Top 5 smallcap stocks with rising promoter holding. Here’s the March watchlist

This marks a stark departure from the previous month, where the trend was more toward promoter selling. Although it's too soon to draw definitive conclusions, this shift in promoter activity could signal a changing sentiment towards smaller companies.

Let's explore five companies that have witnessed notable promoter buying in March 2024.

#1 Man Industries

Man Industries stands out as the first company to mention. As a leading entity within the Man Group, UK, it specializes in the manufacturing, processing, and trading of submerged arc-welded pipes and steel products. These products are essential for industries such as oil, gas, petrochemicals, fertilizers, and dredging.

In March 2024, Man Finance Private Ltd, a promoter group entity, capitalized on the stock's 18% decline by purchasing 52,225 shares across four transactions. A significant factor behind this increased interest could be the company's venture into the burgeoning hydrogen market, recognizing the potential of clean hydrogen as a future energy solution.

Man Industries has begun producing specialized pipes for hydrogen transport, aligning with the global push towards net-zero carbon emissions by 2050. The company recently celebrated a milestone in secure hydrogen conveyance pipe testing in Italy, conducted by RINA Consulting - Centro Sviluppo Materiali SPA.

Looking forward, Man Industries anticipates a topline of about ₹40 billion in two years, buoyed by massive bids for new businesses both domestically and internationally.

#2 Praveg

Next, we have Praveg, an advertising firm with a knack for exhibition and event management, also offering services to the hospitality sector. It boasts a portfolio of exhibitions and projects across the globe, including in the US, China, South Korea, Africa, Europe, and the Middle East.

In response to a 30% drop in its shares, the promoter group increased its stake in March 2024 through nine trades, acquiring 551,288 shares through six open market trades.

A recent win for Praveg was securing an order for the development and management of 50 tents at Agatti Island, Lakshadweep, offering a range of commercial activities.

The company's vision includes expanding to 50-60 resorts by 2028 and targeting 2,500 rooms by the end of FY29, with an estimated revenue potential of approximately ₹4.5 billion.

#3 Gokul Agro Resources

Gokul Agro Resources, involved in manufacturing and trading edible and non-edible oil, meals, and other agro products, also saw promoter buying.

Ritika Infracon Private Ltd, part of the promoter group, acquired 921,300 shares in March, increasing its stake to 0.7% as of 19 March 2024. This move was likely influenced by the stock's nearly 20% decline, alongside strategic decisions like acquiring a 25% stake in PT Riya Pasifik Nabati in Indonesia by its subsidiary.

The company stands out among its peers with a low price-to-earnings ratio of 13 and a modest debt-to-equity ratio of 0.7. With a focus on debt reduction and profitability, going ahead, Gokul Agro is aiming for sustainable growth.

#4 Sarla Performance Fibre

Sarla Performance Fibre, transitioning from commodity to specialized yarns, also experienced promoter investment.

Hindustan Cotton, a promoter entity, increased its stake by acquiring 85,431 shares in March, responding to a 20% decline in stock price. As a result, Hindustan Cotton's stake in the company rose to 56.6% as of 13 March from from 56.5% in February.

This investment also aligns with the company's strong Q3 results, with an impressive 18.2% year-on-year revenue growth, reaching ₹963 million, and a 300% surge in net profit to ₹85 million.

Going forward, the company plans to expand its business, indicating a proactive approach to capitalising on new opportunities and ensuring future growth.

#5 Star Cement

Star Cement, a key player in northeast India's cement industry, also promoter attention. The company's plant has a plant spread across 200 hectares in Lumshnong, Meghalaya, a strategic location that ensures easy availability of high-grade limestone.

Taking advantage of a 20% decline in the company's stock in March, promoter Prem Kumar Bhajanka bought 289,470 shares during the month, raising his stake from 10.1% in February to 10.2% as of 19 March 2024.

This coincided with strategic plans to expand presence, especially in south India, and a significant coal procurement deal with Coal India Ltd.

Looking ahead, Star Cement aims to capitalise on the anticipated surge in cement demand in eastern and northeastern India. To achieve this, the company is accelerating its expansion plans in greenfield and brownfield projects. By 2025-26, total annual capacity is projected to reach 9.7 million tonnes.

Conclusion

Promoter buying is a strong signal of confidence in a company's future prospects, aligning promoter and shareholder interests. 

This trend is typically associated with a positive outlook, driven by various factors such as strong financial results, anticipated growth, new product launches, or favourable industry trends.

Furthermore, the act of promoter buying may suggest a belief in the current undervaluation of the company's stock, making it an appealing entry point with expectations of future appreciation.

While such activity often reflects positively on the company, investors are advised to conduct their due diligence.

Promoter buying is just one aspect of the overall investment landscape, and a thorough analysis of market conditions, company fundamentals, and industry trends remains essential for making informed decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com