Raj Rayon Inds. (RAJRILTD)
CyclicalFairStock Score: 32/100 — RISKY
Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 0/2 · Dividend: 0/1
Key Financials
| Current Price | ₹21.7 |
| Market Cap | ₹1,221.9 Cr |
| P/E Ratio | 51.67 |
| ROCE | 6.78% |
| ROE | 24.37% |
| Dividend Yield | 0% |
| Profit Growth | 0.8% |
| Debt/Equity | 1.42 |
| Sales Growth | 43.2% |
| Promoter Holding | 94.13% |
| 52-Week Range | ₹19.41 — ₹28.9 |
| Sector | Textiles & Apparels |
| Book Value | ₹2.34 |
Strengths
- Sales growth of 33.17% indicates strong revenue momentum.
- ROE of 33.27% is high, even if partly leverage-driven.
- Promoter holding of 94.13% shows significant skin in the game.
- Latest quarter sales of ₹305 Cr reflect meaningful scale in the textile segment.
Concerns
- Profit growth is down 27.98% despite 33% sales growth, showing poor conversion and margin pressure.
- Net profit margin is under 2% in the latest quarter (₹6 Cr on ₹305 Cr sales).
- High leverage: Debt/Equity of 1.52, with ROCE of only 6.78% versus ROE of 33.27%.
- Valuation is expensive at P/E of 38.18 and P/B of 11.77, with zero dividend yield.
AI Analysis
At first glance, Raj Rayon looks like a compounding machine—sales up 33% and an ROE of 33%. But Benjamin Graham taught me to look behind the curtain. The ROE is achieved on a book value of just ₹1.85, with debt-to-equity of 1.52. ROCE is only 6.78%, so the high equity return is borrowed, not earned by the business. The latest quarter tells a sobering story: ₹305 Cr of sales produced just ₹6 Cr of net profit, a net margin under 2%. Annual profit growth is down 27.98% even as sales grow 33%—that is growth without quality, often the sign of a cyclical or price-taker. The Piotroski score of 4/9 supports the caution: financial health is deteriorating. I do not like paying 38x earnings and 11.77x book for a business with falling profit and no dividend. If I wanted to own this, Mr. Market would need to offer a much lower price. Promoter holding at 94.13% is a warning both ways—it shows alignment, but the tiny free float can distort prices. The stock trades at ₹21.78, near the low of its 52-week range of ₹19.41 to ₹28.90, so the market is starting to agree. This is not a wonderful business at a fair price; it may be a fair business at a bad price. I need margin of safety. Here I do not find it.
Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer