Arihant Capital Markets Ltd Valuation Shifts Signal Renewed Price Attractiveness

Valuation Metrics: A Closer Look

Arihant Capital Markets currently trades at a P/E ratio of 20.50, a figure that positions it favourably within the capital markets sector. This valuation is notably more attractive than several peers, including Mufin Green and Arman Financial, which exhibit P/E ratios of 102.07 and 61.04 respectively, categorised as very expensive. The company’s price-to-book value stands at 1.91, indicating a moderate premium over its book value, which aligns with its sector peers such as SMC Global Securities (P/E 20.53) and Satin Creditcare (P/E 8.88), both also rated attractive.

Enterprise value multiples further reinforce Arihant Capital’s relative valuation appeal. The EV to EBITDA ratio is 7.80, considerably lower than Ashika Credit’s 95.13 and Mufin Green’s 20.45, signalling a more reasonable valuation relative to earnings before interest, taxes, depreciation, and amortisation. Additionally, the EV to EBIT ratio of 8.18 and EV to sales of 2.85 reflect efficient capital utilisation and revenue generation compared to riskier or loss-making peers such as LKP Finance and Avishkar Infra.

Financial Performance and Returns

Despite the improved valuation metrics, Arihant Capital’s recent stock performance has been mixed. Over the past week and month, the stock has declined by 3.26% and 13.64% respectively, underperforming the Sensex which fell by 0.98% and 0.14% over the same periods. Year-to-date, the stock is down 15.74%, significantly lagging the Sensex’s 2.08% decline. However, longer-term returns paint a more favourable picture, with a 3-year return of 66.67% and an impressive 5-year return of 350.62%, far outpacing the Sensex’s 36.80% and 61.40% respectively. Over a decade, the stock has delivered a staggering 1,738.59% return compared to the Sensex’s 256.90%, underscoring its strong growth trajectory over time.

Quality and Profitability Indicators

Profitability metrics also support the valuation upgrade. Arihant Capital’s return on capital employed (ROCE) stands at a robust 36.64%, reflecting efficient use of capital to generate earnings. Return on equity (ROE) is more modest at 10.43%, but still positive, indicating reasonable shareholder returns. The dividend yield of 0.66% is modest but consistent, providing some income alongside capital appreciation potential.

Market Capitalisation and Rating Changes

The company holds a market cap grade of 4, signalling a mid-sized market capitalisation within its sector. Notably, the MarketsMOJO Mojo Grade for Arihant Capital was upgraded from Sell to Strong Sell on 17 February 2026, reflecting a cautious stance despite the improved valuation parameters. The Mojo Score currently stands at 28.0, indicating significant risks relative to rewards in the near term. This downgrade suggests that while valuation metrics have improved, underlying concerns about growth prospects or market conditions persist.

Comparative Peer Analysis

When benchmarked against peers in the capital markets sector, Arihant Capital’s valuation appears more reasonable. Several competitors are classified as very expensive, including Ashika Credit with a P/E of 170.14 and EV to EBITDA of 95.13, and Saraswati Commercial with a P/E of 15.34 but an EV to EBITDA of 12.07. Others such as Satin Creditcare and Dolat Algotech maintain attractive valuations but with lower P/E ratios of 8.88 and 11.24 respectively, suggesting Arihant Capital sits in the mid-range of valuation attractiveness.

Riskier peers such as LKP Finance and Avishkar Infra are currently loss-making, with negative EV to EBITDA ratios, highlighting the relative stability of Arihant Capital despite its recent stock price softness. Capital India is classified as expensive but also loss-making, further underscoring Arihant’s comparatively sound financial footing.

Price Movement and Trading Range

At the time of writing, Arihant Capital’s stock price stands at ₹75.75, up 1.36% from the previous close of ₹74.73. The day’s trading range has been between ₹74.15 and ₹76.38. The 52-week high is ₹120.35, while the 52-week low is ₹56.31, indicating a wide trading band and potential volatility. The current price is closer to the lower end of this range, which may contribute to the improved valuation attractiveness as the stock price has corrected from its highs.

Investment Implications

The shift from very attractive to attractive valuation grades suggests that Arihant Capital’s stock price has adjusted to a level that may offer better entry points for investors seeking exposure to the capital markets sector. However, the downgrade in the Mojo Grade to Strong Sell signals caution, reflecting concerns that may stem from broader market conditions, sector-specific challenges, or company-specific risks.

Investors should weigh the company’s strong long-term returns and solid profitability metrics against recent underperformance and the cautious market sentiment. The relatively moderate P/E and P/BV ratios compared to expensive peers provide a valuation cushion, but the stock’s recent price weakness and rating downgrade warrant a careful approach.

Conclusion: Valuation Improvement Amid Caution

Arihant Capital Markets Ltd’s valuation parameters have improved, with key metrics such as P/E and EV to EBITDA ratios moving into attractive territory relative to peers and historical levels. This shift reflects a more reasonable pricing of the stock following recent price corrections. However, the downgrade to a Strong Sell Mojo Grade and the stock’s underperformance relative to the Sensex in the short term highlight ongoing risks.

Long-term investors may find value in the company’s strong historical returns and solid profitability, but should remain vigilant to market developments and sector dynamics. The current valuation attractiveness offers a potential entry point, yet the cautious rating advises a measured investment approach.

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