Grasim Inds (GRASIM)

FairStock Score: 38/100 — MIXED

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

Key Financials

Strengths

• Sales growth of 18.78% and 5-year revenue CAGR of 14.21% show strong demand momentum.
• Latest quarter net profit of ₹2,233 Cr with 26.20% profit growth is encouraging.
• Promoter holding of 43.73% aligns management interests with long-term shareholders.
• Piotroski F-Score of 7/9 indicates decent near-term operational health.
• P/B of 1.87 against book value of ₹1,463.85 provides some asset backing.

Concerns

• Free cash flow is deeply negative at -₹40,483 Cr, suggesting growth is being funded by debt.
• Debt/Equity of 2.06 and Altman Z-Score of 1.07 signal financial stress risk.
• ROE of 9.51% and ROCE of 7.50% are low relative to the stock's P/E of 41.31.
• Valuation offers no margin of safety: Graham Number ₹1,476.51 vs price ₹2,735, with EV/EBITDA of 607.71 and dividend yield of only 0.36%.

AI Analysis

As a value investor, I first ask whether the business earns a good return on capital. Grasim's ROE of 9.51% and ROCE of 7.50% are mediocre, especially for a capital-heavy cement maker. The 14.21% five-year revenue CAGR and latest 18.78% sales growth show demand, but growth that consumes cash is not growth I prize; free cash flow is a worrying -₹40,483 Cr. The balance sheet is stretched: debt/equity of 2.06, current ratio of only 1.17, and an Altman Z-score of 1.07 in the danger zone. The Piotroski score of 7 suggests some operational quality, but numbers like EV/EBITDA of 607.71 tell me the market is paying absurdly for current earnings. At ₹2,735, the P/E is 41.31 while the Graham Number is ₹1,476.51—a negative margin of safety of nearly 90%. Book value per share is ₹1,463.85, so you are paying roughly 1.87 times book for a 9.5% ROE; that is no bargain. Promoter holding at 43.73% is decent, and profit growth of 26.20% in the latest quarter is impressive. Still, I cannot ignore that this is a cyclical commodity business with low returns, high leverage, and negative free cash flow. In cement, today's growth often leads to tomorrow's overcapacity and price wars. A fair business at a wonderful price is better than a wonderful business at a fair price; here I get a mediocre-return business at an expensive price. I would keep this on my watchlist, but not in my wallet.

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