Diligent Industries Ltd Downgraded to Sell Amid Mixed Financial Signals

Quality Assessment: Weak Long-Term Fundamentals

Diligent Industries’ quality rating has deteriorated, reflecting concerns over its long-term fundamental strength. The company’s average Return on Capital Employed (ROCE) stands at a modest 4.34%, signalling limited efficiency in generating profits from its capital base. This figure is notably below industry averages for the edible oil sector, where ROCE typically exceeds 10% for well-performing companies.

Moreover, the company’s operating profit growth rate over the past five years has averaged 16.43% annually, which, while positive, is considered insufficient to sustain robust expansion in a competitive market. The relatively low ROCE combined with moderate profit growth has led to a downgrade in the quality parameter, reflecting a cautious stance on the company’s ability to deliver consistent shareholder value over the long term.

Valuation: Attractive but Not Enough to Offset Risks

On the valuation front, Diligent Industries presents a mixed picture. The stock is trading at a discount relative to its peers’ historical valuations, supported by an Enterprise Value to Capital Employed (EV/CE) ratio of approximately 1. This suggests that the market currently values the company’s capital employed at a reasonable level, potentially offering an attractive entry point for value investors.

Additionally, the company’s ROCE for the nine months ending September 2025 improved to 6.1%, indicating some operational improvement. Net sales for the same period rose by 24.61% to ₹139.24 crores, signalling strong top-line momentum. However, despite these positives, the valuation appeal is tempered by the company’s broader financial weaknesses and risk profile, which have led to a cautious overall rating.

Financial Trend: Mixed Signals with Debt Concerns

While Diligent Industries has reported positive financial performance in Q2 FY25-26, including a 6.69% return over the past year, its profitability has declined by 15.2% during the same period. This divergence between returns and profit contraction raises questions about the sustainability of earnings and operational efficiency.

More critically, the company’s ability to service debt has weakened significantly. The Debt to EBITDA ratio stands at a high 10.97 times, indicating substantial leverage and potential liquidity risks. Such a high ratio suggests that the company may face challenges in meeting its debt obligations without impacting operational cash flows, which is a key factor behind the downgrade in the financial trend rating.

Technicals: Market Reaction and Price Movement

From a technical perspective, Diligent Industries’ stock price has shown limited upside, with a day change of -0.39% on the downgrade announcement date. The stock’s Mojo Score of 40.0 and Mojo Grade of Sell reflect a bearish sentiment among investors, influenced by the company’s fundamental weaknesses and valuation concerns.

Despite the discount to peers and some positive sales growth, the technical indicators suggest a lack of strong buying momentum. This is consistent with the cautious stance adopted by MarketsMOJO analysts, who have downgraded the stock from Hold to Sell as of 27 Jan 2026.

Shareholding and Sector Context

Diligent Industries remains majority-owned by promoters, which typically provides stability in governance. However, in the context of the edible oil sector, which is characterised by intense competition and fluctuating commodity prices, the company’s weak financial metrics and high leverage present significant headwinds.

Compared to sector peers, Diligent Industries’ valuation discount and modest growth rates do not sufficiently compensate for its financial risks, leading to a cautious investment outlook.

Outlook and Investor Implications

The downgrade of Diligent Industries Ltd to a Sell rating by MarketsMOJO reflects a comprehensive reassessment of its investment merits across four key parameters: quality, valuation, financial trend, and technicals. While the company shows some encouraging signs such as strong net sales growth and an attractive valuation relative to peers, these are overshadowed by weak long-term profitability, high leverage, and declining earnings.

Investors should weigh the risks associated with the company’s financial health and operational challenges against the potential valuation discount. The current Mojo Grade of Sell and a score of 40.0 suggest that the stock is not favoured for accumulation at this stage, especially given the competitive pressures in the edible oil sector and the company’s limited ability to service debt efficiently.

For those considering exposure to the edible oil industry, it may be prudent to explore alternative stocks with stronger fundamentals and more favourable financial trends, as highlighted by MarketsMOJO’s thematic analyses and SwitchER tool.

Summary of Ratings and Scores

Diligent Industries Ltd’s current ratings as of 27 Jan 2026 are as follows:

• Mojo Grade: Sell (downgraded from Hold)


• Mojo Score: 40.0


• Market Cap Grade: 4


• Return on Capital Employed (ROCE): 4.34% (5-year average), 6.1% (9M FY25-26)


• Operating Profit Growth: 16.43% CAGR over 5 years


• Debt to EBITDA Ratio: 10.97 times


• Net Sales Growth (9M FY25-26): 24.61% to ₹139.24 crores

These metrics collectively underpin the cautious stance and the Sell recommendation issued by MarketsMOJO analysts.

Unlock special upgrade rates for a limited period. Start Saving Now →