With a market capitalisation of just ₹10.00 crores and the stock trading at ₹13.88 as of November 17, 2025, Lime Chemicals has shed 7.28% in a single day and now trades 52.20% below its 52-week high of ₹29.04. The company's struggles are evident across all financial metrics, with revenue collapsing 38.66% year-on-year and operating margins remaining deeply negative.
Financial Performance: A Downward Spiral Accelerates
The Q2 FY26 results paint a grim picture of a company struggling to maintain operational viability. Net sales plummeted to ₹1.46 crores in Q2 FY26, representing a 21.08% sequential decline from ₹1.85 crores in Q1 FY26 and a devastating 38.66% year-on-year drop from ₹2.38 crores in Q2 FY25. This marks the third consecutive quarter of revenue contraction, with the company's top line now at its lowest level in the available quarterly data spanning back to March 2024.
Operating performance deteriorated further, with the company posting an operating loss (PBDIT excluding other income) of ₹0.16 crores in Q2 FY26, yielding a negative operating margin of 10.96%. This represents a marginal worsening from the 8.65% negative margin in Q1 FY26. The company has now recorded negative operating margins in five of the last seven quarters, highlighting fundamental issues with cost structure and pricing power.
| Metric | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 1.46 | 1.85 | 1.64 | 2.60 | 2.38 |
| QoQ Change | -21.08% | +12.80% | -36.92% | +9.24% | -21.71% |
| YoY Change | -38.66% | -39.14% | -30.51% | — | — |
| Net Profit (₹ Cr) | -0.16 | 0.03 | 0.06 | 0.06 | -0.05 |
| Operating Margin % | -10.96% | -8.65% | -15.24% | 1.54% | -2.94% |
| PAT Margin % | -10.96% | 1.62% | 3.66% | 2.31% | -2.10% |
The quality of earnings remains questionable, with the company's profit before tax at ₹-0.16 crores in Q2 FY26. Other income of ₹0.03 crores provided minimal cushion, down significantly from the ₹0.22 crores recorded in Q1 FY26. Employee costs remained relatively stable at ₹0.18 crores, but with such low revenue levels, even modest fixed costs become burdensome.
Critical Concern: Persistent Operating Losses
Lime Chemicals has recorded negative operating margins (excluding other income) in five of the last seven quarters, with Q2 FY26 marking the worst performance at -10.96%. The company's inability to generate positive operating cash flow from its core calcium carbonate manufacturing business raises serious questions about long-term viability. With revenue declining 39% year-on-year, the company faces a structural profitability challenge that cannot be resolved through cost-cutting alone.
Balance Sheet Under Strain: Negative Equity Concerns
The company's balance sheet as of March 2025 reflects years of accumulated losses and weak capital structure. Shareholder funds stood at just ₹1.94 crores, comprising share capital of ₹6.50 crores offset by negative reserves and surplus of ₹4.56 crores. This represents a marginal improvement from ₹1.74 crores in March 2024, but the company remains precariously positioned.
Lime Chemicals operates with a debt-to-equity ratio averaging 2.58 times over recent years, indicating high financial leverage for a company with such weak profitability metrics. Long-term debt stood at ₹0.10 crores as of March 2025, whilst current liabilities totalled ₹7.80 crores, including trade payables of ₹2.43 crores. Current assets of ₹3.58 crores provide insufficient coverage, raising working capital concerns.
Return on equity (ROE) averaged just 2.83% over recent periods, whilst return on capital employed (ROCE) averaged a deeply negative 30.62%. The latest ROE figure stood at -0.52%, reflecting the ongoing losses. These metrics underscore the company's inability to generate adequate returns for shareholders or efficiently deploy capital.
Capital Efficiency Crisis
With an average ROCE of -30.62% and latest ROE at -0.52%, Lime Chemicals demonstrates fundamental capital allocation challenges. The company's fixed assets of ₹5.75 crores generate insufficient revenue to cover operating expenses, let alone provide returns to investors. The negative ROCE indicates that for every rupee of capital employed, the company is destroying value rather than creating it.
Industry Context: Underperforming in a Growing Sector
The commodity chemicals sector in India has shown resilience, with the broader industry delivering a 7.63% return over the past year. However, Lime Chemicals has dramatically underperformed, posting a 50.07% decline over the same period—an underperformance of 57.70 percentage points versus its sector peers.
The company operates in the calcium carbonate manufacturing space, supplying products for toothpaste, pharmaceuticals, PVC, rubber, plastics, polymers, cables, leather, paper, and paints. Despite serving diverse end-markets, Lime Chemicals has failed to capitalise on demand, with sales declining at a compound annual rate of 21.26% over the past five years.
Competitive pressures and the company's inability to maintain pricing power have contributed to margin compression. With larger, better-capitalised competitors dominating the market, Lime Chemicals' micro-cap status (₹10.00 crores market capitalisation) limits its ability to invest in capacity expansion, technology upgrades, or market development initiatives.
Peer Comparison: Valuation Disconnect
A comparison with commodity chemicals peers reveals Lime Chemicals' valuation anomaly. Despite being loss-making and commanding no P/E ratio, the company trades at a price-to-book value of 4.65x—significantly higher than most profitable peers.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity |
|---|---|---|---|---|
| Lime Chemicals | NA (Loss Making) | 4.65x | 2.83% | 2.58 |
| Emmessar Biotech | 67.34x | 1.94x | 17.56% | -0.92 |
| Advance Petroch. | 427.95x | 4.24x | 12.82% | 2.51 |
| Vivid Global | 31.67x | 1.02x | 4.81% | -0.13 |
| Sreechem Resins | NA (Loss Making) | 1.03x | 15.53% | 0.15 |
| Link Pharma Chem | NA (Loss Making) | 1.16x | 4.94% | 0.50 |
Lime Chemicals' ROE of 2.83% trails the peer average of approximately 11%, whilst its P/BV multiple of 4.65x exceeds the peer average of roughly 1.90x. This valuation disconnect suggests the market has not fully priced in the company's deteriorating fundamentals and structural challenges. Profitable peers like Emmessar Biotech (ROE: 17.56%) and Sreechem Resins (ROE: 15.53%) trade at significantly lower P/BV multiples despite superior returns.
Valuation Analysis: Overvalued Relative to Fundamentals
At the current price of ₹13.88, Lime Chemicals trades at a P/BV ratio of 4.65x against a book value per share of ₹2.99. For a loss-making company with negative operating margins and declining revenue, this valuation appears unjustifiable on fundamental grounds.
The company's enterprise value metrics paint an equally concerning picture, with EV/EBITDA and EV/EBIT both at -14.04x due to negative earnings. EV/Sales stands at 1.86x, whilst EV/Capital Employed is 2.02x. These metrics suggest the market is assigning value to a business that is actively destroying shareholder wealth.
The stock's 52-week range of ₹12.56 to ₹29.04 indicates high volatility, with the current price just 10.51% above the 52-week low. The dramatic 52.20% decline from the 52-week high reflects growing investor recognition of the company's fundamental challenges.
"With persistent operating losses, declining revenue, and a P/BV multiple of 4.65x, Lime Chemicals presents a classic value trap—seemingly cheap on price alone, but expensive when considering the deteriorating business fundamentals."
Shareholding Pattern: Institutional Exit Signals Concern
The shareholding pattern reveals a concerning trend of institutional divestment. Foreign institutional investor (FII) holdings have declined from 7.38% in September 2024 to just 2.35% in September 2025, representing a steady exodus over four consecutive quarters.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|
| Promoter | 29.27% | 29.27% | 29.27% | 29.27% | 29.27% |
| FII | 2.35% | 2.35% | 3.07% | 6.04% | 7.38% |
| Mutual Funds | 0.05% | 0.05% | 0.05% | 0.05% | 0.05% |
| Non-Institutional | 68.33% | 68.33% | 67.60% | 64.64% | 63.30% |
Promoter holding has remained stable at 29.27% throughout the period, with no pledging of shares—a rare positive in an otherwise concerning picture. However, the low promoter stake combined with minimal institutional interest (just 2.40% total institutional holdings) suggests limited confidence from sophisticated investors.
Non-institutional holdings have increased from 63.30% to 68.33%, primarily absorbing the shares sold by FIIs. This shift towards retail and non-institutional investors often precedes further volatility, as these shareholders typically have shorter investment horizons and lower tolerance for sustained losses.
Stock Performance: Severe Underperformance Across All Timeframes
Lime Chemicals' stock performance has been disastrous across virtually all timeframes, with the company underperforming the Sensex by substantial margins. Over the past year, the stock has declined 50.07% whilst the Sensex gained 9.50%, resulting in a negative alpha of 59.57 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.68% | +1.69% | -5.37% |
| 1 Month | -15.93% | +1.19% | -17.12% |
| 3 Months | -4.93% | +5.40% | -10.33% |
| 6 Months | -19.54% | +3.18% | -22.72% |
| YTD | -42.17% | +8.72% | -50.89% |
| 1 Year | -50.07% | +9.50% | -59.57% |
| 3 Years | -47.62% | +37.57% | -85.19% |
| 5 Years | -24.57% | +93.28% | -117.85% |
The technical picture reinforces the bearish fundamental outlook. The stock trades below all key moving averages—5-day (₹14.53), 20-day (₹15.01), 50-day (₹15.40), 100-day (₹16.00), and 200-day (₹16.96). The technical trend turned bearish on October 24, 2025, and all weekly and monthly indicators (MACD, Bollinger Bands, KST) signal continued bearish momentum.
With a beta of 1.50, Lime Chemicals exhibits higher volatility than the broader market, amplifying downside risk during market corrections. The stock's volatility of 66.96% over the past year—more than five times the Sensex's 12.26%—reflects extreme price instability and heightened risk for investors.
Investment Thesis: Multiple Red Flags Dominate
The proprietary Mojo Score assigns Lime Chemicals a rating of just 12 out of 100, placing it firmly in "STRONG SELL" territory. This assessment reflects the convergence of negative factors across valuation, quality, financial trends, and technical indicators.
The company's quality grade stands at "BELOW AVERAGE," driven by weak long-term financial performance, negative ROCE averaging -30.62%, and declining sales growth of -21.26% over five years. The financial trend for Q2 FY26 is classified as "FLAT," though this understates the severity of the operating losses. Technical trends remain firmly "BEARISH" across all timeframes.
Valuation is assessed as "RISKY," reflecting the disconnect between the company's loss-making status and its elevated P/BV multiple. The overall Mojo assessment characterises the investment case as "MIXED," though the preponderance of negative factors suggests this may be generous.
Key Strengths & Risk Factors
Limited Strengths
- No Promoter Pledging: Zero per cent pledged shares indicates promoters are not leveraging their holdings, though the low 29.27% stake itself raises questions about commitment.
- Established Presence: Company has been operational since 1970, providing some operational knowledge and customer relationships in the calcium carbonate space.
- Diverse End-Markets: Products serve multiple industries including pharmaceuticals, PVC, rubber, plastics, paper, and paints, theoretically providing diversification.
- Low Debt Levels: Long-term debt of just ₹0.10 crores limits interest burden, though this reflects limited access to capital rather than financial strength.
Critical Concerns
- Persistent Operating Losses: Negative operating margins in five of last seven quarters, with Q2 FY26 at -10.96%, indicating fundamental business model issues.
- Revenue Collapse: 38.66% YoY decline in Q2 FY26, with five-year sales CAGR of -21.26%, reflecting severe market share loss or industry decline.
- Destroyed Capital: Average ROCE of -30.62% and current ROE of -0.52% demonstrate consistent value destruction for shareholders.
- Institutional Flight: FII holdings declined from 7.38% to 2.35% over four quarters, signalling sophisticated investors are exiting.
- Valuation Disconnect: P/BV of 4.65x for a loss-making company represents significant downside risk as fundamentals deteriorate further.
- Micro-Cap Constraints: ₹10.00 crores market cap limits access to capital, institutional interest, and ability to invest in turnaround initiatives.
- Weak Balance Sheet: Shareholder funds of just ₹1.94 crores with negative reserves of ₹4.56 crores leaves minimal buffer for further losses.
- Technical Breakdown: Trading below all moving averages with bearish indicators across all timeframes suggests further downside momentum.
Outlook: Critical Juncture with Limited Visibility
Lime Chemicals faces a critical juncture with limited evidence of a turnaround. The company must demonstrate its ability to stabilise revenue, restore positive operating margins, and generate cash flow from operations. Without these fundamental improvements, the current valuation—however low in absolute terms—remains unjustified.
Positive Catalysts (Low Probability)
- Stabilisation of revenue decline and return to QoQ growth
- Achievement of positive operating margins for consecutive quarters
- Strategic partnership or capacity modernisation announcement
- Evidence of market share gains in core calcium carbonate segments
Red Flags to Monitor
- Further sequential revenue decline in Q3 FY26
- Operating margins remaining negative beyond -10%
- Additional FII or institutional selling in shareholding pattern
- Breach of ₹12.56 support level (52-week low)
- Working capital deterioration or liquidity concerns
- Any promoter stake reduction or pledge initiation
The path forward requires immediate action to arrest revenue decline and restore operational profitability. However, the company's micro-cap status, limited financial resources, and weak competitive position make a successful turnaround highly uncertain. Investors should monitor Q3 FY26 results closely for any signs of stabilisation, though the burden of proof rests entirely with management to demonstrate viability.
The Verdict: Exit Recommended
Score: 12/100
For Fresh Investors: Avoid entirely. The combination of persistent operating losses, collapsing revenue, negative ROCE, and overvaluation relative to fundamentals presents unacceptable risk. No compelling entry point exists until the company demonstrates sustained operational improvement and positive cash generation.
For Existing Holders: Exit positions at current levels or on any relief rally. The 50% decline over the past year has not fully priced in the structural challenges facing the business. With FIIs exiting and technical indicators bearish, further downside appears likely. The risk-reward profile is heavily skewed to the downside.
Fair Value Estimate: Given negative earnings and deteriorating fundamentals, book value of ₹2.99 represents the upper bound of fair value. Current price of ₹13.88 implies 78% downside to book value. However, if losses continue, even book value will erode further.
Note: ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Investing in micro-cap stocks carries substantial risk of loss.
