Top 10 Multibagger Microcaps FIIs Backed in Q1

Microcap stocks have been on a blazing rally recently, capturing the market's attention with their explosive growth.

The Nifty Microcap 250 index has not only outpaced its larger counterparts but has surged by an impressive 32% in the first five months of FY25, far exceeding the Nifty Smallcap 250's 27% climb.

This remarkable performance has been fuelled by strong earnings growth across many of these companies, which in turn sparked a significant influx of capital into the microcap space.

In a standout trend, around 10 of the top stocks within the Nifty Microcap 250 have transformed into multibaggers this financial year, delivering exceptional returns.

What's more, all 10 of these high-flying stocks witnessed a noticeable increase in Foreign Institutional Investor (FII) stakes during the June quarter, compared to March 2024.

Below is a list of microcap stocks that have attracted FII buying.

#1 Paras Defence & Space Technologies

Leading the list is Paras Defence and Space Technologies.

The company specialises in technologies needed for rockets and missiles, space research, naval systems, electronic warfare, drones, and quantum communication, among others.

Paras Defence currently counts the likes of DRDO, ISRO, defence shipyards, Hindustan Aeronautics, Larsen & Toubro, and the Tata group among its key customers.

The company stands among the few companies in India that specialise in the high-end manufacturing of electronics and optronics for defence and space applications.

In FY25 up till 4 September 2024, the stock price has increased by 108%, rising to Rs 1,272 from Rs 612 as of 28 March 2024.

FIIs raised their stake to 2.97% in the June 2024 quarter, up from 0.13% in the March 2024 quarter.

This can be as, in the last few months, the company has bagged contracts for supplying submarine optronic periscopes for the Indian Navy and supplying the complete glass avionic suite for the Saras MK2 in March 2023.

Further, in 2024, the company incorporated a subsidiary, Mechtech Thermal to design, develop and validate thermal products for the aviation, defence, and space sectors.

Further, for the March 2024 quarter, its revenue increased by 24.2% to Rs 796.7 million (m). Meanwhile, its net profit jumped by 63.8% to Rs 960 m.

In an interview, director Amit Mahajan stated that the company's order book is expected to be at Rs 25 bn by the end of FY28.

This is a jump of nearly 4x from the current order book levels of Rs 6 billion (bn). Mahajan also said that the company has orders worth Rs 15 bn in the pipeline.

The company is likely to continue to grow at a steady pace of 25-30% per year with a 15-18% profit margin. The top management does not expect much from the drone segment due to excess competition, but they are very bullish on the anti-drone business and its prospects going forward.

For more details, see the Paras Defence & Space Tech company fact sheet and quarterly results.

#2 IIFL Securities

Next on the list is IIFL Securities.

IIFL Securities provides retail and institutional equities, financial products distribution, commodity broking, currency broking, investment banking, financial planning and wealth management services to retail and institutional customers across India.

In FY25 till 2 September 2024, the stock price has increased by 124%, rising to Rs 276 from Rs 123 as of 28 March 2024.

FIIs raised their stake by 2.3% to 17.51% in the June 2024 quarter, up from 15.2% in the March 2024 quarter.

On 1 June IIFL Securities announced three senior management appointments to bolster its Wealth management platform/equities broking business.

It has appointed career private bankers Raghav Gupta and Prakash Bulusu as Joint CEOs to manage and grow their HNI & UHNI wealth business and Amit Srivastava as Senior Managing Partner to run investments and products for the firm.

Further, for the March 2024 quarter, IIFL Securities reported a 74% YoY surge in revenue to Rs 7 bn. Meanwhile, its net profit more than doubled to Rs 1.8 bn driven by strong growth in all the business segments.

Going forward, the company plans to enhance its offerings.

For more details, see the IIFL Securities company fact sheet and quarterly results.

#3 Gravita India

Next on the list is Gravita India.

Gravita India is one of the largest lead producers in India. The company produces leads, zinc, and copper alloys and has recently introduced the plastic recycling division, widely used across industrial sectors.

It enjoys expertise in the recycling of used batteries, cable scrap/other lead scrap and aluminium scrap.

The company maintains a deep-routed procurement network with over 1,500 touchpoints in tandem with a well-diversified customer network of over 375 customers across 38 countries. This wide base sets it apart from its peers, giving it an enviable edge.

In FY25 so far, the stock price has increased by 128%, rising to Rs 2,277 from Rs 999 as of 28 March 2024.

FIIs raised their stake to 13.4% in the June 2024 quarter, up from 11.08% in the March 2024 quarter.

The business has performed admirably in the past few years on the back of growing demand and the company's capacity additions.

Between 2020-2024, the sales have expanded at a 5-year CAGR of 20.5%, and the net profits have grown at 65.8%. The 5-year average return on equity (RoE) and return on capital employed (RoCE) stand at 25.4% and 32.2%, respectively.

Further, for the June 2024 quarter Gravita India delivered a robust Q1 performance, driven by strong growth in lead and plastic segments and improved profitability in aluminium.

The company reported a stellar 29.1% year-on-year (YoY) jump in revenues followed by a 50.2% and 29.3% jump in operating profit and net profit, respectively.

The company's focus on volume growth in the lead segment, coupled with improved profitability in the aluminium business due to higher LME prices, was instrumental in driving this exceptional performance.

Looking ahead, Gravita is investing heavily in future growth avenues. The company's foray into lithium-ion battery recycling and tyre recycling is a strategic move to tap into emerging opportunities.

Additionally, expansion plans in rubber, paper, and steel recycling demonstrate a clear intent to diversify revenue streams and reduce reliance on traditional materials.

For more details, see the Gravita India Company fact sheet and quarterly results.

#4 LT Foods

LT Foods is a food processing brand engaged in milling, processing, marketing, and manufacturing rice and value to rice food products.

It has a diversified rice product portfolio that includes white rice, brown rice, steamed rice, organic rice, parboiled rice, and quick-cooking rice.

Its flagship brands, Daawat and Royal, enjoy leadership positions in India and the US.

In FY25, up until 2 September 2024, the stock price surged by 102%, climbing to Rs 379 from Rs 188 on March 28, 2024.

During this period, Foreign Institutional Investors (FIIs) increased their stake to 5.89% in the June 2024 quarter, up from 5.14% in the March 2024 quarter. This growth can be attributed to the company ramping up its manufacturing operations.

LT Foods expects to maintain a double-digit growth momentum this financial year, driven by the rising global consumption of basmati rice. Europe and America, the primary markets for the company's organic range, account for 85% of its sales.

After achieving a growth rate of 15% in FY24, the company anticipates sustaining this momentum for continued double-digit growth. Further growth is expected from scaling up its ready-to-cook (RTC) and ready-to-eat (RTE) ranges, particularly rice-based breakfast products.

To support this expansion, LT Foods is strengthening its distribution portfolio and solidifying its presence across all sales channels. While quick-commerce is experiencing rapid growth, with a 12-15% month-on-month increase, the company sees a significant opportunity to expand its reach in general trade.

In addition to ramping up manufacturing capacity, LT Foods is also exploring inorganic growth opportunities.

For more details, see the LT Foods company fact sheet and quarterly results.

#5 Johnson Controls Hitachi

Next on the list is Johnson Controls Hitachi.

Johnson Controls Hitachi Air Conditioning established on 1 October 2015, is a joint venture between Hitachi Appliances, Inc. (now Hitachi Global Life Solutions, Inc.) and Johnsons Controls, Inc.

Johnson Controls specialises in producing electronics and HVAC equipment, building automation systems, security solutions, fire detection systems, batteries, and other related products.

In FY25 to date, the stock price has increased by 102%, rising to Rs 1,926 on 2 September 2024 from Rs 954 as of 28 March 2024.

FIIs raised their stake to 1.2% in the June 2024 quarter, up from 0.5% in the March 2024 quarter. This was seen after strong March 2024 quarter results.

The company's operational revenue grew by 40.95% YoY to Rs 7,718 m compared to Rs 5,476.2 m a year back.

Further, being an air conditioning product company, its dependency on business is more seasonal in nature and major market demand is generated during the first and last quarter of every financial year.

As India's population continues to grow and its economy undergoes a transformation, the air conditioning industry has emerged as one of the high-potential industries in the country.

This has opened up new avenues for the company's growth.

Going forward, Johnson Controls-Hitachi aims to reinforce its brand leadership in North India and capitalise on the promising growth opportunities in residential and commercial segments.

For more details, see the Johnson Controls Hitachi company fact sheet and quarterly results.

#6 Techno Electric

Next on this list is Techno Electric.

It's engaged in providing EPC, asset ownership and operations and maintenance services in the power infrastructure industry.

It specialises in rural electrification via the RGGVY program, smart metering infrastructure, and STATCOM devices for reactive power.

The company is now looking to revolutionise data centres with its solutions for more efficiency and scalability.

In FY25, up until 2 September 2024, the stock price has surged by 112%, climbing to Rs 1,635 from Rs 772 as of 28 March 2024.

Foreign Institutional Investors (FIIs) increased their stake by 0.5%, reaching 4.39% in the June 2024 quarter, compared to 3.85% in the March 2024 quarter.

This can be attributed to order wins. In April 2024, the company secured several orders worth Rs 40 bn from Power Grid Corporation, Adani Transmission, Millenium Challenge Account, IndiGrid Trust, Damodar Valley Corporation and REC Power Distribution Company.

Further, on 2 September 2024, the company won a contract to design, build, finance, operate, and transfer Edge Data Centers (EDCs) by RailTel Corporation of India. Accordingly, the company will establish EDCs in 102 Indian cities for RailTel Corporation under a 20-year concession agreement.

Further, for FY24, the company beat all estimates and reported solid numbers. Revenue for the year surged to Rs 16.8 bn, 75% higher compared to FY23. Net profit more than doubled to Rs 2.7 bn, against Rs 1.3 bn in FY23.

Going forward, the company's move to expand into data centre projects provides good growth potential.

For more details, see the Techno electric & eng company fact sheet and quarterly results.

#7 Puravankara

Next on the list is Puravankara.

Puravankara has been a pioneer in the Indian real estate industry for over four decades.

The company has developed over 80 projects across India, with a total developable area of over 40 m sq. ft.

In FY25, the stock price has increased by 119%, rising to Rs 460 on 2 September 2024 from Rs 210 as of 28 March 2024.

FIIs raised 0.3% of their stake to 16.9% in the June 2024 quarter, up from 16.6% in the March 2024 quarter.

The upward momentum began following the release of the Puravankara business update for Q4 FY24 and FY24, highlighting its record-breaking performance in FY24.

The company achieved its highest-ever collections, totalling Rs 59.1 bn, marking a substantial 90% increase from the previous fiscal year's Rs 31.1 bn.

Further, the real estate company is gearing up to launch a qualified institutional placement (QIP) that will see the company raise as much as Rs 7-8 bn. It plans to use the funds for both organic and inorganic growth opportunities and will spend the money on capex and reducing debt.

If Puravankara goes through with its QIP, it will be the fifth company from the real estate sector to tap the stock markets to raise equity.

For more details, see the Puravankara company fact sheet and quarterly results.

#8 Optiemus Infracom

Next on the list is Optiemus Electronics.

It is one of the leading electronic manufacturing services (EMS) providers.

Distinguished for its wide-ranging portfolio, Optiemus Electronics engages in the production of various IT hardware products, including networking equipment, storage devices, wearable technology, laptops, and more.

Notably, Optiemus Electronics has been actively looking to participate in the Indian government's PLI scheme for IT hardware, a testament to its commitment to fostering growth and innovation in the electronics manufacturing sector.

In FY25, the stock price has increased by 133%, rising to Rs 586 on 2 September 2024 from Rs 251 as of 28 March 2024.

FIIs raised their stake to 0.2% in the June 2024 quarter, up from 0.02% in the March 2024 quarter.

This increase can be attributed to Optiemus Electronics collaborating with the government to develop a comprehensive electronics ecosystem in India.

The company has expressed its support for the government's proposal to extend the Production-Linked Incentive (PLI) scheme to electronic component manufacturing, which is expected to play a significant role in fostering a self-reliant India.

Further, the company in August 2024 forayed into telecom equipment manufacturing.

To promote indigenous design and manufacturing of telecom equipment in India, Optiemus is collaborating with Tejas Networks as a manufacturing partner for various telecom products, such as 4G Base Band Units, Remote Radio Head, ONT, ONU, and Broadband Switches & Routers.

Going forward, the company is intensifying its focus on IT hardware and telecom equipment, signalling its readiness to explore opportunities in the burgeoning electric vehicle (EV) sector.

For more details, see the Optiemus Infracom company fact sheet and quarterly results.

#9 PG Electroplast

Next on the list is PG Electroplast.

PG Electroplast Limited (PGEL) is the flagship company of PG Group. While the PG Group started its journey in 1977, PG Electroplast was formally set up in 2003 and is a leading, diversified Indian Electronic Manufacturing Services provider.

It specialises in Original Design Manufacturing (ODM), Original Equipment Manufacturing (OEM) and Plastic Injection Molding, catering to 50+ leading Indian and Global brands.

In FY25, up till 2 September 2024, the stock price has increased by 216%, rising to Rs 525 from Rs 166 as of 28 March 2024.

FIIs raised their stake in PG Electroplast by 0.1% to 11.1% in the June 2024 quarter, up from 11% in the March 2024 quarter.

The company on May 2023 announced splitting its shares in the ratio 10:1, which means that for every share having a face value of Rs 10, there will now be 10 shares having a face value of Re 1.

The record date for the same was 10 July 2024.

Coming to its financials, In Q1 FY25, the company achieved all-time high quarterly profits and sales. The operating revenue surged by 95% to over Rs 13.2 bn.

The company demonstrated industry-leading growth in its product business, with operating revenues reaching Rs 9.9 bn, a 124% growth.

The room AC business contributed Rs 8.8 bn with a 130% growth, while the washing machine business grew by 72% YoY. Cooler operating revenues saw a remarkable 287% increase.

The operating profit doubled to Rs 1.3 bn. The net profit for the quarter rose by 151% to Rs 850 m.

Going forward, the company has revised its operating revenue guidance now standing at a minimum of Rs 36.5 bn for PGEL and an additional Rs 6 bn in the JV company, Goodworth Electronics, implying a total group operating revenue of Rs 42.5 bn.

The company has revised its net profit guidance to at least Rs 2.2 bn for FY25. The management expects the product business to grow by approximately 60%.

For more details, see the PG Electroplast company fact sheet and quarterly results.

#10 Lux Industries

Last on the list is Lux Industries.

Kolkata-based Lux Industries is an innerwear clothing brand. Some of its brands include Lux Cozi, ONN, GenX, Lyra, Lux Inferno, Lux Cozi Glo, Lux Nitro, Lux Cozi Her, Lux Touch, Lux Karishma and Lux Mozze.

Lux Industries operates in the mid-value segment. It has an all-weather portfolio of more than 100 products marketed under 16 brands.

In FY25 to 2 September 2024, the stock price increased by 121%, rising to Rs 2,377 from Rs 1,074 on 28 March 2024.

During the June 2024 quarter, the FIIs increased their stake marginally to 0.8%.

This can be attributed to ace investor Mukul Agrawal's stake buy.

The latest shareholding of Lux Industries shows that Mukul Agrawal holds a 1.3% stake in the company worth around Rs 738 m.

Every quarter, investors holding over 1% stake in a company must share their portfolio moves as part of their filings.

Before this, in the March 2024 quarter, Mukul Agrawal might be holding less than 1% stake or no stake at all in Lux Industries.

Further, Lux Industries posted healthy numbers for Q4 as well as for the full financial year.

The company's net profit for Q4 grew 78% YoY to Rs 555 m.

Lower expenses helped the company post robust growth in net profit. Expenses were down by nearly 7% at Rs 6.4 bn.

For the full financial year, the net profit was in-line while revenue remained rangebound.

Going forward, the company plans to get out of this sluggish export phase.

For more details, see the Lux Industries company fact sheet and quarterly results.

Conclusion

Investing in a microcap that has turned into a multibagger, particularly when Foreign Institutional Investors (FIIs) have increased their stake, can be highly attractive for several reasons.

First, the fact that a microcap has achieved multibagger status signals strong performance and significant growth potential.

FIIs' involvement further underscores their confidence in the company's future, often leading to increased interest and investment from other market participants.

Microcaps are typically in the early stages of growth, and as these companies expand, they offer substantial potential for returns, especially if they continue to execute their strategies effectively.

Additionally, microcaps are often undervalued or overlooked by the broader market. FIIs' investment can lead to a re-rating, unlocking value for early investors.

Beyond just providing capital, FIIs can also bring strategic guidance, improved corporate governance, and enhanced visibility, all of which contribute to sustained growth.

However, it's important to exercise caution, as microcaps can be highly volatile and come with higher risks.

Despite the positive signs of FII involvement, thorough research is crucial to understand the company's fundamentals and potential challenges before making an investment decision.

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...