Three capital-efficient market outliers FIIs bought during the 2024 selloff
Towards the end of the year, as markets experienced a significant correction, foreign institutional investors (FIIs) began pulling their funds from Indian equities. Calling it a mere withdrawal might be an understatement—it was more of an exodus.
FIIs pulled out over $11.5 billion, marking one of the largest outflows in recent memory. This scale of withdrawal aligns with outflows during major global disruptions. For instance, the 2008-09 financial crisis saw $15.4 billion withdrawn over a 15-month period, and the pandemic-induced uncertainty in early 2020 led to a sharp $10.6 billion outflow within just three months.
Amid this widespread retreat, however, a few midcap stocks bucked the trend, quietly attracting fresh investments from FIIs.
Here are three such midcaps with impressive ROCE (Return on Capital Employed) that stood out during this period of large-scale outflows.
#1 Mrs Bectors Food Specialities
With a market cap of ₹10,333 crore and FII holding of 13.12% as of September quarter, Mrs Bectors Food Specialities Ltd—India’s largest biscuits exporter—leads this list.
FII holding increased significantly from 8.22% in the April-June quarter to 13.12% by the end of the September quarter. Key contributors include the Abu Dhabi Investment Authority, which acquired a 1.17% stake, and Singapore government, which picked up 1.06%, as per latest shareholding data available with exchanges.
Read this | Watchlist 2025: Three mid-cap stocks that scored five out of five in 2024
This surge in FII interest is linked to the company’s fundraise in September, during which it allotted 25,80,645 equity shares to eligible institutions at ₹1,550 per share.
The financial performance of Mrs Bectors supports this attention. Sales grew from ₹784 crore in FY19 to ₹1,624 crore in FY24—a 107% jump. Net profit rose an impressive 324%, from ₹33 crore to ₹140 crore during the same period. Ebitda (earnings before interest, taxes, depreciation, and amortization) increased from ₹97 crore to ₹243 crore, recording a compound annual growth rate (CAGR) of 20%.
The company’s expansion efforts over the years have played a significant role in this growth. Between FY20 and FY24, it invested over ₹469 crore in capacity expansion, with plans to spend an additional ₹350 crore in FY25. From setting up new plants to launching innovative products, Mrs Bectors is not only consolidating its leadership position but also pushing for further growth.
The company’s share price reflects this trajectory, rising from its listing price of ₹590 in 2021 to ₹1,683 as of 17 December—a compounded growth of 65%.
View Full Image
In terms of valuations, the stock trades at a PE of 72.5x, compared to an industry average of 35x. Its 10-year median PE stands at 48x, higher than the industry median of 30x.
Read this | Mrs Bectors Food shines as green shoots of rural demand emerge
A standout feature of Mrs Bectors is its capital efficiency. With a current ROCE of 25.4%, one of the highest among its peers, the company has demonstrated its ability to use capital effectively to generate strong returns for investors and stakeholders alike.
#2 ASK Automotive
Second on the list is ASK Automotive Ltd, a leading manufacturer of advanced braking systems for two-wheelers in India, commanding a 50% market share in terms of production volume for OEMs and the branded independent aftermarket. The company also specializes in aluminum lightweighting precision solutions and safety control cables.
With a market cap of ₹988 crore, ASK Automotive reported a sharp rise in FII holding, increasing from 4.91% in the April-June period to 9.16% in the quarter ended September. According to exchange filings, Allspring Emerging Markets Equity Fund, Abu Dhabi Investment Authority, and Florida Retirement System Allspring Global Investments LLC each acquired stakes of just over 1% in the company during the quarter ended September.
The growing FII interest is likely tied to the company’s expansion trajectory and its foray into manufacturing for electric two-wheelers. ASK Automotive has formed a technical collaboration with Taiwan-based LIOHO to produce 2W HPDC Alloy Wheels. Additionally, it has entered into a joint venture with Japan’s AISIN Group, a top 10 global tier-one auto component supplier, to market and sell passenger car products in the independent aftermarket.
The company’s financial performance further underscores its appeal. Sales rose from ₹1,785 crore in FY19 to ₹2,995 crore in FY24, a compounded growth of 11%. Net profit increased from ₹114 crore to ₹174 crore over the same period, reflecting a CAGR of 10%. Ebitda also grew from ₹226 crore in FY19 to ₹301 crore in FY24, recording a 6% compounded growth rate.
ASK Automotive’s shares currently trade at a PE of 44.6x, compared to an industry median of 32x. Its capital efficiency is notable, with a current ROCE of 24.25%, placing it among the top performers in its category.
View Full Image
Commenting on the company’s prospects in the annual report, chairman & managing director Kuldip Singh Rathee said, “I am extremely confident that our recent partnerships with global players and capacity expansion plans will immensely contribute and support growth of our company in future.”
The last company on the list is a prominent player in India’s paint industry, recognized for pioneering category-creator products like Metallic Emulsions and Tile Coat Emulsions in the decorative paint market. The company holds an impressive 80%-90% market share in some of its differentiated product segments.
With a market cap of ₹6,941 crore and an FII holding of 12.31% as of September-ended quarter (up sharply from 8.28% in the previous quarter), Indigo Paints has attracted significant interest from foreign investors. Notable investors include Arisaig Asia Fund Limited, which acquired a 2.54% stake, and Mercer QIF Fund Plc-Mercer Investment Fund 1, which purchased a 1.01% stake, as per September 2024 exchange filings.
The company’s consistent topline growth, outperforming the industry for six consecutive quarters, signals sustained market share gains—a likely factor behind the rising FII interest.
Its financial performance further reinforces its appeal. Sales grew from ₹536 crore in FY19 to ₹1,349 crore in FY24, achieving a compounded growth rate of 19%. Net profit surged at a remarkable CAGR of 40%, climbing from ₹27 crore in FY19 to ₹149 crore in FY24. Ebitda also demonstrated robust growth, increasing from ₹54 crore in FY19 to ₹233 crore in FY24, reflecting a CAGR of 34%.
Also read | What’s behind the sudden 100% surge in this financial stock? Is there more to come?
However, share price performance has been a mixed bag. While the company’s stock dropped from its listing price of ₹2,600 in March 2021 to ₹1,459 as of 17 December 2024—a decline of about 44%—it has still seen long-term growth. For instance, since its December 2023 listing at ₹310, the stock has risen to ₹502, marking a 62% increase.
In terms of valuations, the stock trades at a PE of 49x, slightly above the peer industry median of 48x. Its 10-year median PE stands at 54.5x, while the industry median for the same period is approximately 58x.
View Full Image
The company also stands out for its capital efficiency, boasting a current ROCE of 23.2%.
Looking ahead, Indigo Paints expects to grow its FY25 revenue at 3-4 times the industry growth rate, with an anticipated Ebitda margin improvement of 50-100 basis points.
In late 2023, the company diversified into construction chemicals and waterproofing by acquiring a 51% stake in Apple Chemie India Ltd. While Apple Chemie continues to cater to B2B infrastructure clients, Indigo Paints introduced retail products under the ‘Indigo Protect Plus Series’ brand. The acquired business has performed well, reporting over 24% growth since the acquisition.
Will the midcap magic work?
While FIIs typically gravitate towards large-cap stocks, their interest in these midcaps suggests they see untapped potential. The precise reasons may be difficult to pinpoint, but the combination of robust financials and high capital efficiency makes their appeal less surprising.
It’s worth noting that domestic investors, including Nippon India Small Cap Fund, HDFC Small Cap Fund, and Invesco India Manufacturing Fund, have also taken substantial fresh positions in these companies around the same time as the FIIs.
For more such analysis, read Profit Pulse.
As we step into 2025, these midcap stocks are worth keeping an eye on to see how their growth stories unfold.
Note: This article relies on data from www.Screener.in, www.trendlyne.com, and www.tijorifinance.com. In cases where data was unavailable, alternative but widely accepted sources have been used.
The purpose of this article is to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. Before considering any investment, readers are strongly advised to consult their financial advisor. This article is intended strictly for educational purposes.
About the author: Suhel Khan has been a passionate follower of the markets for over a decade. During this time, he served as Head of Sales & Marketing at a leading equity research organization based in Mumbai. Currently, he spends his time analyzing the investments and strategies of India’s Super Investors.
Disclosure: The writer and his dependents do not hold any of the stocks discussed in this article.
