The Indian economy, projected to be the fastest-growing in the world, is expected to attract a lot of foreign money this year.

The year 2024 is significant not just for India, but for the global economy as well. With major elections scheduled both domestically and internationally, the political climate is set to have a profound impact on the financial markets.

During such times, smallcap stocks often present unique opportunities for exponential growth.

The interplay of these political events and their subsequent economic policies will undoubtedly influence the trajectory of select small-cap stocks in a big way.


1. Engineers India

The first stock on this list is a company that hit its 52 week high today.

Established in 1965, Engineers India is a one-stop shop for project management, consultancy, and engineering services catering to the hydrocarbon, petrochemicals, fertilizers, and infrastructure sectors.

The company’s share price has surges by a staggering 127% since January 2023 due to a surge in its order book.

Even after this rally, the shares are trading at a PE multiple of 23.47 against the industry median of 35.72.

Take a look at company’s key metrics over the past 5 years.

Consolidated, Rs bn FY19 FY20 FY21 FY22 FY23
Total Income 27 34.9 33.3 30.4 34.9
Net Profit 3.7 4.3 2.6 3.4 3.4
Operating Margin (%) 23.2 21.2 16.4 15.5 13.4
P/E (x) 20.1 9 19.3 25.8 12.1
Debt to Equity (x) 0 0 0 0 0
ROCE (%) 24.4 28.2 29.2 25.2 22.5
ROE (%) 15.7 17.6 14.2 7.9 17.7

The company presents a compelling growth story going forward.

The Indian government’s National Infrastructure Pipeline, aiming to invest an estimated US$ 1.4 trillion (tn) by 2025, is fueling a massive infrastructure surge.

This includes projects like dedicated freight corridors, high-speed railways, and smart cities – all areas where Engineers India’s expertise lies.

India’s ambitious renewable energy targets (500 GW by 2030) and push for energy independence are opening up a plethora of new project opportunities.

Engineers India is actively involved in designing and consulting for solar, wind, and hydrogen projects, capitalizing on this green wave.

The company has a strong presence in both domestic and international markets, with an engineering office in Abu Dhabi catering to the business needs in UAE/Middle-East region.

This global presence allows the company to tap into diverse markets and opportunities.

As of June 2023, Engineers India’s order book was at a healthy Rs 106 billion (bn), with projects across diverse sectors.


2. India Tourism Development Corp (ITDC)

ITDC is a hospitality, retail, and education company owned by the Government of India, under the administration of the Ministry of Tourism.

The company was established in October 1966 and has been the prime mover in the progressive development, promotion, and expansion of tourism in the country.

The company’s share price surged by 30% in the calendar year 2023, as the company achieved its highest ever turnover (Rs 4.8 bn) and steep growth in its profit after tax (Rs 0.6 bn).

Here are the key metrics over 5 years.

Consolidated, Rs bn FY19 FY20 FY21 FY22 FY23
Total Income 3.8 3.6 1.9 3 4.8
Net Profit 0.4 0.2 -0.3 0.1 0.6
Operating Margin (%) 10.9 10.6 -19.2 2.2 18.4
P/E (x) 55 66.7 -99.2 653.5 42.8
Debt to Equity (x) 0 0 0 0 0
ROCE (%) 12.7 6.5 -12 2.4 17.3
ROE (%) 10.1 9.3 -10.1 1.9 22

The Indian tourism sector is currently on a tear with domestic footfalls shattering records, and foreign tourist arrivals steadily climbing.

This bodes well for ITDC, with its prime locations and diverse portfolio catering to this resurgent travel demand.

The increasing disposable income of the Indian population, particularly the younger demographic, has led to a growing demand for leisure and recreational travel.

ITDC’s diversified portfolio, which includes hotels, restaurants, transport units, and duty-free shops, allows it to cater to a wide range of tourist needs.

With over 40 years of experience in the travel industry, ITDC has developed significant expertise and a strong reputation. Its “Ashok” brand carries a legacy of Indian hospitality.

Unlike private players, ITDC enjoys the unique advantage of government support. This translates to easier land acquisition, regulatory approvals, and potential access to infrastructure funding.

A couple of points to keep in mind. The luxury hospitality space is fiercely competitive, with both established players and new entrants vying for market share and global economic slowdowns.


3. Garden Reach Shipbuilders & Engineers Ltd (GRSE)

GRSE is one of India’s leading shipyards, located in Kolkata. It is involved in the construction and repair of a variety of ships for the Indian Navy, Coast Guard, and foreign customers.

It also manufactures diesel engines, deck machinery, steel bridges, and other engineering products.

In the past year, its share price has surged by 75%.

Here are the key metric trends over past 5 years.

Consolidated, Rs bn FY19 FY20 FY21 FY22 FY23
Total Income 15.6 16.6 13.3 19.2 27.6
Net Profit 1.1 1.6 1.5 1.9 2.3
Operating Margin (%) 13.4 16.5 20.2 15.1 12.2
P/E (x) 10.3 9.6 13.8 13.7 22.9
Debt to Equity (x) 0 0 0 0 0.2
ROCE (%) 16.6 20.7 18.7 19.3 20.3
ROE (%) 10.6 15.7 13.5 15.1 16.1


GRSE has a strong order book of Rs 270 bn as of September 2023.

These orders are expected to be executed over the next five to six years, ensuring steady revenue and profitability.

India’s defense modernisation budget is expected to surge in 2024, with a renewed focus on indigenous procurement.

GRSE, as a leading domestic player, stands to benefit significantly from this tidal wave of orders.

The company has invested in modernising and upgrading its shipbuilding infrastructure, enhancing its capacity and capability to build larger and more complex ships.

It has also set up a state-of-the-art virtual reality lab and a 100+ strong design team to leverage the latest technology and innovation in ship design and construction.

With its proven track record and competitive pricing, GRSE is increasingly venturing into the export market. This opens up a new avenue for growth beyond the domestic defense pie.

GRSE’s PSU status grants them preferential access to government contracts and easier land acquisition, lowering project costs and streamlining execution.

Timely completion of complex projects like warships is crucial for maintaining order flow and investor confidence. Global conflicts and supply chain disruptions can impact material procurement and project timelines.

A robust order book, rising defense spending, and strategic advantages position the company for significant growth in 2024.


4. Gujarat Mineral Development Corporation Limited (GMDC)

GMDC is a major Indian state-owned minerals and lignite mining company.

The company operates through two segments, Mining and Power.

The company’s stock price has surged by 185% in the past year.You can inspect the key metrics here.

Consolidated, Rs bn FY19 FY20 FY21 FY22 FY23
Total Income 20.2 16.9 14.9 28.9 38.9
Net Profit 2.2 1.4 -0.4 4.1 12.1
Operating Margin (%) 30.2 13.5 3.7 25.8 42.8
P/E (x) 11.8 6.8 -44.6 14.9 3.3
Debt to Equity (x) 0 0 0 0 0
ROCE (%) 12.2 4.3 1.1 13.4 25.8
ROE (%) 5.1 3.6 -1 8.5 21


GMDC holds exclusive rights to mine lignite, limestone, bauxite, and fluorspar in Gujarat. This monopolistic position gives it the competitive edge and pricing power.

The state’s aggressive infrastructure and industrial development plans spell good news for GMDC’s core minerals. Increased demand from cement and power sectors is expected to keep revenue flowing.

The company is actively venturing into downstream value-added products like clinker and alumina, further strengthening its position in the value chain and boosting revenue potential.

GMDC is expanding globally, already exporting lignite to Bangladesh and Nepal, and plans to boost exports in future.

Keen to establish a Rare Earth Elements (REE) processing plant, the company is studying its economic feasibility.

As a state-owned entity, GMDC enjoys preferential access to mining leases and regulatory approvals, reducing hurdles and streamlining project execution.

5. Rashtriya Chemicals & Fertilizers (RCF)

RCF is a leading fertilizers and chemicals manufacturing company with about 75% of its equity held by the Government of India.

The company’s share price is currently trading at its peak after recovering 87% from its 52-week low, riding on the tailwinds of global fertilizer shortages.

You can examine the company’s key metrics here.

Consolidated, Rs bn FY19 FY20 FY21 FY22 FY23
Total Income 89.7 98.3 84.1 129.5 215.9
Net Profit 1.4 2.1 3.7 7.1 9.7
Operating Margin (%) 4.1 5.6 8.3 7.4 6.5
P/E (x) 24 7.6 11.4 7 5.4
Debt to Equity (x) 1.1 1.5 0.6 0.8 0.4
ROCE (%) 8.7 12.1 13.7 17.2 22.9
ROE (%) 4.4 6.5 11.3 18.1 21.1


RCF manufactures a wide range of urea, NPK, and water-soluble fertilizers, catering to both soil and greenhouse needs.

Its “Suphala” brand is a household name in the Indian agricultural sector.

The Indian government aims to reduce fertilizer imports by 50% by 2025. This translates to substantial growth opportunities for domestic players like RCF, potentially securing increased government contracts and subsidies.

RCF’s diverse product portfolio, which includes urea, complex fertilizers, bio-fertilizers, micro-nutrients, water-soluble fertilizers, soil conditioners, and industrial chemicals, provides it with a competitive edge.

RCF’s foray into specialty fertilizers and bio-fertilizers caters to the growing demand for sustainable agricultural practices.

The company is embarking on significant capacity expansion projects for both fertilizers and chemicals.


In Conclusion

In conclusion, the year 2024 promises to be a pivotal year for government-owned small-cap stocks in India.

The interplay of domestic and global political events presents a compelling case for their explosive growth.

However, do note that careful consideration of risks and uncertainties is paramount. Global volatility, policy shifts, and project execution delays are but a few of the hurdles on the path.

The 5 Indian government smallcaps that we discussed above stand poised to ride the waves of India’s growth, propelled by strategic tailwinds and government muscle.

Whether they truly explode in 2024 remains to be seen, but one thing is certain – they deserve a place on the watchlist of every discerning investor seeking alpha in the smallcap universe.


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