M-cap order may fire up some midcaps

The Securities and Exchange Board of India ( Sebi ) norm stipulating market cap oriented mutual funds to have exposure of at least 65% to respective categories is likely to generate interest in some of the well- managed under-owned midcap companies.Currently, mutual funds tend to own under 50% in the respective categories. The Sebi circular defines midcaps as companies between 101 and 250 when ranked in the descending order of their market cap. ET Intelligence Group has identified four midcaps with institutional holding of less than 10% of the free float, at the end of September 2017, that may attract investors’ interest given their strong fundamentals.The earnings of the housing finance company grew 40% annually between FY13 and FY17. In the first half of FY18, too, earnings grew by a similar magnitude. Such a high growth was achieved without compromising on the asset quality. It has maintained the gross NPA ratio at less than one. The stock has under 3% institutional holding and trades at a trailing price-book of 5.3. At 1257 pm, shares of the company were trading flat at Rs 470 apiece.A revival in the domestic aluminium sector is likely to help Himadri Speciality which produces coal tar, a major raw material. The aluminium sector will add nearly 25% capacity in the next three years. This augurs well for Himadri. In addition, it has developed speciality carbon black used in pipes, engineering plastics and coatings. Speciality carbon has better margin and is currently 5% of its product portfolio. Only 5% of the free float is owned by institutions. The stock was trading at Rs 170.80 apiece in the afternoon trade.The leading glass making company which is a supplier to automobile, consumer, architectural and solar sectors offers a strong consumer growth story. Its earnings in the first half of FY18 grew by 38% year-onyear. A gradual recovery in the real estate sector is a positive factor for the company. Just over 5% of its free float is owned by the institutions. In the afternoon trade, shares of the company were trading at Rs 375 apiece on BSE.has seen its market capitalisation rise from `100000000 in 2009 to `12,0000000000 currently, but no major mutual fund has been able to gain. With strong growth (over 100% earnings growth in the first half of FY18), high return on equity of over 60%, over 20% dividend payout ratio and valuation of less than 20 times expected FY19 earnings, the stock may see a strong institutional interest in the coming months. Around 9% of the free float is owned by financial institutions. At 1 pm, the stock of the company was trading at Rs 2674, up 5% on BSE.The chemical company which is present in pigments, agrochemicals and basic chemicals, mainly caustic soda, has been delivering strong performance across categories along with margin expansion. In the Sept 2017 quarter, it reported 7-25% growth across categories. The operating margin before depreciation (EBIDTA margin) rose 300 basis points YoY to 22%. The trend is likely to continue. However, on Friday, the stock was trading at Rs 120 apiece, down 2%.