In a market that loves a loud story, the quietest moves on a balance sheet are often the most underrated. While retail chatter chases the next defence or AI multibagger, the slow erasure of debt by a company tends to fly under the radar. Yet history suggests the year a business turns debt-free is often the year its earnings curve bends sharply upward.
A quick screen I ran gave me two small caps that fit this exact moment. Both have aggressively retired their borrowings over the last few years. Both now sport a return on capital employed that leaves industry peers well behind. And both sit in old-economy sectors the herd considers too boring to chase.
Whether they reward shareholders in FY27 and beyond depends on execution. But the financial scaffolding they have built deserves a closer look. Let us dive in and see if they deserve a spot on the watchlist.
#1 Force Motors Ltd: From Loss-Making Tempo Maker to Debt-Free Engine Powerhouse
Incorporated in 1958, Force Motors Ltd was the original Bajaj Tempo, the flagship of the Abhay Firodia group. It changed its name in 2005 but the core stayed the same – a fully integrated maker of light commercial vehicles, multi-utility vehicles like the Traveller and Gurkha, and tractors. It also assembles engine and axle components for Mercedes-Benz and BMW in India, a niche but high-margin business few outside the auto sector talk about.
With a market cap of Rs 25,295 cr, Force Motors is no longer the sleepy SME story it once was. The stock has compounded at 140% over the last three years, riding a turnaround very few saw coming.
The Rs 1,069 cr Debt That Vanished in 36 Months
In FY22, Force Motors was sitting on borrowings of Rs 1,069 cr. The company was bleeding. In the first year of the pandemic, FY21, the company ended the year with a net loss of Rs 124 cr. FY22 followed with another Rs 91 cr loss. The Mercedes engine ramp-up had not kicked in, and the Traveller business was hurting from the post-COVID hangover.
Cut to March 2026, the borrowings on the balance sheet read Rs 0 cr. The company has effectively retired its entire debt within three financial years.
This is not accounting jugglery. Cash flow from operations tells the same story: Rs 532 cr in FY23, Rs 1,014 cr in FY24, and Rs 971 cr in FY25. Three straight years of strong operating cash have gone toward paying down lenders, funding capex, and still leaving the company with reserves of Rs 3,493 cr as of September 2025.
Deconstructing the Operational Turnaround: From Operating Losses to 16% Margins
The consolidated financials over the last five years tell their own story.
| Financial Year | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 | 5-Yr CAGR |
| Sales (Rs cr) | 3,081 | 1,988 | 3,240 | 5,029 | 6,992 | 8,072 | 21% |
| EBITDA (Rs cr) | 261 | 24 | 50 | 313 | 897 | 1,099 | 33 |
| Net Profit (Rs cr) | 50 | -124 | -91 | 134 | 388 | 801 | 74% |
A company that posted operating profits of just Rs 50 cr in FY22 ended FY25 with Rs 1,099 cr. Net profits, in the red barely three years ago, stand at Rs 801 cr for FY25 and a TTM figure of Rs 1,368 cr.
Operating margins, painfully thin at 1-2% during the loss years, sit at 16% on a trailing basis. That is not a small reversal for an auto OEM with the kind of fixed cost base Force carries.
ROCE That Beats the Industry
Force Motors currently has a Return on Capital Employed (ROCE) of 36%, while the industry median sits closer to 17%. So, for every Rs 100 of capital the business deploys, it generates Rs 36 of profit, ahead of names like Tata Motors and Maruti Suzuki on this metric, even if those peers beat it on absolute scale.
ROE has climbed back to 29%, after averaging just 8% over a 10-year window dented by two years of losses.
Promoter holding has stayed at 62% for over a decade. The interesting move has been on the institutional side. FII stake has more than tripled from 2.72% in March 2023 to 10.93% by March 2026, a clear vote from foreign money quietly building positions through the rerating.
The share price of Force Motors was around Rs 1,254 in May 2021 and as of closing in 19th May 2026 it was Rs 19,208, which is a jump of over 1,430% in just 5 years. Rs 1 lac invested in the stock 5 years ago would have been over Rs 15.3 lacs today.
Has the Train Left the Station on Valuations?
The stock trades at a PE of 24x and the industry median currently is 27x. For context, Maruti Suzuki trades around 28x, Mahindra and Mahindra at 22x, and Hyundai Motor India at 27x. Force sits at the upper end of its peer set on TTM.
The 10-year median PE for Force Motors is roughly 26x, while the industry has traded closer to 33x in the same period. This is a stock that lived in single-digit valuation territory for most of its loss-making years. The rerating has been the market acknowledging the structural turn.
The bigger watchpoint is the price action. From Rs 26,486 at its 52-week high, the stock has corrected to its current price of Rs 19,208, a drop of almost 28%. Nothing alarming, but enough to suggest the easy money has likely been made. This correction however is possibly due to the drop in net profits in the Q4FY26 (March 2026), which was Rs 279 cr, lesser than the Rs 406 cr in December 2025 quarter.
The defence order book is the eye catcher. The Gurkha 4×4 contract with the Ministry of Defence and the steady scale-up in Mercedes engine assembly are the two engines that need to keep firing for the multiple to hold.
#2 Sharda Cropchem Ltd: The Asset-Light Exporter With a 132% Profit Spike
Incorporated in 2004, Sharda Cropchem Ltd is principally in the export of agrochemicals, including technical-grade chemicals and formulations, plus non-agro lines like conveyor belts and dye intermediates. It sells across 80+ countries with a heavy footprint in Europe, NAFTA, and Latin America.
With a market cap of Rs 8,235 cr, the company is asset-light by design. It does not manufacture its own chemicals. It identifies generic molecules going off-patent, files for registrations across geographies, and ships products made by third-party contract manufacturers. The moat is built on regulatory paperwork, not on factories.
Asset-Light Blueprint: Outsourcing Production to Scale Global Registrations
Unlike Force Motors, Sharda Cropchem was never carrying heavy debt. But over the last three years, it has methodically pared down even the small working capital loans it had on its books. Borrowings as of September 2025 stand at Rs 4 cr, against Rs 47 cr in FY22 and Rs 81 cr in FY21. For a company that just logged Rs 5,268 cr sales, this is about as clean as a balance sheet gets.
Reserves have grown from Rs 1,313 cr in FY20 to Rs 3,046 cr by March 2026.
The headline numbers look unimpressive at first glance.
| Financial Year | FY21 | FY22 | FY23 | FY24 | FY25 | FY26 | 5-Yr CAGR |
| Sales (Rs cr) | 2,396 | 3,580 | 4,045 | 3,163 | 4,320 | 5,268 | 17% |
| EBITDA (Rs cr) | 450 | 696 | 659 | 303 | 615 | 1,076 | 19% |
| Net Profit (Rs cr) | 229 | 349 | 342 | 32 | 304 | 681 | 24% |
The 5-year sales compound is a respectable 17%, but the real story is the FY24 collapse and the FY25 recovery. Net profits fell to just Rs 32 cr in FY24 as global agrochemical prices crashed and Sharda was caught with high-cost inventory and weak European demand. That was the year everyone wrote the company off.
FY25 closed with Rs 304 cr in net profit, and the TTM figure stands at Rs 566 cr. Profits are up 132% year on year on a TTM basis, the kind of turnaround that explains the recent rally.
The share price of Sharda Cropchem was around Rs 347 in May 2021 and as of closing on 19th May 2026 it was Rs 916, which is a jump of 164% in 5 years.
The stock trades at a PE of 12x, while the industry median is currently 24x. The 10-year median PE for the company is 18x and the industry medina for the same period is 25x. The stock sits slightly below its own long-term average and well below the industry, the kind of setup value hunters tend to circle.
The structural caveat is debtor days, which routinely run between 150 and 180. Agrochem exports have a long collection cycle, and that is reflected in a cash conversion cycle of 125 days as of FY26, something to keep an eye on.
ROCE, Dividend, and the Asset-Light Edge
Sharda Cropchem has a current ROCE of 30%, while the industry median floats around 14%. The 10-year average ROCE has been 22%, which says a lot about a business model that carries minimal fixed costs.
Dividend payout has been steady at over 40%, with FY24 even seeing an 85% payout as the management chose to share what little was left of a profit-starved year with shareholders. The current dividend yield of 0.98% is roughly five times the industry median of 0.18%.
Promoter holding sits at 75% with zero pledged shares. DII holding is 9.7% and FIIs hold 4.6%, with the FII stake doubling from 2.14% in March 2024 to 4.60% by March 2026. At peak the FII holding was 5.5%.
A Quiet Pair, A Loud Signal – The Smallcap Rebound Thesis
Force Motors and Sharda Cropchem both clear the same test, debt elimination paired with above-industry ROCE. The similarities end there.
Force Motors is a high-octane turnaround story, where every line of the income statement has bent sharply north and the market has already rewarded the stock with a near-vertical rerating. The next leg depends on whether the Mercedes engine business and defence contracts can keep trailing earnings growing at 80-90%.
Sharda Cropchem is the slow-burn, asset-light contrarian play. The market has only just started believing in the FY26 recovery. With the valuation still well below the industry median and TTM profit growth at 132%, the case for a rerating is arguably stronger on paper, though it carries the well-known baggage of high debtors and cyclical agrochem pricing.
When a small-cap quietly retires its loans while pushing ROCE above the industry, the market eventually catches on. The question is whether you spot it before the analyst reports start landing in your inbox.
Add these stocks to a watchlist and keep an eye on them to ensure you don’t miss out on any big movements.
Disclaimer:
Note: We have relied on data from www.Screener.in and www.trendlyne.com 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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