Why is Vadivarhe Speci. falling/rising?

Recent Price Movement and Market Context

Vadivarhe Speciality Chemicals hit a new 52-week low of ₹16.70 on 16 December, signalling persistent downward pressure on the stock. The share price has underperformed not only today but also over multiple time horizons. Over the past week, the stock declined by 18.14%, sharply contrasting with the Sensex’s marginal gain of 0.08%. The one-month performance shows a 20.10% drop against a slight 0.19% decrease in the Sensex, while year-to-date losses stand at a staggering 62.51%, even as the benchmark index gained 9.37% during the same period.

These figures highlight a sustained negative trend for Vadivarhe Speciality Chemicals, which has failed to keep pace with broader market gains. Over the last year, the stock has lost 60.52%, whereas the Sensex rose by 4.83%. The three-year comparison is even more stark, with the stock down 58.66% while the Sensex surged 41.55%. Although the five-year return is positive at 49.78%, it still lags significantly behind the Sensex’s 89.00% gain, underscoring long-term underperformance.

Technical Indicators and Investor Participation

From a technical standpoint, Vadivarhe Speciality Chemicals is trading below all key moving averages, including the 5-day, 20-day, 50-day, 100-day, and 200-day averages. This technical weakness often signals bearish sentiment among traders and investors. Additionally, investor participation appears to be waning, with delivery volumes on 15 December falling by 28.57% compared to the five-day average. Reduced trading volumes can exacerbate price declines as fewer buyers are willing to support the stock at current levels.

Fundamental Weaknesses Driving the Decline

The company’s fundamental profile is a significant factor behind the stock’s poor performance. Vadivarhe Speciality Chemicals has not declared financial results in the past six months, raising concerns about transparency and operational health. The firm’s ability to service its debt is weak, evidenced by a high Debt to EBITDA ratio of -1.00 times, indicating negative earnings before interest, taxes, depreciation, and amortisation. This negative EBITDA status points to operational losses, which heighten financial risk.

Profitability metrics further underscore the company’s struggles. The average Return on Equity (ROE) stands at a mere 0.89%, reflecting minimal returns generated on shareholders’ funds. Moreover, profits have plummeted by 299% over the past year, a dramatic decline that has severely impacted investor confidence. This erosion of profitability is mirrored in the stock’s steep negative returns, which have consistently lagged behind the BSE500 and other benchmarks over the last three years.

Risk Profile and Market Perception

Given these financial challenges, Vadivarhe Speciality Chemicals is considered a risky investment. Its current valuations are unfavourable compared to historical averages, and the company’s inability to generate positive earnings raises concerns about its sustainability. The stock’s consistent underperformance relative to the benchmark indices and sector peers has likely contributed to the ongoing sell-off and subdued investor interest.

Conclusion: Why the Stock is Falling

In summary, Vadivarhe Speciality Chemicals Ltd’s share price decline on 16 December is the result of a combination of weak financial fundamentals, negative earnings, and poor market performance relative to benchmarks. The company’s failure to report recent results, coupled with a high debt burden and negligible profitability, has eroded investor confidence. Technical indicators and declining trading volumes further compound the bearish outlook. Until the company demonstrates improved financial health and operational stability, the stock is likely to remain under pressure, continuing its trend of underperformance in the Indian equity markets.

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 →