Synopsis: Century Enka and Nahar Spinning Mills, along with three other microcap companies, have significantly higher reserves than their market caps, portraying them as having a higher capacity to absorb future shocks and continue its business uninterrupted.
It could be a difficult task to find decent microcap stocks. However, one indicator that can be helpful is when a company’s reserves are more than its market value. In most cases, it implies that the company is a more solid one than the stock price is showing. However, one should also know its debt levels to consider balance sheet risk implications. In this article, we will look at five microcaps which you should definitely keep under your radar.
Century Enka
Century Enka, a member of the Aditya Birla Group, is among the top Indian manufacturers of nylon tyre cord fabric and nylon filament yarn. Established in 1965, the company runs state-of-the-art facilities in Pune and Bharuch and is recognised for its premium products, innovation, and customer-centric approach in the textile and tyre sectors.
With a market capitalisation of Rs 964 crore, Century Enka is currently trading at Rs 441 per share. It has a minimal debt of only Rs 36.4 crore and a high interest coverage ratio of 20.6x, signalling lower risk from leverage. The company has a huge reserve base of Rs 1,414 crore against its market capitalisation of Rs 964 crore, which is more than 1.4x of its market cap.
Oricon Enterprises
Oricon Enterprises, a Parijat Enterprises company, is engaged in the production and sale of diversified packaging products such as metal packaging, ROPP caps, plastic closures, PET preforms, and aluminium tubes, along with a few other industries such as petrochemicals and real estate development. Besides being a publicly traded company, it is a significant industrial player with a worldwide presence, exporting its products to over 40 countries.
With a market capitalisation of Rs 930 crore, Oricon Enterprises is currently trading at Rs 59.2 per share. It has a minimal debt of only Rs 11.3 crore and a high interest coverage ratio of 24.5x, signalling lower risk from leverage. The company has a huge reserve base of Rs 1,238 crore against its market capitalisation of Rs 930 crore, which is more than 1.3x of its market cap.
Oswal Green Tech
Oswal Greentech Limited is basically a company that develops and invests in real estate. The company develops real estate assets for sale and also makes investments in the equity and debt markets. Besides that, it also offers intercorporate deposits, hence it is active in both the property and the financial investment sectors.
With a market capitalisation of Rs 866 crore, Oswal Green Tech is currently trading at Rs 33.7 per share. It has a minimal debt of only Rs 5.11 crore and a high interest coverage ratio of 16x, signalling lower risk from leverage. The company has a huge reserve base of Rs 2,011 crore against its market capitalisation of Rs 866 crore, which is more than 2.3x of its market cap.
Avadh Sugar & Energy
Avadh Sugar & Energy Limited is a Kolkata-based company that was incorporated in 2015. Its main business is the manufacture of sugar, along with the production of the related by-products. The company is a multi-unit enterprise handling the three segments of the sugar business, viz., cogeneration power, and the distillery. It makes a wide range of products with the sugar business as the mother unit, such as ethanol, molasses, bagasse, and industrial spirits; also, it generates power and some trades in petroleum products.
With a market capitalisation of Rs 771 crore, Avadh Sugar & Energy is currently trading at Rs 385 per share. It has a high debt of Rs 594 crore and a low interest coverage ratio of only 2.25x, signalling higher risk from leverage. The company has a high reserve base of Rs 1,040 crore against its market capitalisation of Rs 771 crore, which is more than 1.3x of its market cap.
Nahar Spinning Mills
Nahar Spinning Mills Limited, a company that was established in 1980, is located in Ludhiana. It is a diversified textile company which makes various types of yarns, knitted garments, woollen wear, woven fabrics, including denim, to name a few. Apart from that, it runs businesses in polyfilms, financial services, sugar, and other areas that are related to the industrial sector, thus making it a broad-based industrial player.
With a market capitalisation of Rs 722 crore, Nahar Spinning Mills is currently trading at Rs 200 per share. It has a high debt of Rs 760 crore and a low interest coverage ratio of only 1.8x, signalling higher risk from leverage. The company has a huge reserve base of Rs 1,517 crore against its market capitalisation of Rs 722 crore, which is more than 2x of its market cap.
Written by Satyajeet Mukherjee
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