Top 5 Smallcap Stocks with Rising Promoter Holding. Here's a Watchlist...

In a departure from the conventional practice where promoters typically increase their shareholdings during market downturns, a notable shift has emerged in the current market scenario.

Rather than waiting for a bear phase to bolster their stakes, promoters are seizing opportunities amid the ongoing record-breaking run of the stock market.

The market has exhibited a remarkable 10% surge over the three months spanning the December quarter, and this surge has been accompanied by a noticeable uptick in promoter holdings for around two dozen companies, particularly in the mid-cap and small-cap segments.

This strategic move by promoters, choosing to reinforce their positions during a period of market upswing, not only reflects confidence in the current market sentiment but also unveils insightful considerations about the company, as they are the ultimate insiders.

Let's take a look at five such companies that have seen an increase in promoter holding in the December 2023 quarter.

#1 Danlaw Technologies

Leading the list is Danlaw Technologies.

Danlaw Technologies India Limited (Formerly known as Grow-Tech Software Services Limited) was incorporated as a public limited company in December 1992.

The company is a global leader in the connected cars and automotive electronics space.

It is in the business of providing engineering and software development consulting services for Industrial electronics.

The latest shareholding pattern for Danlaw Technologies reveals a notable increase in promoter holding stake, rising from 38% in the September 2023 quarter to 61.9% in December 2023, a growth of 23.9%.

This positive shift can be attributed to robust quarter results. For the September 2023 quarter, the company reported a 31.8% YoY rise in revenue to Rs 501 m from Rs 380 m a year back.

Meanwhile, the net profit for the quarter jumped 391% to Rs 59 m from Rs 12 m a year back due to decrease in operating expenses.

Adding to this positive momentum, the company recently unveiled its acquisition of Cohda Wireless, based in Australia. This strategic move represents a significant milestone in Danlaw's global expansion strategy, with a focus on advancing connected vehicle safety and smart city solutions.

The acquisition ensures localised support and solutions across key regions, solidifying a truly global and responsive partnership.

Looking ahead, the company is set on a trajectory for further global expansion and aims to grow its customer base.

The collaboration between Danlaw's foothold in North America and India and Cohda's extensive reach in Europe and the Asia-Pacific region not only strengthens the global presence of both entities but also positions them to offer tailored assistance and solutions in diverse regions.

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

#2 Salzer Electronics

Second on the list is Salzer Electronics.

The company is among the leading players offering total and customized electrical solutions in switchgear wires & cables and energy management business in India.

It caters to a wide range of products with five In-house manufacturing facilities in Coimbatore. The company has a distribution network locally and globally, exporting to more than 40 countries.

In India Salzer markets its products through its distributors and more than 350 local distributors of L&T.

For the December 2023 quarter, promoters have increased their stake in the company to 37.2%, up 2.1% from 135.1% in the September 2023 quarter.

This increase in ownership can be attributed to a significant development: The company secured a patent for its revolutionary product, the heavy-duty energy efficient automatic source changeover.

This patent grants exclusivity for 20 years and positions the product as a game-changer in efficiently managing generator power distribution in various settings, including residential buildings, townships, apartment complexes, and commercial structures.

Furthermore, on 29 December 2023, the company's subsidiary entered into a joint venture (JV) with M/s. Kostad Steuerungsbau GmbH focuses on the development of DC fast charging stations for electric cars.

Under this collaboration, the company subscribed to 290,000 equity shares with a face value of Rs 10 each, amounting to a total consideration of Rs 2.9 m, thereby increasing its ownership in the JV company to 60%.

In its quarterly report for July-September, the company reported encouraging financial results, with an 11% rise in revenue to Rs 2.7 bn from Rs 2.4 bn a year earlier.

The net profit also showed a positive trajectory, experiencing a 5% year-on-year increase to Rs 93.8 m during the quarter, up from Rs 89.5 m reported in the same quarter last year.

Looking ahead, the company outlines its strategic direction, emphasising a focus on existing core businesses and potential strategic acquisitions in high-growth areas.

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

#3 Tide Water Oil

Third on the list is Tide Water Oil.

Tide Water Oil is a part of the multi-divisional Andrew Yule group. The company manufactures and sells engine lubricants for automotive and industrial applications in India.

The company offers various automotive oils such as diesel engine, premium diesel engine, PMCO and two-wheeler dedicated engine gear and transmission and agri-engine oils, as well as coolant and brake fluid.

The company has witnessed insider buying worth Rs 1.2 bn in December 2023, with promoters buying almost 5% of the market.

According to the December 2023 shareholding pattern, promoters have increased their stake in the company to 62.3%, up 5% from 57.3% in the preceding September 2023 quarter.

This significant increase can be attributed to the company's strong Q2 performance. In the September 2023 quarter, the company reported a notable 7% year-on-year increase in revenue, reaching Rs 4.8 bn.

The primary driver behind this growth was the impressive surge in net profit, which recorded a substantial 72% increase, amounting to Rs 3.5 bn.

Enhancing its appeal to investors, the company boasts a debt-free balance sheet, robust return ratios, a price-to-earnings ratio of 19.5 times, and an attractive dividend yield of 3%.

The company has a history of consistently rewarding shareholders with regular dividends, making it particularly appealing to income-seeking investors.

It has declared 38 dividends since 2004. Over the past 12 months, Tide Water Oil Company India Ltd. has declared an equity dividend totalling Rs 45 per share.

Looking ahead, the company is actively engaged in research and development, demonstrating a commitment to enhancing its product offerings and staying abreast of industry trends.

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

#4 Pritika Auto Industries

Fourth on the list is Pritika Auto Industries.

The company specialises in machined castings and automotive components. The company manufactures axle housings, wheel housings, hydraulic lift housings, end covers, and plate differential carriers, among others.

As of the shareholding pattern in December 2023, promoters have significantly increased their stake in the company to 68.4%, marking a substantial 19.8% rise from the previous September 2023 quarter, where it stood at 48.6%.

This notable increase can be attributed to the National Company Law Tribunal (NCLT) granting approval to the scheme of arrangement between Pritika Industries Limited (PIL) and Pritika Auto Industries Limited (PAIL) for the demerger of its automotive, tractor, and engineering component business.

The demerged entity, post the implementation of the demerger, would be known as Pritika Industries.

For the September 2023 quarter, the company reported a 6.3% YoY rise in revenue at Rs 937 m. Meanwhile, the net profit for the quarter came down to Rs 37.8 m, down 24.4%.

In a recent development, Preetika Auto, a part of this restructuring, informed the stock market that its board of directors has approved the conversion of 6 m warrants into equity shares.

The initial warrant allotment was communicated on 16 March 2023. Preetika Auto Industries is now set to convert 6 m shares, each with a face value of Rs 2, into 60 lakh equity shares. The company had set the issue price of these warrants at Rs 19.

Additionally, the company has unveiled plans to raise funds and expand its business, indicating a proactive approach to capitalizing on new opportunities and ensuring future growth.

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

#5 Capacite Infraprojects

Last on the list is Capacite Infraprojects.

Capacite Infraprojects is a construction company incorporated in August 2012.

The company offers construction services such as high-rise and super high-rise buildings, gated communities, filaments, commercial and office complexes, institutional buildings (schools, colleges, hospital projects), and multi-level car parks.

During the December 2023 quarter, promoters significantly increased their stake in the company, elevating ownership from 35.7% in September 2023 to 38.3%.

This can be attributed to receiving a repeat order from the realty division of Raymond, for a total contract value of Rs 2.8 bn for project - Codename Xception at Thane.

Apart from that, the board of Capacite Infraprojects has approved the launch of a qualified institutional placement (QIP) issue.

The company plans to raise a total of Rs 2 bn through the QIP, which will have a base issue size of Rs 1.5 bn and the rest being a green shoe option.

Promoters and promoter groups of the company will have a lock-in period of 60 days post the QIP.

It plans to utilise these to support the long-term working capital requirements.

It has guided for a revenue growth of around 20%, with the amount expected to reach Rs 18 bn on a consolidated basis.

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

Snapshot of Promoter Stake Buy Trends on Equitymaster Stock Screener

Here's a list of rising promoter holding stocks on Equitymaster's stock screener.

Please note these parameters can be changed according to your selection criteria.

Conclusion

Investors may find it tempting to consider buying stocks when promoters of a company are actively purchasing shares. This behaviour is often interpreted as a positive signal.

Promoters, being insiders, symbolize confidence in the company's future, with their personal investments reflecting a shared commitment to long-term success.

The alignment of interests between promoters and shareholders is a favourable aspect, fostering a sense of collective dedication.

This trend of promoter buying 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.

Despite these tempting signals, it is crucial for investors to approach such situations with careful consideration and conduct comprehensive research.

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. Learn more about our recommendation services here...