The agrochemical manufacturer, which specialises in producing Dimethoate Technical and Malathion Technical, faced multiple headwinds during the quarter. Revenue contracted 3.83% year-on-year to ₹82.04 crores from ₹85.31 crores, whilst also declining 12.57% sequentially from ₹93.84 crores in Q2 FY26. This dual pressure on the top line, coupled with deteriorating margins, underscores the operational challenges confronting the company in an increasingly competitive pesticides and agrochemicals sector.
Financial Performance: Margin Erosion Compounds Revenue Weakness
The quarter's financial performance revealed troubling trends across multiple metrics. Operating profit before depreciation, interest, tax and other income (PBDIT excluding OI) fell to ₹10.32 crores, representing a margin of just 12.58%—a significant compression of 303 basis points from the 15.61% margin achieved in Q3 FY25. Year-on-year, operating profit declined 22.52% from ₹13.32 crores, whilst sequential performance showed a 14.21% drop from ₹12.03 crores in Q2 FY26.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Operating Profit (₹ Cr) | Operating Margin | Cons. Net Profit (₹ Cr) |
|---|---|---|---|---|---|
| Dec'25 | 82.04 | -12.57% | 10.32 | 12.58% | 2.70 |
| Sep'25 | 93.84 | +5.07% | 12.03 | 12.82% | 3.05 |
| Jun'25 | 89.31 | +28.71% | 10.99 | 12.31% | 1.60 |
| Mar'25 | 69.39 | -18.66% | 5.75 | 8.29% | 4.13 |
| Dec'24 | 85.31 | +3.48% | 13.32 | 15.61% | 5.27 |
| Sep'24 | 82.44 | +10.46% | 11.76 | 14.26% | 4.01 |
| Jun'24 | 74.63 | — | 9.39 | 12.58% | 3.52 |
The profit after tax (PAT) margin for Q3 FY26 stood at 4.47%, down from 8.14% in the year-ago quarter—a stark deterioration of 367 basis points. Employee costs increased to ₹15.24 crores from ₹13.92 crores year-on-year, placing additional pressure on profitability. Interest expenses rose marginally to ₹2.31 crores from ₹2.26 crores, whilst depreciation climbed to ₹5.06 crores from ₹4.84 crores, reflecting the company's ongoing capital investments.
For the nine-month period ending December 2025, consolidated net profit totalled ₹7.35 crores, representing a 42.19% decline from ₹12.80 crores in the corresponding nine-month period of FY25. This sustained underperformance across three consecutive quarters signals deeper structural challenges rather than temporary disruptions.
Operational Challenges: Weak Returns on Capital Employed
Shivalik Rasayan's operational efficiency metrics paint a concerning picture. The company's return on equity (ROE) stands at a meagre 6.12% on average, significantly below industry standards and indicating poor capital productivity. The latest ROE figure of just 2.40% highlights the severity of recent profitability challenges. Similarly, return on capital employed (ROCE) averaged 9.45% over the past five years, with the latest reading plummeting to 3.89%—well below acceptable thresholds for a manufacturing enterprise.
⚠️ Critical Concern: Deteriorating Capital Efficiency
With ROE at 6.12% and ROCE at 9.45% (average), Shivalik Rasayan demonstrates poor management efficiency in deploying shareholder capital. The latest quarterly ROCE of just 3.89% signals that the company is generating minimal returns above its cost of capital, raising questions about long-term value creation capability.
The balance sheet reveals a company that has significantly expanded its asset base without commensurate improvement in profitability. Fixed assets surged to ₹336.64 crores as of March 2025 from ₹214.01 crores a year earlier—a 57.28% increase—suggesting substantial capital expenditure. However, this investment has not translated into improved returns, with operating profit growth remaining anaemic.
Debt levels remain manageable with long-term debt at ₹13.72 crores (down from ₹23.97 crores in FY24) and an average net debt-to-equity ratio of just 0.09, indicating conservative leverage. The debt-to-EBITDA ratio of 1.54 times suggests the company could service its obligations comfortably under normal circumstances. However, the interest coverage ratio, whilst adequate at 8.43 times on average, has weakened as profitability declined.
Industry Context: Underperforming Sector Peers
The pesticides and agrochemicals sector has delivered mixed results, with the industry posting a one-year return of 12.59%. Shivalik Rasayan, however, has dramatically underperformed, declining 58.75% over the same period—an underperformance of 71.34 percentage points versus its sector. This stark divergence suggests company-specific issues beyond broader industry headwinds.
The agrochemicals sector faces multiple challenges including pricing pressure from Chinese competition, inventory destocking by distributors, and fluctuating raw material costs. However, better-managed peers have navigated these headwinds more successfully, maintaining margin discipline and market share. Shivalik Rasayan's inability to defend its margins—with operating margin declining from 15.61% to 12.58% year-on-year—indicates competitive weakness or operational inefficiencies.
Sector Dynamics: Pricing Pressure and Competition
The Indian agrochemical industry is experiencing intense competition, particularly from generic manufacturers. Shivalik Rasayan's focus on organophosphate insecticides exposes it to commoditisation risk, where product differentiation is limited and pricing power remains constrained. The company's declining margins suggest it is struggling to pass on cost increases to customers or facing volume pressure from competitors.
Peer Comparison: Valuation Disconnect
When compared to sector peers, Shivalik Rasayan presents a mixed valuation picture. The company trades at a price-to-earnings (P/E) ratio of 31.19 times trailing twelve-month earnings, which appears elevated given its weak profitability metrics. However, its price-to-book value (P/BV) ratio of 0.75 times suggests the market is pricing in significant concerns about asset quality or future earnings potential.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Shivalik Rasayan | 31.19 | 0.75 | 6.12 | 0.09 | 0.18 |
| Astec Lifesciences | NA (Loss Making) | 3.39 | 7.84 | 0.86 | — |
| Advance Agrolife | 34.59 | 4.83 | — | 0.00 | — |
| Heranba Industries | NA (Loss Making) | 0.98 | 4.37 | 0.56 | 0.48 |
| Dharmaj Crop Guard | 16.75 | 2.05 | 11.64 | 0.28 | — |
| Best Agrolife | 27.53 | 0.86 | 25.19 | 0.48 | 0.99 |
Shivalik Rasayan's ROE of 6.12% lags significantly behind the best performer, Best Agrolife, which boasts an impressive 25.19% ROE. Even against the peer average of approximately 10%, Shivalik Rasayan's capital efficiency appears subpar. The company's low P/BV multiple of 0.75 times—compared to the peer average around 2.40 times—reflects market scepticism about the company's ability to generate adequate returns on its expanded asset base.
The minimal dividend yield of 0.18%, based on a ₹0.50 per share dividend, further limits the stock's appeal to income-focused investors. The dividend payout ratio of just 6.12% suggests management is retaining most earnings, presumably for reinvestment, yet the poor returns on incremental capital raise questions about this capital allocation strategy.
Valuation Analysis: Attractive Price, Concerning Fundamentals
Despite the weak operational performance, Shivalik Rasayan's valuation grade stands at "Attractive" as of February 2026, having been upgraded from "Very Attractive" in November 2025. This assessment appears to reflect the stock's significant price decline—down 62.61% from its 52-week high of ₹744.20—rather than improving fundamentals. The current price of ₹278.25 trades near the 52-week low of ₹276.20, suggesting the market has fully discounted near-term concerns.
The enterprise value-to-EBITDA multiple of 11.68 times appears reasonable on the surface, but investors must consider the quality of earnings. With EBITDA margins compressing and profit growth negative, this multiple may not represent genuine value. The EV-to-sales ratio of 1.46 times similarly looks attractive in isolation, but the deteriorating margin profile undermines this apparent discount.
The stock's classification as "High Beta" with a beta coefficient of 1.50 indicates it moves 50% more than the broader market, amplifying both gains and losses. Given the current negative momentum, this high volatility profile adds to investment risk. The 40.38% volatility over the past year—nearly four times the Sensex's 11.53% volatility—underscores the speculative nature of the stock.
Shareholding Pattern: Stable Promoter Base, Limited Institutional Interest
The shareholding structure reveals a stable promoter holding of 47.37% as of December 2025, unchanged over the past three quarters. The primary promoter entity, Growel Remedies Limited, maintains this entire stake with zero pledging—a positive indicator of promoter confidence and financial stability. However, the absence of pledging must be weighed against the company's deteriorating operational performance.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 47.37% | 47.37% | 47.37% | 47.37% | 0.00% |
| FII | 3.89% | 4.38% | 4.36% | 4.27% | -0.49% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 0.12% | 0.48% | 0.56% | 0.64% | -0.36% |
| Non-Institutional | 48.61% | 47.77% | 47.71% | 47.71% | +0.84% |
Foreign institutional investor (FII) holdings declined to 3.89% in Q3 FY26 from 4.38% in Q2 FY26, representing a 0.49 percentage point reduction. This sequential decrease, coupled with a reduction in other domestic institutional investor (DII) holdings from 0.48% to 0.12%, signals waning institutional confidence. The complete absence of mutual fund and insurance company participation—both at 0.00%—is particularly telling, as these sophisticated investors typically conduct thorough due diligence before investing.
The increase in non-institutional holdings to 48.61% from 47.77% suggests retail investors may be attempting to "catch the falling knife," attracted by the stock's steep price decline. However, this retail accumulation in the absence of institutional support often proves premature, as fundamental improvements typically lag price recovery.
Stock Performance: Severe Underperformance Across All Timeframes
Shivalik Rasayan's stock performance has been dismal across virtually all time horizons. The stock has declined 58.75% over the past year, dramatically underperforming the Sensex's 8.52% gain by a staggering 67.27 percentage points. This negative alpha extends across shorter timeframes as well, with the stock down 37.44% over three months (versus Sensex's -2.19%) and 45.74% over six months (versus Sensex's +2.59% gain).
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.79% | -1.14% | -1.65% |
| 1 Month | -17.42% | -1.20% | -16.22% |
| 3 Month | -37.44% | -2.19% | -35.25% |
| 6 Month | -45.74% | +2.59% | -48.33% |
| YTD | -21.81% | -3.04% | -18.77% |
| 1 Year | -58.75% | +8.52% | -67.27% |
| 2 Years | -57.10% | +15.47% | -72.57% |
| 3 Years | -59.97% | +36.73% | -96.70% |
The technical picture reinforces the fundamental weakness. The stock trades in a confirmed bearish trend since November 13, 2025, when it broke down from ₹438.60. All key moving averages—from the 5-day (₹291.60) to the 200-day (₹460.93)—lie above the current price, creating formidable resistance levels. The MACD, RSI (on weekly timeframe), Bollinger Bands, and KST indicators all flash bearish signals, with no technical indicator suggesting an imminent reversal.
The risk-adjusted return profile is particularly unfavourable, with the stock posting a risk-adjusted return of -1.45 over the past year compared to the Sensex's positive 0.74. This places Shivalik Rasayan firmly in the "High Risk, Low Return" category—the worst quadrant for investors. The Sharpe ratio remains negative, indicating the stock has failed to compensate investors for the substantial volatility risk undertaken.
Investment Thesis: Multiple Red Flags Override Valuation Appeal
The investment case for Shivalik Rasayan is significantly challenged by multiple structural concerns. Whilst the stock's "Attractive" valuation grade and low P/BV ratio of 0.75 times might initially appeal to value investors, the underlying fundamentals paint a troubling picture. The company's proprietary Mojo Score of just 37 out of 100, coupled with a "SELL" rating, reflects the confluence of negative factors weighing on the stock.
The "Average" quality grade reflects the company's mediocre long-term financial performance, characterised by a mere 6.12% average ROE and 9.45% average ROCE—both well below acceptable standards for value creation. Whilst the company maintains a healthy balance sheet with minimal leverage (net debt-to-equity of 0.09) and no promoter pledging, these positives are overshadowed by persistent profitability challenges.
The "Negative" financial trend designation for Q3 FY26 stems from the 52.57% decline in profit before tax (excluding other income) and the 38.04% drop in PAT over the latest six-month period. This deterioration follows a pattern of inconsistent performance, with the company's financial trend oscillating between "Very Positive," "Positive," "Negative," and "Flat" over recent quarters—indicating operational instability rather than temporary setbacks.
Key Strengths & Risk Factors
✓ Key Strengths
- Conservative Balance Sheet: Minimal leverage with net debt-to-equity of 0.09 and declining long-term debt provides financial flexibility
- No Promoter Pledging: Zero pledged shares by promoters (Growel Remedies Limited) indicates financial stability at the promoter level
- Stable Promoter Holding: Consistent 47.37% promoter stake over multiple quarters demonstrates commitment
- Attractive Valuation: P/BV of 0.75x and depressed price near 52-week low may appeal to deep value investors
- Long-term Revenue Growth: Five-year sales CAGR of 12.50% shows historical top-line expansion capability
- Established Manufacturing Base: Significant fixed asset expansion to ₹336.64 crores positions for future capacity
- Niche Product Focus: Specialisation in organophosphate insecticides provides specific market positioning
⚠ Key Concerns
- Severe Profitability Decline: Consolidated net profit down 48.77% YoY with sustained margin compression
- Weak Capital Efficiency: ROE of 6.12% and ROCE of 9.45% indicate poor returns on invested capital
- Deteriorating Margins: Operating margin fell 303 bps to 12.58%; PAT margin down 367 bps to 4.47%
- Negative Financial Trend: Three consecutive quarters of declining or volatile profitability
- Institutional Exodus: FII and DII holdings declining; zero mutual fund or insurance participation
- Bearish Technical Setup: All major indicators negative; stock below all moving averages
- High Volatility: 40.38% volatility with negative risk-adjusted returns; classified as "High Risk, Low Return"
- Sector Underperformance: Down 58.75% versus sector gain of 12.59%—a 71.34 percentage point gap
- Weak Interest Coverage: Declining profitability threatens comfortable debt servicing despite low leverage
Outlook: What Lies Ahead
The forward outlook for Shivalik Rasayan remains clouded by multiple uncertainties. For the company to stage a meaningful recovery, it must address fundamental operational issues including margin compression, competitive positioning, and capital productivity. The substantial fixed asset additions of recent years must begin generating improved returns, or the company risks further value destruction.
Positive Catalysts to Monitor
- Stabilisation of operating margins above 14% on sustained basis
- Return of institutional investor interest (FII/MF buying)
- Improvement in quarterly profit trajectory with positive QoQ growth
- ROE and ROCE recovery above 10% and 12% respectively
- Technical reversal with stock reclaiming 200-day moving average (₹460.93)
Red Flags to Watch
- Further margin compression below 12% operating margin
- Continued decline in quarterly profitability
- Additional institutional selling or promoter stake reduction
- Breach of 52-week low (₹276.20) indicating new downside momentum
- Deterioration in working capital management or cash flow generation
The agrochemical sector's outlook remains mixed, with demand dependent on monsoon patterns, crop prices, and farmer income levels. Generic competition continues to intensify, particularly from low-cost manufacturers. For Shivalik Rasayan to reverse its fortunes, it must demonstrate pricing power, operational leverage from recent capital investments, and sustained improvement in capital efficiency metrics.
Investors should closely monitor the Q4 FY26 results for signs of stabilisation. A return to double-digit profit growth, margin expansion, and improved ROE/ROCE would be necessary to validate any investment thesis. Conversely, continued deterioration would reinforce the current negative outlook and potentially trigger further downside.
The Verdict: Avoid Until Clear Turnaround Evidence Emerges
Score: 37/100
For Fresh Investors: Avoid initiating positions despite the apparent valuation discount. The combination of deteriorating fundamentals (48.77% profit decline, compressing margins, weak ROE/ROCE), negative financial trend, bearish technical setup, and institutional selling creates an unfavourable risk-reward profile. The "Attractive" valuation grade reflects price decline rather than improving fundamentals. Wait for clear evidence of operational turnaround—sustained margin improvement, return to profit growth, and institutional re-entry—before considering investment.
For Existing Holders: Consider reducing exposure or exiting positions, particularly if holding at a loss from higher levels. The stock has declined 62.61% from its 52-week high with no technical or fundamental indicators suggesting an imminent reversal. The negative financial trend, weak capital efficiency (ROE 6.12%, ROCE 9.45%), and absence of institutional support argue against maintaining positions. Any technical bounce towards ₹303-₹338 (20-day and 50-day moving averages) could provide exit opportunities with reduced losses.
Fair Value Estimate: ₹245-₹265 (12-16% downside risk from current price of ₹278.25). Based on depressed earnings trajectory, weak return metrics, and sector peer multiples, the stock appears fairly valued to slightly overvalued even at current levels. Meaningful upside requires fundamental improvement that is not yet evident in the quarterly trends.
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. The views expressed are those of the author and do not necessarily reflect those of any affiliated organisations. Investing in equities involves risk, including possible loss of principal.
