Companies generally manage their capital requirements with the help of equity or through internally generated cash. However, they may also use debt for the same. While debt provides financial leverage to companies, too much of it can invite trouble.
Many companies that are debt-free send a signal to investors that they are able to manage their funding requirements primarily through cash. During an economic slowdown, companies with no debt or very little debt do not have to worry about falling sales and payment of fixed interest. Here are a few small-cap multibagger companies that are debt free:
Tanfac Industries Ltd
With a market capitalization of ₹ 1579 Crores, Tanfac Industries is a small-cap company that is a leading producer of Hydrofluoric Acid and its derivatives. It is jointly held by the Aditya Birla Group and Tamil Nadu Industrial Development Corporation (TIDCO).
The company’s share price rose from ₹ 598.75 apiece to the current level of ₹ 1605.75 apiece, thereby giving multibagger returns of 168.18%. If an investor would have invested ₹ 10,000 in the company’s shares a year ago, the value of their holdings would have been ₹ 26,818 today!
Tanfac Industries does not have any debt on its balance sheet. It has a return on equity of 35.31% and a dividend yield of 0.57%. Its shares were trading at a price-to-earnings ratio (P/E) of 28.14 which is higher than the industry P/E of 16.37, indicating that the stock is overvalued compared to its peers.
The company reported a revenue of ₹ 115.53 crores in the January to March quarter of the financial year 2023, up 72.18% compared to ₹ 67.1 crores reported in the corresponding quarter last year. Its profit increased by a whopping 217% to ₹ 22.38 crores in the March quarter, as compared to ₹ 7.06 crores reported in the corresponding quarter last year.
Jyoti Resins and Adhesives Ltd
With a market capitalization of ₹ 1856 crores, Jyoti Resins and Adhesives is a small-cap company that manufactures synthetic resin adhesives under the brand name EURO 7000. It is currently the second largest-selling wood adhesive brand in India in the retail segment.
The company’s share price rose from ₹ 683.55 apiece to the current level of ₹ 1544.00 apiece, thereby giving multibagger returns of 125.88%. If an investor would have invested ₹ 10,000 in the company’s shares a year ago, the value of their holdings would have been ₹ 22,588 today!
Jyoti Resins and Adhesives has zero debt on its balance sheet. It has a return on equity of 37.12% and a dividend yield of 0.16%. Its shares were trading at a price-to-earnings ratio
(P/E) of 50.23 which is higher than the industry P/E of 16.37, indicating that the stock is overvalued compared to its peers.
The company reported a revenue of ₹ 66.61 crores in the October to December quarter of the financial year 2023, up 36.32% compared to ₹ 48.86 crores reported in the corresponding quarter last year. Its profit increased by a whopping 148% to ₹ 12.15 crores in the December quarter of FY 2022-23, as compared to ₹ 4.89 crores reported in the corresponding quarter last year.
TD Power Systems Ltd
With a market capitalization of ₹ 2,639 crores, TD Power Systems is a small-cap company that manufactures AC generators and electric motors for various applications.
The company’s share price rose from ₹ 69.62 apiece to the current level of ₹ 175.00 apiece, thereby giving multibagger returns of 151.36%. If an investor would have invested ₹ 10,000 in the company’s shares a year ago, the value of their holdings would have been ₹ 25,136 today!
TD Power Systems is debt-free. However, it has a low return on equity of 14.16% and a dividend yield of 0.50%. On the bright side, its shares were trading at a price-to-earnings ratio (P/E) of 30.60 which is higher than the industry P/E of 31.37, indicating that the stock is undervalued compared to its peers.
The company reported a revenue of ₹ 205.28 crores in the October to December quarter of the financial year 2023, up 14.16% compared to ₹ 179.81 crores reported in the corresponding quarter of the previous year. Its profit increased by 2.71% to ₹ 20.07 crores in the December quarter of FY 2022-23, as compared to ₹ 19.54 crores reported in the corresponding quarter last year.
Written by Simran Bafna
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