5 Smallcap Stocks that Crushed FY23 Annual Profit in the First Half of FY24

Identifying small-cap stocks to invest in is a big challenge.

More so in the current environment where most of the smallcaps have seen a broad-based rally in the ongoing bull market.

While there's no specific answer to this, it all depends on one's risk appetite and goals.

But one thing is certain... the profitability of the underlying business can help you make a more reliable decision.

Keeping that in mind, we have shortlisted 5 smallcap stocks that reported higher net profit in the first half of FY24 compared with the full year profit in FY23.

#1 VLS Finance

First on the list is VLS Finance.

Established in 1986, VLS Finance is a multi-faceted, multi-divisional, integrated financial services group.

It provides various services like asset management, strategic private equity investments, arbitrage, and investment banking.

The company is credited as one of the pioneers of private equity (PE) investing in India and has made a series of investments in private and public companies.

The company's financial performance was impacted in FY23, but it was hopeful of improving margins in FY24.

As expected, VLS Finance has lived up to the expectations and already surpassed its FY23 sales and profit numbers in the first half of financial year 2024.

In the June 2023 quarter, VLS Finance posted a profit of Rs 920 million (m) compared to a loss of Rs 430 m posted in the same quarter a year ago.

In the September 2023 quarter, it again posted a profit of Rs 700 m compared to Rs 620 m posted in September 2022.

In FY23, it had posted a profit of Rs 560 m on a consolidated revenue of Rs 821 m. So far in the first half of FY24, the company has already managed to better these numbers with sales and profit of Rs 1.9 bn and 1.6 bn, respectively.

Going by recent performance, the company is expected to post profitable quarters in the remaining two quarters.

VLS Finance pays consistent dividends and has averaged a dividend yield of over 1% for the last seven years.

Promoters of the company continue to remain bullish as they keep buying shares from the open market. The shareholding data shows that promoters have taken their stake up constantly for the past two quarters.

Apart from this, you could also look at the company from a value unlocking perspective as it holds a 10% stake in footwear major Relaxo Footwears.

#2 Summit Securities

Next on this list is Summit Securities.

It's a non-deposit taking NBFC registered with RBI and is engaged in the business of investments in shares and securities.

So basically, it's a holding company like Tata Investment Corp.

In FY23, the company reported a degrowth in topline as well as bottomline owing to lower dividend income, which came in at Rs 463 m compared to Rs 606 m in the previous year.

The performance was also impacted due to lower gain on fair value changes of mutual funds and other investments.

So far in the first two quarters of FY24, it has posted decent numbers which have already surpassed FY23's full year profit and revenue.

For the first half of FY24, it has reported net sales of Rs 647 m and a profit of Rs 467 m. Compared to FY23 sales and profit of Rs 504 m and 371 m, this represents a growth of around 28% in sales and net 26% in profit.

The company is expected to give better quarters in the second half as well.

Note that investors are super bullish on the holding company in anticipation of a potential relaxation of delisting norms.

The market regulator had announced last year that it will streamline the delisting framework and introduce a distinct mechanism for the delisting of holding companies.

Apart from the dividend income that investors enjoy while investing in holding companies, one other perk that they get is stocks of holding companies usually trade at a discount to the fair value of the assets they hold.

In case of Summit Securities, shares of the company currently trade at a book value of 0.2x compared to its 5-year average of 0.1x.

#3 Ashiana Housing

The third smallcap on this list is Ashiana Housing.

Many consider Ashiana a pure real estate player but it's not your typical real estate company. It does not regard itself as a real estate player. Instead, it says it is in the business of building homes.

The difference here is that real estate players invest a lot in buying land parcels. For them, price of land they buy and their expected value over the next few years is an important criterion.

Ashiana, however, doesn't see land that way. For them, land is just a raw material for building homes. They treat land just as any manufacturer would treat their raw material for building their product.

The company ended FY23 with strong set of numbers. Revenue for the year stood at Rs 4 bn, up 84% for the year. The sharp growth was mainly on account of jump in realisations during the year.

The company even turned a corner in FY23 by posting a net profit at Rs 279 m as against a net loss of Rs 70 m during the previous financial year.

Continuing the momentum, it has yet again posted strong performance for the first two quarters of FY24.

In June 2023, Ashiana posted sales of Rs 1.2 bn and a net profit of Rs 110 m. In the following quarter, it posted highest ever quarterly sales of Rs 3.5 bn resulting in higher net profit of Rs 270 m.

Compared to full FY23 figures, Ashiana has already posted a 17% growth in sales and 37% growth in profit in the first half of FY24.

Going by the management commentary, it appears the company could post even higher numbers in the remaining two quarters of FY24.

The company is on an expansion spree, and it has planned a capex of Rs 5 bn in multiple phases.

Primarily catering to senior living-focused real estate projects, it recently announced to launch two premium residential projects in Chennai comprising 1,500 units.

Ashiana expects to launch six new projects including three in Jaipur, one in Gurugram, and two senior living projects in Chennai.

Ashiana also announced a share buyback last year worth Rs 550 m.

A net cash company with strong presence in Rajasthan, Ashiana Housing is a play on the tier 1 and tier 2 real estate story.

#4 Spandana Spoorthy Financial

The fourth smallcap on this list is Spandana Spoorthy Financial.

The company is primarily engaged in the business of micro finance providing small value unsecured loans to low-income customers in semi-urban and rural areas.

In financial year 2023, the company's profitability was heavily impacted owing to one-time write-off of Rs 7 bn during the first quarter.

Skip forward to 2024 and the company has made stellar progress in the first two quarters already.

For the half year ended September 2023, it reported net profit of Rs 2.4 bn as against a profit of Rs 124 m in FY23. This was due to increase in interest income, controlled operating expense, and improving credit cost.

The company's asset quality has also improved as it revamped the entire organization's structure and the underlying IT systems, along with credit underwriting practices.

As part of its growth strategy, the company plans to acquire a NBFC company to enhance its loan against property and small business portfolios through its subsidiary Criss Financial.

The company is also looking to offer individual retail loans.

It also said that it will continue focussing on the joint liability group (JLG), whereas many of its peers in the microfinance segment are shifting to the individual-lending model.

In the next five year, the company plans to transform into a big player, taking its assets under management to Rs 280 bn by the end of 2027-28 from the current Rs 100 bn.

#5 Thomas Cook (India)

Last on this list is Thomas Cook.

The company offers a broad spectrum of services, including foreign exchange, corporate travel, leisure travel, visa & passport services, and E-Business.

Thomas Cook is a solid brand and a solid company. Unfortunately, it was the biggest casualty of covid when travel, especially international, travel ceased.

People associate Thomas Cook as a tour operator but there is much more to the company. It also gets a decent amount of revenue from a subsidiary, Digiphoto Entertainment Imaging, which takes photos and videos of visitors at tourist attractions.

After posting losses in FY20, FY21 and FY22, the company finally became profitable and posted a PAT of Rs 100 m in FY23.

For the first two quarters of FY24, it has already posted good numbers, thereby taking its half year profit to Rs 1.3 bn, compared to a profit of Rs 65 m posted in FY23.

The company has had a remarkable turnaround over the past 3-4 quarters despite international travel not having fully resumed.

In terms of demand, most of the segments have recovered since Covid. Some segments like leisure, hospitality, and the digital imaging segment are doing better than pre-covid. In fact, most segments have reached 85-90% of pre-covid levels.

A pure analysis of the past 5-year numbers would tell you a different story and suggest to never invest in the stock. But in this case, the turnaround has happened since the past 2-3 quarters.

The company recently conducted an OFS of 40 million equity shares, its promoter Fairbridge Capital, being the seller.

In the next two quarters, the company is expecting even more growth. Thomas Cook's cruise business in particular is doing exceptionally well. The company is the highest seller for Cordelia cruises.

Other Smallcaps that have Surpassed FY23 Profit Already

Apart from the above, here are some other smallcaps that have surpassed their FY23 net profit or sales by a big margin.

Rs m, consolidated	FY23 Sales	FY23 Profit	HY2024 Sales	HY2024 Profit
VA Tech Wabag Ltd.	29,605	129	12,178	1,192
Jai Balaji Industries Ltd.	61,251	578	30,292	3,720
Sudarshan Chemical Industries Ltd.	23,017	448	11,970	2,848
Sat Industries Ltd.	4,662	428	2,670	2,451
Jaiprakash Power Ventures Ltd.	57,867	554	30,576	2,603
NIIT Ltd.	3,415	32	1,440	133
Graphite India Ltd.	31,809	1,994	15,400	7,720
TruCap Finance Ltd.	1,231	6	807	24
Responsive Industries Ltd.	9,737	240	5,315	707
Birla Corporation Ltd.	86,823	405	46,943	1,181
Onmobile Global Ltd.	5,252	68	2,708	184
Indo Rama Synthetics (India) Ltd.	40,849	-246	20,290	-640
Orient Green Power Company Ltd.	2,583	326	2,010	843
Genus Power Infrastructures Ltd.	8,084	290	5,201	717
Ganesh Housing Corporation Ltd.	6,163	1,001	4,338	2,473
Black Box Ltd.	62,876	237	31,458	549
IFB Industries Ltd.	41,950	149	21,868	331
Welspun Corp Ltd.	97,581	2,067	81,287	4,423

Data Source: Ace Equity

In Conclusion

So there you go... a handy list of smallcaps that you could track and see how they perform in the remaining two quarters of FY24.

Investing in best smallcap stocks can provide investors with opportunities for substantial growth, diversification, and exposure to emerging trends.

While the risks are higher, prudent research and a well-structured investment strategy can help investors harness the potential rewards of this segment of the market.

Since smallcaps interest you, check out our guide on how to screen the best smallcap stocks.

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...