The manufacturing sector in India contributes to about 17% of the GDP and employs over 27 million workers, making it a sector hard to ignore. And with the support of government initiatives like Make in India and production-linked incentive (PLI) schemes, India is targeting manufacturing to account for 25% of GDP in the coming years.
So, it makes a lot of sense to look at manufacturing stocks in India that are fundamentally strong enough to pass a “Value Stock” check.
The 5 Pillars of Our 2026 Value Stock Framework
Here are all the parameters we checked for in this test.
1. P/E Ratio (Price to Earnings): Tells you how many Rupees you are paying for every Rs 1 the company earns in profit; it helps you decide if the “asking price” for the business is fair or too high.
2. D/E Ratio (Debt to Equity): Shows how much money the company has borrowed from the bank (Debt) compared to how much of his own savings (Equity) he has put into the business.
3. ROCE (Return on Capital Employed): Showshow much profit the company generates for every Rs 100 of capital used.
4. Cash Conversion Cycle (CCC): This is the time it takes for the company to buy material from the wholesaler, put them on the shelf, sell them, and finally get the cash back into their pocket.
5. Dividend Yield: Thisis like the “rent” or “bonus cash” the company sends to your bank account every year, shown as a percentage of what you paid for the share.
Let us now dive into the 2 companies that cleared our strict Value stock test.
#1 Swaraj Engines: The ‘Negative Cash’ Powerhouse
Incorporated in 1985, Swaraj Engines Ltd manufactures diesel engines specifically for tractors in the range of 22 HP to above 65 HP and hi-tech engine components.
With a market cap of Rs 4,549 cr, over 52% of the company is held by Mahindra and Mahindra Ltd, a Rs 4,65,702 cr giant which is the number 1 tractor manufacturer in the country.
Here is now the company performed in our strict “Value Stock” filter.
| Parameter | Current Value | Industry Median |
| P/E(Price to Earning) | 26x | 40x |
| D/E (Debt to Equity) | 0% | 0.12% |
| ROCE | 56% | 26% |
| Cash Conversion Cycle | – 1 Day | 104 Days |
| Dividend Yield | 2.80% | 0.50% |
Swaraj maintains a negative Cash Conversion Cycle because it effectively operates on its suppliers’ money. It receives immediate cash from its parent company (Mahindra) for sales but uses its massive bargaining power to withhold payments to raw material providers for nearly 52 days (Days Payable). This creates a “cash float” that keeps its own bank account full, allowing the company to remain debt-free while funding expansions and high dividends.
Looking at the financials, sales for the company grew at a compounded rate of 17% from Rs 773 cr in FY20 to Rs 1,682 in FY25.
EBITDA (earnings before interest, taxes, depreciation, and amortization) went from Rs 100 cr to Rs 227 cr in the same period, logging in a compound growth of 18%.
The net profits grew from Rs 71 cr in FY20 to Rs 166 cr in FY25, which is a compounded growth rate of 19%.
The share price of Swaraj Engines Ltd was around Rs 1,425 in January 2021 and as on 8th January 2026 it was Rs 3,744. That is a 163% jump in 5 years.
In the FY24 balance sheet, Capital Work in Progress (CWIP) jumped significantly from Rs 2 cr to Rs 38 cr. By FY25, this resulted in a large increase in Fixed Assets (from Rs 76 cr to Rs 110 cr).
This means that the company has completed or is nearing the completion of a major production capacity hike. And that ensures that as Mahindra & Mahindra scales its “Swaraj” brand of tractors, Swaraj Engines has the “ready-to-use” infrastructure to supply higher engine volumes without further delays or huge immediate spending.
#2 Kamdhenu Ltd: Scaling Through Asset-Light Franchising
Incorporated in 1994, Kamdhenu Ltd is into manufacture, marketing, and distribution of TMT Bars, structural steel and allied products.
With a market cap of Rs 657 cr, the company is India’s the largest TMT selling brand in the Retail Segment with over 8,500+ Dealers, 250+ Distributors across the country with 80+ Franchise Units to manufacture Steel Rebars, Structural Steel Products & Colour Coated Profile Sheets.
Here is how Kamadhenu performed in our Value Stock test.
| Parameter | Current Value | Industry Median |
| P/E(Price to Earning) | 9x | 23x |
| D/E (Debt to Equity) | 0% | 0.26% |
| ROCE | 29% | 14% |
| Cash Conversion Cycle | 15 Days | 104 Days |
| Dividend Yield | 1.09% | 0.00% |
Coming to financials (Standalone for a better long-term perspective), the company’s sales have seen a slight drop in the last 5 years from Rs 924 cr in FY20 to Rs 747 in FY25. However, for H1FY26, the company has already recorded Rs 387 cr in sales.
While the sales saw a small drop, EBITDA grew from Rs 45 cr in FY20 to Rs 75 cr in FY25, logging a compound growth of 11%.
Net profit also grew from Rs 2 cr in FY20 to Rs 61 cr in FY25, which is a compounded growth of close to an impressive 99%.
The share price of Kamdhenu Ltd was around Rs 7 in January 2021 and as on 8th January 2026 it was Rs 23, which is a jump of 230%.
The shares of the company are currently trading at a discount of 66% from its all-time high of Rs 67, giving rise to speculation if this is a good entry to the stock. This might however be due to the demerger of their Paint Business (Kamdhenu Ventures) into a separate company.
The company has strategically shifted its business to a franchisee-led model, which is a major plus for future scalability without taking on debt. In simple words, it means that Kamdhenu doesn’t need to spend its own money to build expensive new factories. Instead, it lets other people build them and use the “Kamdhenu” brand name in exchange for a royalty/fee. This makes the company’s growth faster and much less risky during economic downturns.
Value Stocks or Value Traps?
The financials for both the companies we saw today, Kamdhenu and Swaraj Engines show solid promise. Add to that the fact that both these stocks have passed our stringent “Value Stocks” test, and they deserve the attention of smart investors.
Speaking of Value, the current PE of both companies is lower than their respective industry medians possibly meaning that they are undervalued when compared to their peers. Not to forget that they are highly capital efficient, don’t shy away from sharing profits with investors by means of dividends and virtually debt free and getting money back in their accounts faster than peers.
Whether these two stocks will continue their streak of beating industry peers at the “Value Stock test” parameters and turn out to be future multibaggers, is something we will have to wait and watch. A good way to keep a close eye on these stocks would be to add them to a watchlist.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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