Best Small Cap Stocks in India: Risk-taking investors are always on the lookout for high-growth small companies. The idea is that they can double investment much faster than their slow-growing larger counterparts. But how do you find the best smaller companies? There are so many of them. In this article, we’ll tell you about the Best small-cap stocks in India which you can add to your watchlists.
Table of Contents
Best Small Cap Stocks in India
We’ve shortlisted some of the best small-cap companies on the basis of their return ratios, sales growth, future plans, and more. A brief description of the business, any recent developments, and financials are also present. So without further ado, let us jump in.
Best Small Cap Stocks in India #1 – Mazagon Dock Shipbuilders
| CMP | ₹758 | Market Cap (Cr.) | ₹15,250 |
| EPS | ₹44.6 | Stock P/E | 17.0 |
| RoCE | 25.5% | RoE | 19.1% |
| Promoter Holding | 84.8% | Book Value | ₹185 |
| Debt to Equity | 0.00 | Price to Book Value | 4.09 |
| Net Profit Margin | 10.4% | Operating Profit Margin | 7.7% |
Mazagon Dock Shipbuilders traces its origins to 1774 when a small dry dock was established in Mazagon. The business grew over the years and it was incorporated in 1934 as a privately held company.
Later in 1960, the company was taken over by Government and brought under the ownership of the Ministry of Defence, Government of India. Presently, the government holds a majority 84.8% stake in the company.
The defense CPSU is engaged in the business of manufacturing warships and submarines for the Indian Navy. It also builds offshore oil drilling platforms, tankers, cargo bulk carriers, passenger ships, and ferries. Additionally, it provides ship repairs and ship refits services.
The net profits of the company have grown from Rs 496 crore in FY18 to Rs 611 crore in FY22. Its TTM profit after tax stood at Rs 952 crore after the December 2022 quarter. The earnings have more than doubled from FY18 levels because of sales increase and margin growth.
Best Small Cap Stocks in India #2 – Happiest Minds Technologies
| CMP | ₹850 | Market Cap (Cr.) | ₹12,500 |
| EPS | ₹15.5 | Stock P/E | 56.1 |
| RoCE | 32% | RoE | 31% |
| Promoter Holding | 53.2% | Book Value | ₹50 |
| Debt to Equity | 0.53 | Price to Book Value | 16.90 |
| Net Profit Margin | 18% | Operating Profit Margin | 24% |
Founded in 2011 by Ashok Soota, Happiest Minds is an IT solutions & services company. It helps organizations in their digital transformation endeavors. The company provides digital business, product engineering, agile infra & security, IoT, analytics, and digital process transformation services.
Happiest Minds caters to clients across a broad range of industries including airline, automotive, BFSI, e-commerce, consumer packaged goods, insurance, and manufacturing.
Recently it acquired Madurai-based IT services company Sri Mookambika Infosolutions (SMI) for Rs 111 crore. This will take the total workforce up by 400 to 5,011 employees now.
The IT company had its IPO in September 2020 and has generated a return of 137% for its investors since the listing date. This comes as revenues and net profits of Happiest Minds have grown rapidly in the last five financial years.
| Fiscal Year | Sales | Net Profit |
| 2022 | 1094 | 181 |
| 2021 | 773 | 162 |
| 2020 | 698 | 72 |
| 2019 | 590 | 14 |
| 2018 | 444 | -13 |
Like other IT companies, it also has high return ratios with RoCE 31.2% and RoE 30.6% respectively. The stock currently trades at a price-to-earnings ratio of 60.2 and price to book value ratio of 18.2.
Best Small Cap Stocks in India #3 – Aegis Logistics
| CMP | ₹350 | Market Cap (Cr.) | ₹12,250 |
| EPS | ₹11.9 | Stock P/E | 29.4 |
| RoCE | 17.4% | RoE | 17.4% |
| Promoter Holding | 58.1% | Book Value | ₹95 |
| Debt to Equity | 0.46 | Price to Book Value | 3.67 |
| Net Profit Margin | 8.3% | Operating Profit Margin | 11.5% |
Aegis Logistics was founded almost 6 decades ago in 1956. Since then, it has emerged as a leading oil, gas, and chemical logistics company. An integrated business, it stands as one of the major private importers and handlers of liquefied petroleum gas (LPG).
Aegis has a big network of liquid and gas terminals at key Indian ports. The company can handle 15,70,000 kilolitres (KL) of chemicals and petroleum, oil & lubricants (POL), and 1,14,000 MT of LPG.
Hindustan Petroleum, Bharat Petroleum, Reliance Industries, ONGC, Tata Steel, and Shell are some of the top clients of this Mumbai-headquartered company.
As for the future plans, Aegis will be setting up liquids and gas terminalling facilities in JV with Royal Vopak N.V. Furthermore, it plans to add 65 more gas retailing stations to its portfolio of 135 stations at present.
The profits of Aegis Logistics have grown at a CAGR of 12.45% to Rs 385 crore in FY22 from Rs 214 crore in FY18 on the back of margin expansion in the last two years. As a result, the stock rallied by 65% in the last year.
Best Small Cap Stocks in India #4 – Campus Activewear
| CMP | ₹375 | Market Cap (Cr.) | ₹11,500 |
| EPS | ₹3.6 | Stock P/E | 103 |
| RoCE | 31.9% | RoE | 29.5% |
| Promoter Holding | 74% | Book Value | ₹16 |
| Debt to Equity | 0.83 | Price to Book Value | 23.80 |
| Net Profit Margin | 9.1% | Operating Profit Margin | 20.3% |
Incorporated in 2016, Campus Activewear is a leading sport and athleisure footwear company in India. It manufactures and retails footwear across various price segments and demographic audiences.
The company has an assembly capacity of 28.80 million pairs per annum. As for the retail presence, it has a strong network of over 425 distributors and 20,000 retailers. It has 66 COCOs, 41 FOFOs, and 107 EBOs across major Indian cities.
In addition to its offline presence, the company also has a formidable digital presence. Campus sold 5.56 million shoes and earned 32.92% of its FY22 revenue from online channels.
The sales of Campus Activewear have grown at a CAGR of 19% from Rs 595 crore in FY19 to Rs 1,194 core in FY22. During the same period, its net profits have grown at a much faster annual rate of 29% from Rs 39 crore to Rs 108 crore.
The company had its IPO recently in April 2022. The stock has a high promoter holding of 74%. In addition to this, it is an efficient business with return ratios of RoCE and RoE at 31.9% and 29.5% respectively.
Best Small Cap Stocks in India #5 – Cholamandalam Financial Holdings
| CMP | ₹600 | Market Cap (Cr.) | ₹11,250 |
| EPS | ₹63.2 | Stock P/E | 9.47 |
| RoCE | 10.2% | RoE | 17.3% |
| Promoter Holding | 48.6% | Book Value | ₹367 |
| Debt to Equity | 11.50 | Price to Book Value | 1.64 |
| Net Profit Margin | 15.3% | Operating Profit Margin | 50.8% |
Part of the multi-billion conglomerate Murugappa Group, Cholamandalam Financial Holdings Ltd. (CHFL) is a non-deposit-taking investment company. Over 7 decades old, it is presently structured as a holding company owning significant investments in the other companies of the business group.
CHFL indirectly provides insurance, lending, risk management, and other financial services through its stakes in:
- Cholamandalam Investment and Finance Company Ltd.
- Cholamandalam MS General Insurance Company Ltd.
- Cholamandalam MS Risk Services Ltd.
It is one of the most preferred stocks in the assets management industry with various mutual funds holding a substantial investment in the company. As of the recent shareholding data for December 2022, FIIs and DIIs owned 11.60% and 26.57% stakes in CFHL respectively.
The net profits of Cholamandalam Financial Holdings have almost doubled from Rs 1,165 crore in FY20 to Rs 2,239 crore in FY22. The stock presently trades at a P/E of 9.47 and offers a good RoE of 17.3%.
List of Best Small Cap Stocks in India
Above we read about the five Best small-cap stocks in India. The table below compiles those names and a few others for your reference.
| Company Name | Industry | CMP (Rs) | Market Cap (Rs Cr) |
|---|---|---|---|
| Mazagon Dock Shipbuilders | Maritime | 760 | 15,250 |
| Mahindra CIE Automotive | Auto Ancillary | 391 | 15,000 |
| Happiest Minds Tech. | IT | 850 | 12,500 |
| Aegis Logistics | Logistics | 350 | 12,250 |
| Campus Activewear | Footwear | 375 | 11,500 |
| Cholamandalam Fin. Holdings | Finance - Investment | 600 | 11,250 |
| Suzlon Energy | Renewable Energy | 9 | 10,000 |
| Lemon Tree Hotels | Hospitality | 75 | 6,000 |
| West Coast Paper Mills | Paper | 5,000 | 3,300 |
| Mrs. Bectors Food Specialities | FMCG | 511 | 3,000 |
In Conclusion
In our study of the Best small-cap stocks in India, we noticed how the stock returns have closely tracked the earnings growth and the expansion in margins. Therefore, increasing sales should be the primary filter to pick good small-cap companies. But it is also a risky proposition because stock may fall sharply if the growth evaporates. Investors may quickly dump the stock.
What parameters should one keep in mind while investing in small-cap companies?
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