Top 5 Penny Stocks with Exceptional Promoter Backing. Look at These Hidden Gems...

Penny stocks are considered risky and speculative, but they also offer tremendous opportunities for investors.

Some of the penny stocks are backed by exceptional promoters - owners with high stakes, unwavering confidence, and a track record of success.

The advantage in these stocks is that the promoters can signify not just financial muscle, but also quality management, a clear vision, and unwavering commitment to shareholder value.

Keeping that in mind, here are the top 5 penny stocks with exceptional promoter backing.

#1 AVT Natural Products

AVT Natural Products is a leading manufacturer of plant-based extracts and natural ingredient solutions, serving the food, beverage, animal nutrition, and nutraceutical industries globally.

The company has a diversified portfolio of products, including marigold oleoresins, spice oleoresins, essential oils, instant tea, and animal feed supplements.

AVT is trusted by some of the world's leading food, cosmetics, and feed companies.

In financial year 2023, the company posted a revenue of Rs 5.8 billion (bn), a marginal growth of 4% YoY.

As of September 2023, the company's promoters hold 75% of the shares in the company.

The promoters of AVT Natural Products are part of the AV Thomas Group, which has a rich legacy of over eight decades in the fields of agriculture, plantations, and natural products.

The group has a strong presence in the domestic and international markets and has established a reputation for quality and innovation.

The promoters bring their expertise, network, and resources to AVT Natural Products, which gives it a competitive edge in the industry.

The company has a strong research and development (R&D) capability, which enables it to innovate and customise products according to customer needs.

The company also has a robust supply chain and quality control system, which ensures consistent and reliable delivery of products.

AVT's diverse portfolio insulates it from market fluctuations.

Its focus on high-demand natural ingredients like ginger, turmeric, and stevia, aligns perfectly with the burgeoning health and wellness trend.

Additionally, initiatives like expanding its global footprint and investing in R&D for novel applications of natural extracts, further bolster its growth prospects.

#2 Indian Railway Finance Corporation Ltd (IRFC)

Second on the list is IRFC, the dedicated funding arm of Indian Railways, the largest rail network in the world.

The company was set up in 1986 to mobilise funds from domestic and overseas markets to meet the extra budgetary requirement of Indian Railways.

IRFC has shown consistent growth in its revenue, assets, and profitability over the years.

For the quarter ended September 2023, the company reported a revenue of Rs 67.7 bn, and a net profit of Rs 15.5 bn.

The promoter of IRFC is the President of India, acting through the Ministry of Railways (MoR), which holds 86.4% of the total share capital of the company.

This holding is expected to go down as the company needs to meet the minimum shareholding rules as per the regulator.

IRFC enjoys a strong relationship with MoR and has been fulfilling its funding needs for over three decades. It lends funds to MoR and other railway entities at a margin of 0.4% over its cost of borrowing.

Its strong credit ratings, sovereign guarantee, and favorable government policies give it access to long-term funds at low interest rates.

It also has a diversified domestic and international investor base. It raises funds from various sources, including term loans, bonds, and external commercial borrowings from domestic and international markets.

It issues green bonds to finance environmentally friendly projects of Indian Railways.

IRFC uses a leasing approach to fund Indian Railways' rolling stock and project assets, which ensures a steady and predictable cash flow for the company.

IRFC has the capacity to finance large-scale projects of Indian Railways, crucial for the development of the rail transport sector and the economy making it a favorable bet in the election year.

The company is well-positioned to capitalise on the increasing demand for rail infrastructure and services in India.

#3 SJVN

SJVN is a state-owned company engaged in the generation and sale of electricity from hydro, wind, solar, and thermal sources.

The company operates six power plants with a total installed capacity of 2,091.5 MW, of which 91.4% is hydroelectric power.

SJVN also provides engineering consulting services for power projects in India and abroad.

The promoters of SJVN are the President of India and the Governor of Himachal Pradesh, who together hold 81.8% of the company's shares.

The company maintains a robust financial profile with high profitability, low debt, and attractive valuation.

The company reported a revenue of Rs 8.8 bn and a net profit of Rs 4.4 bn for the quarter ended September 2023, with a net margin of 50.0%.

In the last one year, its share price has risen by almost 180%.

SJVN has a strategic and business advantage over its peers, due to long-term power purchase agreements and a diversified portfolio of renewable and conventional energy sources, with a focus on hydro power.

Hydro power is a clean, reliable, and low-cost source of energy, which also helps in balancing the grid and providing ancillary services. This positions it strategically in the burgeoning renewable energy space.

SJVN actively pursues ventures in wind and solar, mitigating single-segment risks and creating a balanced portfolio for sustainable growth.

SJVN has a strong project pipeline, with 18 projects under various stages of development, totaling 7,200 MW of capacity.

The company also has a presence in Nepal, Bhutan, and Bangladesh, where it is developing hydro power projects with attractive returns.

SJVN has a vision to become a 25,000 MW company by 2030, with a global footprint and a diversified energy mix.

The Indian government's focus on hydropower and clean energy bodes well for SJVN's core business, while its diversification efforts unlock new avenues.

Additionally, its planned foray into thermal power projects can act as a hedge against market fluctuations.

#4 Khaitan Chemicals & Fertilizers Ltd. (KCFL)

KCFL is a leading Indian manufacturer of single super phosphate, sulphuric acid, and soya edible oil.

With the largest production capacity for single super phosphate and sulphuric acid in India, the company has been committed to the development of agriculture since its inception in 1982.

The promoters hold a significant 74.99% stake in the company demonstrating their commitment and confidence in the business.

The company is promoted by the Khaitan family. It's led by Mr. Shailesh Khaitan, a veteran industrialist with over 40 years of experience in the fertilizer sector.

KCFL boasts distinct strategic advantages that position it for long-term growth.

Its dominant position as India's largest SSP producer, with a 26% market share, grants it pricing power and a strong distribution network.

This diversified product portfolio allows the company to cater to a wide range of industries and reduces its dependence on a single product.

Additionally, its integrated operations - manufacturing, processing, and power generation - ensures cost competitiveness and operational efficiency.

The company's commitment to boosting the agriculture sector (that contributes 16% to the GDP) positions it favorably in an election year.

Its focus on high-demand fertilizers, operational efficiency, and sustainability aligns perfectly with the growth trends in the agricultural sector.

#5 RattanIndia Enterprises Ltd.

RattanIndia Enterprises is the flagship company of the RattanIndia Group, focusing on new-age growth businesses with cutting-edge technologies.

The company's portfolio includes tech-focused businesses such as e-commerce, electric vehicles (EVs), fintech, and drones.

The promoter Rajiv Rattan holds a substantial 74.86% of the company's shares. He is a serial entrepreneur with an knack for navigating disruptive sectors.

RattanIndia's unwavering focus on sustainable development and cutting-edge technologies, coupled with his proven track record of value creation, forms the bedrock of the company's strategic direction and investor confidence.

The company has reported a net profit of Rs 1.4 bn in Q2FY24, a 35.6% jump YoY.

It has strategically positioned itself in new age growth businesses, including e-commerce, EVs, fintech, and drones.

This diversification into high-growth sectors provides the company with a significant strategic advantage and market resilience.

One of the key businesses of RattanIndia is Revolt Motors, which focuses on providing world-class electric mobility products.

With the increasing emphasis on sustainable and clean energy, this venture is well-positioned to capitalise on the growing electric vehicle market in India.

Another significant business is Cocoblu Retail Ltd, an online seller that helps brands scale up on e-commerce platforms.

Cocoblu has partnered with over 600 top brands and operates in eight categories with over 2 million products stocked. This venture leverages the booming e-commerce market in India, providing a robust growth platform for RattanIndia.

In Conclusion

These 5 companies have shown promising growth, backed by exceptional promoters, and have strategic advantages in high-growth sectors.

A penny stock with consistent rise in promoter shareholding often represents a scenario where the promoters see a bright future for the company and in turn, they plan to benefit from its good growth.

A word of caution. Sometimes, penny stock promoters can use misleading information about the actual valuation of the company. So, make sure to do your own research before taking the plunge.

Since penny stocks interest you, check out Equitymaster's YouTube channel that has a separate playlist for penny 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...