Top 5 Smallcap Stocks in Which FIIs Increased their Stake in Q1

Rs 320 billion (bn) foreign inflows in 12 days.

That's a big number, right?

FII's seem to be going bonkers over small-cap stocks.

For 12 consecutive trading sessions from 7 June 2024 to 25 June 2024, FIIs were net buyers on Dalal Street.

Propelling Sensex and Nifty to fresh all-time peaks, foreign institutional investors (FIIs) bought Indian stocks with a cumulative inflow of Rs 320 bn for those 12 trading sessions.FIIs can be seen pouring money into Indian funds at the cost of China, Brazil, Taiwan, and South Korea as consensus is gradually building on imminent rate cuts in the second half of 2024.

Out of the lot, the FIIs seem to be placing their bets on small-cap companies. Small-cap companies are those that have a market capitalisation of less than the 250th stock on the stock exchange.

Small-cap companies often offer substantial growth potential in their early stages and may be undervalued. FIIs are drawn to these companies for the opportunity to achieve high returns.

An increase in FII stakes enhances the company's credibility among other investors, potentially leading to a rise in stock prices. A smart way to filter stocks is to track what FIIs are buying.

Here's a list of small-cap stocks recently bought by FIIs in the first quarter of FY25.

These stocks are filtered using Equitymaster's Stock Screener.

#1 Ujjivan Small Finance Bank

Ujjivan Small Finance Bank is an Indian bank focused on serving financially underserved and unserved segments, dedicated to promoting financial inclusion in the country.

It started its operations as Ujjivan Financial Services Limited, a non-banking financial company in 2005 to provide financial services to the 'economically active poor' who were not adequately served by financial institutions.

FIIs have increased their stake by 20.7% from 3.9% in the first quarter of FY24, to 24.6% stake in the first quarter of FY25.

The number of FII investors in this bank increased from 125 to 209 in the same quarter.

The bank aims to adjust its loan portfolio to a 60:40 ratio of unsecured to secured loans over the next two to three years. The company has opened a lot of digital initiatives.

The bank utilises AI for fraud detection, leveraging sophisticated analytics to detect and thwart fraudulent transaction patterns.

The company has made advancements in mobile and internet banking, including innovative features like voice and video capabilities, as well as digital savings and FDs. 89.79% of the company's transactions are now digital.

Ujjivan's plans are for digital enhancements, cloud migration, and expanding service offerings to evolve into a comprehensive universal bank.

Coming to its financial performance, the bank reported an advance of 22% in deposits at Rs 325 bn in the April-June quarter. The bank's gross loan book rose 19% on a yearly basis to Rs 300 bn in the first quarter, as compared to Rs 253 bn in the same period last year.

The proportion of deposits that come from low-cost current and savings accounts rose to 25.6% from 24.6% in the year-ago period.

A higher CASA ratio indicates a lower cost of funds, since lenders don't usually give any interest on current account deposits and the interest on saving accounts is low.

The bank reported loan disbursements at Rs 530 bn in comparison to Rs 528 bn a year ago.

To know more, check out Ujjivan's financial factsheet.

#2 Awfis Space Solutions

Awfis Space Solutions specialises in providing flexible workspace solutions across India, catering to startups, small medium enterprises (SMEs), and large corporates.

Awfis claims to be the largest flexible space operator in India with 181 centers, around 0.11 million (m) seats, and about 5.6 m square feet of chargeable area, as of 31 March 2024.

Awfis Space Solutions aims to shift its focus to tier-II cities for future expansion from its strong presence in metros and tier-I urban centers currently.

The company's blended occupancy stands at 71%, and centers operating for 12 months or more have an occupancy rate of 84%. This reflects balanced growth in both adding new centers and maintaining strong occupancy levels.

It continues its focus on maintaining an asset-light and risk-averse managed aggregation (MA) model, with a 64% concentration of centers and 67% of seats in the MA model.

The company is experiencing significant improvements in operating leverage as it continues to open new centers.

During the quarter ended 30 June 2024, the company completed its initial public offer (IPO) at an issue price of Rs 383 per share. It listed a 13% premium over the issue price.

The co-working space solutions provider reported a consolidated net profit of Rs 28 m in the first quarter of FY25, a recovery from a net loss of Rs 83 m reported in the same period a year ago.

Adding to positive sentiment, Goldman Sachs India EQ Portfolio has also purchased nearly 1 m equity shares in Awfis Space Solutions in recent months.

Overall, FIIs have 22.5% stake and DIIs have a 13.5% stake in the company as of 30 June 2024.

The company's management expects its top line to surpass the Rs 11 bn mark in FY25.

Further, the company plans to expand its portfolio by about 50%, reaching a total of 0.135 m operational seats by the end of the year.

#3 Gokaldas Exports

Gokaldas Exports is engaged in the business of design, manufacture, and sale of a wide range of garments for men, women, and children. It caters to the needs of several leading international fashion brands and retailers.

The company recently raised Rs 6 bn in equity capital through a Qualified Institutional Placement (QIP) in April 2024.

Last month, the company announced that it will invest in fabric manufacturer BRFL Textiles Private Ltd by subscribing through optionally convertible debentures (OCDs). Based on certain conditions, it will also look at exploring a possible merger or acquisition on 30 June 2025.

Coming to its quarterly performance, the company saw a dip in its net profit of 16.5% to Rs 272 m in the first quarter of FY25, compared to Rs 326 m in the corresponding quarter last year.

Production disruptions in factories during April and May negatively impacted profits, causing shipment delays that resulted in increased overtime and airfreight costs.

The company expanded its workforce in anticipation of volume growth; however, ramping production units took longer than expected, adding costs.

The cloth manufacturer reported a 79.9% increase in consolidated revenue, reaching Rs 9.3 bn compared to Rs 5.2 bn in the same quarter last year.

To know more, check out Gokaldas Exports' financial factsheet.

#4 CSB Bank

CSB Bank is engaged in the business of banking services, the oldest private sector bank in India with a history of over 98 years, and a strong base in Kerala. The bank focuses on SME, retail, and NRI customers.

In the first quarter of FY25, FIIs increased their holding in CSB Bank to 12.4% from 4.9%.

During the quarter, CSB Bank's gross advances saw a 17.8% jump on a yearly basis to Rs 250.9 bn.

The bank reported a 22.2% advance in deposits at Rs 299.20 bn, as compared to Rs 244.7 bn in the same period last year.

Despite the recent pressure, the company's management has guided for NIMs to remain in the range of 4.5%-4.8% for the full year.

#5 Aurionpro Solutions

Aurionpro Solutions works to provide business solutions in the fields of transaction banking platforms, customer experience (ACE Platform), smart city and smart transportation experience, and cybersecurity solutions.

The company primarily offers software products and consulting services to the banking industry in India and abroad.

In January 2024, Aurionpro Solutions' board greenlit a fundraising plan of up to Rs 6.5 bn through various instruments, including QIP, preferential issues, or rights issues.

Recently, the company secured an order worth nearly 1 bn from the Haryana government for issuing open-loop NCMC cards, providing free travel to families below the poverty line.

The company had also recently issued bonus shares at a ratio of 1:1 alongside the dividend payout of Rs 2.5 per equity share post-bonus.

Coming to its quarterly performance, Aurionpro Solutions' net profit rose 36.5% to Rs 0.43 bn in the first quarter of FY25 as against Rs 0.31 bn during the previous year's same quarter.

While its net sales rose 31.67% to Rs 2.6 bn

The company expects to continue its growth momentum in FY25 and plans to deliver a revenue growth between 30% and 35%. The company aims to keep EBITDA and net profit margins at similar levels - EBITDA between 20% and 22% and net profit between 15% and 16%.

FIIs have increased their stake by 10.7% from 2.9% in the first quarter of FY24 to 12.85% stake in the first quarter of FY25.

Snapshot of Smallcap Stocks where FIIs Have Increased Stake

Here's a snapshot of the above companies on various parameters -

Conclusion

Investing in stocks that FIIs are buying can be an interesting strategy, as FIIs often have access to extensive research and resources, and their investment decisions can reflect a level of confidence in the company's prospects.

However, FIIs often have specific objectives or constraints that may not align with individual investors' needs.

While foreign investment plays a role, the Indian stock market has its fundamentals. As an investor, focus on your research, understand your risk tolerance, and invest for the long term to achieve your financial goals

Their investment horizon, risk tolerance, and goals may differ from yours, so blindly following their investments may not be suitable for your portfolio.

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...