Malu Paper Mills Limited — financial distress indicators
Financial-health summary
Malu Paper Mills Limited's reported numbers place it in the 'Very weak' financial-health band (distress score 91/100). The main indicators are liabilities exceed assets (negative equity), operating profit does not cover interest and market-implied default probability >20%. Independently, the Ohlson accounting model puts its 1-year failure probability at 99% and the market-implied (Merton) default probability is 41.9%. 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.
Total liabilities are 1.14× total assets.
Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of net-worth erosion; under the Companies Act 2013 it is a recognised sign of financial sickness.
Interest coverage (EBIT / interest) is -0.11×.
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 0.21 σ → PD 42%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Current ratio is 0.47 (current assets cover 47% of near-term obligations).
Cash-flow insolvency test: inability to pay debts as they fall due is the trigger for both U.S. involuntary petitions and Indian IBC default.
Total debt is 35.5× EBITDA.
Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.
O-score 4.94 → model probability 99%.
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.
Short-term debt is 41.4× cash on hand.
Maturity wall: debt due within a year must be refinanced, which is the most common proximate cause of filings.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Operating cash flow is positive over the latest 12 months.
- Revenue still growing (+20% YoY).
- High insider/promoter ownership (74%) aligns management with survival.
📰 Recent news scan
- Malu Paper Mills vs Nifty 50: Share Price Performance Compared - UnivestGoogle News · 2026-10-05
- Malu Paper Mills Ltd Share Price Today NSE/BSE Charts - Alice BlueGoogle News · 2026-10-01
- Malu Paper Mills appoints CS Priyanka Jaiswal as Secretarial Auditor for FY27-FY31 - scanx.tradeGoogle News · 2026-09-23
- Malu Paper Mills Bull Case vs Bear Case for 2026 - UnivestGoogle News · 2026-09-15
- Malu Paper Mills returns to profit in Q1FY26 on higher sales - scanx.tradeGoogle News · 2026-07-23
⚖️ 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 Malu Paper Mills Limited's financial-health indicators show?
As of 2026-10-09, Malu Paper Mills Limited's public financial data places it in the 'Very weak' band with a distress score of 91/100, driven by liabilities exceed assets (negative equity), operating profit does not cover interest and market-implied default probability >20%. 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 Malu Paper Mills Limited's financial distress score?
91/100 ('Very weak'). Ohlson O-score 4.94 (model 1-year failure probability 99%). Merton distance-to-default 0.21 σ (model default probability 41.9%).
What works in Malu Paper Mills Limited's favour?
Operating cash flow is positive over the latest 12 months. Revenue still growing (+20% YoY). High insider/promoter ownership (74%) 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.