Sahana System Limited

Sector n/a · NSE

₹1,571.00−₹19.50 (−1.23%)

DalalBaazaar Score

59 / 100

🟡 Moderate

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, with both sales and profits growing well. Debt is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:09 pm

Mixed / neutral. No major red flags jump out, but nothing here screams "obviously cheap" either. This is a name that needs a peer comparison and a view on near-term earnings triggers before sizing a position.

Understanding the Business

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

How does it make money?

Turns over ₹331 Cr a year. Of every ₹100 of sales, about ₹20 reaches shareholders as profit, with ₹32 left at the operating level before interest, tax and depreciation.

EBITDA margin32.1%

Net margin20.5%

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

ROCE has stayed above 15% in every year available and stands at 35.1%. Returns that high normally get competed away; when they persist, something is protecting them. What that something is — brand, scale, switching costs, regulation — the accounts cannot tell you.

ROCE35.1%

ROE26.9%

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 +1272% while net margin moved -20% 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+1272%

Margin effect-20%

DalalBaazaar Score

59/ 100

Moderate

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
✗ 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

66/ 100

Good

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

Valuation

35/ 100

Expensive

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

A good business, but the price already reflects that. The quality is real; the question is whether you are overpaying for it today.

vs. its own history

Not enough price and earnings history

vs. sector peers

Not enough peers with a usable P/E

vs. generic bands

No P/E available

P/E (Trailing)

—

P/B

—

EV/EBITDA

15.7x

PEG

—

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well2

High return on capital employed
ROCE of 35.1% 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 Attention5

Margins are compressing
EBITDA margin has slipped from 37.4% to 32.1% over 3 years.
Debt is rising
Total debt is up 276% over 3 years — worth checking what it funded.
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 58.7% to 26.9% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 83.8% to 35.1% — often a sign of competition or overexpansion.

Red Flags

4 items require attention · 3 high · 1 watch

🔴Debt has risen sharplyFinancial
Total debt is up 276% over 3 years, from ₹5 Cr to ₹18 Cr.
🔴High leverageFinancial
Debt/Equity of 7.11x — earnings must service borrowings before shareholders see anything.
🔴Significant margin compressionFinancial
EBITDA margin has fallen 5.3 points, from 37.4% to 32.1%.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹6 Cr in the latest year.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 35.1% 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.
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 37.4% to 32.1%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Leverage amplifies any setback
Debt/Equity of 7.11x. Interest is payable whether or not the business has a good year.
Returns on shareholder capital are falling
ROE has dropped from 58.7% to 26.9%. 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.

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

1Revenue growth stays above 105% a year✓ 139.4% CAGR
Latest reported year was 97.8%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 30%✓ 32.1%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹6 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 0.2x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 32%✓ 35.1%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

7 / 9 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
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

4 good · 5 neutral · 2 weak

Market Cap

₹1,666 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

Not available

No data

Source didn't return this field

P/B Ratio

Not available

No data

Source didn't return this field

EPS (TTM)

Not available

No data

Source didn't return this field

ROE

26.9%

Strong

Strong capital efficiency

ROCE

35.1%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

7.11x

High

High leverage

Revenue Growth (YoY)

97.8%

Healthy

Healthy top-line growth

Profit Growth (YoY)

91.4%

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

-₹6 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹1,571

Gross Margin

94.6%

Proxy

Operating margin unavailable — showing gross margin instead

Net Margin

20.5%

Good

Strong bottom-line conversion

Current Ratio

2.61

Comfortable

Healthy short-term liquidity

Technical Snapshot

SMA 20 / SMA 50

875.9 / 871.8

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

59.3

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹24 Cr	₹69 Cr	₹167 Cr	₹331 Cr	+139.4%
EBITDA	₹9 Cr	₹24 Cr	₹57 Cr	₹106 Cr	+127.4%
EBITDA Margin	37.4%	34.6%	34.2%	32.1%	—
PAT (Net Profit)	₹6 Cr	₹18 Cr	₹35 Cr	₹68 Cr	+122.0%
EPS	₹6.32	₹19.72	₹38.93	—	—
ROE	58.7%	32.3%	20.1%	26.9%	—
ROCE	83.8%	41.0%	29.9%	35.1%	—
Total Debt	₹5 Cr	₹13 Cr	₹12 Cr	₹18 Cr	+55.5%
Free Cash Flow	₹1 Cr	₹20 Cr	-₹60 Cr	-₹6 Cr	—

🟢 Revenue has grown at 139.4% a year over 3 years.

🟢 EBITDA has grown at 127.4% a year over 3 years.

🔴 EBITDA Margin has fallen from 37.4% to 32.1% over 3 years (-5.3 pts).

🟢 PAT (Net Profit) has grown at 122.0% a year over 3 years.

🔴 ROE has fallen from 58.7% to 26.9% over 3 years (-31.8 pts).

🔴 ROCE has fallen from 83.8% to 35.1% over 3 years (-48.8 pts).

🔴 Total Debt has grown at 55.5% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹1 Cr to -₹6 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹386 Cr

Total Liabilities

₹103 Cr

Total Debt

₹18 Cr

Cash & Equivalents

₹17 Cr

Operating Cash Flow

₹41 Cr

Capex

-₹47 Cr

Recent News

5 positive1 general

Should Income Investors Look At Sahana System Limited (NSE:SAHANA) Before Its Ex-Dividend?

Simply Wall Street, 05 OctCapital return

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

Sahana System shareholders approve 1:5 bonus issue, Main Board migration

scanx.trade, 27 JulCapital return

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

Sahana System Limited (NSE: SAHANA) Sales Rise 89%: Profit, ROCE and P/E Explained

Kalkine India, 02 OctResults

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

Sahana System Ltd. Share Price: Significant 14.84% Gain

Univest, 31 Jul

Sahana System Subsidiary Wins Long-Term Defence Deal with CEL; Stock Gains 5% in Opening

Sahi, 15 JunOrder win

🟢Potentially positiveAn order or contract win, which adds to future revenue. How much depends on its size against annual sales and on when it is executed.

Low PE, High ROCE IT Stock Fixes Record Date for 1:5 Bonus Issue; FII & DII Holdings Increase

Dalal Street Investment Journal, 24 JulCapital return

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

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.
Sector/industry classification unavailable — verify manually for peer comparison.
3 metrics couldn't be retrieved for this stock — this is more common for smaller or thinly-covered listings.

DalalBaazaar Thesis

🟢Business QualityStrong15.2/20

🟡Financial HealthAdequate9.9/20

🟡GrowthModest12.9/20

🟢ProfitabilityStrong11/15

🟡ValuationFair7.5/15

🔴RiskHigh2.5/10

Good business, demanding price

The quality is real and the price already reflects it. Buying here is a bet that the business keeps compounding for long enough to grow into the multiple — which good businesses often do, but it removes the margin for error that a lower price would have given you. 3 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓Revenue growth stays above 105% a year139.4% CAGR
✓EBITDA margin holds above 30%32.1%
✗Free cash flow remains positive-₹6 Cr
✓Debt / EBITDA stays below 2x0.2x
✓ROCE stays above 32%35.1%