Bhilwara Spinners Ltd Quality Parameters Improve Amid Mixed Financial Metrics

Quality Grade Upgrade: Context and Implications

On 1 February 2026, Bhilwara Spinners Ltd’s quality grade was upgraded from a strong sell to a sell rating, with the quality parameter moving from below average to average. This change reflects a reassessment of the company’s financial health and operational performance, as captured by MarketsMOJO’s proprietary scoring system. The company’s Mojo Score currently stands at 45.0, indicating a cautious stance despite the upgrade.

The garment and apparel industry, known for its cyclical nature and sensitivity to raw material costs, demands consistent operational efficiency and prudent financial management. Bhilwara Spinners’ recent metrics suggest some progress in these areas, though challenges persist.

Sales and Earnings Growth: Positive Momentum

Over the past five years, Bhilwara Spinners has delivered a robust sales growth of 52.57%, complemented by an EBIT growth of 43.71%. These figures indicate that the company has been able to expand its top line and improve earnings before interest and taxes at a healthy pace. Such growth rates are commendable within the garments sector, where fluctuating demand and input costs often constrain profitability.

However, the average sales to capital employed ratio remains low at 0.11, signalling that the company’s asset utilisation is suboptimal. This suggests that while revenues are growing, the efficiency with which capital is deployed to generate sales is limited, potentially impacting long-term returns.

Return on Equity and Capital Employed: Signs of Improvement but Still Modest

Bhilwara Spinners’ average ROE stands at 3.54%, a figure that, while positive, remains below industry-leading peers. This modest return indicates that the company is generating some shareholder value but has significant room for improvement. The average ROCE is negative at -0.28%, which is a concern as it suggests the company is not efficiently generating returns from its capital base.

The negative ROCE could be attributed to the company’s elevated debt levels and the associated interest burden, which erodes operating profits. This is corroborated by the EBIT to interest coverage ratio of 0.47, indicating that earnings before interest and taxes are less than half the interest expense on average. Such a low coverage ratio signals financial stress and limits Bhilwara Spinners’ ability to comfortably service its debt.

Debt Profile: Elevated Leverage Raises Caution

Debt metrics remain a key area of concern. The average debt to EBITDA ratio is a high 30.67, implying that the company’s debt is more than 30 times its earnings before interest, taxes, depreciation, and amortisation. This level of leverage is unsustainable in the long term and exposes the company to refinancing and liquidity risks.

Net debt to equity ratio averages at 0.93, indicating that the company’s debt is nearly equal to its equity base. While not excessively high by some standards, this leverage level combined with weak interest coverage and negative ROCE suggests that Bhilwara Spinners is operating under financial strain. Investors should monitor any deleveraging efforts or improvements in cash flow generation closely.

Shareholding and Pledging: Stability in Ownership

On a positive note, Bhilwara Spinners has zero pledged shares, which reduces the risk of forced selling by promoters in adverse market conditions. Institutional holding is low at 0.86%, reflecting limited participation by large investors, possibly due to the company’s financial challenges and sector risks.

Stock Performance: Volatility Amid Sector Challenges

The stock price closed steady at ₹119.00, unchanged from the previous close, with a 52-week range between ₹98.90 and ₹158.00. Short-term returns have been mixed, with a 1-week decline of 3.92% contrasting with a strong 1-month gain of 15.25%. Year-to-date, the stock has appreciated by 14.53%, outperforming the Sensex which declined by 5.28% over the same period.

However, the stock has underperformed over the last year, falling 20.56% compared to the Sensex’s 5.16% gain. Over longer horizons, Bhilwara Spinners has delivered exceptional returns, with a 5-year gain of 732.17% and a 10-year gain of 726.39%, far outpacing the Sensex’s respective 74.40% and 224.57% returns. This long-term outperformance highlights the company’s growth potential despite recent volatility.

Peer Comparison: Quality Grade in Context

Within its peer group in the garments and apparels sector, Bhilwara Spinners now shares an average quality grade alongside companies such as Indiabulls, India Motor Part, and Aeroflex Enterprises. Some peers like A-1 and Zuari Industries remain below average, while others have no assigned grade. This relative positioning suggests Bhilwara Spinners is improving but still trails sector leaders in operational and financial metrics.

Outlook and Investor Considerations

The upgrade in Bhilwara Spinners’ quality grade from below average to average reflects a cautious optimism about the company’s trajectory. The strong sales and EBIT growth over five years demonstrate operational progress, yet the persistently high leverage and weak returns on capital employed temper enthusiasm.

Investors should weigh the company’s long-term growth potential against its financial risks. The garment sector’s inherent volatility and Bhilwara Spinners’ current debt burden suggest that only risk-tolerant investors with a long-term horizon may find the stock attractive at this stage. Monitoring improvements in interest coverage, ROCE, and capital efficiency will be critical to reassessing the company’s quality grade in future updates.

In summary, Bhilwara Spinners Ltd’s recent quality grade upgrade signals some fundamental improvements but also highlights ongoing challenges. The company’s ability to deleverage and enhance capital returns will be key determinants of its investment appeal going forward.

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