Top 5 Fastest Growing Penny Stocks on the Brink of Explosive Growth

With the share market at an all-time high, speculation is rife in the market with investors looking for buying opportunities left, right, and centre.

While some investors are cautious about the exuberance, price sensitive investors are looking for stocks that won't break the bank.

For these investors, penny stocks have emerged as a captivating investing arena. These stocks, characterised by their low share prices and small market capitalisations, offer potentially significant returns despite their inherent volatility.

Amid the multitude of choices, a select few have proven to be the fastest-growing penny stocks in India. These stocks have garnered attention due to their remarkable ascent, showcasing rapid growth and have promising prospects.

With this in mind, let's explore the top five fastest-growing penny stocks in the Indian market.

#1 Servotech Power Systems

First on our list is Servotech Power Systems.

The company is engaged in the end-to-end manufacturing, procurement, and distribution of advanced solar products.

Servotech's sales have grown at a CAGR of 47.1% in the last three years while net profit has risen at a CAGR 138.7%. This is on the back of the promoters' experience of over two decade, and established relationships with suppliers and key customers.

The company's growth has also been driven by deeper penetration in the solar and EV segments as these segments are highly supported by government initiatives and subsidies. For the financial year 2024, the company's scale of operations is expected to improve to over Rs 4 bn.

The company is setting up a new EV plant in Uttar Pradesh with a manufacturing capacity of 10,000 EV DC chargers per year. This facility will not only manufacture chargers but will also support the company's future R&D. To support this, the company has committed Rs 3 bn in investment.

The company has also filed two patents for EV charger technology. These patents enable users to fast charge any GB/T Bharat DC 001 vehicle based on 72v/96VDC through a CCS2 connector using a small additional gadget.

Servotech Power will also work on developing a model for constant engagement with universities and IITs to promote innovation.

In the next 2-3 years, the company plans to set up 5,000 charging stations under its subsidiary, Servotech EV Infra, responsible for developing robust charging infrastructure.

As a supplier to many oil marketing companies (OMCs) and original equipment manufacturers (OEMs), Servotech Power already has a presence across India. But the company envisages having its own network.

Servotech's return ratios are strong with return on equity (RoE) and return on capital employed (ROCE) at 17.4% and 17.7% respectively.

The company's debt to equity ratio is also comfortable at 0.5x. Promoters hold a 60.6% stake in the company.

For more details, check out Servotech Power Systems company fact sheet and quarterly results.

#2 Lancer Container

Second, on our list is Lancer Container.

The company provides shipping and logistics services in India and abroad. Its primary business is ocean transport services of intermodal containers by container ships.

Lancer Container's numbers have also show healthy growth in the last three years with sales growing at a CAGR of 46.7% and net profit at 88.6%. This has been on the back of a steady increase in demand and capacity addition.

In its latest conference call, the company's management has said it plans to add more than double the number of containers in the next two years. It's spending around Rs 600 million (m) as part of capex for this. This capacity addition is expected to be done by the end of FY24.

Apart from this, the company is going to start vessel operations from January 2024. This could possibly result in better operating margins.

Going forward, the company is also looking to expand to new markets including China, the Mediterranean, North Africa, East Africa, and CIS countries.

This, coupled with the capacity expansion and new product launches, should keep the company in a steady growth phase at least for the medium term.

Shares of the company have more than doubled in the past three months, ever since it posted strong Q1 earnings and laid out big growth plans for the coming 2-3 years.

Lancer Container Lines has an ROE of 41.9% and an ROCE of 29.6% as of March 2023. The latest shareholding pattern of Lancer Container Lines shows that promoters hold a 52.56% stake in the company.

In the September 2023 quarter, foreign investors (FIIs) holding went up from 17.49% to 22.41%. Prior to this, FIIs were on a selling spree, reducing exposure for the past three quarters.

The company has a debt-to-equity ratio of 1.47x.

To know more, check out Lancer Container's financial factsheet and its latest quarterly results.

#3 Easy Trip Planners

Third, on our list is Easy Trip Planners.

The company offers a comprehensive range of travel-related products and services under the flagship brand ''Ease My Trip''.

It also provides end-to-end travel solutions, including airline tickets, hotels and holiday packages, rail tickets, bus tickets and taxis as well as ancillary value-added services such as travel insurance, visa processing and tickets for activities and attraction.

Easy Trip Planners (EMT) is the fastest growing, second largest and only profitable company in the online travel portal space in India. The company's sales have grown at a CAGR of 47% while net profit has grown at a CAGR of 59.6%.

The company has executed several key initiatives to drive this growth, including strategic acquisitions and collaborations with Guideline Travels Holidays, TripShope Travel, Dook Travels, DuDigital Global Limited, and BluSmart.

The company has also expanded its presence in North India by launching franchisee outlets in Ludhiana, Jalandhar, Delhi, and Agra.

For FY24, the company's outlook for gross booking revenue growth is around 20-25%. Its primary objective is to achieve a profit before tax of Rs 2.5 bn for the year, and it is on track to reach this milestone.

Easy Trip Planners has robust return ratios. The company's ROE stands at 44.27% and ROCE stands at 50.98% as of March 2023.

Its debt-to-equity ratio is low at 0.22x. The company's promoter holding is high at 65.5%.

To know more, check out Easy Trip Planners financial factsheet and its latest quarterly results.

#4 Paradeep Phosphates

Fourth on the list is Paradeep Phosphates.

The company is a manufacturer of non-urea fertilizers. It's India's second largest private sector phosphatic company, engaged in manufacturing, trading, distribution, and sales of a variety of complex fertilizers.

Over the last three years, the company's sales have seen a growth of 47.1% while net profit has seen a growth of 16.3%. This has been on the back of a sharp increase in realisation of both phosphatic fertilisers and urea, along with the increase in volumes.

Going forward, the company's revenues and volumes are likely to increase with the stabilisation of the operations of the Goa unit and completion of the debottlenecking of its facilities at Paradeep, which will increase its manufacturing capacity to 1.8 MMTPA from 1.3 MMTPA, along with the addition of 1.2-MMTPA capacity from Zuri Agro Chemical's assets.

The company has acquired Zuari Agro Chemicals, parent of Mangalore Chemicals.

With this acquisition, Paradeep is planning to broaden its market reach to the southern and western markets as well.

The company recently released strong financial numbers for the September 2023 quarter with significant year-on-year growth in revenue, operating profit, and net profit.

For FY24, it expects to maintain EBITDA per metric ton of Rs 3,500 to Rs 4,000 in the second half of the year. It expects to achieve sustainable EBITDA per ton of Rs 5,000 to Rs 5,500 in the future.

Paradeep Phosphates has an ROE of 10.6% and ROCE of 10.8%. Its debt-to-equity ratio stands slightly high at 1.3x. It anticipates a reduction in net debt by the end of FY25.

Promoters hold a 56.08% stake in the company.

To know more, check out Paradeep Phosphates financial factsheet and its latest quarterly results.

#5 Rhetan TMT

Last on the list is Rhetan TMT.

The company manufactures TMT bars and round bars which are primarily used in the construction industry.

Rhetan's sales have grown at a CAGR of 62.6% in the last three years as it took advantage of niche opportunities globally.

The company's business model is built to tap into these opportunities. It is also aligning its strategies to utilize opportunities in the domestic market.

While it reported a net loss of Rs 5.8 m, it has turned profitable since then. The company reported a net profit of Rs 54.2 m in FY23.

The demand of the company's products is steadily increasing. The company is ready to take the challenges of increased demand by continuously adding capacities, investing in up gradation of its manufacturing capacities, and also striving to achieve cost efficiencies.

Rhetan TMT's ROE stands at 10.14% while its ROCE stands at 11.17% as of March 2023.

The company's debt to equity stands low at 0.2x. Promoter holding is comfortable at 62.12%.

To know more, check out Rhetan TMT financial factsheet and its latest quarterly results.

Snapshot of Fastest Growing Stocks on Equitymaster Stock Screener

Here's a list of fastest growing penny stocks on Equitymaster's stock screener.

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

Things to Consider while Investing in Penny Stocks

Penny stocks are extremely volatile and hence require investors to have a higher tolerance for risk. However, they can be quite rewarding as they have huge growth potential.

Before investing in a penny stock, one must check whether the company has a strong balance sheet. A healthy financial profile indicates good growth prospects.

Next, check for future growth opportunities. Favourable government policies or good order book status are some indicators you can look at.

Finally, check for feasibility of business. The more viable the business, the longer it will last.

Investing in penny stocks is no rocket science. However, it requires you to practice caution while doing so.

Picking the right penny stocks will help boost your portfolio returns.

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...