The December 2025 quarter marked a significant inflection point for Pasupati Acrylon, with the company achieving its highest-ever quarterly operating profit of ₹39.20 crores, representing a remarkable operating margin expansion to 14.56% from 9.69% in the previous quarter. This stellar performance has propelled the company's Mojo Score to 82 out of 100, earning it a "Strong Buy" rating with an investment advisory recommending it as an excellent opportunity for fresh investors.
The stock has delivered robust returns over the longer term, with a three-year return of 59.48% and an impressive five-year return of 273.01%, significantly outperforming the Sensex's 63.46% gain over the same period. The company's quality grade has been upgraded to "Good" based on long-term financial performance, supported by strong return metrics including an average ROCE of 20.17% and minimal debt burden.
Financial Performance: Exceptional Quarter Across All Metrics
Pasupati Acrylon's Q3 FY26 results showcased exceptional operational excellence across every financial parameter. Net sales reached ₹269.23 crores, marking a 54.85% year-on-year increase from ₹173.87 crores in Q3 FY25, whilst registering a modest 3.93% sequential decline from Q2 FY26's ₹280.25 crores. The company has demonstrated remarkable revenue momentum, with sales growing 28.36% above the previous four-quarter average, indicating sustained demand for its acrylic fibre and polypropylene film products.
| Metric | Q3 FY26 | Q2 FY26 | Q1 FY26 | Q4 FY25 |
|---|---|---|---|---|
| Net Sales | ₹269.23 Cr | ₹280.25 Cr | ₹216.05 Cr | ₹168.32 Cr |
| QoQ Growth | -3.93% | +29.72% | +28.36% | -3.19% |
| Operating Profit | ₹39.20 Cr | ₹27.15 Cr | ₹6.02 Cr | ₹13.98 Cr |
| Operating Margin | 14.56% | 9.69% | 2.79% | 8.31% |
| Net Profit | ₹25.69 Cr | ₹16.20 Cr | ₹1.75 Cr | ₹11.27 Cr |
| PAT Margin | 9.54% | 5.78% | 0.81% | 6.70% |
The profit trajectory has been nothing short of spectacular. Net profit of ₹25.69 crores represented a 58.58% quarter-on-quarter increase and a stunning 153.60% year-on-year surge from ₹10.13 crores in Q3 FY25. The PAT margin expanded significantly to 9.54%, up from 5.78% in the previous quarter and 5.83% in the year-ago period, demonstrating improving profitability dynamics. Profit before tax (excluding other income) reached its highest-ever quarterly level at ₹32.57 crores, underscoring the quality and sustainability of the company's earnings.
Operating leverage worked favourably for Pasupati Acrylon, with the operating profit margin of 14.56% marking the highest level in at least seven quarters. The company's ability to expand margins whilst growing revenues reflects effective cost management and favourable product mix dynamics. Employee costs remained well-controlled at ₹9.35 crores, representing just 3.47% of net sales, whilst interest expenses of ₹3.43 crores and depreciation of ₹3.20 crores were manageable relative to the operating profit generation.
Margin Expansion Story
The company's operating margin journey tells a compelling story: from 2.79% in Q1 FY26 to 9.69% in Q2 FY26, and now reaching 14.56% in Q3 FY26. This 1,177 basis points expansion over two quarters reflects not just cyclical tailwinds but fundamental improvements in operational efficiency and product realisation.
Balance Sheet Strength: Strategic Capacity Expansion Underway
Pasupati Acrylon's balance sheet reveals a company in transformation mode, with significant capital deployment towards growth initiatives. Shareholder funds stood at ₹364.14 crores as of March 2025, comprising share capital of ₹89.14 crores and reserves of ₹275.00 crores. The book value per share of ₹40.85 provides a comfortable cushion below the current market price of ₹49.20, resulting in a price-to-book ratio of 1.15x.
The most notable balance sheet development has been the strategic increase in long-term debt to ₹101.88 crores from ₹44.08 crores in the previous year, reflecting the company's capacity expansion programme. Fixed assets surged to ₹250.22 crores from ₹75.20 crores, indicating substantial capital expenditure on manufacturing infrastructure. Despite this debt addition, the company maintains a healthy net debt-to-equity ratio of -0.01 (effectively net cash position when considering working capital), with a debt-to-EBITDA ratio of just 0.94, well within comfortable servicing limits.
Key Balance Sheet Strengths
✓ Zero Promoter Pledging: All promoter holdings remain unpledged, demonstrating confidence and financial stability.
✓ Strong ROCE: Return on capital employed of 20.17% (average) significantly exceeds the cost of capital, indicating efficient capital allocation.
✓ Manageable Leverage: Despite recent debt addition for expansion, the EBIT-to-interest coverage ratio stands at a robust 13.65x, ensuring comfortable debt servicing.
Current assets of ₹334.22 crores adequately cover current liabilities of ₹109.45 crores, providing a current ratio of approximately 3.05x, which reflects strong liquidity. However, cash flow from operations turned negative at ₹6.00 crores in FY25 due to working capital build-up of ₹38.00 crores, a temporary phenomenon typically associated with rapid revenue growth. The company funded its ₹81.00 crores capital expenditure through a combination of operating cash flow and debt financing of ₹61.00 crores.
Return Ratios: Improving Capital Efficiency
Pasupati Acrylon's return metrics paint a picture of improving capital efficiency, though with room for further enhancement. The return on equity (ROE) of 10.30% for the latest period, whilst modest, represents steady improvement from historical levels and compares favourably with the company's average ROE of 12.95%. More impressively, the return on capital employed (ROCE) stands at 13.56% for the latest period, with a five-year average of 20.17%, demonstrating the company's ability to generate healthy returns on the capital deployed in its business.
The company's sales-to-capital-employed ratio of 2.11x indicates reasonable asset turnover, whilst the five-year EBIT growth rate of 67.58% significantly outpaces the sales growth rate of 11.54%, reflecting operating leverage and margin expansion over the longer term. These improving return metrics, combined with the recent capacity additions, position the company well for sustained profitability growth as the new assets ramp up to full utilisation.
Industry Positioning: Outperforming Petrochemicals Peers
Within the petrochemicals sector, Pasupati Acrylon occupies a specialised niche as one of India's leading manufacturers of acrylic fibre, tow, and tops, alongside cast polypropylene film. The company's performance stands out favourably when benchmarked against peers, particularly in terms of valuation metrics and recent operational momentum. With a one-year stock return of 16.31%, Pasupati Acrylon has significantly outperformed the broader petrochemicals sector, which delivered a negative 0.59% return over the same period, representing a 16.90 percentage point outperformance.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity |
|---|---|---|---|---|
| Pasupati Acrylon | 11.14 | 1.15 | 12.95% | -0.01 |
| Manali Petrochemicals | 15.68 | 0.92 | 14.95% | -0.18 |
| T N Petro Products | 7.95 | 0.87 | 13.12% | 0.03 |
| Nexxus Petrochem | 10.50 | 1.86 | 18.87% | 0.48 |
| Polylink Polymers | 86.67 | 1.46 | 4.87% | 0.24 |
The peer comparison reveals Pasupati Acrylon's attractive valuation proposition. Trading at a P/E ratio of 11.14x, the stock commands a significant discount to Manali Petrochemicals (15.68x) and a substantial discount to the sector average. The company's ROE of 12.95%, whilst below Nexxus Petrochem's 18.87%, compares favourably with most peers and is improving. The price-to-book ratio of 1.15x appears reasonable given the company's improving profitability trajectory and recent capacity expansion investments.
The company's net cash position (negative debt-to-equity of -0.01) stands out positively compared to peers carrying debt, though this metric has shifted with recent borrowings for expansion. The acrylic fibre and CPP film segments in which Pasupati operates face cyclical demand patterns influenced by textile industry dynamics and packaging sector growth, respectively. The company's ability to navigate these cycles whilst maintaining profitability demonstrates operational resilience.
Valuation Analysis: Attractive Entry Point Despite Recent Rally
Pasupati Acrylon's current valuation presents a compelling case for investors seeking exposure to the specialty petrochemicals space. Trading at ₹49.20 with a market capitalisation of ₹443.00 crores, the stock commands a P/E ratio of 11.14x based on trailing twelve-month earnings, representing a 49% discount to the industry average P/E of 22x. This valuation gap appears unjustified given the company's recent operational momentum and improving financial trajectory.
The price-to-book ratio of 1.15x, combined with an ROE of 10.30%, results in an attractive valuation matrix. Using the traditional P/BV-ROE framework, a company delivering 10% ROE typically merits a price-to-book ratio of 1.0x to 1.2x, suggesting the current valuation is fair to slightly attractive. However, with ROE trending upward (as evidenced by the latest quarter's strong profitability) and the five-year average ROCE of 20.17% indicating superior capital efficiency, there is scope for valuation re-rating as the improved performance sustains.
The enterprise value metrics provide additional perspective on valuation attractiveness. An EV/EBITDA multiple of 7.19x appears reasonable for a company demonstrating strong earnings growth and margin expansion. The EV/Sales ratio of 0.52x reflects the capital-intensive nature of the petrochemicals business but also suggests potential upside if margins continue improving. The PEG ratio of 1.05x indicates the stock is reasonably valued relative to its growth prospects.
The company's valuation grade has fluctuated between "Attractive" and "Fair" over the past several months, currently standing at "Fair" as of August 2025. However, the recent stellar quarterly performance and improving operational metrics suggest the valuation could migrate back towards "Attractive" territory. Based on the current earnings trajectory and assuming a normalized P/E ratio of 13x to 15x (still below industry average), a fair value estimate would place the stock in the ₹55 to ₹65 range, implying 12% to 32% upside potential from current levels.
Shareholding Pattern: Stable Promoter Base with Minimal Institutional Interest
Pasupati Acrylon's shareholding structure reveals a stable promoter base with minimal institutional participation, a characteristic common among micro-cap companies. Promoter holding has remained steady at 65.87% over the past five quarters through December 2025, with no sequential changes, indicating strong promoter confidence and commitment. The absence of any pledged shares further reinforces the financial stability and conviction of the promoter group led by Mukesh Jain.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoters | 65.87% | 65.87% | 65.87% | 65.87% | 0.00% |
| FII | 0.35% | 0.00% | 0.08% | 0.07% | +0.35% |
| Mutual Funds | 0.20% | 0.20% | 0.20% | 0.20% | 0.00% |
| Other DII | 0.01% | 0.01% | 0.01% | 0.01% | 0.00% |
| Non-Institutional | 33.57% | 33.92% | 33.84% | 33.85% | -0.35% |
Institutional holdings remain minimal, with total institutional ownership at just 0.55% (combining FII, mutual fund, insurance, and other DII holdings). The most notable recent change has been FII holdings increasing to 0.35% in December 2025 from zero in the previous quarter, potentially signalling emerging institutional interest following the strong quarterly results. Mutual fund holdings have remained stable at 0.20% across all five quarters, represented by seven mutual fund schemes.
The high non-institutional holding of 33.57% reflects the stock's retail investor base, typical for micro-cap companies. Whilst low institutional participation limits near-term liquidity, it also presents an opportunity: should the company's improving performance attract greater institutional attention, it could serve as a significant positive catalyst for the stock price. The stable shareholding pattern, combined with zero promoter pledging, provides a solid foundation for long-term value creation.
Stock Performance: Multi-Year Wealth Creator Despite Recent Volatility
Pasupati Acrylon's stock price performance tells a tale of significant long-term wealth creation punctuated by periods of volatility. Trading at ₹49.20 as of February 11, 2026, the stock has delivered exceptional returns over extended time horizons, though shorter-term performance has been more mixed. The five-year return of 273.01% represents a remarkable 4.7x return on investment, vastly outperforming the Sensex's 63.46% gain over the same period, resulting in an alpha of 209.55 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.34% | +0.50% | +0.84% |
| 1 Month | +4.46% | +0.79% | +3.67% |
| 3 Months | -5.86% | +0.43% | -6.29% |
| 6 Months | +5.13% | +4.50% | +0.63% |
| YTD | -7.27% | -1.16% | -6.11% |
| 1 Year | +16.31% | +10.41% | +5.90% |
| 3 Years | +59.48% | +38.81% | +20.67% |
| 5 Years | +273.01% | +63.46% | +209.55% |
The three-year return of 59.48% and one-year return of 16.31% both comfortably exceed benchmark returns, with positive alpha of 20.67% and 5.90% respectively. However, shorter-term performance has been more challenging, with the stock declining 7.27% year-to-date and 5.86% over the past three months, underperforming the Sensex during these periods. The recent one-month gain of 4.46% suggests renewed momentum following the strong quarterly results.
From a technical perspective, the stock exhibits a "Mildly Bullish" trend as of February 4, 2026, having transitioned from a sideways pattern. The stock trades below its key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), indicating consolidation after the recent rally. The 52-week range of ₹37.55 to ₹66.00 provides perspective on valuation, with the current price sitting 25.45% below the 52-week high and 31.03% above the 52-week low.
The stock's risk profile reflects its micro-cap nature, with high volatility of 54.11% over the past year and a beta of 1.50, indicating it moves 50% more than the broader market. The risk-adjusted return of 0.30 and positive Sharpe ratio classify it as a "High Risk Medium Return" investment, appropriate for investors with higher risk tolerance seeking growth opportunities. Recent delivery volume trends show healthy participation, with delivery volumes at 56.93% of total traded volume, suggesting genuine investor accumulation rather than speculative trading.
Investment Thesis: Multiple Catalysts Support Strong Buy Rating
Pasupati Acrylon's investment case rests on several compelling pillars that collectively support the "Strong Buy" rating and 82/100 Mojo Score. The company's recent operational turnaround, marked by the outstanding Q3 FY26 performance, demonstrates management's ability to drive profitability improvement through operational leverage and margin expansion. The financial trend has been upgraded to "Outstanding," reflecting the highest-ever quarterly metrics across multiple parameters including ROCE, operating profit, operating margin, and net profit.
The quality assessment has improved to "Good" from "Average," underpinned by healthy long-term growth metrics (67.58% EBIT CAGR over five years), strong ROCE of 20.17%, minimal debt burden, and zero promoter pledging. The company's balance sheet strength, despite recent debt addition for capacity expansion, remains robust with comfortable interest coverage of 13.65x and low debt-to-EBITDA of 0.94x. The recent capital expenditure programme, reflected in fixed assets surging from ₹75.20 crores to ₹250.22 crores, positions the company for sustained growth as new capacity comes on stream.
From a valuation perspective, the stock trades at a significant discount to industry peers despite improving fundamentals. The P/E ratio of 11.14x compares favourably with the industry average of 22x, whilst the price-to-book ratio of 1.15x appears reasonable given the improving ROE trajectory. The combination of attractive valuation, improving quality metrics, and outstanding recent financial performance creates a compelling risk-reward proposition for investors.
Key Strengths & Risk Factors
KEY STRENGTHS
- Outstanding Q3 Performance: Highest-ever quarterly operating profit at ₹39.20 crores with 14.56% operating margin demonstrates operational excellence and scalability.
- Strong Return Metrics: Average ROCE of 20.17% significantly exceeds cost of capital, indicating efficient capital allocation and value creation.
- Minimal Debt Burden: Despite recent borrowing for expansion, debt-to-EBITDA of 0.94x and interest coverage of 13.65x ensure financial flexibility.
- Zero Promoter Pledging: Unpledged promoter holdings of 65.87% reflect strong promoter confidence and financial stability.
- Capacity Expansion Underway: Significant capex programme with fixed assets rising to ₹250.22 crores positions company for future growth.
- Attractive Valuation: P/E of 11.14x represents 49% discount to industry average despite improving fundamentals.
- Long-term Wealth Creation: Five-year return of 273.01% demonstrates management's ability to create shareholder value over time.
KEY CONCERNS
- Cyclical Industry: Petrochemicals sector subject to raw material price volatility and demand fluctuations from textile and packaging industries.
- Working Capital Intensity: Operating cash flow turned negative at ₹6.00 crores in FY25 due to ₹38.00 crores working capital build-up.
- Minimal Institutional Holding: Total institutional ownership of just 0.55% limits liquidity and creates potential volatility.
- High Volatility: Stock volatility of 54.11% and beta of 1.50 indicate significant price fluctuations and market risk.
- Micro-Cap Risks: Small market capitalisation of ₹443.00 crores exposes investors to liquidity constraints and higher execution risks.
- Recent Debt Addition: Long-term debt increased to ₹101.88 crores from ₹44.08 crores, requiring careful monitoring of debt servicing ability.
- Quarterly Revenue Volatility: Sequential decline of 3.93% in Q3 FY26 revenue highlights inherent business volatility despite strong YoY growth.
Outlook: What to Watch
POSITIVE CATALYSTS
- Capacity Utilisation Ramp-up: New capacity additions reaching optimal utilisation levels could drive significant revenue and profitability growth.
- Sustained Margin Expansion: Operating margins maintaining above 12% to 14% range would validate improved operational efficiency.
- Institutional Discovery: Increased institutional participation following improved performance could provide valuation re-rating catalyst.
- Working Capital Normalisation: Positive operating cash flow generation as working capital stabilises post-expansion phase.
- Market Share Gains: Continued outperformance versus petrochemicals sector peers in revenue and profitability growth.
RED FLAGS
- Margin Compression: Operating margins falling below 10% would signal deteriorating pricing power or cost pressures.
- Debt Servicing Stress: Interest coverage falling below 5x or debt-to-EBITDA rising above 2x would indicate financial stress.
- Revenue Growth Stagnation: Failure to sustain double-digit revenue growth post-capacity expansion would question investment rationale.
- Negative Operating Cash Flow: Sustained negative operating cash flow beyond FY26 would indicate working capital management issues.
- Promoter Stake Dilution: Any reduction in promoter holding or introduction of pledging would be a significant negative signal.
Looking ahead, the key monitoring points for Pasupati Acrylon centre on the company's ability to sustain the momentum demonstrated in Q3 FY26. The capacity expansion programme represents both an opportunity and a risk – successful execution and ramp-up could drive substantial earnings growth, whilst any delays or utilisation challenges could pressure profitability. The company's performance in managing working capital as revenues scale will be critical, with investors watching for positive operating cash flow generation in FY26.
Industry dynamics will play a crucial role, particularly demand trends from the textile sector for acrylic fibre products and packaging industry growth for CPP films. Raw material price movements, especially acrylonitrile and propylene, will significantly influence margins. The company's ability to maintain operating margins in the 12% to 14% range whilst growing revenues would strongly support the investment thesis. Additionally, any increase in institutional shareholding would serve as an important validation of the improved fundamentals and could provide a re-rating catalyst.
The Verdict: Compelling Opportunity in Turnaround Story
Score: 82/100
For Fresh Investors: Pasupati Acrylon represents an excellent entry opportunity at current levels. The combination of outstanding recent financial performance, attractive valuation at 11.14x P/E (49% discount to sector), improving quality metrics, and significant capacity expansion positions the stock for substantial upside. The Q3 FY26 results demonstrate operational excellence with 14.56% operating margins and 153.60% YoY profit growth. Investors should consider accumulating with a 12 to 18-month investment horizon, recognising the high volatility inherent in micro-cap stocks.
For Existing Holders: Continue holding with confidence. The company's transformation from "Average" to "Good" quality grade, combined with "Outstanding" financial trend status, validates the long-term investment thesis. The recent capacity expansion programme should drive sustained growth as utilisation ramps up. Existing investors have been rewarded with 273.01% returns over five years, and the current trajectory suggests further upside potential. Consider adding on any dips towards ₹45 levels.
Fair Value Estimate: ₹58 to ₹62 (18% to 26% upside from current price of ₹49.20)
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. Investments in micro-cap stocks carry higher risks including liquidity constraints, volatility, and execution risks.
