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
Best Debt Free Small Cap Stocks #1 – Clean Science & Technology
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||₹ 1,486||Market Cap (Cr.)||₹ 15,784|
|EPS||₹ 26.8||Stock P/E||55.4|
|ROCE||46.6 %||ROE||34.9 %|
|Face Value||1||Book Value||₹ 82.3|
|Promoter Holding||78.5 %||Price to Book Value||18|
|D/E Ratio||0||Dividend Yield||0.23 %|
|Net Profit Margin||33.4 %||Operating Profit Margin||41.3 %|
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
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||₹ 602||Market Cap (Cr.)||₹ 9,358|
|EPS||₹ 114||Stock P/E||5.28|
|ROCE||33.1 %||ROE||24.5 %|
|Face Value||₹ 10||Book Value||₹ 546|
|Promoter Holding||41.2 %||Price to Book Value||1.09|
|D/E Ratio||0||Dividend Yield||1.62 %|
|Net Profit Margin||19.7 %||Operating Profit Margin||22.3 %|
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
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||₹ 989||Market Cap (Cr.)||₹ 10,336|
|EPS||₹ 26.4||Stock P/E||37.4|
|ROCE||31.6 %||ROE||23.9 %|
|Face Value||₹ 10||Book Value||₹ 116|
|Promoter Holding||20.0 %||Price to Book Value||8.52|
|D/E Ratio||0||Dividend Yield||1.49 %|
|Net Profit Margin||49.7 %||Operating Profit Margin||57.4 %|
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
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:
|CMP||777||Market Cap (Cr.)||₹ 15,671|
|EPS||₹ 44.6||Stock P/E||17.5|
|ROCE||25.5 %||ROE||19.1 %|
|Face Value||₹ 10||Book Value||₹ 185|
|Promoter Holding||84.8 %||Price to Book Value||4.19|
|D/E Ratio||0||Dividend Yield||1.17 %|
|Net Profit Margin||10.4 %||Operating Profit Margin||9.30 %|
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
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||₹ 371||Market Cap (Cr.)||₹ 2,849|
|EPS||₹ 7.79||Stock P/E||47.7|
|ROCE||23.7 %||ROE||17.0 %|
|Face Value||₹ 1||Book Value||₹ 37.8|
|Promoter Holding||70.5 %||Price to Book Value||9.82|
|D/E Ratio||0||Dividend Yield||0.81 %|
|Net Profit Margin||12.6 %||Operating Profit Margin||19.3 %|
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.||Name||Mar Cap in Cr||CMP Rs.||P/E||Debt / Eq|
|4||I D F C||15185.45||94.91||22.48||0|
|5||Nippon Life Ind.||14756.81||236.8||20.42||0|
|11||Lak. Mach. Works||12347.73||11558.3||32.12||0|
|13||C D S L||10317.31||987.3||37.37||0|
|15||G N F C||9263.04||596||6.34||0|
|22||Multi Comm. Exc.||6943.43||1361.45||46.64||0|
|23||G S F C||6371.64||159.9||4.89||0|
|26||Caplin Point Lab||5585.19||735.65||15.8||0|
|27||G M D C||5347.17||168.15||5.66||0|
|43||TD Power Systems||3197.59||204.8||33.36||0|
|45||Kaveri Seed Co.||2885.56||516||10.6||0|
|47||I T D C||2815.36||328.25||47.48||0|
|51||VST Till. Tract.||2305.44||2668.5||24.95||0|
|55||Savita Oil Tech||2109.98||305.35||8.72||0|
|57||Butterfly Gan Ap||1998.98||1118||38.68||0|
|69||Tide Water Oil||1566.08||898.8||13.32||0|
|72||Rel. Indl. Infra||1360.4||900.95||148.17||0|
|74||Sh. Digvijay Cem||1246||85.81||21.54||0|
|75||Suven Life Scie.||1242.38||56.97||0|
|77||Nalwa Sons Invst||1131.32||2201||12.32||0|
|81||Guj. Themis Bio.||1074.54||739.6||18.54||0|
|87||G M Breweries||1022.47||559.4||10.77||0|
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!
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