Small cap stocks are small sized companies that have lower market capitalizations relative to the large and mid cap companies. Some companies in the small cap segment face issues such as financial instability, lack of resources and low volumes on the stock exchange. The possibility of capital appreciation is higher but their stock prices exhibits high volatility. Such high variations increases the probability of loss. Not all small cap stocks are risky as some of them have high growth potential. They can be good long term bets if selected after adequate research. Out of 770 stocks of the BSE Small cap index, 599 have gained whereas 171 stocks lost money this year. Let us look at the top 5 stocks of BSE Small cap index that have given highest returns in 2017.
HEG: The company is engaged in manufacturing of graphite electrodes and caters to the requirements of steel manufacturers in India and across the globe. It produces two types of electrodes: High Power and Ultra High power electrodes. The company exports over 80% of its production to more than 25 countries of the world. Its integrated graphite plant is located at Mandideep in Madhya Pradesh. In FY17, the company suffered a net loss of Rs 50.1 crores. Its revenue declined by -1.1% whereas the total expenditure increased by 5.9%. Increase in power and fuel cost by over 9.7% and decline in other income has led to reduction in operating profit that fell by over 37% in FY17. The company showed an improvement in financial performance in Sep'17 quarter. Sales revenue and operating profit grew by 101% and 778% respectively compared to Sep'16 quarter. Marginal increase in total expenditure of over 18% compared to substantial jump in revenue and decrease in interest costs helped company generate profit of Rs 113.6 crores in Sep'17 quarter compared to net loss of Rs -14 crores in Sep'16 quarter. The stock outperformed BSE Smallcap index by over 24 times in 2017. Between 2 Jan 2017, the first trading day of the year and 12 Dec 2017, stock delivered 1190.9% returns compared to BSE small cap that delivered 48.7% returns.
Indiabulls Ventures: Its primary businesses include Broking and Related activities and Lease Rental activities. The company is the corporate member of the capital market and derivative segment of the NSE and BSE and its business areas include equity, commodities, currency broking, depository service, consumer finance, asset reconstruction and marketing of non-discretionary wealth management products. In FY17, company's operating income grew by 8.7%. Its bottom line grew by a healthy 38.5% helped by increase in other income (202.5%) and reduction in interest costs (-6.6%). Looking at the Sep'17 quarterly numbers, company's revenue & operating profit grew by 57.5% and 88.6% respectively compared to Sep'16 quarter. Along with the strong top-line growth, significant increase in other income by over 152% and reduction in depreciation costs by over -66% helped bottom-line that grew by 221% year on year. The stock outperformed BSE smallcap index by nearly 23 times this year. Between 2 Jan 2017 and 12 Dec 2017, the stock returned 1115.4% returns compared to BSE smallcap index that returned 48.7% returns.
Graphite India: The company is engaged in the manufacturing of graphite electrodes, graphite equipments, steel, glass reinforced plastic pipes and tanks and generation of hydel power. Its manufacturing facilities are located in Maharashtra, West Bengal, Bangalore, Karnataka and Jharkhand. Graphite and carbon segment contributes around 90% to the total revenue. In FY17, the company witnessed decline in sales revenue by -3.5% & increase in total expenditure by 2.2%. Increase in other income by nearly 75% could not help bottom-line growth as net profit declined by -14.9% compared to FY16. The financials improved substantially during Sep'17 quarter with sales revenue jumped by 35.8% with a small increase in total expenditure by 1.8%. Its operating profit jumped by more than 4 times between Sep'16 quarter and Sep'17 quarter. Helped by strong top-line, operating profit and reduction in interest costs, the company's EPS jumped by more than 460% in Sep'17 quarter. The stock outperformed BSE small index by more than 16 times this year. Between 2 Jan 2017 and 12 Dec 2017, the stock returned 795.8% compared to BSE Smallcap index that returned 48.7%.
Bhansali Engineering Polymers: Vertically integrated petrochemical company engaged in the manufacture of acrylonitrile butadiene styrene (ABS) resins and styrene acrylonitrile (SAN) resins that are used as a raw material for companies dealing in automobiles, home appliances, telecommunications, luggage, bus body and various other applications. Between FY16 & FY17, revenue grew by 18% whereas the total expenditure grew by 14%. The bottom line jumped by over 2 times helped by increase in other income, reduction in depreciation and interest costs. In Sep'17 quarter, the revenue and operating profit grew by 60.2% and 133.2% respectively. Its net profit grew by 186% and profit margins improved from 4.8% in Sep'16 quarter to 8.6% in Sep'17 quarter. The stock outperformed BSE small index by more than 13 times this year. Between 2 Jan 2017 and 12 Dec 2017, the stock returned 655% compared to BSE Small cap index that returned 48.7%.
Rain Industries: The company is engaged in the business of manufacture and sale of carbon products, chemicals and cement. The Carbon Products segment consists of Calcined Petroleum Coke (CPC), Green Petroleum Coke (GPC), Coal Tar Pitch (CTP), Co-generated Energy and other derivatives of Coal Tar distillation. The Chemicals segment includes the downstream operations of Coal Tar distillation and consists of Resins, Modifiers, Super Plasticizers and other specialty products. The Cement segment includes the manufacture and sale of Cement. Carbon segment contributed 71% to the revenues in 2016, followed by chemicals (19%) and cement (10%). In FY17, on a consolidated basis, the sales revenue declined by 8.8% YoY. The total expenditure declined by over 10% supported by reduction in raw material costs that fell by -19%. Irrespective of strong growth in other income of 52.5%, the bottom line growth fell by nearly 25% relative to FY16. For Sep'17 quarter, the company reported strong financial numbers with sales revenue growth of over 33% and operating profit growth of nearly 48%. EPS grew by 93.6% between Sep'16 quarter and Sep'17 quarter. The stock outperformed BSE small index by nearly 12 times this year. Between 2 Jan 2017 and 12 Dec 2017, the stock returned 571.7% compared to BSE Small cap index that returned 48.7%.