Shanthi Gears Limited

Industrials — Specialty Industrial Machinery · NSE

₹544.55+₹9.45 (+1.77%)

DalalBaazaar Score

58 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by micro-cap size, which brings thin liquidity, a very high earnings multiple, which leaves little margin for disappointment, falling profits.

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

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:03 pm

Understanding the Business

Company site ↗

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

What does this company do?

Shanthi Gears Limited designs, manufactures, supplies, and services gears and gear boxes in India, the United States, Europe, and internationally.

IndustrySpecialty Industrial Machinery

SectorIndustrials

Employees479

Annual revenue₹513 Cr

How does it make money?

Turns over ₹513 Cr a year. Of every ₹100 of sales, about ₹15 reaches shareholders as profit, with ₹21 left at the operating level before interest, tax and depreciation. Each of its 479 employees supports ₹1.07 Cr of revenue a year, the signature of a capital- or asset-led business.

Revenue / employee₹1.07 Cr

Who are its competitors?

The closest listed comparisons in its industry are SIEMENS LTD, ABB INDIA LIMITED, LARSEN & TOUBRO LTD., HAVELLS INDIA 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 20.2%. Returns that high normally get competed away; when they persist, something is protecting them, and its ROE of 17.4% against a peer median of 17.1% is consistent with that. What that something is — brand, scale, switching costs, regulation — the accounts cannot tell you.

Peer median ROE17.1%

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 +18% while net margin moved -3% 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+18%

Margin effect-3%

DalalBaazaar Score

58/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ P/E of 65.5x is demanding — it needs sustained high growth to justify
✗ P/E is 27% above its own historical median of 51.8x — expensive by its own standards
✗ P/B of 9.49x is a steep premium to book

Quality vs. Valuation

Company Quality

64/ 100

Average

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

Valuation

31/ 100

Expensive

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

65.5x

3Y Median

51.8x

40 monthly readings · mean 49.6x · range 32.9x–73.3x

Sector Median

66.2x

median of 4 sector peers

⚠️Current valuation is approximately 27% above its 3y median of 51.8x. Paying more than usual needs a reason — faster growth, a better balance sheet, or a re-rating you believe in.

🟡Against its sector it is priced broadly in line with the peer median of 66.2x.

vs. its own history

Expensive

51.8x median over 40 months · +27%

vs. sector peers

Fair

66.2x median of 4 peers · -1%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

39.0x

PEG

14.35

What's Good / What's Bad

🟢 What's Going Well2

High return on capital employed
ROCE of 20.2% 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 Attention2

Return on equity is falling
ROE has dropped from 22.2% to 17.4% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 26.4% to 20.2% — often a sign of competition or overexpansion.

Red Flags

2 items require attention · 1 high · 1 watch

🔴Receivables growing faster than salesFinancial
Receivables up 70% against revenue up 18% — sales are being booked faster than they are collected.
🟡Inventory building faster than salesFinancial
Inventory up 69% against revenue up 18% — stock may not be moving.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 20.2% 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?

Sales are being booked faster than collected
Receivables are up 70% against revenue up 18%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
The price already assumes success
The stock trades 27% above its own median multiple. At this level the business has to deliver just to stand still, and a stumble is repriced twice — lower earnings on a lower multiple.
Growth barely outpaces inflation
Revenue compounding at 5.6% 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.
Returns on shareholder capital are falling
ROE has dropped from 22.2% to 17.4%. 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.
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

1EBITDA margin holds above 19%✓ 20.9%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Revenue growth stays above 4% a year✓ 5.6% CAGR
Latest reported year was -14.4%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
3Free cash flow remains positive✓ ₹17 Cr
Profit that never becomes cash eventually stops being profit.
4ROCE stays above 17%✓ 20.2%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.
5Valuation vs its own median of 51.8x✗ 65.5x today
A re-rating above its own history needs a reason; without one it is just a higher price.

Investment Checklist

7 / 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
✓ 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

4 good · 3 neutral · 4 weak

Market Cap

₹4,179 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

65.5x

Expensive

Expensive — verify against sector peers

P/B Ratio

9.49x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹8.31

Profitable

Profitable on a per-share basis

ROE

17.4%

Strong

Strong capital efficiency

ROCE

20.2%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

Not available

No data

Source didn't return this field

Revenue Growth (YoY)

-14.4%

Shrinking

Sales are contracting

Profit Growth (YoY)

-56.8%

Falling

Profits are shrinking

Dividend Yield

0.92%

Modest

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

Free Cash Flow

₹17 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

P/E (Forward)

141.1x

Flat

At or above the trailing multiple — no earnings uplift is being priced in

Operating Margin

8.8%

Average

Average margins

Net Margin

12.8%

Good

Strong bottom-line conversion

Current Ratio

3.71

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

-0.00

Defensive

Steadier than the market

52W Range Position

45%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

604.1 / 559.3

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

22.9

Oversold zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹436 Cr	₹528 Cr	₹599 Cr	₹513 Cr	+5.6%
EBITDA	₹89 Cr	₹102 Cr	₹127 Cr	₹107 Cr	+6.4%
EBITDA Margin	20.4%	19.3%	21.2%	20.9%	—
PAT (Net Profit)	₹67 Cr	₹82 Cr	₹96 Cr	₹77 Cr	+4.6%
EPS	₹8.74	₹10.72	₹12.52	₹9.99	+4.6%
ROE	22.2%	23.8%	23.8%	17.4%	—
ROCE	26.4%	27.1%	29.0%	20.2%	—
Free Cash Flow	₹48 Cr	₹16 Cr	₹67 Cr	₹17 Cr	-28.9%

🟢 Revenue has grown at 5.6% a year over 3 years.

🟢 EBITDA has grown at 6.4% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 20.9% over 3 years.

🟢 PAT (Net Profit) has grown at 4.6% a year over 3 years.

🟢 EPS has grown at 4.6% a year over 3 years.

🔴 ROE has fallen from 22.2% to 17.4% over 3 years (-4.8 pts).

🔴 ROCE has fallen from 26.4% to 20.2% over 3 years (-6.1 pts).

🔴 Free Cash Flow has shrunk at 28.9% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹556 Cr

Total Liabilities

₹116 Cr

Total Debt

—

Cash & Equivalents

₹1 Cr

Operating Cash Flow

₹70 Cr

Capex

-₹53 Cr

Shareholding (proxy)

Institutional Holding

3.1%

Insider Holding

74.8%

Corporate Actions

Dividend Rate

₹5

Ex-Dividend Date

17 Jul 2026

Peer Comparison

Company	P/E	ROE
SIEMENS LTD	88.8x	10.5%
ABB INDIA LIMITED	92.6x	19.1%
LARSEN & TOUBRO LTD.	30.1x	15.2%
HAVELLS INDIA LIMITED	43.5x	17.1%

Recent News

3 mixed3 general

Shanthi Gears shares surge 37% in two trading sessions. Here's why

The Economic Times, 24 AugPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Shanthi Gears shares zoom 17% after Tube Investments raises stake

Business Standard, 21 Aug

Shanthi Gears Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 27 Aug

Here's why shares of this Murugappa Group company gained over 18% on Friday

CNBC TV18, 21 AugPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Price Action | Urban Company gains 5% after UBS initiates coverage with 'buy'; Shanthi Gears jumps 14%...

Moneycontrol.com, 21 Aug

Shanthi Gears Share Price Target 2026: Bull Case Rs 615, Bear Cas

Univest, 30 JunAnalyst view

🟡Mixed / dependsBroker commentary — an opinion about the price rather than new information about the business.

Watch Items

Revenue growth is negative (-14.4%) on the latest reported period — check if this is one-off or a trend.
Cross-check against the company's latest quarterly filing / investor presentation before acting.
1 metric couldn't be retrieved for this stock — this is more common for smaller or thinly-covered listings.
RSI is in oversold territory — could mean either a bargain or a stock still falling for good reason. Check the 'why' before assuming reversal.

DalalBaazaar Thesis

StrongBusiness Quality · Financial Health

MiddlingProfitability · Risk

WeakGrowth · Valuation

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. 1 high-severity red flag sits above this conclusion and should be read first.

1 of 5 tripwires tripped — Valuation vs its own median of 51.8x · see Key things to watch ↑