By Suhel Khan
The Indian markets are shaped by the movements made by Domestic Institutional Investors (DIIs) significantly. DIIs include mutual funds, insurers, and pension funds among others. By tracking DII investment patterns, one can gain valuable insights into potential market trends and possibly some big opportunities.
Here are 2 stocks that have recently become favourites of DIIs.
#1 Sky Gold Ltd (SGL)
Sky Gold Limited is engaged in the business of designing, manufacturing, and marketing gold jewellery, mainly in 22 Karat gold jewellery.
With a market cap of Rs 5,355 cr, SGL has exclusive designs across 14 Product categories, making the average ticket size for their fast-moving segment Rs. 50,000. It has an Inhouse ~80 Member Design Team and ~2000-2500 designs being floated every month.
The company has seen a jump in sales from Rs 786 cr in FY22 to Rs 1,745 cr in FY24. Which is an absolute jump of around 122% and a compounded sales growth rate of 49%.
And in the first three quarters of FY24 (June to December 2024), the company has already recorded sales of Rs 2,490 cr signalling continues growth.
The net profits have also grown Rs 17 cr in FY22 to Rs 40 cr in FY24, which is a compounded growth of about 54%. The first 3 quarters of FY25 the company has already recorded Net profits of Rs 95 cr.
The sales and net profits could very well be the reason for the company grabbing DII attention, to an extent that the DII holding in the company has gone from about 0% up until the quarter ending September 2024, to 6.63% at the quarter ending December 2024.
Motilal Oswal Small Cap Fund has bought a 4.01% stake and Kotak Mahindra Life Insurance Company Ltd has bought another 1.78% stake.
To add to the sales and net profits, the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) grew from Rs 20 cr in FY22 to Rs 78 cr in FY24, making a CAGR of a big 98%.
Let’s look at the how these numbers reflected in the stock prices, which grew from Rs around Rs 10 in February 2020 to its current price of Rs 365 (as on 5th Feb 2025). This is a compounded growth of a staggering 104% in just 5 years.
The stock’s current PE is 50x while the industry average is 40x. The 10-year median PE for the company is 37x, while the industry median for the same period is 21x.
By 2030 the company plans to double Products designs per month ~3,000 to ~7,000 and double the designers from ~100 to ~200-250.
Also, the company wants to expand to new geographies and add White Gold, Studded (Natural diamond and ruby emerald), Platinum in its metal basket.
#2 Pondy Oxides & Chemicals Ltd (POCL)
Incorporated in 1995, Pondy Oxides and Chemicals Ltd manufactures Lead Metal and Alloys and other Non-ferrous metals.
With a market cap of Rs 2,030 cr, POCL is India’s largest secondary Lead manufacturer in Lead Alloys. Its core product lead and lead alloys are mainly used in making lead-acid batteries.
The company’s DII holding went from 0.14% in September 2024 to 5.05% for the quarter ending December 2024. Screener.in does not have the details of the DII’s who have invested in the company yet, but POCL’s website in the shareholding pattern says that 2 Mutual funds and 9 Alternate investment funds are holding stake in the company.
Let’s see what could have prompted this sudden jump in DII holdings.
The company’s sales were at Rs 1,049 cr in FY19 and went up to Rs 1,524 cr in FY24, which is a CAGR of 8% in 5 years. To push the needle further in the company’s favor, in the first 3 quarters of FY25 (April to December 2024), the company has already recorded sales of over 1,500 cr.
The net profits also have a similar story to tell. Between FY19 and FY24, the net profits grew from Rs 34 cr to Rs 40 cr, which is a compounded growth of 3%. And between April to December 2024, the company has already recorded a net profit of Rs 47 cr.
EBITDA also went from Rs 65 cr in FY19 to Rs 73 cr in FY24, which means it grew at a compounded quarterly rate of around 2.25%.
As for the share price, the current price is Rs 759 (as on 5th February 2025), which is huge 1,280% higher when compared to its 5-year-old price of around Rs 55.
The company’s share is trading at a current PE of 36x while the industry average when compared to peers is 37x. The 10-year median PE of the company is 8.4x and the industry median for the same period is 19x.
In the company’s latest investor presentation, the company has given their targets for 2030 which are 20%+ Revenue CAGR, 20%+ Profitability growth, 15%+ Volume growth, 20%+ ROCE (Return on Capital Expenditure) and 8%+ EBITDA margins.
Follow Their Lead?
Looking at these 2 stocks, one might just say that Domestic Institutional Investors (DIIs) almost always invest in companies with strong fundamentals, prevalent market dominance, and good growth potential.
The sales and profit numbers for both Sky Gold Ltd and POCL contribute to their appeal, which has caught the DII fancy.
How these stocks will do in the future for the institutional investor and in turn their individual investors, is something one should keep a vigilant eye on.
While DII investments can offer valuable insights, individual investors must conduct thorough due diligence. While the strategy of institutional investors can guide us, in the end a well-informed, diversified approach tailored to one’s risk appetite and financial goals that is penultimate.
Disclaimer
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.