Small cap stocks are preferred by various investors as they are known to give excellent returns.

These stocks invest in companies that have a market capitalization of 250-500. Although these stocks are highly volatile in nature, they are preferred vastly by most investors.

Let’s have a look at some of the best small-cap funds you can consider investing in.

[stocks-data title= “Small Cap Stocks to Consider Investing In” stockcodes=”hg-infra-engineering-ltd:maharashtra-seamless-ltd:automotive-axles-ltd:balrampur-chini-mills-ltd:himatsingka-seide-ltd:psp-projects-ltd:fairchem-speciality-ltd:fairchem-speciality-ltd:hawkins-cookers-ltd:bajaj-corp-ltd”]

1.HG Infra Engineering Ltd.

About the company

Incorporated in 2003, HG Infra Engineering Ltd. (HGIEL) is an emerging pure-play EPC company with presence across India.

The company focuses on roads and allied sectors such as Flyovers, Bridges, and Irrigation.

Why Should You Invest in This Stock?

The company has an order book of Rs 68.5 billion (approx 3.4x of its TTM revenue) including the L1 orders.

The order book provides for robust revenue visibility for the next 2-3 years. Also, the company is likely to gain excellent traction over time driven by improvement in financial pre-qualification and a huge opportunity in the roads and highways.

The company’s commendable execution capabilities and a record of no project cost overruns have helped it become a full-fledged contractor with bidding technical qualification of Rs13bn (as of now) for NHAI, PWD, and MoRTH projects on a standalone basis.

With impressive execution track record, along with a comfortable balance sheet with healthy return ratios and strong order book to sales ratio, one can look at the stock from a long-term horizon.

2. Maharashtra Seamless Ltd

About the Company

Maharashtra Seamless Ltd. (MSL), incorporated on May 10, 1988, is engaged in the manufacturing of seamless pipes & tubes.

Why Should You Invest in This Stock?

The company’s top line was better against the street expectation on the back of healthy volume growth. However, the increased cost of raw material coupled with a 30-day shutdown at the company’s Nagothane plant impacted the EBITDA margins.

The Government of India’s emphasis on initiatives like the replacement of old oil/gas pipelines, pan-India gas pipeline connectivity, city gas distribution is likely to spur demand for pipes.

The government policy for providing preference to domestically manufactured iron and steel products for government procurements also augurs well for domestic pipe manufacturers.

Thus, the stock is likely to outperform over the long-term when seen from the current levels.

 

 

 

 

 

 

 

 

 

3. Automotive Axles Ltd

About the Company

Established in 1981, Automotive Axles Limited (AAL) is a joint venture of Kalyani Group and Meritor Inc., USA.

The company manufactures drive axles, non-drive axles, front steer axles, specialty & defense axles, and drum & disc brakes. The company has manufacturing facilities at Mysore (Karnataka) and Jamshedpur (Jharkhand).

Why Should You Invest in This Stock?

The company’s revenue grew at a healthy pace in the previous few quarters despite the slowdown in commercial vehicles during the quarter.

On account of improving utilization, and various cost-efficiency measures, the operating profit margins have improved over the past few quarters.

One can expect utilization to improve further on account of increasing demand in M&HCV and LCV segments; further availability of finance will also improve the sentiment in the industry.

AAL is comfortably placed to tap the upcoming opportunity in the industry owing to improving road infra, BS-VI pre-buying and foray into new segments coupled with the expansion of capacity by 35-40%. At the CMP, the company is valued attractively for the long-term investing horizon.

 

 

 

 

 

 

 

 

4. Balrampur Chini Mills Ltd

About the Company

Balrampur Chini Mills Ltd (BCML) is the second largest sugar manufacturing company in India. The company is also engaged in the manufacturing of ethanol and co-generation businesses.

One of the largest integrated sugar manufacturing company has its factories in Uttar Pradesh.

The company has aggregate cane crushing capacity of 76,500 tonnes per day with distilleries possessing an aggregate capacity of 360 kilolitres per day and co-generation capacity of 163.20 megawatts.

10 most volatile stocks in the market

Why Should You Invest in This Stock?

The company is likely to see a growth of around 15-20% in its sugar production to 1.2mn tonnes (mt), and with the expected increase in Minimum Support Price (MSP), the company is likely to benefit at its profitability level.

The company is likely to see ~100mn liters sales of ethanol which is expected to provide benefit at the profitability level with the revision in ethanol prices.

Also, the company plans to divert a portion of sugar towards ethanol production due to higher remuneration.

Lastly, due to higher sugarcane crushing, the company is likely to sell higher units of power thereby seeing some positive effect on the top line. Thus, over the medium-term, with everything else remaining stable, the company could see a healthier growth in the price.

5. Himatsingka Seide Ltd.

About the Company

Himatsingka Seide Ltd (HSL) is an integrated home textile player with presence from farm to store.

The company has a manufacturing facility in India and distribution in North America, Europe, and Asia. The company has sheeting and processing capacity of 61 mn meters per annum (MMPA), ultra-fine cotton yarn manufacturing facility with a capacity of 211,584 spindles, and it is also setting up terry towel facility with a capacity of 25,000 tonnes per annum.

The company is licensed to manufacture, source and distribute brands such as Calvin Klein Home, Tommy Hilfiger Home, Barbara Barry, etc. in the locations such as North America, Europe, etc.

Why Should You Invest in This Stock?

The margins are to see healthy growth due to the efficiency offered by the integrated business model which also helps in delivering quality products.

The company has over 12 brands – making it one of the broadest portfolio of home textiles brands. The company received exclusive licensing rights to home textiles brand ‘Royal Velvet’ for North America which will significantly add to the company’s topline, owing to its strong growth potential.

Also, the company is likely to see deleveraging over the next few years, given its capex is in the final stage of execution and is expected to commission soon. Thus, one can look at the stock from a long-term horizon for healthy double-digit returns from current levels.

6. PSP Projects Ltd

About the Company

PSP Projects Ltd (PSPL) is a multidisciplinary construction company that offers a diversified range of construction and allied services across industrial, institutional, government, government residential and residential projects.

The company has also diversified its portfolio geographically moving away from Gujarat. Since incorporation in August 2008, the company has executed nearly 100 projects.

Why Should You Invest in This Stock?

The company saw healthy revenue growth from its key clients with healthy margins that are hovering in the 12-14% guidance band.

The company has an outstanding order book of Rs 27 bn which depicts excellent revenue visibility. Also, the company has a strong pipeline of projects that is likely to get added during the fiscal.

The company has strategically moved out of its home state Gujarat, but seeks to limit its exposure to around 30% given ample opportunity in the state.

The company has one of the lowest leverage ratios vs. peers and has one of the best NWC cycles of fewer than ten days. Also, the company has free deposits of over a billion rupees that are free from any charge.

Thus, with a healthy balance sheet, consistent EBITDA margins, and healthy order book, the company remains one of the preferable names in the sector.

7. Fairchem Specialty Ltd

About the Company

Fairchem Speciality Ltd (FSL) is a Fairfax company that is a specialty chemicals company formed with the merger of Adi
Finechem Ltd (producer of oleochemicals and nutraceuticals) and Privi Organics India Ltd (producer of Aroma chemicals).

The company caters to different sectors right from printing and packaging to adhesives, paints, fragrance, FMCG, and Pharmaceuticals.

The company has a production capacity of 45000 MTPA of Adi and 22000 MTPA of Privi located in Western India and has over 65 products’ portfolio.

Why Should You Invest in This Stock?

The global market for oleochemicals/nutraceuticals/aroma chemicals is likely to grow at a moderate pace.

Also, with the company’s dominant position in three segments along with its large capex plan, the company should register healthy volume growth over the medium term.

For Aroma chemicals – The company has a production capacity of 22000 MTPA and includes clientele such as Givaudan, Firmenich, IFF, Symrise and so on.

For the other two verticals – oleochemicals and nutraceuticals, the company has a manufacturing capacity of 45000 MTPA in Sanand, Ahmedabad.

The oleochemicals find application in the manufacturing of surfactant, soaps and detergents, cosmetics, food emulsifiers, paints, inks & lubricants.

The nutraceuticals find use in dietary supplements, functional food, functional beverages, personal care & pharmaceuticals.

Thus, owing to the growth momentum of the FMCG market, rising disposable income, and increasing urbanization, the company is likely to see healthy growth over the medium. Thus, one can look to invest in the company for a similar time horizon.

8. Hawkins Cookers

About the Company

Hawkins Cookers Ltd (HCL) is a Mumbai based company that manufactures pressure cookers and cookware.

The company has a manufacturing facility at Thane, Hoshiarpur, and Jaunpur. The products are marketed under the name of Hawkins, Futura, Contura, Hevibase, Big Boy and Ventura.

Why Should You Invest in This Stock?

The company reported good numbers both in top line and profitability. While the cost of raw materials increased significantly, the operating leverage helped the company expand its margins significantly.

We expect the revenue growth momentum to sustain and drive the implementation of  Ujjwala Yojana scheme of the government.

The program is likely to provide a new set of opportunity for the cooker and the cookware segment. The organized market in the pressure cooker industry is estimated at Rs. 1500 crore, and HCL stands second only to TTK Prestige accounting for ~30% market share.

Off late, the company has seen excellent traction coming from the rural market due to rising penetration of the LPG connection.

Figures, numbers, & ratios to check when buying a stock

Given the penetration of pressure cookers in rural areas is merely 30%, the sector provides immense opportunity for companies like HCL.

Lastly, the company has a lean balance sheet good leverage that is pegged at 0.3x. Also, the company has managed a track record of healthy dividends of 75%. Lastly, the asset-light nature of the business has resulted in the company generating sound accruals and healthy asset turnover ratio.

 

 

 

 

 

 

 

 

 

 

9. Bajaj Consumer Care Ltd.

About the Company

Bajaj Consumer Care Ltd (BCCL) is an Indian consumer goods company with a significant presence in hair care. The company belongs to the Bajaj Group.

The company is the second largest player in the overall hair oil segment and commands a 52% market share through its key brand – Bajaj Almond Drops Hair Oil.

The company has manufacturing facilities located in Parwanoo, Paonta Sahib and Dehradun.

Why Should You Invest in This Stock?

Bajaj Consumer Care Ltd (BCCL) saw subdued performed in the last fiscal due to flattish volume growth in the domestic market.

This was primarily due to the channel inventory clearance before the re-launch of its flagship brand. However, the company is likely to register sharp improvement in volume which will be aided by media activation after re-launch of the Bajaj Almond Drops Hair Oil.

The company has increased its focus on improving its direct distribution which has started showing signs of improvement.

Thus, while the stock belongs to a popular group and has an active market for its product, one could see benefit coming in over the long term and not immediately due to changes in brand positioning.

 

 

 

 

 

 

 

 

Conclusion

These were some of the stocks that you can consider investing in, if you want to explore the small cap space. Remember that these stocks are very volatile, but consequently provide higher returns!

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww. Groww in no-way promotes/advices any stock for investment.

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