Aro Granite Industries Limited — financial distress indicators
Financial-health summary
Aro Granite Industries Limited's reported numbers place it in the 'Very weak' financial-health band (distress score 80/100). The main indicators are operating profit does not cover interest, market-implied default probability >20% and revenue collapse. Independently, the Ohlson accounting model puts its 1-year failure probability at 79% and the market-implied (Merton) default probability is 90.0%. In its favour: operating cash flow is positive over the latest 12 months.
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is -0.55×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
Merton distance-to-default -1.28 σ → PD 90%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Revenue changed -40% year over year.
A >30% sales drop typically breaches leverage covenants and starves fixed-cost coverage.
Total debt is 11.4× EBITDA.
Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.
O-score 1.35 → model probability 79%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Recurring net losses.
Repeated losses are a core input in both Ohlson and Altman failure models.
Operating margin fell from 12% to -11% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue declined every year for three years.
Structural, not cyclical, decline.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Operating cash flow is positive over the latest 12 months.
- High insider/promoter ownership (58%) aligns management with survival.
📰 Recent news scan
- Aro Granite Industries Trading Window Closure October 2026 - Kalkine IndiaGoogle News · 2026-09-28
- Aro Granite Industries seeks approval for ₹67 crore Jaipur unit slump sale - scanx.tradeGoogle News · 2026-09-16
- Aro Granite Industries passes all resolutions at 38th AGM - scanx.tradeGoogle News · 2026-09-12
- Aro Granite Industries Share: Bull Case vs Bear Case for 2026 - UnivestGoogle News · 2026-09-09
- Aro Granite Industries Share Price Forecast to 2030 - UnivestGoogle News · 2026-07-14
- Oriental Aromatics Ltd leads gainers in 'B' group - Business StandardGoogle News · 2026-04-16
⚖️ Indian legal pathway — the IBC, 2016
How insolvency starts
- A financial creditor (§7), an operational creditor after a demand notice (§§8–9) or the company itself (§10) can apply to the NCLT once a default of at least ₹1 crore occurs (§4).
- On admission a moratorium (§14) stops suits and recovery; the board is suspended and an insolvency professional runs the company.
- The Committee of Creditors approves a resolution plan with 66% of voting share (§30(4)) within an outer limit of 330 days (§12); otherwise liquidation (§33) under the §53 waterfall — equity ranks last. Defaulting promoters are generally barred from bidding (§29A).
Earlier warning stages
- RBI's Prudential Framework for Resolution of Stressed Assets (7 June 2019): lenders must review a borrower within 30 days of default and implement a resolution plan, or provide more.
- Listed companies must disclose loan defaults to exchanges under SEBI (LODR); a rating downgrade to “D” is a public signal.
- Auditors must report going-concern uncertainty (SA 570 / Ind AS 1).
Frequently asked questions
What do Aro Granite Industries Limited's financial-health indicators show?
As of 2026-10-09, Aro Granite Industries Limited's public financial data places it in the 'Very weak' band with a distress score of 80/100, driven by operating profit does not cover interest, market-implied default probability >20% and revenue collapse. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Aro Granite Industries Limited's financial distress score?
80/100 ('Very weak'). Ohlson O-score 1.35 (model 1-year failure probability 79%). Merton distance-to-default -1.28 σ (model default probability 90.0%).
What works in Aro Granite Industries Limited's favour?
Operating cash flow is positive over the latest 12 months. High insider/promoter ownership (58%) aligns management with survival.
How are shareholders treated if a company enters insolvency?
Under the IBC the Committee of Creditors controls the resolution; the §53 waterfall pays secured creditors and workers first and equity last. In most resolution plans existing shareholders are wiped out or left with a token stake, and the company may be delisted.
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.