Why is Hikal falling/rising?

Recent Price Movement and Market Performance

Despite opening the day with a positive gap of 2.12%, Hikal’s shares failed to sustain gains, hitting an intraday low of ₹237.95 before closing lower. The weighted average price indicates that more volume was traded near the day’s low, signalling selling pressure. The stock has now declined for five consecutive sessions, underperforming its sector by nearly 2% today and registering a 7.05% loss over the past week. This contrasts sharply with the broader Sensex, which gained 0.20% during the same period.

Technically, the stock remains above its 20-day moving average but trades below its 5-day, 50-day, 100-day, and 200-day averages, suggesting a bearish momentum in the medium to long term. Investor participation has also waned, with delivery volumes dropping by over 30% compared to the five-day average, indicating reduced conviction among shareholders.

Fundamental Weaknesses Driving the Decline

Hikal’s share price decline is underpinned by significant fundamental challenges. Over the past year, the stock has delivered a negative return of 41.48%, markedly underperforming the Sensex’s 4.80% gain. The company’s profitability has deteriorated sharply, with profits falling by 86.2% year-on-year. This erosion of earnings power is reflected in the company’s very negative quarterly results declared in September 2025, where the earnings per share plunged by over 320%, and the quarterly profit after tax recorded a loss of ₹34.90 crore.

Long-term growth prospects appear bleak, with a compound annual growth rate (CAGR) of operating profits declining by 16.24% over the last five years. The company’s return on equity averages just 8%, indicating low profitability relative to shareholders’ funds. Additionally, the return on capital employed (ROCE) remains subdued at 4.1%, signalling inefficient use of capital.

Debt servicing capacity is another concern, as the company carries a high Debt to EBITDA ratio of 2.51 times, reflecting elevated leverage and potential financial strain. The operating profit to interest coverage ratio is also alarmingly low at 0.48 times, underscoring difficulties in meeting interest obligations from operating earnings.

Valuation and Market Position

Despite these challenges, Hikal’s valuation metrics suggest the stock is trading at a discount relative to its peers, with an enterprise value to capital employed ratio of 1.9. This attractive valuation, however, has not been sufficient to offset investor concerns about the company’s deteriorating fundamentals and poor earnings trajectory. The majority shareholding by promoters has not translated into improved performance or investor confidence.

Long-Term Underperformance and Investor Sentiment

Hikal’s stock has consistently underperformed broader market indices and sector benchmarks over multiple time horizons. Over three years, the stock has declined by 35.63%, while the Sensex has surged nearly 38%. Even over five years, Hikal’s 39.32% gain pales in comparison to the Sensex’s 80.33% rise. This persistent underperformance reflects ongoing operational challenges and weak investor sentiment.

The recent decline in delivery volumes and the stock’s inability to sustain intraday gains further highlight a lack of buying interest. The combination of poor earnings, high leverage, and subdued profitability metrics has weighed heavily on the stock’s performance, prompting investors to reassess their positions.

In summary, Hikal Ltd’s share price is falling primarily due to its weak financial results, deteriorating profitability, and poor long-term growth prospects. While the stock’s valuation appears attractive on a relative basis, fundamental weaknesses and negative earnings trends continue to exert downward pressure on the price, leading to sustained underperformance against market benchmarks.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →