Rajapalayam Mills Limited

Consumer Cyclical — Textile Manufacturing · NSE

₹740.00+₹28.00 (+3.93%)

DalalBaazaar Score

57 / 100

🟡 Moderate

Verdict

NEUTRAL

Risk

Moderate

Driven by short-term liabilities exceed short-term assets, micro-cap size, which brings thin liquidity.

In simple words: The business is earning a fairly low return on the money invested in it, with both sales and profits growing well. Short-term liquidity is 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 Rajapalayam Mills Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Rajapalayam Mills Limited engages in the manufacturing and sale of cotton yarn and fabrics in India. It operates in two segments, Textile and Windmills.

IndustryTextile Manufacturing

SectorConsumer Cyclical

Employees4,938

Annual revenue₹934 Cr

How does it make money?

Turns over ₹934 Cr a year. Of every ₹100 of sales, about ₹12 reaches shareholders as profit, with ₹14 left at the operating level before interest, tax and depreciation. Each of its 4,938 employees supports ₹18.9 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹18.9 lakh

Who are its competitors?

The closest listed comparisons in its industry are MARUTI SUZUKI INDIA LTD., TITAN COMPANY LIMITED, TRENT LTD, AVENUE SUPERMARTS 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?Little sign of one

Returns on capital of 2.0% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

Peer median ROE25.9%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +9% while net margin moved +28% 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+9%

Margin effect+28%

DalalBaazaar Score

57/ 100

Moderate

Weighted across six categories. Every point is explained below.

✓ Beta of 0.15 — 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

Quality vs. Valuation

Company Quality

53/ 100

Average

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

Valuation

82/ 100

Cheap

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

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

5.5x

Sector Median

69.2x

median of 4 sector peers

🟢Against its sector it trades 92% below the peer median of 69.2x.

vs. its own history

Not enough price and earnings history

vs. sector peers

Cheap

69.2x median of 4 peers · -92%

vs. generic bands

Cheap

Below 15x

EV/EBITDA

13.5x

PEG

0.47

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 Attention0

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

Red Flags

5 items require attention · 2 high · 3 watch

🔴Thin interest coverageFinancial
Operating profit covers interest only 0.7x — little room if earnings dip.
🔴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.
🟡Margins are compressingFinancial
EBITDA margin is down 2.1 points over 3 years.
🟡Receivables growing faster than salesFinancial
Receivables up 34% against revenue up 9% — sales are being booked faster than they are collected.
🟡Short-term liquidity is tightFinancial
Current ratio of 0.78 — near-term obligations exceed near-term assets.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Cheaper than its peers
It trades 92% 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 ₹30 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?

Margins are being competed away
EBITDA margin has fallen from 16.6% to 14.4%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
The debt load needs earnings to hold up
Debt is 8.5x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
Sales are being booked faster than collected
Receivables are up 34% against revenue up 9%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
Growth barely outpaces inflation
Revenue compounding at 2.9% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
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.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 12%✓ 14.4%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 8.5x
Already stretched, so this is a reduction target rather than a level to hold. Around 3x is where lenders typically start attaching conditions.
3Interest cover stays above 3x✗ 0.7x
How much operating profit can fall before interest stops being comfortably covered.
4Revenue growth stays above 4% a year✗ 2.9% CAGR
Latest reported year was 38.6%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
5Free cash flow remains positive✓ ₹30 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

7 good · 2 neutral · 2 weak

Market Cap

₹682 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

0.28x

Reasonable

Reasonable against the company's book value

EPS (TTM)

₹134.92

Profitable

Profitable on a per-share basis

ROE

4.7%

Weak

Weak capital efficiency

ROCE

2.0%

Weak

Low return on total capital employed

Debt/Equity

0.47x

Low

Conservative leverage

Revenue Growth (YoY)

38.6%

Healthy

Healthy top-line growth

Profit Growth (YoY)

111.9%

Healthy

Profits growing at a healthy clip

Dividend Yield

0.07%

Modest

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

Free Cash Flow

₹30 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

Operating Margin

7.2%

Average

Average margins

Net Margin

12.2%

Good

Strong bottom-line conversion

Current Ratio

0.78

Tight

Tight short-term liquidity

Beta (vs Nifty)

0.15

Defensive

Steadier than the market

52W Range Position

76%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

747.3 / 781.9

Bearish alignment (short < long)

RSI (14)

41.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹857 Cr	₹855 Cr	₹892 Cr	₹934 Cr	+2.9%
EBITDA	₹142 Cr	₹98 Cr	₹87 Cr	₹135 Cr	-1.7%
EBITDA Margin	16.6%	11.5%	9.8%	14.4%	—
PAT (Net Profit)	₹82 Cr	₹44 Cr	₹17 Cr	₹114 Cr	+11.8%
EPS	₹94	₹48.2	₹18.52	₹124.25	+9.7%
ROE	3.7%	1.9%	0.7%	4.7%	—
ROCE	3.3%	2.0%	0.4%	2.0%	—
Total Debt	₹1,114 Cr	₹1,087 Cr	₹1,112 Cr	₹1,146 Cr	+1.0%
Free Cash Flow	-₹401 Cr	₹50 Cr	₹91 Cr	₹30 Cr	—

🟢 Revenue has grown at 2.9% a year over 3 years.

🟡 EBITDA has been broadly flat over 3 years (-1.7% a year).

🔴 EBITDA Margin has fallen from 16.6% to 14.4% over 3 years (-2.1 pts).

🟢 PAT (Net Profit) has grown at 11.8% a year over 3 years.

🟢 EPS has grown at 9.7% a year over 3 years.

🟢 ROE has risen from 3.7% to 4.7% over 3 years (+1.1 pts).

🔴 ROCE has fallen from 3.3% to 2.0% over 3 years (-1.3 pts).

🟡 Total Debt has been broadly flat over 3 years (1.0% a year).

🟢 Free Cash Flow has turned positive, from -₹401 Cr to ₹30 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹3,721 Cr

Total Liabilities

₹1,293 Cr

Cash & Equivalents

₹3 Cr

Operating Cash Flow

₹66 Cr

Capex

-₹35 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

67.7%

Corporate Actions

Dividend Rate

₹0.5

Ex-Dividend Date

21 Aug 2026

Peer Comparison

Company	P/E	ROE
MARUTI SUZUKI INDIA LTD.	25.2x	13.4%
TITAN COMPANY LIMITED	68.5x	36.7%
TRENT LTD	87.2x	25.9%
AVENUE SUPERMARTS LIMITED	69.9x	12.7%

Recent News

2 positive2 negative2 general

Rajapalayam Mills pledges 6.32 lakh Ramco Cements shares to Tata Capital

scanx.trade, 24 JulOwnership

🔴Potentially negativePromoter selling or pledging is a signal worth understanding, though the reason is often personal rather than about the business.

Rajapalayam Mills Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 30 Aug

Rajapalayam Mills Limited (NSE:RAJPALAYAM): Understanding Its Operat

Kalkine India, 14 Sept

Rajapalayam Mills releases pledge on 1.3 lakh Ramco Industries shares

scanx.trade, 24 JulOwnership

🔴Potentially negativePromoter selling or pledging is a signal worth understanding, though the reason is often personal rather than about the business.

Rajapalayam Mills declares Re.0.50 dividend, approves related-party deals

scanx.trade, 28 AugCapital return

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

Rajapalayam Mills consolidated net profit up 115% in Q1FY27 to ₹175.5 crore

scanx.trade, 13 AugResults

🟢Potentially positiveReported improvement. Check whether it came from volume, price or a one-off item before treating it as a trend.

Watch Items

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

DalalBaazaar Thesis

StrongValuation

MiddlingBusiness Quality · Financial Health · Growth · Profitability

WeakRisk

Points for each in the Score ↑

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you. 2 high-severity red flags sit above this conclusion and should be read first.

3 of 5 tripwires tripped — Debt / EBITDA falls below 3x; Interest cover stays above 3x; Revenue growth stays above 4% a year · see Key things to watch ↑