Understanding the Current Rating
The Strong Sell rating assigned to Khadim India Ltd indicates a cautious stance for investors, suggesting that the stock is expected to underperform relative to the broader market. This rating is derived from a comprehensive evaluation of four key parameters: Quality, Valuation, Financial Trend, and Technicals. Each of these factors contributes to the overall assessment of the company’s investment potential.
Quality Assessment
As of 16 February 2026, Khadim India Ltd’s quality grade is classified as below average. This reflects persistent challenges in the company’s fundamental strength. Over the past five years, the company has experienced a negative compound annual growth rate (CAGR) of -6.01% in net sales, signalling a contraction in its core business operations. Furthermore, the company’s ability to generate returns for shareholders remains limited, with an average Return on Equity (ROE) of just 6.90%. This low profitability per unit of shareholder funds highlights inefficiencies in capital utilisation.
Debt servicing capacity is another concern, with a high Debt to EBITDA ratio of 4.37 times. This elevated leverage ratio indicates that the company carries significant debt relative to its earnings before interest, taxes, depreciation, and amortisation, increasing financial risk and limiting flexibility for future investments or expansions.
Valuation Perspective
Despite the weak quality metrics, Khadim India Ltd’s valuation grade is currently very attractive. This suggests that the stock is trading at a price level that may offer value relative to its earnings and asset base. For value-oriented investors, this could present an opportunity to acquire shares at a discount. However, the attractive valuation must be weighed against the company’s deteriorating fundamentals and financial health.
Financial Trend Analysis
The financial trend for Khadim India Ltd is categorised as very negative as of today. The latest results for the quarter ended December 2025 reveal a sharp decline in net sales by -21.77%, continuing a pattern of negative performance over the last three consecutive quarters. Profit after tax (PAT) for the latest six months stands at ₹3.31 crores, reflecting a steep decline of -59.14% compared to previous periods.
Operational efficiency indicators also paint a challenging picture. The debtors turnover ratio is at a low 2.02 times, indicating slower collection of receivables, which can strain working capital. Additionally, the operating profit to interest coverage ratio is only 1.71 times, signalling limited capacity to comfortably meet interest obligations from operating profits. These factors collectively underscore the company’s financial stress and weakening earnings quality.
Technical Outlook
From a technical standpoint, the stock is mildly bearish. Price performance over various time frames confirms this trend, with the stock delivering negative returns consistently. As of 16 February 2026, Khadim India Ltd’s stock has declined by 48.02% over the past year, underperforming the BSE500 index across the last three years, one year, and three months. Shorter-term returns also reflect this downtrend, with losses of 9.84% over the past month and 31.15% over the past three months.
The mild bearish technical grade suggests that market sentiment remains subdued, and the stock has yet to show signs of a sustained recovery or positive momentum. Investors should be cautious and consider the prevailing downward trend when evaluating entry or exit points.
Implications for Investors
The Strong Sell rating for Khadim India Ltd serves as a warning signal for investors. It indicates that the stock is currently facing significant headwinds across multiple dimensions, including fundamental quality, financial health, and market sentiment. While the valuation appears attractive, this alone does not offset the risks posed by declining sales, profitability challenges, and high leverage.
Investors should carefully assess their risk tolerance and investment horizon before considering exposure to this stock. The current rating suggests that the company may continue to face operational and financial difficulties in the near term, which could further pressure the stock price.
Summary of Key Metrics as of 16 February 2026
- Net Sales CAGR (5 years): -6.01%
- Debt to EBITDA Ratio: 4.37 times
- Return on Equity (average): 6.90%
- Net Sales decline (latest quarter): -21.77%
- PAT (latest six months): ₹3.31 crores, down -59.14%
- Debtors Turnover Ratio (HY): 2.02 times
- Operating Profit to Interest Coverage (Q): 1.71 times
- Stock Returns: 1 Year -48.02%, 3 Months -31.15%, 1 Month -9.84%
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Company Profile and Market Context
Khadim India Ltd operates in the footwear sector and is classified as a microcap company. The sector itself is competitive and sensitive to consumer spending patterns and fashion trends. The company’s current market capitalisation reflects its relatively small size, which can contribute to higher volatility and liquidity risks in the stock.
Given the company’s ongoing challenges, investors should monitor key developments such as quarterly earnings, debt management strategies, and any operational restructuring efforts that could influence future performance. The current Strong Sell rating reflects a cautious outlook until there is clear evidence of turnaround or stabilisation.
Conclusion
In summary, Khadim India Ltd’s Strong Sell rating as of 12 August 2025 remains justified based on the latest data available on 16 February 2026. The company faces significant headwinds in quality, financial health, and technical momentum despite an attractive valuation. Investors are advised to approach this stock with caution and consider the risks carefully before making investment decisions.
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