Godawari Power (GPIL)

FairStock Score: 75/100 — STEADY

Score breakdown: P/E: 1/3 · ROCE: 1/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• Promoter holding of 63.50% aligns management with minority shareholders
• Very strong balance sheet: Debt/Equity 0.04 and Altman Z-score 3.97
• Decent capital efficiency: ROCE 23.25% and ROE 15.12%
• Positive free cash flow of ₹459 Cr and latest quarter net profit of ₹143 Cr

Concerns

• Valuation is rich: P/E 24.07 and P/B 4.03, with price far above Graham Number ₹132.78 and DCF value ₹59.49
• Negative growth momentum: sales down 3.66% and profit down 8.26%
• Negative EV/EBITDA of -16.03 makes conventional valuation murky
• Low dividend yield of 0.38% offers little income support in a cyclical downturn

AI Analysis

Looking at Godawari Power, I first notice the owner's mindset: promoters hold 63.50%, so their money is beside mine. That matters in a cyclical industry like iron and steel. The balance sheet is the strongest part of the story. Debt/equity is just 0.04, and an Altman Z-score of 3.97 suggests no near-term distress. ROCE of 23.25% tells me capital is being put to decent use, and ROE of 15.12% is acceptable. The company generated ₹459 crore of free cash flow and earned ₹143 crore in the latest quarter, so it is not a broken business. But a good business can be a bad investment if you pay too much. The market cap is ₹17,854 crore, yet the current price-to-earnings ratio is 24.07. That is rich for a company whose sales fell 3.66% and profit fell 8.26% in the latest annual displays. Steel is cyclical; today's earnings should not be capitalised at a growth multiple. Graham would compare price to conservatively measured value. The Graham Number is ₹132.78 and the DCF value is ₹59.49, far below ₹294.25. That leaves no margin of safety; instead, the margin is negative. The negative EV/EBITDA also makes traditional valuation untrustworthy, and the dividend yield of 0.38% cannot rescue the total return case. A 5-year revenue CAGR of 6.34% confirms this is not a fast grower. I admire the low debt and positive free cash flow. But buying at 4 times book value with shrinking sales and profits violates my first rule: never overpay for a commodity business. I would wait for a much lower price or a clear upturn in volumes and margins. Until then, this is a watch-and-wait situation, not a buy.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer