Why is Facor Alloys Ltd falling/rising?

Recent Price Movement and Market Performance

Facor Alloys Ltd closed at ₹2.70 on 09-Jan, down by ₹0.04 or 1.46% from the previous session. This decline extends a three-day losing streak, during which the stock has fallen by 4.26%. The share price remains perilously close to its 52-week low of ₹2.61, just 3.33% above that mark, signalling sustained downward pressure. Notably, the stock has underperformed its sector by 0.6% on the day, and it trades below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages, underscoring a bearish technical outlook.

Investor participation has marginally increased, with delivery volumes on 08 Jan rising by 3.81% compared to the five-day average, indicating some trading interest despite the negative momentum. However, liquidity remains limited, constraining the stock’s ability to attract larger trades without impacting price.

Fundamental Weaknesses Driving the Decline

The persistent fall in Facor Alloys’ share price is primarily attributable to its weak long-term fundamentals. The company continues to report operating losses, with its ability to service debt severely impaired. The average EBIT to interest ratio stands at a negative -5.38, indicating that earnings before interest and tax are insufficient to cover interest expenses, a critical red flag for creditors and investors alike.

Profitability metrics further highlight the company’s struggles. The average return on equity (ROE) is a mere 2.72%, reflecting minimal returns generated on shareholders’ funds. This low profitability is compounded by the company’s recent quarterly results, which were notably disappointing. The profit after tax (PAT) for the quarter ending September 2025 plunged to a loss of ₹6.40 crores, a staggering 382.3% decline compared to the average of the previous four quarters. Similarly, profit before tax excluding other income (PBT less OI) and profit before depreciation, interest, and tax (PBDIT) both hit their lowest levels at ₹-7.46 crores and ₹-5.95 crores respectively.

Risk Factors and Market Sentiment

Facor Alloys is considered a risky investment due to its negative EBITDA and deteriorating profit margins. Over the past year, the stock has delivered a return of -45.89%, while profits have plummeted by 98.4%, signalling a severe erosion of earnings power. This poor performance is starkly contrasted by the benchmark Sensex, which has gained 7.67% over the same period, emphasising the stock’s underperformance.

Adding to the concerns is the high level of promoter share pledging, with 70.91% of promoter holdings pledged as collateral. In a falling market, such a high pledge ratio often exacerbates selling pressure, as promoters may be forced to liquidate shares to meet margin calls, further depressing the stock price.

Over the longer term, Facor Alloys has consistently underperformed the benchmark indices. The stock has generated negative returns of -72.14% over three years and -33.50% over five years, while the Sensex has delivered positive returns of 37.58% and 71.32% respectively during these periods. This persistent underperformance reflects structural challenges within the company and a lack of investor confidence.

Conclusion: Why Facor Alloys Is Falling

The decline in Facor Alloys Ltd’s share price as of 09-Jan is a direct consequence of its weak financial performance, ongoing operating losses, and poor debt servicing capability. The company’s inability to generate consistent profits, coupled with a high promoter pledge ratio, has eroded investor confidence. Its sustained underperformance relative to the broader market and sector benchmarks further compounds the negative sentiment. Despite a slight uptick in trading volumes, the stock remains technically weak, trading below all major moving averages and close to its 52-week low. These factors collectively explain the persistent downward trajectory of Facor Alloys’ stock price, signalling caution for investors considering exposure to this microcap.

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