Polychem Limited

Basic Materials — Specialty Chemicals · BSE

₹1,801.00−₹12.00 (−0.66%)

DalalBaazaar Score

67 / 100

🟢 Good

Verdict

NEUTRAL

Risk

High

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

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, 6:08 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 Polychem Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Polychem Limited, together with its subsidiary, manufactures and sells polymers and co-polymers in India, the United Kingdom, the United States, the Netherlands, Germany, Japan, and Hungary.

IndustrySpecialty Chemicals

SectorBasic Materials

Employees23

Annual revenue₹43 Cr

How does it make money?

Turns over ₹43 Cr a year. Of every ₹100 of sales, about ₹38 reaches shareholders as profit, with ₹11 left at the operating level before interest, tax and depreciation. Each of its 23 employees supports ₹1.86 Cr of revenue a year, the signature of a capital- or asset-led business.

EBITDA margin11.1%

Net margin38.1%

Revenue / employee₹1.86 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.

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 46.3% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

ROCE46.3%

ROE27.3%

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 -14% while net margin moved +162% 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-14%

Margin effect+162%

DalalBaazaar Score

67/ 100

Good

Weighted across six categories. Every point is explained below.

✓ Beta of 0.00 — 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

67/ 100

Good

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

Valuation

80/ 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

5.5x

3Y Median

15.8x

40 monthly readings · mean 18.1x · range 4.5x–38.7x

Sector Median

40.4x

median of 4 sector peers

🟢Current valuation is approximately 65% below its 3y median of 15.8x. 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 86% below the peer median of 40.4x.

vs. its own history

Cheap

15.8x median over 40 months · -65%

vs. sector peers

Cheap

40.4x median of 4 peers · -86%

vs. generic bands

Cheap

Below 15x

P/E (Trailing)

5.5x

P/B

1.22x

EV/EBITDA

15.2x

PEG

0.18

Dividend Yield

1.11%

What's Good / What's Bad

🟢 What's Going Well5

Return on equity is rising
ROE has improved from 20.7% to 27.3%.
Return on capital is rising
ROCE has improved from 27.5% to 46.3%.
High return on capital employed
ROCE of 46.3% is the mark of a business that converts capital into profit efficiently.
Valuation below its historical average
At 5.5x the stock trades 65% below its own median of 15.8x.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Debt is rising
Total debt is up 1357% over 3 years — worth checking what it funded.
Free cash flow is negative
The business is not currently covering its capital spending from operations.

Red Flags

3 items require attention · 2 high · 1 watch

🔴Debt has risen sharplyFinancial
Total debt is up 1357% over 3 years, from ₹0 Cr to ₹1 Cr.
🔴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.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹5 Cr in the latest year.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 46.3% 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 65% 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 86% 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?

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

1EBITDA margin holds above 9%✓ 11.1%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✗ -₹5 Cr
Profit that never becomes cash eventually stops being profit.
3Debt / EBITDA stays below 2x✓ 0.2x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
4ROCE stays above 43%✓ 46.3%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.
5Valuation vs its own median of 15.8x✓ 5.5x today
A re-rating above its own history needs a reason; without one it is just a higher price.

Investment Checklist

6 / 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 · 3 neutral · 3 weak

Market Cap

₹73 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

5.5x

Cheap

Cheap against the generic band

P/B Ratio

1.22x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹329.25

Profitable

Profitable on a per-share basis

ROE

27.3%

Strong

Strong capital efficiency

ROCE

46.3%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

1.49x

Moderate

Moderate leverage

Revenue Growth (YoY)

-7.2%

Shrinking

Sales are contracting

Profit Growth (YoY)

-88.9%

Falling

Profits are shrinking

Dividend Yield

1.11%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

-₹5 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹1,801

Operating Margin

-1.8%

Weak

Thin margins leave little room for error

Net Margin

30.9%

Good

Strong bottom-line conversion

Current Ratio

5.30

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.00

Defensive

Steadier than the market

52W Range Position

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

1845.9 / 1886.6

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

39.2

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹50 Cr	₹53 Cr	₹41 Cr	₹43 Cr	-4.8%
EBITDA	₹6 Cr	₹9 Cr	₹4 Cr	₹5 Cr	-8.3%
EBITDA Margin	12.4%	17.1%	10.1%	11.1%	—
PAT (Net Profit)	₹7 Cr	₹7 Cr	₹3 Cr	₹16 Cr	+31.2%
EPS	₹178.89	₹178.27	₹70.06	₹403.87	+31.2%
ROE	20.7%	17.5%	6.4%	27.3%	—
ROCE	27.5%	20.6%	9.6%	46.3%	—
Total Debt	₹0 Cr	₹2 Cr	₹1 Cr	₹1 Cr	+144.2%
Free Cash Flow	₹3 Cr	₹6 Cr	₹2 Cr	-₹5 Cr	—

🔴 Revenue has shrunk at 4.8% a year over 3 years.

🔴 EBITDA has shrunk at 8.3% a year over 3 years.

🔴 EBITDA Margin has fallen from 12.4% to 11.1% over 3 years (-1.3 pts).

🟢 PAT (Net Profit) has grown at 31.2% a year over 3 years.

🟢 EPS has grown at 31.2% a year over 3 years.

🟢 ROE has risen from 20.7% to 27.3% over 3 years (+6.5 pts).

🟢 ROCE has risen from 27.5% to 46.3% over 3 years (+18.8 pts).

🔴 Total Debt has grown at 144.2% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹3 Cr to -₹5 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹83 Cr

Total Liabilities

₹5 Cr

Total Debt

₹1 Cr

Cash & Equivalents

₹2 Cr

Operating Cash Flow

-₹1 Cr

Capex

-₹4 Cr

Shareholding (proxy)

Institutional Holding

2.8%

Insider Holding

67.9%

Corporate Actions

Dividend Rate

₹20

Ex-Dividend Date

17 Jul 2026

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 negative4 general

RENOL POLYCHEM LIMITED Share Price

Upstox, 05 May

Polychem Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 31 Aug

Polychem Q1 FY27 Results: Revenue Falls to Rs 12 Crore, PAT Pat 71 Lakh

Univest, 17 AugResults

🔴Potentially negativeReported deterioration, which feeds the growth and margin inputs on this page directly.

Polychem Ltd pays ₹52,010 BSE fine for delayed XBRL compliance filing

scanx.trade, 13 AugRegulatory

🔴Potentially negativeRegulatory and legal actions carry a financial cost and a governance question. The second usually matters more than the first.

Renol Polychem Ltd

Equitypandit, 12 Sept

Renol Polychem (NSEI:RNPL) - Stock Analysis

Simply Wall Street, 07 Aug

Watch Items

Revenue growth is negative (-7.2%) 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 QualityStrong15.1/20

🟡Financial HealthAdequate10.9/20

🟡GrowthModest10.5/20

🟢ProfitabilityStrong13.5/15

🟢ValuationAttractive13.2/15

🔴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

✓EBITDA margin holds above 9%11.1%
✗Free cash flow remains positive-₹5 Cr
✓Debt / EBITDA stays below 2x0.2x
✓ROCE stays above 43%46.3%
✓Valuation vs its own median of 15.8x5.5x today