Move Over Tata, JSW: This Underdog SME Silently Powering India's Steel Boom | SME Radar

Monolithisch operates a highly capital-efficient model. The company currently boasts a Return on Capital Employed of 61%, while the industry averages about just 16%. The current Return on Equity is also a strong 53%, which is higher than the current industry median of 13%.

To put this in perspective, even the most established refractory giants in the country struggle to maintain a ROCE above 20%. The ability to make Rs 61 on every Rs 100 of capital employed suggests a dominant competitive position in its regional micro-market.

Also, since its listing in June 2025, the company has cleared its long-term debts, getting its Debt-to-Equity ratio to a healthy 0.21. This provides a solid cushion for future expansion, as the company is free from worries of big interest payments.

However, this rapid growth has influenced the company’s working capital cycle. The Cash Conversion Cycle has increased to roughly 147 days. In simple words, this means that from the moment the company spends on raw materials or manufacturing, it takes roughly 5 months (147 days) to recoup the cash back into its bank account from a customer.

Now this is driven by Inventory Days (average number of days a company holds its goods in the warehouse before they are sold to customers), which currently stand at 127 days as the company stocks up on high-grade quartzite to avoid supply chain disruptions.

While this might ensure production continuity, it also leads to a divergence between Ebitda and cash flow from operations. In the case of Monolithisch, for FY25, while the company reported an Ebitda of Rs 21 crore, the CFO stood at Rs 6 crore. When looking at the company, investors must also try and see if this inventory build-up is a strategic choice or a sign of slowing receivables.

While every data point mentioned above paints a very rosy picture, one must always know that no investment comes without its share of risks. Like in the case of Monolithisch, the one concern staring investors in the face is its valuation. Trading at a Price-to-Earnings (P/E) ratio of 78x (TTM), the market has already factored in an ambitious amount of future growth. The stock trades at nearly 10 times its book value, a steep premium for an SME-platform entity.

Not to forget the major concentration risk. Over 90% of the company’s revenue comes from the iron and steel sectors in West Bengal, Jharkhand, and Odisha. But given that the secondary steel sector produces nearly 40% of India's steel, it is also the most vulnerable to economic slowdowns and regulatory shifts.

And the last but biggest concern is the company being listed on Emerge, the NSE SME Exchange.

You see, investing in SME stocks is a high-stakes gamble where "buyer beware" is the rule of thumb. Mandatory lot sizes create a dangerous liquidity trap, often leaving investors locked in during a market spiral. Also, the tiny equity base of these companies often becomes a playground for market manipulators, who use "pump and dump" tactics to snare retail capital. Add relaxed disclosure norms that often hide any financial rot, until it’s far too late for investors to exit unhurt.

To conclude, while promoters hold a solid 74% stake, and super investors like Mukul Agrawal entering the mix, the institutional footprint remains very negligible. Hence, making the stock vulnerable to sharp swings on low volumes, a factor that every conservative investor must look at before being swayed by the 84% Ebitda growth.