Sobhagya Mercantile Limited

Basic Materials — Other Industrial Metals & Mining · BSE

₹1,333.95+₹22.25 (+1.70%)

DalalBaazaar Score

54 / 100

🟡 Moderate

Verdict

CAUTION

Risk

Very High

Driven by high debt relative to equity, micro-cap size, which brings thin liquidity, a very high earnings multiple, which leaves little margin for disappointment.

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

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:46 pm

Understanding the Business

Company site ↗

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

What does this company do?

Sobhagya Mercantile Limited engages in the selling of metal products in India. It operates through Engineering Consultancy and Metal Sale (Stone Crusher) segments. The company constructs roads.

IndustryOther Industrial Metals & Mining

SectorBasic Materials

Annual revenue₹233 Cr

How does it make money?

Turns over ₹233 Cr a year. Of every ₹100 of sales, about ₹9 reaches shareholders as profit, with ₹15 left at the operating level before interest, tax and depreciation.

Who are its competitors?

The closest listed comparisons in its industry are HINDALCO INDUSTRIES LTD, VEDANTA LIMITED, TATA STEEL 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?Some evidence

ROCE of 17.9% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

Peer median ROE12.0%

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 +114% while net margin moved -4% 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+114%

Margin effect-4%

DalalBaazaar Score

54/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ P/E of 54.5x is demanding — it needs sustained high growth to justify
✗ P/E is 7614% above its own historical median of 0.7x — expensive by its own standards
✗ P/B of 5.84x is a steep premium to book

Quality vs. Valuation

Company Quality

62/ 100

Average

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

Valuation

26/ 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

54.5x

3Y Median

0.7x

40 monthly readings · mean 17.5x · range 0.0x–51.0x

Sector Median

12.3x

median of 3 sector peers

⚠️Current valuation is approximately 7614% above its 3y median of 0.7x. Paying more than usual needs a reason — faster growth, a better balance sheet, or a re-rating you believe in.

⚠️Against its sector it trades 343% above the peer median of 12.3x.

vs. its own history

Expensive

0.7x median over 40 months · +7614%

vs. sector peers

Expensive

12.3x median of 3 peers · +343%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

38.5x

PEG

2.01

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 Attention2

Return on equity is falling
ROE has dropped from 30.1% to 11.4% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 41.7% to 17.9% — often a sign of competition or overexpansion.

Red Flags

5 items require attention · 3 high · 2 watch

🔴Debt has risen sharplyFinancial
Total debt is up 210% over 3 years, from ₹7 Cr to ₹22 Cr.
🔴High leverageFinancial
Debt/Equity of 5.45x — earnings must service borrowings before shareholders see anything.
🔴Inventory building faster than salesFinancial
Inventory up 252% against revenue up 114% — stock may not be moving.
🟡Receivables growing faster than salesFinancial
Receivables up 163% against revenue up 114% — sales are being booked faster than they are collected.
🟡Shareholders have been dilutedOwnership
Shares outstanding are up 2290% over 3 years — each existing share owns a smaller slice of the company.

Investment Thesis

🟢 Bull CaseWhat could make this work?

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?

Leverage amplifies any setback
Debt/Equity of 5.45x. Interest is payable whether or not the business has a good year.
Sales are being booked faster than collected
Receivables are up 163% against revenue up 114%. 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 7614% 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.
Returns on shareholder capital are falling
ROE has dropped from 30.1% to 11.4%. 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

1Revenue growth stays above 22% a year✓ 28.8% CAGR
Latest reported year was -21.4%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 13%✓ 15.0%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✓ ₹53 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 0.6x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 15%✓ 17.9%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

5 / 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

3 good · 3 neutral · 5 weak

Market Cap

₹1,387 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

54.5x

Expensive

Expensive — verify against sector peers

P/B Ratio

5.84x

Rich

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

EPS (TTM)

₹24.47

Profitable

Profitable on a per-share basis

ROE

13.5%

Moderate

Moderate capital efficiency

ROCE

17.9%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

5.45x

High

High leverage

Revenue Growth (YoY)

-21.4%

Shrinking

Sales are contracting

Profit Growth (YoY)

-44.6%

Falling

Profits are shrinking

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

₹53 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

ROA

7.6%

Average

Average asset productivity

Operating Margin

13.3%

Average

Average margins

Net Margin

9.4%

Average

Average bottom-line conversion

Current Ratio

1.91

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

-0.47

Defensive

Steadier than the market

52W Range Position

72%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

1338.0 / 1319.8

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

46.6

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹109 Cr	₹115 Cr	₹157 Cr	₹233 Cr	+28.8%
EBITDA	₹16 Cr	₹18 Cr	₹25 Cr	₹35 Cr	+30.3%
EBITDA Margin	14.5%	15.4%	16.0%	15.0%	—
PAT (Net Profit)	₹11 Cr	₹12 Cr	₹16 Cr	₹22 Cr	+27.1%
EPS	₹263.01	₹482.61	₹21.73	₹26.14	-53.7%
ROE	30.1%	24.5%	19.4%	11.4%	—
ROCE	41.7%	36.1%	30.7%	17.9%	—
Total Debt	₹7 Cr	₹14 Cr	₹7 Cr	₹22 Cr	+45.8%
Free Cash Flow	-₹4 Cr	₹4 Cr	-₹17 Cr	₹53 Cr	—

🟢 Revenue has grown at 28.8% a year over 3 years.

🟢 EBITDA has grown at 30.3% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 15.0% over 3 years.

🟢 PAT (Net Profit) has grown at 27.1% a year over 3 years.

🔴 EPS has shrunk at 53.7% a year over 3 years.

🔴 ROE has fallen from 30.1% to 11.4% over 3 years (-18.7 pts).

🔴 ROCE has fallen from 41.7% to 17.9% over 3 years (-23.8 pts).

🔴 Total Debt has grown at 45.8% a year over 3 years.

🟢 Free Cash Flow has turned positive, from -₹4 Cr to ₹53 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹350 Cr

Total Liabilities

₹157 Cr

Cash & Equivalents

₹63 Cr

Operating Cash Flow

₹53 Cr

Capex

-₹0 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

86.3%

Peer Comparison

Company	P/E	ROE
HINDALCO INDUSTRIES LTD	12.3x	12.0%
VEDANTA LIMITED	10.4x	18.7%
TATA STEEL LIMITED	19.8x	10.8%

Recent News

1 mixed5 general

Sobhagya Mercantile Ltd. Stock News: Price Rise Analysis

Univest, 03 Aug

Sobhagya Mercantile Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 02 Sept

Sobhagya Mercantile discloses AGM voting results, all resolutions passed

scanx.trade, 29 SeptResults

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

Sobhagya Mercantile Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 30 Aug

Sobhagya Mercantile Ltd. Lower Circuit Today: Price, Data and Peers

Univest, 17 Sept

Sobhagya Mercantile receives environmental clearance for coal mine

scanx.trade, 08 Aug

Watch Items

Revenue growth is negative (-21.4%) 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.

DalalBaazaar Thesis

StrongGrowth

MiddlingBusiness Quality · Financial Health · Profitability

WeakValuation · Risk

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. 3 high-severity red flags sit above this conclusion and should be read first.

All 5 tripwires holding · see Key things to watch ↑