As Warren Buffett famously said, “Price is what you pay, value is what you get.”
This quote resonates deeply with many of us who are just starting to earn or are still settling in our careers, with limited funds to invest. Putting all our hard-earned money into a single stock can be risky, especially without diversification. It almost makes us wish for a list of the right stocks to be included in our portfolios. Considering that there are thousands of stocks to choose from, the stock-picking game can be tricky! So, we have curated a list of the best stocks priced under Rs. 500 for the fiscal year 2023.
With careful analysis and the inclusion of specific filters, we aim to help you invest safely in good companies, even on a budget. Let’s dive in and know the stocks that can potentially propel your financial growth.
Read More – Best strategies to take profits from stocks
How to identify the best stocks under Rs 500?
In order to identify safe and investment-worthy companies, we have used some filters. These are:
- Market Capitalization above Rs. 1,000 Crores
- Sales growth for 5 Years (CAGR Basis )>15%
- Profit growth for 5 Years (CAGR Basis) >15%
- Average Return on capital employed for 5 Years >15%
- Average Return on equity for 5 Years >15%
Top 5 stocks under Rs 500
Here are the details of the top 5 stocks under Rs. 500 that you can consider for your portfolio:
1. Sumitomo India Chemical
Sumitomo Chemical India Ltd. (SCIL) is a prominent player in the industry, offering a diverse range of technical and formulation products. The company boasts a balanced portfolio and has achieved backward integration for certain products. SCIL is recognized for its domestic marketing of proprietary products from its Japanese parent company, Sumitomo Chemical Company Limited, in agrochemicals, animal nutrition, and environmental health sectors. Furthermore, the recent integration of Excel Crop Care Limited has bolstered SCIL’s generics portfolio, propelling the company’s position within the Indian crop protection industry.
Diversified product portfolio
The company is well diversified with agro chemical products covering multiple crop segment in both Kharif and Rabi season and non-agrochemical including animal nutrition and environment health products
The company has established market position in the domestic crop protection business supported by its diversified product portfolio including insecticides, weedicides, fungicides, fumigants and rodenticides as well as plant growth nutrition products, bio-rationals and plant growth regulators
Capex to drive sales
The company allocated Rs 120 Cr for manufacturing proprietary products for the parent, with one project already in commercial production since 2QFY23. Its management has hinted at a potential capex of Rs 250 Cr in FY24.
Strong parent group
The company benefits from the international standing of its parent, SCC Japan. It gets access to SCC’s global supply chain and global R&D activities.
Financials
| Company | Share Price(Rs) As of May 23, 2023 | Market Cap (Cr) | Sales growth 5 years ( CAGR %) | Profit growth 5 years ( CAGR %) | Average ROE for 5 yrs (%) | Average ROCE for 5 yrs (%) |
| Sumitomo Chemical India Ltd | 395 | 19,704 | 30.80% | 47.70% | 22.10% | 30.30% |
2. Saregama.
Saregama India Ltd is India’s oldest music label company, youngest film studio and a multi-language TV content producer. It holds ownership of nearly 50% of all the music ever recorded in India. The company has also expanded into other branches of entertainment like film & series production, live events, and music-based consumer products.
Saregama India Limited is India’s largest music IP of about 130000+ songs covering multiple language and genres indicating a very high entry barrier.To put things in perspective, a new music label acquiring music of 200 films per year (typical movie has 5 songs) will take 100 years to build a library of this size.
Reduction in Piracy
The revenues of music label companies have skyrocketed in recent years due to the decline in music piracy and the emergence of streaming platforms like Spotify, Wynk Music, and Gaana.com. Saregama stands out as it earns money not only from music streaming platforms but also from streaming on social media platforms, video streaming platforms, and broadcasting platforms.
Consistent growth in license fees
Saregama’s licensing fee has seen substantial growth, with a CAGR of 24% during FY20-FY22 and a 28% YoY increase in FY22. The company’s evolving business model capitalises on digital platforms, such as OTT platforms like YouTube, and opportunities for publishing in movies, TV shows, and brand usage. The increasing availability of affordable data and smartphone usage has significantly contributed to the rise in digital content consumption.
Financials
| Company | Share Price(Rs) | Market Cap (Cr) | Sales growth 5 years ( CAGR %) | Profit growth 5 years ( CAGR %) | Average ROE for 5 yrs (%) | Average ROCE for 5 yrs (%) |
| Saregama India Ltd | 329 | 6,342 | 21.60% | 78.50% | 15.20% | 21.20% |
3.Laxmi Organic
Laxmi Organic Industries Ltd, established in 1989, is a leading specialty chemical manufacturer operating in two segments: Acetyl Intermediates (AI) and Specialty Intermediates (SI). As India’s largest producer and exporter of Acetyl Intermediates, with a capacity of 2,32,000 MTPA, their products find application in various industries like solvents, adhesives, paints, pharmaceuticals, dyestuff, and emulsifiers. The company also holds the largest market share in the domestic Specialty Intermediates business and is a preferred partner for customers due to its integrated Diketene manufacturing capabilities. Diketene is in high demand for the production of agrochemicals used in agriculture.
Over the years, Laxmi Organic has expanded its product range, increased production capacity for Diketene and derivatives, and elevated its offerings up the value chain.
New segment
The company is now entering a new segment which is Fluoro-Specialty Intermediaries. The products being developed have diverse and growing applications across industry segments with potential to enter new customer segments. The company has acquired 92 acres land, which will be used primarily for expansion of specialty Intermediates and Fluoro-specialty Intermediates.
The company has a clear vision to expand specialty type business and capex in the AI business will be less than 10%. It is working on 10-12 products within the 100 product portfolio acquired from Miteni, which are at various stages of qualification with the customers
Diversified customer base
The company enjoys a diversified customer base across high-growth industries with marquee clients such as Alembic Pharma, Dr. Reddy’s Lab, Laurus Labs and UPL Ltd., to name a few.
Financials
| Company | Share Price(Rs) | Market Cap (Cr) | Sales growth 5 years ( CAGR %) | Profit growth 5 years ( CAGR %) | Average ROE for 5 yrs (%) | Average ROCE for 5 yrs (%) |
| Laxmi Organic | 271 | 7,176 | 23.40% | 29.00% | 18.80% | 21.10% |
4. Orient Electric
Orient Electric is a leading consumer electrical brand and the largest manufacturer and exporter of fans in India. It manufactures a range of products, including fans, lighting, home appliances, and switch gears.
Established brand
Orient Electric is a leading consumer electrical brand in India. It is the largest exporter of fans from India and has a strong presence in West Asia and Africa. It sells its products under the well-known brand of ‘Orient Electric’ and has a pan-India presence. The company spends around 3-4% of its net sales in advertising and sales promotion activities. It sells its products through a wide distribution network of around 5,000 dealers and 1,25,000 retail outlets spread across the country. It also sells its products through leading online marketplaces.
Diversified product portfolio
Orient Electric operates through two broad segments: Electrical Consumer Durables (ECD) and Lighting & Switchgears. The ECD division contributes about 73.5% of the total sales. The company also has an exclusive strategic partnership with De’longhi group, Italy since FY19 to market and sell its premium international brands in India.
Distribution realignment starts to deliver
Orient Electric implemented a direct-to-market strategy in four states, which resulted in 60% YoY revenue growth for Q3. The strategy will be implemented in Andhra Pradesh and Telangana by end-Q4. The company estimates that it has captured 25% of the potential market in states where the distribution realignment is complete and sees scope to further expand market share. In the long term, the direct-to-market strategy should result in improved margins.
Financials
| Company | Share Price(Rs) | Market Cap (Cr) | Sales growth 5 years ( CAGR %) | Profit growth 5 years ( CAGR %) | Average ROE for 5 yrs (%) | Average ROCE for 5 yrs (%) |
| Orient Electric Ltd | 222 | 4,724 | 63.10% | 60.70% | 26.20% | 31.50% |
5. IDFC First Bank
IDFC FIRST Bank was created in 2018 with the merger of IDFC Bank and Capital First. IDFC Bank was a commercial bank that was spun off from IDFC Limited, an infrastructure finance company. Capital First was a consumer and MSME finance company. The merger created a new bank with a strong balance sheet and a diversified product offering.
Strong promoter group
V. Vaidyanathan is the MD and CEO of IDFC FIRST Bank. He previously built ICICI Bank’s Retail Banking business and was the MD and CEO of ICICI Prudential Life Insurance Company.
CASA ratio
CASA (Current Account and Savings Account) is the cheapest source of funds for the bank. The bank’s CASA ratio has been stable at 50%. The bank’s deposits growth has been exceptional the total Customer Deposits (Retail Deposits + Wholesale Deposits) has grown strongly by 4 Year CAGR (Mar-19 to Mar-23) of 36%
NPA numbers reduce
The Gross NPA numbers have drastically reduced from 4.01% in FY21 to 1.65% in FY23 and Net NPA numbers reduced from 1.90% in FY21 to 0.55% in FY23.
Conclusion
Overall, these 5 stocks are undertaking a massive capex which will improve sales. With all these companies having strong balance sheets and strong return ratios, their stocks may reflect positive performance in the long run. If you are looking to invest in any of these, make sure to do your own research and evaluate your risk-return profile carefully before investing.
FAQs
It is essential to conduct thorough research, assess the company’s fundamentals, and evaluate growth potential before investing in low-priced stocks.
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It’s advisable to analyze the company’s financial statements, evaluate its competitive position, and compare its valuation metrics with industry peers to assess whether the stock is undervalued or facing underlying challenges. Seeking expert advice can also be helpful in such cases.
Some important indicators to assess the value of a low-priced stock include the price-to-earnings ratio (P/E ratio), price-to-book ratio (P/B ratio), and the company’s historical and projected earnings growth. These metrics can help investors gauge whether the stock is undervalued relative to its earnings potential and asset value.
Important Disclaimer
This blog post and information included here are not intended to serve as investment advice and should NOT be used as a substitute for the advice of an appropriately qualified and licensed professional registered investment adviser.
Please note the information provided here is for educational/informational purposes only. Although we attempt to provide accurate and up-to-date information, no guarantee is made to that effect. Investments in securities market are subject to market risks, please read the scheme related documents carefully.
