SKF India Ltd is Rated Hold by MarketsMOJO

Rating Context and Current Position

On 01 October 2025, MarketsMOJO revised SKF India Ltd’s rating from 'Sell' to 'Hold', reflecting an improvement in the company’s overall assessment. The Mojo Score increased by 20 points, moving from 40 to 60, signalling a more balanced outlook. This rating indicates that while the stock is not currently a strong buy, it is also not recommended for selling, suggesting a cautious stance for investors considering exposure to this industrial products company.

It is important to note that all financial data, returns, and fundamental indicators referenced in this article are current as of 01 February 2026, ensuring that investors receive the latest insights rather than relying solely on the conditions prevailing at the time of the rating change.

Quality Assessment

SKF India Ltd’s quality grade is classified as 'good', supported by several key metrics. The company demonstrates high management efficiency, with a robust return on equity (ROE) of 21.98% as of 01 February 2026. This level of ROE indicates effective utilisation of shareholder capital to generate profits, a positive sign for long-term investors.

Additionally, the company maintains a low debt-to-equity ratio, averaging zero, which reflects a conservative capital structure and limited reliance on external borrowings. This financial prudence reduces risk and enhances the company’s ability to weather economic fluctuations.

However, the quality assessment is tempered by some operational challenges. The company’s operating profit growth over the past five years has been modest, at an annualised rate of 4.42%, signalling limited expansion in core earnings. Furthermore, recent results for September 2025 showed some weakness, including the lowest operating cash flow for the year at ₹203.09 crores and a reduced return on capital employed (ROCE) of 27.18% for the half-year period. The debtors turnover ratio also declined to 5.31 times, indicating slower collection efficiency.

Valuation Perspective

From a valuation standpoint, SKF India Ltd is rated 'very attractive'. The stock trades at a price-to-book (P/B) ratio of 3, which is considered a discount relative to its peers’ historical valuations. This suggests that the market may be undervaluing the company’s net assets, presenting a potential opportunity for value-oriented investors.

Despite the attractive valuation, investors should be mindful that the company’s profits have slightly declined by 0.8% over the past year, even as the stock price surged by 105.50% during the same period. This divergence is reflected in a PEG ratio of zero, indicating that price appreciation has outpaced earnings growth. Such a scenario warrants caution, as the stock’s current price may be factoring in expectations of future improvement that have yet to materialise.

Financial Trend Analysis

The financial trend for SKF India Ltd is currently negative, primarily due to the subdued growth in operating profits and recent quarterly results. The company’s operating cash flow and ROCE metrics have shown deterioration, which could impact its ability to generate sustainable returns in the near term.

Nevertheless, the company’s strong ROE and zero debt position provide a solid foundation to support future financial stability. Investors should monitor upcoming earnings releases closely to assess whether the recent negative trends are temporary or indicative of a longer-term slowdown.

Technical Outlook

Technically, SKF India Ltd is rated as 'mildly bullish'. The stock has demonstrated strong market-beating performance, delivering a 105.50% return over the past year compared to the BSE500 index’s 7.95% return. This significant outperformance highlights strong investor interest and momentum in the stock.

Shorter-term price movements have been mixed, with a 0.25% gain on the most recent trading day, but declines over the past month (-9.12%) and three months (-21.20%). The six-month return remains robust at +69.72%, indicating that despite recent volatility, the stock retains upward momentum.

Institutional investors hold a substantial 33.76% stake in SKF India Ltd, suggesting confidence from sophisticated market participants who typically conduct thorough fundamental analysis before committing capital. This institutional backing often provides a stabilising influence on the stock price.

Implications for Investors

The 'Hold' rating from MarketsMOJO reflects a balanced view of SKF India Ltd’s current prospects. For investors, this means the stock is neither a compelling buy nor a clear sell at present. The company’s strong management efficiency, attractive valuation, and market-beating returns are positive factors. However, the negative financial trend and recent operational challenges warrant caution.

Investors considering SKF India Ltd should weigh the company’s solid fundamentals against the risks posed by slowing profit growth and recent cash flow pressures. The stock may be suitable for those seeking exposure to the industrial products sector with a moderate risk appetite, but it is advisable to monitor upcoming financial results and market developments closely.

Summary

In summary, SKF India Ltd’s current 'Hold' rating by MarketsMOJO, updated on 01 October 2025, is supported by a combination of good quality metrics, very attractive valuation, a negative financial trend, and a mildly bullish technical outlook as of 01 February 2026. The company’s high ROE and low debt levels underpin its quality, while the valuation discount offers potential value. However, investors should remain cautious due to recent profit stagnation and cash flow concerns.

Given the stock’s strong one-year return of 105.50%, significantly outperforming the broader market, it remains an interesting candidate for investors who prefer a balanced approach rather than aggressive accumulation or divestment. Continuous monitoring of financial performance and market conditions will be essential to reassess the stock’s outlook in the coming months.

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