Best Debt Free Small Cap Stocks: Both experienced and new investors are fascinated by small-cap stocks, the underdog of the stock market. Take a look at any ace investors’ portfolio. You’ll notice that their investment journey started with one or two companies that made the most wealth in their portfolio.

Combined with their significant growth potential and a generally unaware public, the small-cap stocks have hidden gems, capable of transforming the wealth of any investor. That said, we’ve compiled a list of some of the best debt free small cap stocks.

Best Debt Free Small Cap Stocks in India

Here are list of Best Debt Free Small Cap Stocks listed in NSE and BSE

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Best Debt Free Small Cap Stocks #1 – Clean Science & Technology

Best Debt Free Small Cap Stocks - Clean Science Logo

CSIT is a chemical company, with chemical manufacturing business arms in the FMCG, pharmaceutical, agro, and performance chemical sectors. The company was incorporated in 2003 and innovates its products with its in-house research and development centers. The company got listed recently, in 2021, making it one of the more recently listed companies on our list. 

Financials Of Clean Science Technology:

CMP₹ 1,486Market Cap (Cr.)₹ 15,784
EPS₹ 26.8Stock P/E55.4
ROCE46.6 %ROE34.9 %
Face Value1Book Value₹ 82.3
Promoter Holding78.5 %Price to Book Value18
D/E Ratio0Dividend Yield0.23 %
Net Profit Margin33.4 %Operating Profit Margin41.3 %

Clean Science is a small-cap chemical company, sized at ₹15,784 crores. As of FY 22, the company reported sales of ₹685 crores and a net profit of ₹229 crores. Five years prior, the company earned ₹241 crores and a net profit of ₹49 crores.

The company’s sales and net profits have been on a positive upward trend. It has a phenomenally high ROE of 34.9 percent and a ROCE of 46.6 percent. 

Another positive trait is that the company is debt free, with a D/E ratio of zero. The stock P/E of 55.4 is much higher than its industry P/E of 27.7. Promoters of Clean Science hold a 78.5 percent stake in the company, and there hasn’t been any recent stake sale as of March 2023.

Since listing in 2021, the company’s share price has slightly fallen, given a negative return of (-8.3) percent. 

Best Debt Free Small Cap Stocks #2 – GNFC

Best Debt Free Small Cap Stocks - GNFC logo

GNFC is a Gujarat-based chemical company, set up jointly with the government of Gujarat and the Gujarat State Fertilizers & Chemicals. Since beginning operations in 1982, the company has become one of the largest fertilizer companies in the world.

Their fertilizer products include urea, nitro phosphate, neem de-oiled cake, and Narmade Neem pesticides. Today, along with manufacturing fertilizers, the company has diversified into chemicals, petrochemicals, electronics, and information technology. 

Financials Of GNFC:

CMP₹ 602Market Cap (Cr.)₹ 9,358
EPS₹ 114Stock P/E5.28
ROCE33.1 %ROE24.5 %
Face Value₹ 10Book Value₹ 546
Promoter Holding41.2 %Price to Book Value1.09
D/E Ratio0Dividend Yield1.62 %
Net Profit Margin19.7 %Operating Profit Margin22.3 %

GNFC is a small cap fertilizer company, being one of the biggest manufacturers of fertilizer in the country. As per the latest annual report (FY 22), the company earned ₹8,642 crores and a net profit of ₹1,704 crores.

A 5-year overview of the company shows that it has improved sales, operating profit margins, and as a result, net profits as well. To compare, FY 18 saw the company earn ₹5,837 crores in sales and ₹790 crores in net profits.

The operating profit margin has also improved from 24 percent (FY 18) to 28 percent (FY 22). The ROE and ROCE figures of GNFC are excellent, at 24.5 percent and 33.1 percent respectively.

Promoters of GNFC, Gujarat State Fertilizers & Chemicals, and Gujarat State Investments, own 41.18 percent of the company. As per the latest data, the promoters haven’t trimmed any stake in the company. GNFC has given a positive, but slightly underwhelming return of 24 percent in the past 5 years. 

Best Debt Free Small Cap Stocks #3 – CDSL 

Best Debt Free Small Cap Stocks - CDSL Logo

As an investor if you’ve sold shares recently, especially shares bought from BSE, you might have heard of CDSL. In the Indian markets, there are only two depositories, of which one of them is listed – Central Depository Services Ltd (CDSL).

The company provides services to exchanges to clearing corporations, stock exchanges, investors, and depository participants. Set up in 1999, CDSL is the 2nd depository institution after NSDL. The company provides various investor services, including the maintenance of demat accounts, trade settlements, share transfers, account statements, and nominations, to name a few. 

Financials Of CDSL:

CMP₹ 989Market Cap (Cr.)₹ 10,336
EPS₹ 26.4Stock P/E37.4
ROCE31.6 %ROE23.9 %
Face Value₹ 10Book Value₹ 116
Promoter Holding20.0 %Price to Book Value8.52
D/E Ratio0Dividend Yield1.49 %
Net Profit Margin49.7 %Operating Profit Margin57.4 %

CDSL is more or less a duopoly company, as there are only two major depository institutions in the Indian market. In the financial year ending March 2023, CDSL earned ₹555 crores in revenues and ₹319 crores in operating profits, translating to an operating profit margin of 57 percent.

Its net profits for the year were ₹276 crores, one of the highest profits in the company’s operating history. In FY 19 the company earned ₹196 crores in sales and ₹115 crores in net profits, with an OPM of 56 percent.

The company’s ROE and ROCE are great, at 23.9 percent and 31.6 percent respectively. Promoters of CDSL own a low stake of 20 percent in the company, with the public being the largest shareholder (46.8 percent).

CDSL is one of the best-performing debt free small-cap stocks on our list, giving a return of 251 percent in the last five years.

Best Debt Free Small Cap Stocks #4 – Mazagon Dock Shipbuilders

mazagon Dock Logo

Of all the companies on our list of best debt free small cap stocks, Mazagon Dock Shipbuilders has the most interesting product range – Warships, Submarines, oil platforms, ferries, floating cranes, and almost every other industrial floating vessel you’ve seen on the open sea.

In the past 60+ years, Mazagon Dock has built over 800 vessels, including 27 warships and 7 submarines. Besides building ships and other sea vessels, the company also provides maintenance and repair services to domestic and international clients. 

Financials Of Mazagon Dock:

CMP777Market Cap (Cr.)₹ 15,671
EPS₹ 44.6Stock P/E17.5
ROCE25.5 %ROE19.1 %
Face Value₹ 10Book Value₹ 185
Promoter Holding84.8 %Price to Book Value4.19
D/E Ratio0Dividend Yield1.17 %
Net Profit Margin10.4 %Operating Profit Margin9.30 %

Mazagon Dock Shipbuilders is a Ministry Of Defence company, under the government of India. It reported earnings of ₹5,733 crores for FY 22, and operating profits of ₹442 crores, translating to an OPM of 8 percent.

Their net profits for the year were ₹586 crores, the highest in the past 5 years of operations. Though the company is profitable and generating revenues, the growth has been slow in recent years. ROE (19.1 percent) and ROCE (25.5 percent) of the company are positive and quite high. 

The P/E of Mazagon Dock (17.5) is less than half that of its industry P/E of 36.3, showing signs of underpricing. The company has a D/E ratio of zero, as the company is almost debt free.

The government of India owns a substantial 84.8 percent stake in Mazagon Dock, making them the majority shareholder. Since listing in October 2020, Mazagon Dock Shipbuilders has given a triple bagger return of 356 percent. 

Best Debt Free Small Cap Stocks #5 – Shanthi Gears

Shanti Gears Logo

Part of the generational business dynasty – The Murugappa Group, and a subsidiary of Tube Investments, Shanthi Gears is a small-cap engineering company. They design, manufacture, and supply gears and gearboxes to automotive companies. They employ over 1000 people and have three to four manufacturing facilities, supplying integral parts to major automotive companies. 

Financials Of Shanthi Gears:

CMP₹ 371Market Cap (Cr.)₹ 2,849
EPS₹ 7.79Stock P/E47.7
ROCE23.7 %ROE17.0 %
Face Value₹ 1Book Value₹ 37.8
Promoter Holding70.5 %Price to Book Value9.82
D/E Ratio0Dividend Yield0.81 %
Net Profit Margin12.6 %Operating Profit Margin19.3 %

The latest financial year (FY 22) turned fruitful for Shanthi Gears, which reported an all-time high revenue of ₹377 crores and net profit of ₹59 crores. Another factor that makes FY 22 important is the sudden growth spurt in revenue, as the previous four years saw its sales and profits stagnate around the same levels.

For the financial year ending 2018, Shanthi Gears reported revenues of ₹214 crores and a net profit of ₹29 crores. The operating profit margin for the 5-year period has improved slightly from 17 percent to 18 percent. 

The company has a positive and reassuring ROE (17 percent) and ROCE (23.7 percent). The stock P/E of Shanthi Gears is 47.7, which is almost double that of its industry P/E of 24.6. This could indicate that the stock is overpriced at its current levels.

Promoters of Shanthi Gears, Tube Investments Of India own a 70.5 percent stake in the company, with no major increase or decrease recently. In the past 5 years, Shanthi Gears has given a multi-bagger return of 177.5 percent. 

List of Debt Free Small Cap Stocks in India

S.No.NameMar Cap in CrCMP Rs.P/EDebt / Eq
1Mazagon Dock15401.07763.617.140
2Gland Pharma15241.45925.418.630
3Clean Science15236.761434.251.60
4I D F C15185.4594.9122.480
5Nippon Life Ind.14756.81236.820.420
6Lloyds Metals14596.97328.1516.060
7Gillette India14210.854360.542.870
8Finolex Cables12976.91848.523.450
9Krishna Institu.12849.271605.650.860
10Triveni Turbine12751.62401.1566.160
11Lak. Mach. Works12347.7311558.332.120
12NMDC Steel11956.9140.80
13C D S L10317.31987.337.370
14National Standar9600.14800.051163.650
15G N F C9263.045966.340
16Rites9240.86384.5517.030
17Data Pattern9002.531608.0572.580
18UTI AMC8671.73682.920.460
19NBCC760542.2521.140
20KSB7602.142183.941.450
21BSE7243.62535.535.230
22Multi Comm. Exc.6943.431361.4546.640
23G S F C6371.64159.94.890
24Saregama India5885.84304.9531.170
25Mah. Scooters5806.45508029.750
26Caplin Point Lab5585.19735.6515.80
27G M D C5347.17168.155.660
28Avanti Feeds5175.97379.918.020
29VST Industries5165.63345.615.810
30Kennametal India5131.72334.952.780
31Vesuvius India4914.63242136.010
32Elantas Beck4665.675883.5548.680
33JSW Holdings4632.04417315.450
34NESCO4327.28614.1514.880
35Sharda Cropchem4294.4747612.540
36Infibeam Avenues4030.0815.0529.570
37Volt.Transform.3988.863942.819.960
38Kirl.Pneumatic3751.07580.3534.530
39NOCIL3677.04220.6519.380
40Brightcom Group3277.0716.242.40
41MOIL3264.87160.4511.090
42Shanthi Gears3248.15423.448.490
43TD Power Systems3197.59204.833.360
44Ganesh Housing3018.6136230.170
45Kaveri Seed Co.2885.5651610.60
46Jai Corp2830.17158.6159.360
47I T D C2815.36328.2547.480
48Divgi Torq2520.99824.349.290
49Hathway Cable2414.4213.6433.940
50Bhansali Engg.2389.0314417.590
51VST Till. Tract.2305.442668.524.950
52Honda India2301.832270.0523.760
53Paushak2173.17705141.20
54Swaraj Engines2168.871785.6516.260
55Savita Oil Tech2109.98305.358.720
56Cartrade Tech2000.03426.961.360
57Butterfly Gan Ap1998.98111838.680
58Paras Defence1959.39502.454.480
59Wendt India1836.999184.9545.810
60Vakrangee1823.417.2145.510
61Panama Petrochem1821.46301.17.620
62Tanfac Inds.1775.51178031.580
63Seshasayee Paper1739.75275.854.360
64Foseco India1726.032701.1535.960
65Alembic1723.2567.118.580
66Amrutanjan Healt1715.8358741.030
67Jyoti Resins1700.11416.7536.660
68Sirca Paints1649.7730135.750
69Tide Water Oil1566.08898.813.320
70BF Investment1446.123846.260
71Goldiam Intl.1442.28132.3517.080
72Rel. Indl. Infra1360.4900.95148.170
73RPG LifeScience.1251.43756.6518.50
74Sh. Digvijay Cem124685.8121.540
75Suven Life Scie.1242.3856.970
76Disa India1163.53800139.050
77Nalwa Sons Invst1131.32220112.320
78Uniphos Enter.1095.77157.5528.640
79Raghav Product.1077.6493941.690
80EKI Energy1075.38390.853.10
81Guj. Themis Bio.1074.54739.618.540
82Likhitha Infra.1066.93270.4517.720
83Excel Industries1063.4884613.290
84Ksolves India1048.0188442.120
85John Cockerill1046.32211881.190
86Cressanda Solns.1038.8926.07532.750
87G M Breweries1022.47559.410.770

Conclusion

In this article we got to learn about some of the best debt free small cap stocks. While a lack of debt or borrowings is an important investment filter, it should not be the only criterion when picking stocks. Especially small-cap stocks, which witness higher risk, volatility, and competition from industry leaders.

Apart from debt, you should also consider the return on equity, sales, profit growth, operating profit margins, and more. How important is debt when you pick stocks? Let us know below!

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.


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