Raaj Medisafe India Q3 FY26: Strong Growth Momentum Continues Despite Margin Pressures

The company's transformation from loss-making operations in FY20 to sustained profitability represents a remarkable turnaround story in India's medical disposables sector. With operating margins stabilising around 12.9% in FY25 and a commanding 73.80% promoter holding, Raaj Medisafe has established itself as a niche player in the packaging industry. However, investors must weigh this growth narrative against the company's high leverage position, with a debt-to-equity ratio averaging 1.77 times, and the current mildly bearish technical trend that emerged in early February 2026.

Financial Performance: Exceptional Growth with Margin Normalisation

Raaj Medisafe India's annual performance for FY25 showcases the company's ability to scale operations whilst maintaining profitability. Revenue surged to ₹62.00 crores from ₹43.00 crores in FY24, representing a year-on-year growth of 44.2%. This acceleration follows a consistent growth pattern, with the company delivering a 5-year revenue compound annual growth rate (CAGR) of 64.38%, one of the highest in the packaging sector.

Net profit for FY25 doubled to ₹6.00 crores from ₹3.00 crores in FY24, translating to a PAT margin of 9.7%, up from 7.0% in the previous year. This margin expansion reflects improved operational efficiency despite rising interest costs, which increased to ₹2.00 crores in FY25 from ₹1.00 crore in FY24. The company's operating profit (PBDIT) excluding other income reached ₹8.00 crores with a margin of 12.9%, slightly lower than the 14.0% achieved in FY24, indicating some pressure on operational efficiency as the business scales.

The company's total expenditure rose to ₹53.00 crores in FY25 from ₹36.00 crores in FY24, growing in line with revenue expansion. Employee costs remained stable at ₹3.00 crores, suggesting efficient workforce management. Depreciation charges increased to ₹1.00 crore in FY25, reflecting the capital investments made to support growth. Notably, the company has maintained a zero tax rate, likely due to accumulated losses from previous years or tax incentives available to manufacturing units in Madhya Pradesh.

Capital Efficiency: Exceptional Returns Masking High Leverage

Raaj Medisafe India's return on equity (ROE) stands at an impressive 82.82% on average, with the latest figure at 26.45%, placing it amongst the top performers in the packaging sector. This exceptional ROE reflects the company's ability to generate substantial returns on shareholder capital, a critical metric that underscores management's effectiveness in deploying resources. The company's return on capital employed (ROCE) averages 12.11%, with the latest reading at 11.09%, indicating moderate efficiency in utilising total capital, though significantly lower than the ROE due to the debt burden.

However, this impressive profitability comes with considerable financial leverage. The company's debt-to-equity ratio averages 1.77 times, whilst net debt-to-equity stands at the same level, indicating limited cash reserves to offset borrowings. Long-term debt increased to ₹14.37 crores in FY25 from ₹13.84 crores in FY24, supporting the company's aggressive expansion plans. The debt-to-EBITDA ratio averages 2.65 times, suggesting the company would need approximately 2.6 years of current EBITDA to repay its debt, a moderate but manageable level for a growing manufacturing business.

The balance sheet reveals a company in expansion mode. Shareholder funds surged to ₹26.92 crores in FY25 from ₹10.84 crores in FY24, driven by retained earnings and a share capital increase from ₹10.90 crores to ₹13.18 crores. Fixed assets more than doubled to ₹23.06 crores from ₹10.72 crores, indicating substantial capital expenditure to enhance manufacturing capacity. Current assets grew to ₹29.62 crores, though current liabilities also increased to ₹27.87 crores, resulting in a tight working capital position. Trade payables jumped to ₹4.29 crores from ₹0.71 crores, suggesting the company is stretching payment terms to manage cash flow.

Cash Flow Dynamics: Investment-Led Strain on Liquidity

Raaj Medisafe's cash flow statement for FY25 reveals the challenges of funding rapid growth. Operating cash flow stood at ₹0.00 crores, down from ₹4.00 crores in FY24, primarily due to a ₹7.00 crore increase in working capital requirements. This working capital build-up reflects higher inventory and receivables to support the 44.2% revenue growth, a typical pattern for fast-growing manufacturing companies. The company generated ₹5.00 crores in profit before tax and added back ₹3.00 crores in non-cash adjustments, but the working capital absorption neutralised these inflows.

Investing activities consumed ₹16.00 crores in FY25, up from ₹13.00 crores in FY24, reflecting aggressive capital expenditure to expand manufacturing capabilities. This investment intensity is evidenced by the doubling of fixed assets on the balance sheet. To fund these investments, the company raised ₹16.00 crores through financing activities, up from ₹8.00 crores in FY24, indicating fresh equity infusion and additional borrowings. The closing cash position remained at ₹0.00 crores, suggesting the company operates with minimal cash buffers and relies on external financing to support growth.

Industry Context: Outperforming a Struggling Sector

The packaging industry has faced significant headwinds over the past year, with the sector delivering a negative return of -36.53% compared to Raaj Medisafe's positive 34.33% gain. This 70.86 percentage point outperformance highlights the company's unique positioning within the medical disposables niche, which has benefited from sustained healthcare demand post-pandemic. Whilst broader packaging players have struggled with commodity price volatility and demand slowdown, Raaj Medisafe's focus on medical-grade disposables has provided insulation from these cyclical pressures.

The company's manufacturing facility at Pithampur, Madhya Pradesh, conforms to current Good Manufacturing Practice (cGMP) requirements, a critical certification for medical device manufacturers. This compliance provides a competitive moat, as regulatory barriers limit new entrants into the medical disposables space. The company's transformation from Manoj Surgical Industries Limited to Raaj Medisafe India Limited in 2008 marked its strategic pivot towards specialised medical packaging, a decision that has proven prescient given the sector's growth trajectory over the past decade.

Peer Comparison: Premium Valuation Justified by Superior Returns

When compared to packaging sector peers, Raaj Medisafe India stands out for its exceptional return on equity, though this comes with higher leverage. The company's ROE of 82.82% dwarfs competitors such as Hind Tin Works (7.87%), Kaira Can (8.05%), and Shetron (8.84%). Even Clara Industries, with a respectable ROE of 30.93%, falls well short of Raaj Medisafe's capital efficiency. This superior profitability justifies the company's price-to-book ratio of 4.08 times, which appears reasonable when contextualized against its earnings power.

At a price-to-earnings ratio of 15.44 times, Raaj Medisafe trades at a significant discount to the industry average P/E of approximately 54 times (excluding the outlier Swadeshi Industries). This valuation gap reflects both the company's micro-cap status and concerns about leverage sustainability. However, the PEG ratio of 0.13 suggests the stock is undervalued relative to its growth rate, with the 5-year EBIT CAGR of 60.53% far exceeding the P/E multiple. The company's enterprise value-to-EBITDA of 15.93 times and EV-to-capital employed of 2.12 times indicate attractive valuations for investors willing to accept the leverage risk.

Valuation Analysis: Attractive Entry Point Despite Technical Weakness

Raaj Medisafe India's current valuation metrics paint a picture of a company trading at a significant discount to its growth potential. With a P/E ratio of 15.44 times against a 5-year earnings CAGR of 60.53%, the stock offers compelling value for long-term investors. The price-to-book value of 4.08 times, whilst elevated in absolute terms, appears reasonable when considering the 82.82% average ROE. Companies generating such high returns on equity typically command premium valuations, often trading at 5-8 times book value in efficient markets.

The company's overall valuation grade of "VERY ATTRACTIVE" reflects this disconnect between price and fundamentals. The valuation assessment has remained stable since November 2024, with brief fluctuations into "ATTRACTIVE" territory. At the current price of ₹90.00, the stock trades 12.07% below its 52-week high of ₹102.35 and 41.60% above its 52-week low of ₹63.56, suggesting room for upside if the company maintains its growth trajectory and the technical trend reverses.

The enterprise value metrics further support the attractive valuation thesis. EV-to-sales of 2.33 times and EV-to-capital employed of 2.12 times suggest the market is pricing in limited premium for the company's growth prospects. Given the 64.38% revenue CAGR over five years and improving profitability, these multiples appear conservative. However, investors must balance this valuation appeal against the company's high beta of 1.50, indicating 50% higher volatility than the broader market, and the current mildly bearish technical trend that emerged in early February 2026.

Shareholding Pattern: Stable Promoter Base with Minimal Institutional Interest

Raaj Medisafe India's shareholding structure is dominated by promoters, who hold 73.80% as of December 2025, unchanged from September 2025 but marginally higher than the 73.44% held in March 2025. This stable and substantial promoter holding provides comfort regarding management's commitment to the business. The promoter group includes Sushen Remedies Private Limited (19.24%), Baldeo Mangilal (16.11%), and Anand Bangur (11.29%), amongst others. Importantly, there is zero promoter pledging, eliminating concerns about forced selling or financial distress at the promoter level.

The complete absence of foreign institutional investors (FIIs), mutual funds, and insurance companies reflects the company's micro-cap status and limited liquidity. With zero institutional holdings, the stock remains undiscovered by mainstream investors, presenting both opportunity and risk. The 26.20% non-institutional shareholding consists primarily of retail investors and high-net-worth individuals. This shareholding structure means the stock could experience sharp price movements on relatively low volumes, as evidenced by the daily trading volume of just 100 shares on February 12, 2026. For patient investors, this lack of institutional coverage could present an opportunity if the company continues delivering strong results and eventually attracts institutional attention.

Stock Performance: Exceptional Long-Term Gains with Recent Consolidation

Raaj Medisafe India's stock performance over the long term has been nothing short of spectacular, delivering returns that far exceed broader market benchmarks. Over the past five years, the stock has surged 831.68%, compared to the Sensex's 62.54% gain, generating alpha of 769.14 percentage points. The 10-year return of 1,132.88% versus the Sensex's 264.48% demonstrates the compounding power of sustained business growth. Even over shorter periods, the stock has outperformed significantly, with a 3-year return of 215.24% against the Sensex's 38.06%, translating to alpha of 177.18 percentage points.

However, recent performance has been more subdued. The stock has declined 4.77% over the past month and 1.90% over six months, underperforming the Sensex during these periods. The year-to-date return of 28.55% remains impressive but reflects a moderation from the blistering pace of previous years. The stock's high beta of 1.50 and volatility of 62.03% underscore the risk-return trade-off inherent in micro-cap investing. The current technical trend turned "MILDLY BEARISH" on February 10, 2026, at ₹90.00, following a period of sideways movement, suggesting near-term caution despite the strong fundamental backdrop.

Investment Thesis: High-Growth Story with Leverage Considerations

Raaj Medisafe India presents a compelling investment thesis built on four pillars: exceptional growth momentum, superior capital efficiency, attractive valuation, and niche market positioning. The company's 5-year revenue CAGR of 64.38% and EBIT CAGR of 60.53% demonstrate sustained business expansion, whilst the average ROE of 82.82% highlights management's ability to generate exceptional returns on shareholder capital. These fundamentals support the company's "VERY ATTRACTIVE" valuation grade and "POSITIVE" financial trend classification.

The investment case is strengthened by the company's stable promoter base (73.80% holding with zero pledging), clean regulatory compliance (cGMP-certified facility), and positioning in the defensive medical disposables segment. The current proprietary score of 51/100 with a "HOLD" rating reflects a balanced assessment that acknowledges both the growth potential and the leverage risks. The company's debt-to-equity ratio of 1.77 times and EBIT-to-interest coverage of 3.73 times require careful monitoring, particularly as interest costs doubled in FY25.

Key Strengths & Risk Factors

Outlook: What to Monitor Going Forward