Top 5 Fastest Growing Stocks in India

Investors are constantly seeking stocks with exceptional growth potential, particularly those capable of accelerating revenue growth and profitability.

When evaluating growth stocks, key metrics to consider include robust revenue expansion, strong profit growth, impressive return ratios, and dividend policies.

In this article, we spotlight five rapidly growing stocks that exemplify these traits, offering promising opportunities across various sectors.

#1 LTI Mindtree

First on the list is LTI Mindtree.

Larsen & Toubro Infotech and Mindtree announced a merger in 2022 to become the sixth-largest IT company in India.

The company is primarily engaged in offering IT services like application development, maintenance, outsourcing, enterprise solutions, infrastructure management, and digital solutions.

Its major business verticals are banking, finance and insurance, manufacturing, media, retail, travel, hospitality, and healthcare. The company has over 700 clients across 30 countries, indicating a diversified presence.

In the last five years, the company's sales have grown by a compound annual growth rate (CAGR) 26.7% driven by healthy deal wins, improved crossing and up selling opportunities, and greater ability to bid for large clients.

The earnings before interest tax depreciation and amortisation (EBITDA) and net profit also grew by a CAGR of 25.8% and 24.7%, respectively, on account of high employee utilisation and client additions.

Although the profit margins were slightly reduced on account of merger-related integration costs, the return on capital employed (RoCE) and return on equity (RoE) averaged 27% and 37%, respectively.

Given that the company is an IT services company and has zero debt, it pays high dividends to its shareholders.

In the last five years, the dividend payout and dividend yield averaged at 35% and 1.3% respectively.

LTI Mindtree Financials (2019-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Sales (Rs m)	108,786	123,698	261,087	331,830	355,170
Sales Growth (%)		13.7%	111.1%	27.1%	7.0%
EBITDA (Rs m)	20,203	27,120	52,285	60,947	63,736
EBITDA Margin (%)	18.6%	21.9%	20.0%	18.4%	17.9%
Net Profit (Rs m)	15,205	19,382	39,500	44,103	45,846
Net Profit Margin (%)	14.0%	15.7%	15.1%	13.3%	12.9%
Return on Equity (RoE)	28.5%	26.8%	28.0%	27.4%	23.3%
Return on Capital Employed (RoCE)	39.1%	36.9%	38.4%	36.9%	31.9%
Dividend Payout Ratio (%)	32.1%	36.1%	24.4%	40.2%	42.0%
Dividend Yield (%)	1.7%	1.4%	1.0%	1.2%	1.2%
P/E Ratio (x)	18.6	26.3	24.7	34.1	34.1
P/B Ratio (x)	5.3	7.1	6.9	9.3	8.0

Source: Equitymaster

At present, the company is focusing on cross-sell and up-sell opportunities to win new deals and acquire more clients.

Apart from this, it is focussing on improving its profit margins by reducing its discretionary spending and tail rationalisation by focusing on the most profitable projects and eliminating the least profitable ones.

Going forward, if the efforts of LTI Mindtree are successful, then we can expect strong revenue and profit growth.

To know more, check out LTI Mindtree's financial factsheet and latest quarterly results.

#2 Varun Beverages

Second on the list is Varun Beverages, one of the largest franchisees of PepsiCo in the world.

The company produces and distributes a wide range of carbonated and non-carbonated drinks, as well as packaged water.

Some of the most popular brands sold by the company is Pepsi, Seven-Up, Mirinda, Mountain Dew, and Tropicana.

It has 43 manufacturing facilities in India and abroad with a robust distribution network of 110+ owned depots, 2,500+ owned vehicles, 2,400+ primary distributors, and 925,000+ vis-coolers.

Robust distribution network has given the company a unique advantage to gain market leadership and grow its sales at a CAGR of 17.6% in the last five years.

The company also has strong backward integration facilities for the production of crowns, plastic closures, corrugated boxes, and shrink-wrap films. This has helped the company cut its costs and grow its EBITDA and net profit at a CAGR of 19.9% and 34.8%, respectively.

The profit margins also expanded over the last few years on account of operational efficiencies, and the five-year average EBITDA and net profit stood at 20.6% and 9.2%, respectively.

As a result, the RoE and RoCE also expanded consistently, and the five-year average stood at 20.7% and 22.6%, respectively.

Although not a dividend paymaster, the company manages to pay regular dividends to its shareholders.

In the last five years, the dividend payout and dividend yield averaged 9.6% and 0.2%, respectively.

Varun Beverages Financials (2019-2024)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Sales (Rs m)	70,107	63,445	86,882	129,557	157,641
Sales Growth (%)		-9.5%	36.9%	49.1%	21.7%
EBITDA (Rs m)	14,667	11,480	16,769	28,061	36,325
EBITDA Margin (%)	20.9%	18.1%	19.3%	21.7%	23.0%
Net Profit (Rs m)	4,722	3,573	7,461	15,501	21,018
Net Profit Margin (%)	6.7%	5.6%	8.6%	12.0%	13.3%
Return on Equity (RoE)	14.2%	10.1%	18.3%	30.4%	30.3%
Return on Capital Employed (RoCE)	18.0%	11.9%	20.6%	32.6%	30.0%
Dividend Payout Ratio (%)	7.6%	10.1%	7.3%	7.3%	15.5%
Dividend Yield (%)	0.2%	0.2%	0.1%	0.2%	0.3%
P/E Ratio (x)	47.4	60	54.8	41.7	59.7
P/B Ratio (x)	6.7	6.1	10	12.7	18.1

Source: Equitymaster

Being one of the largest franchisees of PepsiCo, the company has continuously worked on improving its network and expanding its production facilities. In December 2023, the company recently laid the foundation for its 44th manufacturing facility with a capex of Rs 2.7 billion (bn).

Apart from this, it also planning to set up three new manufacturing facilities in Maharashtra, Jharkhand, and Odisha.

Varun Beverages is also planning to grow internationally and has acquired franchisee rights in South Africa.

Going forward, with the company's growth plans, both the revenue and profitability will grow in the medium term.

To learn more, check out Varun Beverages' financial factsheet and the latest quarterly results.

#3 Titan

The third company on the list is Titan.

It is one of the most respected lifestyle companies in India, with an established presence in watches, eyewear, and jewellery segments.

Apart from its existing product categories, the company recently ventured into fragrance, bags, and apparel.

Part of the Tata group, the company is a proud owner of several popular brands such as Skinn, Fastrack, Titan Eye+, Tanishq, and Sonata.

It is also the world's fifth-largest watch manufacturer and has a market share of over 6% in India's jewellery market.

The company has an extensive network of brand outlets across various product categories. It has 898 brand outlets in jewellery segment, 1,080 exclusive and 8,000 multi brand outlets in the watch segment, 975 stores in the eyewear segment, and presence in over 200 large stores for its emerging business segment.

Apart from a strong domestic presence, the company has an international presence in over 40 countries.

A strong distribution network in India and abroad helped the company clock a strong sales growth of 15.5% (CAGR) in the last five years.

The EBITDA and net profit grew by a CAGR of 19.5% and 18.7%, respectively. The profit margins also witnessed an expansion on account of operating leverage and a growing share of high-margin jewellery and watches.

As a result, the RoE and RoCE also expanded and averaged at 21.9% and 32.2% respectively in the last five years.

Titan is also known for paying consistent dividends to its shareholders with a five-year average dividend payout and dividend yield of 29.9% and 0.4%, respectively.

Titan Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Sales (Rs m)	197,785	210,520	216,440	287,990	405,750
Sales Growth (%)		6.4%	2.8%	33.1%	40.9%
EBITDA (Rs m)	19,872	24,630	17,180	32,830	48,450
EBITDA Margin (%)	10.0%	11.7%	7.9%	11.4%	11.9%
Net Profit (Rs m)	13,887	14,930	9,740	21,980	32,740
Net Profit Margin (%)	7.0%	7.1%	4.5%	7.6%	8.1%
Return on Equity (RoE)	22.9%	22.4%	13.0%	23.6%	27.6%
Return on Capital Employed (RoCE)	33.0%	33.9%	20.4%	33.6%	40.1%
Dividend Payout Ratio (%)	32.0%	23.8%	36.5%	30.3%	27.1%
Dividend Yield (%)	0.5%	0.4%	0.3%	0.4%	0.4%
P/E Ratio (x)	0.6	0.6	1.1	0.8	0.6
P/B Ratio (x)	0.1	0.1	0.1	0.2	0.2

Source: Equitymaster

The company is continuously investing in expanding its presence domestically and internationally.

It aims to expand Tanishq's presence from 265 towns to 300 towns in the next couple of years. Titan is also planning to expand its emerging segment business rapidly to capture the growing demand for apparel.

Going forward, the company's strong growth plans will drive its revenue and profit growth in the medium term.

To know more, check out Titan's financial factsheet and latest quarterly results.

#4 Polycab India

Next on the list is Polycab India, India's leading manufacturer of cables and wires.

The company has a wide portfolio of cables, wires, and allied products, such as uPVC conduits, lugs and glands.

Recently it also entered into consumer electrical products like fans, switches, switchgear, LED lights, luminaries, solar inverters, and pumps.

The company enjoys a market share of 24% in domestic organised wires and cables business and has presence in over 76 countries.

It has 25 manufacturing facilities and a strong network of over 4,300 distributors, 0.2 million (m) retail outlets, 23 warehouses, four regional offices, nine local offices, and 17 experience centres in India.

Coming to its financials, the sales grew by a CAGR of 12.1% in the last five years, on account of a growing share of the cables and wires business in the organised sector and the high contribution from the consumer electricals business.

The EBITDA and net profit grew by a CAGR of 14.1% and 20.7%, respectively, on account of the company's ability to pass on raw material increase to its customers.

Hence, the profit margins also expanded and averaged 12.1% and 8.1%, respectively. The RoE and RoCE also averaged 18.1% and 25.4% over the last five years.

Polycab India has also consistently increased its dividend payout. In the last five years, the dividend payout and dividend yield averaged 17.6% and 0.7%, respectively.

Polycab India Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Sales (Rs m)	79,856	88,300	87,922	122,038	141,078
Sales Growth (%)		10.6%	-0.4%	38.8%	15.6%
EBITDA (Rs m)	9,504	11,276	11,067	12,476	18,397
EBITDA Margin (%)	11.9%	12.8%	12.6%	10.2%	13.0%
Net Profit (Rs m)	5,003	7,656	8,418	8,452	12,823
Net Profit Margin (%)	6.3%	8.7%	9.6%	6.9%	9.1%
Return on Equity (RoE)	17.7%	20.1%	17.8%	15.3%	19.4%
Return on Capital Employed (RoCE)	29.9%	27.7%	21.8%	20.9%	26.8%
Dividend Payout Ratio (%)	8.5%	13.6%	17.7%	24.8%	23.4%
Dividend Yield (%)	0.0%	0.8%	1.0%	0.7%	0.8%
P/E Ratio (x)	0.0	16.6	18.3	36.2	30.3
P/B Ratio (x)	0.0	3.3	3.3	5.6	5.9

Source: Equitymaster

Polycab India has high growth plans and plans to incur a capex of Rs 7 bn each year for the next two years.

Out of the total capex, three-fourths will be allocated towards the cables and wire business for setting up a high voltage manufacturing plant, and the rest will be allocated towards the consumer electricals business maintenance and debottlenecking.

It plans to fund the entire capex through internal accruals, which indicates that the company has adequate liquidity.

Going forward, the company's expansion plans can further fuel its growth and boost its revenue and profits in the medium term.

To know more, check out Polycab's financial factsheet and latest quarterly results.

#5 Bharat Electronics

Last on the list is Bharat Electronics.

Formed under the Ministry of Defence, Bharat Electronics is a multi-product, multi-technology conglomerate that provides products and systems to the defence sector.

It has a wide product portfolio, including radars, fire control systems, missile systems, communication systems, tank electronics, and gun upgrades.

Recently, the company ventured into production and supply of weapon systems and lithium-ion batteries.

It is also undertaking solar power plant projects and partnered with ISRO for satellite assembly, integration, and testing.

Apart from this, it secured business from the Security Analytics Center (SAC), Data-Diode Solutions for DRDO, PKI, and associated services.

It is also undertaking railway and metro projects by providing an AFC gating system.

For the defence sector, it is working on the requirements for the UAVs' payload, data linkages, and ground control stations.

Bharat Electronics also provided drone guard systems and is developing RF and IR seekers, missiles, arms, and ammunition.

With a presence in diverse industries, the company is headed for its next leg of growth.

Coming to its financials, in the last five years, the company's revenue has grown by a CAGR of 7.8% on account of high order book.

The EBITDA and net profit also grew by a CAGR of 7.6% and 9.7%, respectively, on account of high order execution.

Its EBITDA and net margin averaged at 21.8% and 15.1% respectively in the last five years, and its RoE and RoCE expanded and averaged at 19.4% and 26.9% respectively.

Bharat Electronics is a dividend paymaster and pays consistently high dividends to its shareholders. Its dividend payout ratio and dividend yield averaged 44.3% and 2.9%, respectively.

Bharat Electronics Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Sales (Rs m)	121,642	129,677	141,087	153,682	177,344
Sales Growth (%)		6.6%	8.8%	8.9%	15.4%
EBITDA (Rs m)	27,676	25,272	31,851	33,221	39,969
EBITDA Margin (%)	22.8%	19.5%	22.6%	21.6%	22.5%
Net Profit (Rs m)	18,480	17,926	20,693	23,545	29,404
Net Profit Margin (%)	15.2%	13.8%	14.7%	15.3%	16.6%
Return on Equity (RoE)	20.1%	17.8%	18.7%	19.2%	21.2%
Return on Capital Employed (RoCE)	28.7%	24.7%	26.7%	25.8%	28.4%
Dividend Payout Ratio (%)	44.8%	38.1%	47.1%	46.6%	44.7%
Dividend Yield (%)	3.1%	3.1%	3.8%	2.6%	1.9%
P/E Ratio (x)	14.6	12.1	12.5	18.0	23.0
P/B Ratio (x)	2.9	2.2	2.3	3.5	4.9

Source: Equitymaster

While the company is already on its growth path, it has secured several prestigious orders from various clients in lithium-ion battery production, defence, and Indian Army.

It has also signed contracts for co-development and co-production of long range dual band indigenous infra-red search and track systems, and a semiconductor chip factory.

All this will boost the company's revenue and net profit in the medium term.

To learn more, check out Bharat Electronics' financial factsheet and the latest quarterly results.

Should You Invest in High-Growth Companies?

High-growth companies are usually market leaders in their respective industries and have a leading market share.

Moreover, these companies can be attractive investments, and their stock prices can experience explosive increases.

However, the success of these companies could depend heavily on economic conditions, and the price of these stocks could be extremely volatile during uncertain times.

Hence, it is best to treat growth stocks with caution, like any other stock, and consider them for investment only in the long term.

Remember, only long-term investment in the stock market can reap substantial gains.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...