Smallcap stocks with low debt and high-profit growth: Timken India, SKF India, and Kansai Nerolac top the list

Indian benchmark indices have recouped partial losses from the recent correction in last week's rally. The NIFTY50 gained 1.9%, and the SENSEX jumped 1.71% in the previous week, abating some investor worries. The broader NIFTY500 index gained nearly 5% from the lows giving broader recovery to the markets. Various technical and fundamental indicators are showing signs that the markets are bottoming out. Investors and market participants now look for opportunities in stocks with sound fundamentals and good track record.

Here are top 5 smallcap stocks with low or negligible debt and have given more than 20% CAGR growth in the net profit.

Timken India

Timken India is a leading auto-ancillary company with key operating areas in the manufacturing and distribution of anti-friction bearings, components, accessories and mechanical transmission products. The company has delivered 9.6% YoY growth in sales and 10% YoY growth in the net profit for Q3FY25. Similarly, the company has a net debt-to-equity ratio of 0 and has delivered 39% CAGR (compounded annual growth rate) in net profits.

Shares of Timken India have fallen nearly 50% from the June 2024 peak and currently trade at 49x price-to-earnings ratio.

SKF India

SKF India is another auto equipment manufacturer and supplier of rolling bearings,seals, mechatronics and lubrication systems.The company is a subsidiary company of AB SKF which is a Swedish seal manufacturing company and holds a 53% stake in the company. In Q3FY25, the company posted a 15%YoY growth in sales and a 10% YoY decline in the net profits for the quarter, largely due to poor operational performance. However, on an annual basis, the company has delivered 22% CAGR in net profit for three years and holds 0 net debt-to-equity ratio. The shares of the company have fallen nearly 50% from the top and traded at 34x price-to-earnings ratio as of today.

Kansai Nerolac Paints

The leading and one of the oldest paint manufacturer which holds dominant market share in the industrial coatings business.The company is a subsidiary of Japan-based Kansai Co. Ltd. The company has delivered muted growth in Q3FY25 as revenue remained largely unchanged and net profit before exceptional items grew 7.2% YoY. In the long term, the company has posted a 30.9% CAGR in the net profit for the past three years and a debt to equity ratio of 0.05%. The shares are down 32% from the 52-week high achieved in September 2024.

AstraZeneca Pharmaceuticals

The company is promoted by AstraZeneca Plc, a multinational pharmaceutical company headquartered in England.AstraZeneca Pharmaceuticals holds 75% stake in the company. The company has delivered robust returns of 40% in the past year, outperforming the broader market correction. The company has also delivered 20% CAGR growth in the net profit for three years and holds a debt-free status. In Q3FY25, the company delivered 43% YoY growth in sales and a 95% jump in the net profit for the quarter.

Ratnamani Metals

Ratnamani Metals & Tubes Ltd operates in the manufacturing of stainless steel pipes and tubes and carbon steel pipes. The company reported a muted set of numbers in Q3FY25, as the net sales grew 4.7% YoY and largely no change in the net profit for the quarter. The company’s total debt-to-equity ratio stands at 0.05% and has delivered 30% growth in the net profit for the past three years. The shares have fallen nearly 36% from the previous year highs and traded at 33.6x price-to-earnings.

Apart from the above key stocks, other stocks like PTC Industries, Bikaji Foods International, Zensar Technologies, Lakshmi Machine Works, Jindal Saw, Afcons Infra, and CIE Automotive India too performed well in the long term as their net profits grew more than 40% CAGR in past three years and hold low or very negligible debt.