The stock, currently trading at ₹28.09 with a market capitalisation of ₹369.37 crores, has declined 20.87% over the past year and remains 51.03% below its 52-week high of ₹57.36. The company's persistent inability to generate bottom-line profits despite operational improvements raises serious questions about its financial sustainability and capital structure viability.
Shivam Autotech operates within the Hero Group ecosystem, manufacturing gear blanks, spline shafts, finished gears, and plungers for original equipment manufacturers in the automotive sector. The company commenced operations in September 1999 but has struggled with profitability for several years, accumulating losses that have eroded shareholder equity from ₹138.55 crores in March 2022 to just ₹31.48 crores by March 2025.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | Operating Margin % |
|---|---|---|---|---|
| Sep'25 | 113.23 | +24.80% | -12.42 | 9.06% |
| Jun'25 | 90.73 | -15.87% | -17.66 | 5.85% |
| Mar'25 | 107.84 | -4.35% | -14.76 | 7.60% |
| Dec'24 | 112.74 | -6.39% | -11.86 | 10.08% |
| Sep'24 | 120.43 | +6.60% | -11.09 | 10.13% |
| Jun'24 | 112.97 | -8.70% | -10.33 | 11.20% |
| Mar'24 | 123.74 | — | -7.82 | 12.07% |
Financial Performance: Revenue Recovery Fails to Translate into Profitability
In Q2 FY26, Shivam Autotech recorded net sales of ₹113.23 crores, representing a 24.80% sequential improvement from Q1 FY26's ₹90.73 crores but still reflecting a 5.98% year-on-year decline from ₹120.43 crores in Q2 FY25. The revenue recovery appears tactical rather than structural, as the company continues to operate below its historical peak quarterly sales of ₹123.74 crores achieved in March 2024.
Operating profitability showed marginal improvement with EBITDA (excluding other income) rising to ₹10.26 crores from ₹5.31 crores sequentially, pushing operating margins up 321 basis points to 9.06%. However, this remains significantly below the 12.07% margin achieved in March 2024, indicating persistent operational inefficiencies or pricing pressures. The company's inability to sustain double-digit operating margins despite being part of the Hero Group ecosystem raises concerns about competitive positioning and cost management capabilities.
The critical weakness lies in the capital structure. Interest expenses of ₹13.11 crores in Q2 FY26 exceeded the operating profit of ₹10.68 crores, creating a structural profitability deficit before accounting for depreciation of ₹8.70 crores. This resulted in a pre-tax loss of ₹11.12 crores and a net loss of ₹12.42 crores after tax adjustments. The PAT margin deteriorated to negative 10.97%, underscoring the company's inability to generate shareholder value despite operational improvements.
Operational Challenges: Debt Burden Suffocates Business Viability
Shivam Autotech's operational challenges stem from an unsustainable debt burden that has transformed what could be a modestly profitable business into a chronic loss-maker. As of March 2025, the company carried long-term debt of ₹120.12 crores against shareholder funds of just ₹31.48 crores, resulting in a debt-to-equity ratio of 3.82 times. More alarmingly, the half-yearly debt-to-equity ratio surged to 192.05 times, indicating severe financial distress and potential covenant breaches.
The company's average EBIT-to-interest coverage ratio of 0.40 times over the past five years reveals that operational earnings are insufficient to service debt obligations. In Q2 FY26, interest expenses of ₹13.11 crores consumed the entire operating profit of ₹10.68 crores and then some, leaving no buffer for depreciation, taxes, or equity returns. This structural imbalance has persisted across multiple quarters, with the company reporting seven consecutive quarterly losses ranging from ₹7.82 crores to ₹17.66 crores.
Return on equity remains non-existent at 0.0% on an average basis, with the latest calculation showing a catastrophic negative 180.11% due to accumulated losses. Return on capital employed stands at a meagre 3.04%, barely above risk-free rates and well below the cost of capital. These metrics indicate that the company is destroying shareholder value with each passing quarter, as borrowed capital generates returns insufficient to cover financing costs.
Critical Financial Distress Indicators
Debt-to-Equity Ratio: 192.05 times (H1 FY26) – amongst the highest in the auto components sector, indicating severe overleveraging and potential solvency concerns.
Interest Coverage: 0.40x (5-year average) – operating profits insufficient to service debt, creating a structural profitability deficit that threatens business continuity.
Shareholder Equity Erosion: Declined from ₹138.55 crores (Mar'22) to ₹31.48 crores (Mar'25) – a 77.28% erosion in just three years due to accumulated losses.
Auto Components Sector: Navigating Cyclical Headwinds
The auto components sector in India faces a challenging environment characterised by fluctuating demand from original equipment manufacturers, rising raw material costs, and increasing competitive intensity. Whilst the broader automotive industry has shown resilience with domestic passenger vehicle sales remaining robust, component manufacturers face margin pressures from OEMs demanding cost reductions and quality improvements simultaneously.
Shivam Autotech's performance reflects these sector-wide challenges but is amplified by company-specific issues. The 5.98% year-on-year revenue decline in Q2 FY26 contrasts with the sector's overall growth trajectory, suggesting market share losses or customer concentration risks. The company's operating margins of 9.06% lag significantly behind better-capitalised peers who maintain margins in the 12-15% range, indicating competitive disadvantages in procurement, manufacturing efficiency, or product mix.
The company's positioning within the Hero Group ecosystem provides some insulation through assured order flows but also creates dependency risks. Hero MotoCorp's shift towards electric vehicles and changing product portfolio could impact demand for Shivam Autotech's traditional gear and shaft products, requiring capital investments for technology upgradation that the company can ill afford given its debt burden.
Peer Comparison: Valuation Premium Unjustified by Fundamentals
A comparison with sector peers reveals Shivam Autotech's stark underperformance across key financial metrics. Whilst the company trades at a price-to-book ratio of 11.90 times, this premium appears entirely disconnected from fundamental performance, likely reflecting low absolute share price rather than genuine valuation appeal.
| Company | P/E Ratio (TTM) | P/BV Ratio | ROE % | Debt/Equity | Div Yield % |
|---|---|---|---|---|---|
| Shivam Autotech | NA (Loss Making) | 11.90 | 0.0% | 10.73 | — |
| Munjal Showa | 21.48 | 0.80 | 3.94% | -0.51 | 3.32% |
| Veljan Denison | 19.05 | 2.13 | 10.03% | -0.16 | 0.76% |
| Remsons Industries | 30.61 | 3.91 | 14.31% | 0.57 | 0.21% |
| Pradeep Metals | 16.43 | 3.00 | 23.42% | 0.42 | 0.99% |
| Pavna Industries | 123.56 | 2.57 | 10.56% | 0.14 | — |
Shivam Autotech's return on equity of 0.0% compares unfavourably with peer average of approximately 12%, whilst its debt-to-equity ratio of 10.73 times stands in stark contrast to peers who either operate debt-free or maintain conservative leverage below 1.0 times. The company's inability to pay dividends for nearly a decade (last dividend in September 2016) further underscores its financial distress, whilst peers like Munjal Showa offer dividend yields above 3%.
Valuation Analysis: Expensive Despite Loss-Making Status
Despite being loss-making, Shivam Autotech trades at a price-to-book value of 11.90 times, significantly above the sector average of approximately 2.5 times. This valuation anomaly reflects the company's severely depleted book value of ₹2.39 per share rather than any fundamental strength. The enterprise value-to-EBITDA multiple of 20.28 times appears elevated for a company with deteriorating margins and negative earnings.
The company's valuation grade has oscillated between "Attractive" and "Expensive" over recent months, currently classified as "Expensive" since September 30, 2025. This assessment appears justified given the structural profitability challenges and lack of visible catalysts for improvement. With no earnings to support a P/E valuation and book value eroding quarterly, traditional valuation frameworks offer little comfort to investors.
Shareholding Pattern: Promoter Stake Reduction Raises Concerns
The shareholding pattern reveals a significant promoter stake reduction from 74.80% in December 2024 to 69.52% by February 2025, with the stake remaining stable thereafter at 69.52% through September 2025. This 5.28 percentage point reduction coincided with increased institutional participation, with other domestic institutional investors (DII) entering with a 7.06% stake in February 2025.
| Category | Sep'25 | Jun'25 | Mar'25 | Feb'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 69.52% | 69.52% | 69.52% | 69.52% | 0.00% |
| FII | 0.04% | 0.00% | 0.05% | 0.00% | +0.04% |
| Mutual Funds | 0.01% | 0.01% | 0.01% | 0.01% | 0.00% |
| Other DII | 7.06% | 7.06% | 7.06% | 7.06% | 0.00% |
| Non-Institutional | 23.37% | 23.41% | 23.36% | 23.41% | -0.04% |
The promoter stake reduction, whilst not dramatic, signals potential concerns about the company's future prospects from insiders with the deepest knowledge of business operations. Positively, there is no promoter pledging, reducing immediate governance risks. However, the negligible institutional participation—with foreign institutional investors at 0.04%, mutual funds at 0.01%, and zero insurance company holdings—indicates that sophisticated investors remain uninterested in the stock despite its depressed valuations.
Stock Performance: Severe Underperformance Across All Timeframes
Shivam Autotech's stock has delivered consistently negative returns across virtually all investment horizons, significantly underperforming both the Sensex benchmark and its sector peers. Over the past year, the stock declined 20.87% whilst the Sensex gained 8.50%, resulting in negative alpha of 29.37 percentage points. This underperformance extends across longer timeframes, with the stock down 17.26% over three years compared to the Sensex's 36.59% gain.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -3.24% | +1.15% | -4.39% |
| 1 Month | -5.58% | +2.61% | -8.19% |
| 3 Months | -0.71% | +4.43% | -5.14% |
| 6 Months | -3.60% | +3.49% | -7.09% |
| YTD | -38.40% | +7.72% | -46.12% |
| 1 Year | -20.87% | +8.50% | -29.37% |
| 3 Years | -17.26% | +36.59% | -53.85% |
The stock's year-to-date decline of 38.40% against the Sensex's 7.72% gain represents a devastating 46.12 percentage point underperformance, reflecting investor recognition of the company's deteriorating fundamentals. The stock currently trades below all key moving averages—5-day, 20-day, 50-day, 100-day, and 200-day—indicating entrenched bearish sentiment with no immediate technical support levels.
Compared to the auto components sector's 12.07% gain over the past year, Shivam Autotech's 20.87% decline translates to 32.94 percentage points of sector underperformance. The stock's high beta of 1.50 amplifies market movements, creating elevated volatility of 54.52% compared to the Sensex's 12.26%, resulting in a negative risk-adjusted return of -0.38 and classifying it as a "HIGH RISK LOW RETURN" investment.
Investment Thesis: Multiple Red Flags Overwhelm Limited Positives
Shivam Autotech's investment thesis is severely compromised by structural profitability challenges, unsustainable leverage, and absence of visible turnaround catalysts. The company's Mojo Score of 26 out of 100 places it firmly in "STRONG SELL" territory, with the proprietary algorithm identifying multiple critical weaknesses that override any potential positives.
"With interest costs exceeding operating profits and shareholder equity eroding by 77% in three years, Shivam Autotech faces an existential crisis that transcends cyclical industry challenges."
Key Strengths & Risk Factors
Limited Strengths
- Hero Group Association: Affiliation with the Hero Group provides some order flow visibility and brand credibility in the auto components space.
- No Promoter Pledging: Zero pledged shares eliminate immediate governance concerns and forced selling risks during market downturns.
- Positive Operating Cash Flow: Generated ₹77.00 crores in FY25, the highest in recent years, indicating some underlying operational resilience.
- Sequential Revenue Recovery: Q2 FY26 revenue of ₹113.23 crores marked a 24.80% improvement from the previous quarter's depressed levels.
- Established Manufacturing Base: Decades of operational history with specialised capabilities in gear manufacturing and auto components.
Critical Risk Factors
- Catastrophic Leverage: Debt-to-equity ratio of 192.05 times (H1 FY26) indicates severe financial distress and potential insolvency risks.
- Seven Consecutive Quarterly Losses: Persistent inability to generate profits despite operational improvements signals structural business model issues.
- Interest Coverage Deficit: Interest expenses consistently exceed operating profits, creating negative earnings before depreciation and taxes.
- Shareholder Equity Erosion: Book value declined 77.28% from ₹138.55 crores (Mar'22) to ₹31.48 crores (Mar'25) due to accumulated losses.
- Zero Institutional Interest: Negligible holdings by FIIs (0.04%), mutual funds (0.01%), and insurance companies (0%) reflect professional investor avoidance.
- Margin Compression: Operating margins of 9.06% lag sector peers by 300-500 basis points, indicating competitive disadvantages.
- Negative Returns Across All Horizons: Stock delivered negative alpha of 29.37 percentage points over one year and 53.85 percentage points over three years.
Outlook: Turnaround Requires Radical Capital Restructuring
Shivam Autotech's path to recovery necessitates comprehensive capital restructuring, likely involving debt forgiveness, equity infusions, or asset monetisation to reduce the crippling interest burden. Without such measures, the company faces continued erosion of shareholder value and potential breach of debt covenants that could trigger insolvency proceedings.
Positive Catalysts (Low Probability)
- Debt restructuring agreement with lenders providing interest relief
- Fresh equity infusion from Hero Group or strategic investor
- Significant operating margin expansion to 12%+ levels
- Major order wins diversifying customer concentration
Red Flags (High Probability)
- Continued quarterly losses depleting remaining shareholder equity
- Debt covenant breaches triggering accelerated repayment demands
- Further promoter stake dilution or distress sale scenarios
- Operating margin compression below 8% due to competitive pressures
- Working capital deterioration impacting supplier relationships
The Verdict: Avoid This Value Trap
Score: 26/100
For Fresh Investors: Avoid completely. The company's catastrophic leverage, persistent losses, and absence of turnaround catalysts make this an unacceptable risk even at current depressed valuations. The debt burden creates a structural profitability deficit that cannot be resolved through operational improvements alone.
For Existing Holders: Exit on any price recovery. With shareholder equity eroding 77% in three years and no visible path to profitability, continued holding risks permanent capital loss. The stock's 38.40% year-to-date decline may extend further if debt restructuring proves unsuccessful.
Rationale: Shivam Autotech exemplifies a value trap where low absolute prices mask deteriorating fundamentals. The debt-to-equity ratio of 192.05 times, seven consecutive quarterly losses, and interest costs exceeding operating profits create an existential crisis that transcends normal business cycles. Without immediate and radical capital restructuring, the company faces continued value destruction and potential insolvency. The Hero Group association provides limited protection given the severity of financial distress.
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.
