Phychem Technologies Limited

Basic Materials — Specialty Chemicals · BSE

₹44.00−₹2.00 (−4.35%)

DalalBaazaar Score

70 / 100

🟢 Good

Verdict

REASONABLE

Risk

High

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

In simple words: Strong business and financial position, 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, 7:02 pm

Understanding the Business

Company site ↗

The 60-second version of Phychem Technologies Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Phychem Technologies Limited engages in the manufacturing of rotational molding compounds in India and Internationally.

IndustrySpecialty Chemicals

SectorBasic Materials

Employees33

Annual revenue₹56 Cr

How does it make money?

Turns over ₹56 Cr a year. Of every ₹100 of sales, about ₹7 reaches shareholders as profit, with ₹13 left at the operating level before interest, tax and depreciation. Each of its 33 employees supports ₹1.71 Cr of revenue a year, the signature of a capital- or asset-led business.

Revenue / employee₹1.71 Cr

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.

Compared side by side in Peers ↓

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

ROCE has stayed above 15% in every year available and stands at 43.8%. Returns that high normally get competed away; when they persist, something is protecting them, and its ROE of 34.8% against a peer median of 22.3% is consistent with that. What that something is — brand, scale, switching costs, regulation — the accounts cannot tell you.

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 +34% while net margin moved +133% 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+34%

Margin effect+133%

DalalBaazaar Score

70/ 100

Good

Weighted across six categories. Every point is explained below.

✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✗ Negative free cash flow means dependence on external funding

Quality vs. Valuation

Company Quality

75/ 100

Good

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

Valuation

85/ 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

11.0x

Sector Median

40.4x

median of 4 sector peers

🟢Against its sector it trades 73% below the peer median of 40.4x.

vs. its own history

Not enough price and earnings history

vs. sector peers

Cheap

40.4x median of 4 peers · -73%

vs. generic bands

Cheap

Below 15x

EV/EBITDA

7.1x

PEG

0.24

What's Good / What's Bad

🟢 What's Going Well6

Margins are improving
EBITDA margin is up from 6.5% to 12.5% 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 25.5% to 29.7%.
Return on capital is rising
ROCE has improved from 38.5% to 43.8%.
High return on capital employed
ROCE of 43.8% is the mark of a business that converts capital into profit efficiently.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

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

Red Flags

2 items require attention · 2 high

🔴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.
🔴Inventory building faster than salesFinancial
Inventory up 138% against revenue up 34% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 43.8% 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 6.5% to 12.5%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Cheaper than its peers
It trades 73% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Self-funding with balance-sheet headroom
Positive free cash flow of ₹1 Cr alongside low debt means growth, buybacks or dividends need no outside money — and a downturn can be absorbed rather than refinanced.
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?

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 8% a year✓ 10.1% CAGR
Latest reported year was 12.3%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 11%✓ 12.5%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✓ ₹1 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 0.8x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 41%✓ 43.8%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

8 / 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

7 good · 3 neutral · 1 weak

Market Cap

₹45 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

11.0x

Cheap

Cheap against the generic band

P/B Ratio

2.41x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹3.99

Profitable

Profitable on a per-share basis

ROE

34.8%

Strong

Strong capital efficiency

ROCE

43.8%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.43x

Low

Conservative leverage

Revenue Growth (YoY)

12.3%

Healthy

Healthy top-line growth

Profit Growth (YoY)

43.9%

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

-₹2 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

ROA

16.6%

Good

Assets are working hard

Operating Margin

10.8%

Average

Average margins

Net Margin

7.2%

Average

Average bottom-line conversion

Current Ratio

1.77

Comfortable

Healthy short-term liquidity

52W Range Position

21%

Mid-range

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹42 Cr	₹47 Cr	₹50 Cr	₹56 Cr	+10.1%
EBITDA	₹3 Cr	₹4 Cr	₹5 Cr	₹7 Cr	+36.9%
EBITDA Margin	6.5%	7.6%	10.2%	12.5%	—
PAT (Net Profit)	₹1 Cr	₹2 Cr	₹3 Cr	₹4 Cr	+45.9%
EPS	₹1.28	₹1.65	₹2.78	—	—
ROE	25.5%	24.7%	29.3%	29.7%	—
ROCE	38.5%	32.9%	40.2%	43.8%	—
Total Debt	₹5 Cr	₹6 Cr	₹5 Cr	₹6 Cr	+6.4%
Free Cash Flow	-₹0 Cr	₹0 Cr	₹2 Cr	₹1 Cr	—

🟢 Revenue has grown at 10.1% a year over 3 years.

🟢 EBITDA has grown at 36.9% a year over 3 years.

🟢 EBITDA Margin has risen from 6.5% to 12.5% over 3 years (+6.0 pts).

🟢 PAT (Net Profit) has grown at 45.9% a year over 3 years.

🟢 ROE has risen from 25.5% to 29.7% over 3 years (+4.2 pts).

🟢 ROCE has risen from 38.5% to 43.8% over 3 years (+5.3 pts).

🔴 Total Debt has grown at 6.4% a year over 3 years.

🟢 Free Cash Flow has turned positive, from -₹0 Cr to ₹1 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹25 Cr

Total Liabilities

₹12 Cr

Cash & Equivalents

₹1 Cr

Operating Cash Flow

₹1 Cr

Capex

-₹0 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

87.0%

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

1 mixed5 general

Compare with

Equitymaster, 18 Oct

Compare with ASTRAL POLY

Equitymaster, 16 Oct

Phychem Technologies Ltd. IPO

The Economic Times, 25 Aug

Phychem Technologies Ltd Share Price

Business Today, 14 Sept

Phychem Technologies Ltd Q3 Results

Livemint, 15 SeptResults

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

Phychem Technologies Ltd Key Financial Ratios – Valuation, Profitability & More

Value Research, 07 Sept

Watch Items

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

DalalBaazaar Thesis

StrongBusiness Quality · Financial Health · Growth · Profitability · Valuation

WeakRisk

Points for each in the Score ↑

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.

All 5 tripwires holding · see Key things to watch ↑