RattanIndia Power Downgraded to 'Sell' by MarketsMOJO, Weak Fundamentals and High Pledged Shares Raise Concerns

RattanIndia Power, a midcap company in the power generation and distribution industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 1, 2024. This decision was based on weak long-term fundamental strength, with an average Return on Capital Employed (ROCE) of 5.03% and a high Debt to EBITDA ratio of 9.44 times, indicating a low ability to service debt.
One of the major concerns for the company is that 88.65% of its promoter shares are pledged, which can put additional downward pressure on the stock prices in falling markets. However, there have been some positive results for RattanIndia Power in the June 2024 quarter, with the highest operating profit to interest ratio of 1.56 times, highest net sales of Rs 931.83 crore, and highest PBT less OI of Rs 8.47 crore.

Technically, the stock is currently in a mildly bullish range, with multiple factors such as MACD, Bollinger Band, and KST indicating a bullish trend. With a ROCE of 3.5, the stock is fairly valued with a 1.6 Enterprise value to Capital Employed. It is also trading at a discount compared to its average historical valuations.

Despite the recent downgrade, RattanIndia Power has shown consistent returns over the last 3 years, outperforming the BSE 500 index in each of the last 3 annual periods. In the past year, the stock has generated a return of 134.16%, while its profits have risen by 46%. However, investors should carefully consider the company's weak fundamental strength and high promoter pledged shares before making any investment decisions.