Indian Penny Stocks with Good Fundamentals in 2023
In continuation to the series of shares and bonds, today we will discuss the best Indian Penny Stocks with Good Fundamentals in 2023. Before we discuss which are the best penny stocks, we must tell you what they mean, how they’re categorized into this bucket, and what you should consider before adding them to your financial portfolio.
What are Indian Penny Stocks with Good Fundamentals?
As the name suggests, a penny means a very small sum of money. You can recall the Hot Cross Buns, one a penny, two a penny Hot Cross Buns rhyme which we used to sing when we were kids. This means you can buy a bun with a penny similarly in the share market context, you can buy stock with pennies.
Now let’s set the definition right Penny stocks are the ones that trade on the share market at a very low price and can have prices below Rs. 10, these stocks belong to companies having meager market capital and are usually illiquid. Hence, get a list of smaller exchanges rather than on the usual ones. They are very speculative in nature due to a lack of liquidity, a minor no. of holdings, a large bid-ask spread, and not too much information on the disclosure form.
How are Indian Penny Stocks Categorised?
When we have made up our minds to make profits so let’s understand the underlying risk before you go and buy these penny stocks.
As these stocks are very cheap and not regulated by national-level stock exchanges so you need to be very careful while picking these pennies in your basket. As they are risky in nature so it has the potential of making fortune from a small investment. Let’s say, you buy 10000 shares of a micro-cap company priced at Rs.5, and in a single day if the price rises to Rs.7 you book a straight profit of Rs.20000 in a single day.
You cannot expect from large-cap companies, as the share price is in the thousands to buy a large volume of shares you need a lot of capital so your single buy cannot manipulate the pricing of the shares. So it’s very easy to manipulate the price of the shares by buying a bulk of shares without giving a cue to average investors whether it’s a genuine rise in price or it’s manipulated by a single buyer. Therefore, these stocks are subject to scams. Therefore, trades on small exchanges are under the category of a trade-to-trade basket. In which you cannot do intra-day trading. That means you need to deliver the shares on the same day if you sell or take delivery if you buy them.
Parameters to Evaluate Before you Consider Penny Stocks
To ensure you make the best decision when selecting the best penny stock, thoroughly analyze the following points.
- Think about a good promoter holding range (from 35% to 55%).
- Institutional ownership (DIIs or FIIs).
- You should also think about the debt-to-equity ratio. The lower it is, the better the company’s stock performs because it has less liability on its books.
- It is necessary to examine these companies’ sales growth patterns over at least three years in order to forecast future years.
In short, if you select a penny stock you need to pick one with good fundamentals which make chances of making excellent profits in long run.
Best Indian Penny Stocks with Good Fundamentals in 2023
On the basis of the above parameters, I have curated a few stocks which meet the listed criteria and can be good bets for you to make profits in 2023. Let’s check them out:
BKV Industries is a Guntur-based company engaged in aquaculture farm activity. With the help of superior water management techniques, they process headless shrimps. The current price of one share is Rs.8.08 and since it launched it touched a max of Rs.14.68. The best thing about this stock is they are almost debt free and there is an increase in sales over the past three years and has positive operating cash flows and a strong promoter holding of 70%. Even in their shareholding patterns, 0.30% stake is of FIIs and DIIs. And have an ROE of 3% over the last three years.
Ashirwad Capital Ltd
The next stock we have under this category is Ashirwad Capital Ltd which is NBFC that deals in lending and investment business. It carries the legacy of almost 4 decades. This company is also debt free with a promoter holding of 51%. Over the last 5 years on a compounding rate Sales accounts for 19% which is quite impressive and the return on equity is also 7% over 3 years.
And have seen a good spike in reserves over 3 years and so does the positive cash flow of 0.73 Crores over a year time.
Lesha Industries Ltd
Lesha Industries has been founded almost 3 decades back. It does trading business of various steel products & in the business of IT and allied services. They are also engaged in shares and stock tradings so basically a multi-category company. The current price of the share is Rs.6.58 but it has touched a maximum of Rs30.9 and lowest at Rs 5.08.
The company is totally debt free but has a little less promoter holding as compared to the other two which stand at 41.48%. Have good reserves in their balance sheet with cash flows tremendously improved over a year time. The best thing about this company is its working capital requirement which has reduced from 41 to 21.1 days. However, the return on equity is quite low at 1.01% over the last 3 years.
This is not the recommendation but after having done a thorough analysis of company fundamentals I feel these companies have a good understanding of their respective business.
Have been in the business for a long time and repeatedly making profits so if you’re looking for bulk purchase of penny stock then you can give it a try.