CAGR
✓EBITDA margin holds above 18%20.1%
✗Free cash flow remains positive-₹18 Cr
✓Debt / EBITDA stays below 2x0.0x
✓ROCE stays above 30%32.6%