Vardhman Textile (VTL)

FairStock Score: 61/100 — STEADY

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

Key Financials

Strengths

• Conservative balance sheet with D/E of 0.15 and strong free cash flow of ₹752 Cr.
• Promoter holding at 64.44% keeps management interests aligned with minority shareholders.
• Piotroski F-Score of 7/9 indicates healthy financial fundamentals.
• Five-year revenue CAGR of 9.77% shows historical growth; latest quarter delivered ₹169 Cr profit on ₹2,505 Cr sales.
• Altman Z-Score of 2.66 suggests low near-term bankruptcy risk.

Concerns

• Moderate returns: ROE of 8.06% and ROCE of 10.83% imply weak competitive protection.
• Stagnant recent growth: sales up only 3.74%, profit up 0.64%, with PEG of 7.24 signaling expensive valuation.
• Price of ₹569.40 is above the Graham Number of ₹460.94, giving a negative margin of safety of -17.70%.
• DCF intrinsic value of ₹69.36 and EV/EBITDA of 77.90 indicate the market is paying far more than fundamentals justify.

AI Analysis

Let me start with the balance sheet, because that is where Benjamin Graham always looked first. Vardhman has debt-to-equity of just 0.15, free cash flow of ₹752 Cr, and a Piotroski score of 7 out of 9. That tells me the company is financially sound, and promoter holding of 64.44% is a positive sign for minority shareholders. Altman Z-score of 2.66 puts it in the safe zone, though not with a wide margin. But sound is not the same as cheap. The company earns an ROE of only 8.06% and ROCE of 10.83%. In a textile business, where products are largely commodity-like and pricing power is scarce, those returns do not suggest a durable economic moat. Growth is also modest: recent sales rose 3.74%, profits barely moved at 0.64%, and while the five-year revenue CAGR of 9.77% is respectable, the current pace is far slower. At ₹569.40, the stock trades at 19.67 times earnings. The Graham number, a conservative valuation based on book value and earnings power, is ₹460.94, implying a margin of safety of negative 17.7%. The PEG ratio of 7.24 is unattractive for this level of growth, and the DCF intrinsic value of ₹69.36 is far below the market price. EV/EBITDA of 77.90 further confirms that the market has priced in expectations I cannot justify. This is the classic value investor dilemma: a reasonable business, conservatively run, but offered at a price that leaves no room for error. I would rather wait for a margin of safety nearer the Graham number or lower. Until then, Vardhman is a company to admire from afar, not a stock to buy.

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