Davangere Sugar Company Limited — financial distress indicators
Financial-health summary
Davangere Sugar Company Limited's reported numbers place it in the 'Watch' financial-health band (distress score 42/100). The main indicators are market-implied default probability >20%, thin interest coverage and deep share-price drawdown. Independently, the Ohlson accounting model puts its 1-year failure probability at 47% and the market-implied (Merton) default probability is 21.3%. In its favour: strong current ratio (1.96).
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.
Merton distance-to-default 0.79 σ → PD 21%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Interest coverage is only 1.32× (lenders typically require ≥ 2–3×).
Low coverage leaves little buffer against a profit dip before a debt-service or covenant breach.
Price is -62% from its 52-week high.
For financial firms a share-price run often precedes a deposit or funding run (confidence channel).
Share count up +47% in a year.
Large issuance usually funds operating losses rather than growth.
Operating cash flow negative in 3 of the last 3 years. The company is profitable, so this likely reflects working-capital or loan-book growth.
A business that cannot fund itself from operations depends on external capital to survive.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Strong current ratio (1.96).
- Revenue still growing (+11% YoY).
- High insider/promoter ownership (50%) aligns management with survival.
📰 Recent news scan
- Davangere Sugar Stock Jumps 6%: What’s Driving This Sugar Stock Rally As Ethanol Expansion Plans Gather Pace? - GoodreturnsGoogle News · 2026-10-23
- Davangere (DAVANGERE.NS) Corrects -3.85% — Key Support to Watch at ₹1.90 2026-10-21 - Shakeout Pattern - https://www.siam.in/Google News · 2026-10-22
- Davangere Sugar Company - 9 penny stocks crash up to 57% in just 2 months - The Economic TimesGoogle News · 2026-10-04
- Davangere Sugar Reports Rs 238.77 Cr FY26 Revenue, Outlines FCCB And Expansion Plans - Outlook BusinessGoogle News · 2026-09-11
- Davangere Sugar Company allots 26.59 cr equity shares on conversion of FCCBs - Business StandardGoogle News · 2026-08-25
- Davangere Sugar Shares: Analyst Note Sees 234% Upside to ₹10 Target Amid Sugar Cycle Tailwinds - First IndiaGoogle News · 2026-08-24
⚖️ 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 Davangere Sugar Company Limited's financial-health indicators show?
As of 2026-10-24, Davangere Sugar Company Limited's public financial data places it in the 'Watch' band with a distress score of 42/100, driven by market-implied default probability >20%, thin interest coverage and deep share-price drawdown. 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 Davangere Sugar Company Limited's financial distress score?
42/100 ('Watch'). Ohlson O-score -0.1 (model 1-year failure probability 47%). Merton distance-to-default 0.79 σ (model default probability 21.3%).
What works in Davangere Sugar Company Limited's favour?
Strong current ratio (1.96). Revenue still growing (+11% YoY). High insider/promoter ownership (50%) 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.
Other Consumer Staples companies with distress indicators
- MT Educare Limited (MTEDUCARE)Very weak 100/100
- Shree Rama Newsprint Limited (RAMANEWS)Very weak 100/100
- Shree Renuka Sugars Limited (RENUKA)Very weak 100/100
- Simbhaoli Sugars Limited (SIMBHALS)Very weak 100/100
- McLeod Russel India Limited (MCLEODRUSS)Very weak 95/100
- Sanwaria Consumer Limited (SANWARIA)Very weak 95/100
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.