A 5 penny stock backed by a great promoter. Should you bet on these?

Penny stocks are considered risky and speculative, but they also represent a great opportunity for investors.

Some penny stocks are backed by great promoters who are unwaveringly confident owners with high stakes and a track record of success.

These company champions represent not only financial strength, but also quality management, a clear vision, and an unwavering commitment to shareholder value.

With that in mind, here are the top 5 penny stocks that are backed by great promoters.

#1 AVT Natural Products

AVT Natural Products is a leading manufacturer of plant-based extracts and natural ingredient solutions serving the food, beverage, animal nutrition, and nutraceutical industries worldwide.

The company has a diverse product portfolio, including marigold oleoresin, spice oleoresin, essential oils, instant tea, and animal feed supplements.

AVT is trusted by the world’s leading food, cosmetics, and feed companies.

In fiscal year 2023, the company recorded the following revenues: INR5.8 billion (bn), a slight growth of 4% YoY.

As of September 2023, the company’s promoters hold 75% of the company’s shares.

The promoters of AVT Natural Products are part of the AV Thomas Group, which has a rich heritage spanning over 80 years in agriculture, plantations and natural products.

The group has a strong presence in domestic and international markets and has established a reputation for quality and innovation.

Promoters bring expertise, networks and resources to AVT Natural Products, giving it a competitive edge in the industry.

The company has strong research and development (R&D) capabilities, allowing it to innovate and customize products according to customer needs.

The company also has a robust supply chain and quality control system to ensure consistent and reliable delivery of its products.

AVT’s diversified portfolio protects you from market fluctuations.

It focuses on in-demand natural ingredients like ginger, turmeric, and stevia, perfectly aligned with burgeoning health and wellness trends.

Additionally, initiatives such as expanding its global footprint and investing in research and development for new applications of natural extracts further strengthen the company’s growth prospects.

2nd place Indian Railway Finance Corporation (IRFC)

Second on the list is IRFC, the specialized financing arm of Indian Railways, the world’s largest railway network.

The company was established in 1986 to raise funds from domestic and international markets to meet the additional budgetary requirements of Indian Railways.

IRFC has shown consistent growth in revenue, assets and profitability over the years.

For the quarter ending September 2023, the company reported the following revenues. INR67.7 billion, net profit is INR15.5 billion

The promoter of IRFC is the President of India and it operates through the Ministry of Railways (MoR) which holds 86.4% of the total share capital of the company.

This holding is expected to decline as the company must meet minimum shareholding rules set by regulators.

IRFC enjoys a strong relationship with the MoR and has been meeting its funding needs for over 30 years. The company lends funds to He MoR and other railway entities at a margin of 0.4% above borrowing costs.

High credit ratings, government guarantees, and favorable government policies provide access to long-term financing at low interest rates.

We also have a diverse investor base both domestically and internationally. We obtain financing from a variety of sources, including term loans, bonds, and external commercial borrowings from domestic and international markets.

It is issuing green bonds to finance environment-friendly projects in Indian Railways.

IRFC uses leasing method to finance Indian Railways’ rolling stock and project assets, which ensures stable and predictable cash flow for the company.

IRFC has the capacity to finance large-scale projects in Indian Railways, which is crucial for the development of the rail transport sector and the economy, making it a good bet in an election year.

The company is well-positioned to capitalize on the growing demand for rail infrastructure and services in India.

#3 SJVN

SJVN is a state-owned company engaged in the generation and sale of electricity from hydro, wind, solar and thermal sources.

The company operates six power plants with a total installed capacity of 2,091.5MW, of which 91.4% is hydropower.

SJVN also provides engineering consulting services for power projects in India and abroad.

SJVN’s promoters are the President of India and the Governor of Himachal Pradesh, who together hold 81.8% of the company’s shares.

The company maintains a solid financial profile with high profitability, low debt, and attractive valuation.

The company reported earnings for INR8.8 billion, net profit is INRFor the quarter ended September 2023, the company had a net profit margin of $4.4 billion, or 50.0%.

Over the past year, the company’s stock price has increased almost 180%.

SJVN has strategic and business advantages over its peers due to its long-term power purchase agreements and diversified portfolio of renewable and conventional energy sources, with a focus on hydropower.

Hydropower is a clean, reliable, and low-cost energy source that also helps balance the power grid and provide ancillary services. This places us strategically in the rapidly growing renewable energy sector.

SJVN is actively pursuing wind and solar ventures to reduce single segment risk and build a balanced portfolio for sustainable growth.

SJVN has a strong project pipeline with 18 projects in various stages of development with a total capacity of 7,200 MW.

The company also has a presence in Nepal, Bhutan and Bangladesh, developing hydropower projects with attractive returns.

SJVN has a vision of becoming a 25,000 MW company with a global footprint and a diverse energy mix by 2030.

The Indian government’s focus on hydropower and clean energy bodes well for SJVN’s core business, while its diversification efforts are opening up new avenues.

Additionally, plans to expand into thermal power projects could act as a hedge against market fluctuations.

#4 Kaitan Chemicals & Fertilizer Co., Ltd. (KCFL)

KCFL is India’s leading manufacturer of single superphosphate, sulfuric acid and soybean edible oils.

Boasting India’s largest single superphosphate and sulfuric acid production capacity, the company has been committed to the advancement of agriculture since its establishment in 1982.

The promoters hold a 74.99% stake in the company, demonstrating their commitment and confidence in the business.

The company is promoted by the Khaitan family. It is headed by Shailesh Khaitan, a veteran businessman with over 40 years of experience in the fertilizer sector.

KCFL has a clear strategic advantage for long-term growth.

Its dominant position as India’s largest SSP producer with a market share of 26% gives it pricing power and a strong distribution network.

This diverse product portfolio enables the company to serve a wide range of industries and reduces reliance on a single product.

Furthermore, the integrated operation of manufacturing, processing and power generation ensures cost competitiveness and operational efficiency.

The company is working to revitalize the agricultural sector (which contributes 16% to GDP) and is well positioned in an election year.

With its focus on in-demand fertilizers, operational efficiency and sustainability, the company is perfectly aligned with growth trends in the agricultural sector.

#5 Rattan India Enterprises Limited

RattanIndia Enterprises is the flagship company of the RattanIndia Group, focused on new-age growth businesses leveraging cutting-edge technology.

The company’s portfolio includes technology-focused businesses such as e-commerce, electric vehicles (EVs), fintech, and drones.

Mr. Rajiv Ratan, the promoter, owns 74.86% of the company’s shares. He is a serial entrepreneur with a knack for navigating disruptive sectors.

RattanIndia’s unwavering focus on sustainable development and cutting-edge technology, coupled with its track record of value creation, forms the basis of the company’s strategic direction and investor confidence.

The company reported a net profit INRQ2 2024 was $1.4 billion, an increase of 35.6% year over year.

The company is strategically positioned in new-age growth businesses such as e-commerce, EVs, fintech, and drones.

This diversification into high-growth areas provides the company with significant strategic advantages and market resilience.

One of RattanIndia’s key businesses is Revolt Motors, which is focused on providing world-class electric mobility products.

With the increasing emphasis on sustainable and clean energy, the venture is well-positioned to tap into India’s growing electric vehicle market.

Another important business is Cocoblu Retail Ltd, an online retailer that helps brands scale up on e-commerce platforms.

Cocoblu partners with over 600 top brands and offers over 2 million products across 8 categories. This venture will leverage India’s rapidly growing e-commerce market and provide RattanIndia with a solid growth platform.

The conclusion is

These five companies have shown promising growth with the backing of good promoters and have strategic advantages in high-growth areas.

Penny stocks with consistently rising promoter shareholding often represent a scenario where the promoter sees a bright future in the company and plans to benefit from its strong growth.

Please note. In some cases, penny stock promoters may use misleading information about a company’s actual valuation. So, be sure to do your own research before taking the plunge.

Happy investing!

Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.

This article is syndicated from equitymaster.com