Small is not just beautiful; in the stock market, it often proves bountiful.
SME stocks trade on both BSE and NSE platforms by the dozens, but they usually go unnoticed till the time the odd stock proves to be a crorepati maker.
Available data shows several SME stocks have delivered multibagger returns to investors over time, but have gone unnoticed.
Take the example of Kushal Tradelink. An investment of Rs 1.75 lakh in this stock in September 2013, when it began trading on the BSE SME platform, became Rs 1.03 crore as of June 5, 2017.
Kushal Tradelink migrated from the SME platform to the mainboard of BSE in November 2015. The scrip was trading at Rs 212.20 on June 5, 2017 compared with the September 4, 2013 price level of Rs 3.58, indicating a gain of over 5,800 per cent, or 60 times, in this period.
Some of the other companies that have migrated to the BSE mainboard over the past few years include Dhabriya Plywood, AshapuraBSE 2.02 % Intimates, Suyog Telematics, SRG Housing Finance and Jupiter Infomedia, which have seen their market-caps soar by up to 2,500 per cent since their listing.
Shares of Suyog Telematics have surged over 1,700 per cent since January 2014 from Rs 21.04 on January 22, 2014 to Rs 387 on June 2, 2016. The market capitalisation of the company has jumped from Rs 16.31 crore to Rs 392.98 crore in this period.
“Performance of a stock does not depend on the size of the company,” G Chokkalingam, Founder, Equinomics Research and Advisory said about investing in SME stocks.
Data available with BSE showed 183 companies have got listed on the BSE SME platform so far since August 2012. Out of them, 29 have migrated to the BSE platform while three have been suspended. Current market capitalisation of companies listed on the BSE SME platform stood at around Rs 10,300 crore as of June 5, 2017.
Since the launch of the BSE SME IPO index in August 2012, it has soared 1,208 per cent till June 5, 2017, whereas BSE benchmark Sensex and the BSE IPO index have surged 77 per cent and 192 per cent, respectively, during this period.
Kushal Tradelink and Suyog Telematics reported robust numbers for the financial years ended March 2017 and March 2016. Consolidated net profit of Kushal Tradelink surged 43 per cent to Rs 140.16 crore in FY17 from Rs 97.89 crore in FY16. The company, which is engaged in the wholesale trade of paper in bulk, had reported net profit of Rs 6.57 crore for FY15.
Suyog Telematics posted 41 per cent year-on-year growth in profit at Rs 17.01 crore for the year ended March 31, 2017 against Rs 3.37 crore posted for FY15.
“Opportunities are plenty in midcaps, but historically investors have made more wealth in small companies. Before investing in any company, including SMEs, one should always check balance sheets, management quality and business model and look for valuation comfort,” said Chokkalingam of Equinomics.
Small and medium-sized enterprises (SMEs) in India are ‘highly optimistic’ about domestic economic growth over next 12 months and are confident of their business performance in 2017, according to the inaugural American Express Global SME Pulse2 2017.
The survey showed Indian SMEs are more positive about the domestic economy over the next 12 months than their Asian counterparts. India led with 71 per cent on this count followed by Japan at 62 per cent, China at 54 per cent, and Singapore at 26 per cent, said a PTI report.