Debt-Free Midcap Stocks Are down up to 49% in 2022; Should You Invest?

June 22, 2022 Trading 4 min read
Debt-Free Midcap Stocks

In line with global indices, Indian market is under pressure in 2022 after a dream run of 2021. The frontline Nifty index is down nearly 11% so far this year, while the Nifty Midcap 100 index has fallen over 15% year-to-date (YTD).

Despite the recent underperformance, the midcap index had outperformed the benchmark in the last three years. The Nifty Midcap 100 has jumped 48% in three years as against 32% gains on the Nifty.

However, amid such volatile and uncertain times, it is crucial for an investor to watch out for the companies with strong fundamentals and ability to whether the storm. There are certain factors in the financials of a company that help investors determine the strength of the company.

One of the most important factors is the debt of the company. A company may raise capital to fund its daily business operations or finance long-term expansion plans. This capital raising can be in the form of equity or debt. While equity does not bear any interest, debt-financing comes with an interest burden that can deteriorate the company’s financials if not managed efficiently. 

High debt means a significant amount of cash outflows in terms of interest payments. This can hit the profitability and erode investors’ wealth in the long run. 

Amid the uncertain times, companies with zero debt or at least with low debt can prove to be valuable for investors as they have greater control over their finances. A company without any external borrowing or with no debt in its balance sheet is considered as a debt-free company.

As mentioned above the midcap index has outperformed the benchmark in the past three years of heightened volatility. Midcap companies are those whose market capitalisation fall in the range of Rs 5,000 crore to Rs 20,000 crore. Let’s take a look at the list of top companies from the midcap universe that are virtually debt-free companies:

List of debt-free companies –

Sr. No. Name Market Capitalisation

(Rs. Crore)

YTD Return

(%)

1 Nippon Life India Asset Management 16,508 -25
2 Grindwell Norton 16,796 -20
3 Clean Science and Technology 15,628 -41
4 Central Depository Services (India) 11.302 -28
5 Eris Lifesciences 8,627 -16
6 BSE 7,971 -8
7 UTI Asset Management Company 7,964 -40
8 Procter & Gamble Health 6,655 -25
9 Praj Industries 6,536 8
10 Zensar Technologies 6,030 -49

Nippon Life India Asset Management

Nippon Life India Asset Management is a financial services and mutual fund company with zero debt on its balance sheet. The stock has fallen nearly 25% YTD amid the broader market sell-off.

The company posted a net profit of Rs 175 crore for the fourth quarter of fiscal 2022. Its net profit for the whole FY2021-2022 was Rs 744 crore. 

Grindwell Norton

Grindwell Norton is an abrasive and ceramics products company. The company’s stock fell 20% YTD, but it is up over 31% in the last one year and around 170% in the past three years.

The company reported a net profit of Rs 89.72 crore upon a revenue of Rs 558.87 crore in Q4FY22. On full year basis, Grindwell Norton’s net profit was at Rs 295.65 crore and revenue was at Rs 2,012.76 crore in the FY22.

Clean Science and Technology

Clean Science and Technology is a specialty chemicals manufacturing company with a market cap of over Rs 15,600 crore. The company had made a stellar debut on the stock exchanges on July 19, 2021. The shares got listed at Rs 1,784.40 apiece, a massive 98% premium to its issue price of Rs 837.

The stock trades near Rs 1,470 level on the BSE and is down over 41% YTD. The stock hit its lifetime high of Rs 2,698.25 on January 4, 2022, while its lifetime low of Rs 1,422.90 was hit on August 26, 2021.

Central Depository Services (India)

Central Depository Services is the first listed securities depositories in India. The company facilitates transaction of securities in the electronic form and settlement of traders on the stock exchanges.

The company’s stock has risen over 11% in one year, while it jumped more than 390% in last three years.

The company earned a revenue of Rs 136.56 crore in the quarter ended March 2022, while its net profit was 77.65 crore.

Eris Lifesciences

Eris Lifesciences is a pharmaceutical company with a pure-play domestic branded formulations business model. The stock has declined over 16% YTD. On June 20, 2022, the stock touched its 52-week low of Rs 600.50. it hit a 52-week high of Rs 863.15 on October 19, 2021.

The company had reported consolidated net profit of Rs 79.97 crore in the fourth quarter of fiscal 2022. Its revenue for the period was Rs 305.95 crore. For FY2022, the company posted a net profit of Rs 405.8 crore.

BSE Ltd

BSE Ltd is the only listed stock exchange in India. It is debt-free company with a market capitalisation of Rs 7,900 crore. The stock price of BSE has risen over 98% in the last one year.

BSE’s net profit in Q4FY22 jumped to Rs 53.84 crore upon a revenue of Rs 172.52 crore.

UTI Asset Management Company

UTI Asset Management Company is mutual fund company with quarterly average asset under management of around Rs 2.24 lakh crore. The stock price is down over 40% YTD.

The company reported a net profit of Rs 54 crore in the quarter ended March 2022. It posted revenue of Rs 301 crore for the period. The stock hit 52-week low of Rs 595 on June 17, 2022, while 52-week high of Rs 1,216.55 on August 31, 2021.

Procter & Gamble Health

Procter & Gamble Health is a pharmaceutical and chemical company supplying consumer health, biotechnology and chemical products. The stock fell 25% YTD and is trading near its 52-week low of Rs 3,925.30 apiece. It had hit a 52-week high of Rs 5,920.00 on June 22, 2021.

The company’s net sales in Q4FY22 were at Rs 267.82 crore, while its net profit was Rs 51.16 crore. 

Praj Industries

Praj Industries is a multinational process and project engineering company with a market cap of over Rs 6,600 crore. The stock has risen over 8% YTD and is up nearly 160% in last three years.

In Q4FY22, the company posted a net profit of Rs 57.65 crore and revenue of Rs 829.01 crore. In FY22, its net profit was Rs 150.25 crore and revenue was Rs 2,333.32 crore. The company had a consolidated order backlog of Rs 2,878 crore as on March 31, 2022.

Zensar Technologies

The shares of software services company Zensar Technologies have fallen over 48% YTD amid the broader market rout. It is a zero-debt company operating in the IT-services sector. The stock trades near 52-week low of Rs 274 apiece on the BSE.

Zensar Technologies posted net profit of Rs 129.90 crore in the fourth quarter of fiscal 2022. Its revenue during the quarter was Rs 1,153.80 crore.


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