Mid & small-caps could see a windfall from MF buying

Mumbai: The Securities and Exchange Board of India’s order for multi-cap schemes to maintain a minimum 25 per cent each of their portfolio money in large-cap, mid-cap and small-cap companies could result in better inflows into small-cap companies, although it is not clear whether funds running multi-cap schemes would be keen on retaining the category.According to estimates, small-cap companies may see inflows of up to Rs 30,000 crore, while large-cap stocks could see an outflow of Rs 35,000 crore if they implement the Sebi rule. Mid-cap stocks could see inflows of up to Rs 13,000 crore.ET Intelligence Group looked at a few companies that fund managers might prefer as their portfolios are churned. Operating profits at these increased at a CAGR of 15 per cent in the past five years. Other parameters used to create the full list are current fund holding of over 10 per cent, free-float holding more than 40 per cent, ROE greater than 15 per cent, last 30 days’ average daily volumes of more than 35,000 shares, promoter pledge less than 10 per cent and debt to equity ratio of less than 1.78097970SISSecurity and Intelligence Services (India), a provider of security solutions to corporations, has reported 4.7 per cent revenue growth annually in the past 13 quarters. In the June quarter, when the majority of corporations witnessed sharp fall in revenue growth, SIS’s quarterly revenue dropped just 1.9 per cent sequentially. This shows the company is not just a security guard provider. It is gradually emerging as a security solutions provider. Interestingly, during periods of lower production and layoffs, there has been higher allocation to security expenses.Galaxy SurfactantsGalaxy Surfactants, a supplier of specialty chemicals used in manufacturing of soap, handwash and skin products, has seen strong demand during the pandemic. Its volumes in surfactants grew 8 per cent on year on year in the first quarter. This accounts for nearly 70 per cent of its total volumes. Galaxy has been able to maintain healthy Ebitda margins. The company’s revenues are likely to grow at a rate faster than the industry. Demand visibility for surfactants could result in higher holding from mutual funds.Deepak NitriteOne of the key strengths of chemicals manufacturing company Deepak Nitrite is its diversified product offerings to varied sectors. This diversification has helped contain a steep fall in its revenues. It buys basic raw materials such as nitric acid, caustic soda, ammonia, toluene and hydrogen and creates value-added chemicals that can be used across sectors. It may benefit from the prevailing anti-China sentiments as importers look beyond China for durable supply chains.

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