🧹 KHFM Hospitality: PSU Contracts, High Debtors, and 51x P/E – Service Industry Mein Drama

🧹 KHFM Hospitality: PSU Contracts, High Debtors, and 51x P/E – Service Industry Mein Drama

At a Glance

KHFM provides facility management, catering, guest house ops, gardening, pest control and more for government and PSU clients. It bagged ₹261 Cr in contracts recently (SBI, ONGC, BMC, Pondicherry University), but debtor days are now 112, promoter holding is down to 37%, and stock trades at 51x P/E. Something smells off — and it’s not the pantry.


1. 🎬 Intro: Low Promoter Holding, High Valuation

  • ₹177 Cr market cap
  • P/E: 51.5
  • Book Value: ₹27 → P/B: 3.03x
  • EPS: ₹1.59
  • Dividend: 0.61% yield, but erratic
  • Promoter Holding: Crashed from 71.2% → 37.0% in 3 years 😬

And yet, the company is bagging PSU contracts like Diwali sweets.


2. 🧽 WTF Do They Even Do?

KHFM is the janitor to the nation — literally.

Services:

  • 🧹 Housekeeping & Building Maintenance
  • 🛏️ Guest House Ops (Govt. bungalows? Maybe!)
  • 🌻 Gardening & Landscaping
  • 🐜 Pest Control (Yes, even that)
  • ☕ Pantry & Catering (recently got ₹50+ Cr deals)
  • 💼 Front Office Management
  • 🏢 Property Management

Client base: PSU, BFSI, Municipal, University, Defence.

Core moat = long-term multi-crore government contracts.


3. 💰 Financials: Stable Sales, Flat Profits

MetricFY23FY24FY25
Revenue (₹ Cr)90112104
Net Profit (₹ Cr)333
OPM %10%9%10%
ROE6.5%7.0%6.6%
  • Sales up 15% in FY24, but fell back 7% in FY25
  • Profit has remained stuck at ₹3 Cr for 3 years straight — a plateau of pain

4. 📊 Valuation: Is ₹82 the Right Price?

  • Market Cap: ₹177 Cr
  • EPS (TTM): ₹1.59
  • P/E: 51.5x
  • EV/Sales: ~1.6x
  • P/B: 3.03

🧮 Fair Value Range (10–20x EPS or 1x EV/Sales):
₹30 – ₹60 is more sensible unless margins expand dramatically.


5. 📈 What’s Cooking?

📰 Order Bonanza:

  • 🏦 ₹50.3 Cr: SBI + Pondicherry University (Apr 2025)
  • 🏢 ₹11.89 Cr: ONGC & BMC (Dec 2024)
  • 🧾 ₹261 Cr contracts confirmed in FY24

👨‍⚖️ Boardroom Moves:

  • CFO & CS Rahul Pathak resigned in Feb 2024
  • Multiple EGMs for preferential allotment + warrants
  • Capital raised via convertible warrants

Still, Q4FY25 profit fell -12% QoQ, even with all this drama.


6. 💼 Balance Sheet – Leverage Under Control?

MetricFY25
Total Assets₹113 Cr
Reserves₹37 Cr
Equity₹22 Cr
Borrowings₹39 Cr
D/E Ratio~1.2x

They repaid ₹9 Cr debt over 2 years — solid improvement.
But reserves still look small for a ₹100 Cr+ revenue company.


7. 💸 Cash Flow – Government Ka Paisa Late Aata Hai

FYCFO (₹ Cr)Comment
FY23-16Severe cash burn
FY247Positive after order wins
FY25-3Slipped again despite stable sales

⚠️ Working Capital days = 249 😵
⚠️ Debtor Days = 112 → PSU clients taking their own sweet time.


8. 📉 Ratios – Stressy but Manageable

RatioValue
ROCE11.1%
ROE6.55%
OPM10%
Interest Coverage~1.2x
  • ROCE just decent, not industry-beating
  • ROE < 7% = weak returns
  • Low ICR = risky if interest rates spike

9. 💵 P&L Breakdown

MetricFY25
Revenue₹104 Cr
Operating Profit₹11 Cr
Other Income₹1 Cr
Interest₹6 Cr
PBT₹5 Cr
Net Profit₹3 Cr

Basically, ₹1 Cr net profit per ₹35 Cr revenue — thin margins.


10. 📊 Peer Comparison

CompanyP/EOPMROESales (₹ Cr)Mcap (₹ Cr)
KHFM51.510%6.6%104₹177
CMS Info22.926%17.7%2,425₹8,525
NESCO22.360%15.2%732₹8,384
Nirlon21.279%59.7%636₹4,643

Verdict: KHFM trades at the highest P/E with the lowest ROE. PSU contracts don’t justify that kind of love.


11. 👨‍👩‍👦 Shareholding & Promoter Moves

YearPromoter Holding
FY2271.2%
FY2337.5%
FY2537.0%

Public now holds 63% of the company.
No DIIs or FIIs in sight.
Promoters have issued warrants to themselves and others, diluting equity multiple times in FY24.


12. 📎 Miscellaneous Masala

  • NSE SME listing → lower liquidity
  • No proper investor communication since April 2025
  • Preferential allotments, resignations, and EGM notices every few months = governance risk?
  • Dividend paid in FY24, then skipped again in FY25. Thoda deti hoon, thoda nahin.

13. 🧑‍⚖️ EduInvesting Verdict™

KHFM is a low-margin service business with large PSU contracts and slow receivables.

Yes, order inflow looks strong. But high debtors, erratic cash flow, declining promoter holding, and a 51x P/E? That’s not a margin of safety — that’s margin of madness.

📉 Until debtor days fall below 60 and ROE rises above 12%, this story is all contracts, no compounding.

Fair Value Range = ₹30 – ₹60


✍️ Written by Prashant | 📅 08 July 2025

Tags: KHFM Hospitality, SME stocks, PSU contracts, facility management, stock analysis India, EduInvesting, smallcap services, ROE low, debtors high, dividend erratic

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