I love mid caps. I'll tell you the reason.
First of all, they are not small companies. So they already have a proven track record. And since they are not so small, they are also not so volatile like small caps. On top of that, mid caps have ample room to grow and become a large cap.
So they have better growth potential than large cap and lower volatility than small cap which makes them a fine investment category. Although, as I said before, I still prefer to keep 50%-60% of my money in large cap.And before we proceed, I want to inform you that I don’t randomly pick names from anywhere. I do an in depth research on each company about its business model, management, products and services, competitive strength and key risks, financial strength on various parameters like growth ratio, profitability ratio, valuations, etc. and finally I analyze the future growth prospect where I study the key trends in the industry and company’s future plan.
All right, now let’s start with our list of top 10 mid cap companies.
#10 Dixon Technologies.
Established in 1993, Dixon technologies started its journey with manufacturing of color television in 1994. Since then, it has expanded in manufacturing many electronics and lightning products under its portfolio including mobile phone, CCTV camera, washing machine, LED lights, etc.
Dixon technologies is one of the largest manufacturers of TV sets in India with a strong set of renowned brands.It also has a wide range of product portfolio with 140 models of semi-automatic washing machines and recently started the production of fully automatic washing machines.
In the last 9 years, Dixon technology revenues have jumped from Rs 572 Cr in Mar 2012 to Rs 5196 by Dec 2020. Just look at the exponential growth! Revenue CAGR growth rate is exceptional 27.7%. The profits have increased from -7 Cr in Mar 2012 to Rs 143 Cr by Dec 2020 at a CAGR of 75%. That's an insane growth numbers!
Since its IPO in 2017, Dixon Technology share price has increased from Rs 2600 in Sep 2017 to currently at Rs 19,300 in Feb 2021 at a crazy CAGR of 70% in the last 3.5 years! Currently, it has a market cap of Rs 19,000 Cr.
If we look at the future growth prospects, the future of Dixon is very bright. Factors like rising per capita income, higher disposable income, penetration of mobile across urban, semi-urban and rural regions have opened opportunities for door-step delivery of goods and services which requires usage of electronic products. Moreover Chinese disruption and government initiatives like Make in India has attracted several global and domestic brands to explore the country’s electronic appliances and lighting space and has created limitless opportunities for companies like Dixon technologies.
Incorporated in 1996, Polycab is India’s largest manufacturer of cables and wires with a market share of 18% in the organized segment. It is also a fast-growing player in the fast-moving electrical goods (FMEG) industry including fan, lights, switches, geyser, cooler, solar products, etc.
In the last 6 years, Polycab revenues have jumped from Rs 3,986 Cr in Mar 2014 to currently at Rs 8,018 by Dec 2020. Again a consistent revenue growth at a CAGR of 11%. The profits have increased from 89 Cr in Mar 2014 to Rs 815 Cr by Dec 2020 at a exceptional CAGR of 39%.
Polycab recently had an IPO in April 2019 and since then its share price has increased from Rs 640 in April 2019 to currently at Rs 1300 in Feb 2021 at a CAGR of 47% in the last 2 years! Currently, it has a market cap of Rs 19,000 Cr.
Indian government has a lot of focus on infrastructure building and digital revolution. So think this way - When you construct bridges, dams, buildings and houses, what do you need? When you build smart cities, what do you need? One of the most important requirements is cables and wires to transfer electricity. Another disruption in Indian economy is in the digital space. India is slowly transforming into a digital economy. One of the critical requirements in building the digital infrastructure is wires and cables. Polycab is the leader in wires and cables with 18% market share.Then you also need a fan, switches, lights, switchgear, geyser, cooler, etc. India’s structural drivers like rapid urbanisation, rising incomes, evolving aspirations, digital inclusion and increasing consumer awareness about safer and energy-efficient products will drive India’s consumption growth story in the electrical segment.
#8 Tata Elxsi
Incorporated in 1989, Tata Elxsi is amongst the world’s leading providers of design and technology services across industries including Automotive, Media, Communications and Healthcare. Tata Elxsi provides integrated services – from research and strategy, to electronics and mechanical design, software development, validation and deployment. Tata Elxsi is helping customers reimagine their products and services through design thinking and application of digital technologies such as IoT (Internet of Things), Cloud, Mobility, Virtual Reality and Artificial Intelligence.
In the last 10 years, Tata Elxsi revenues have jumped from Rs 411 Cr in Mar 2011 to Rs 1,747 Cr by Dec 2020. A consistent revenue growth at a CAGR of 16%. The profits have increased from 32 Cr in Mar 2011 to Rs 335 Cr by Dec 2020 at an exceptional CAGR of 27%. Its share price has increased from Rs 125 in Feb 2011 to currently at Rs 2820 in Feb 2021 at an exceptional CAGR of 36%. Currently, it has a market cap of Rs 17,000 Cr.
If we look at the future growth potential, the future is digital and technologies like connected vehicles, cloud based IoT platform, automation, product design and artificial intelligence would continue to generate more demand. On top of this, as the world inches more towards digitalization, the demand for software development would continue to increase. This would continue to fuel the growth in Tata Elxsi.
#7 Dr Lal Pathlab
Established in 1949, Dr Lal Path lab is one of the largest diagnostic chains in India with almost 200+ clinical labs and 3000+ patient service center with an exhaustive range of pathology, radiology and cardiology tests.
In the last 10 years, Dr Lal Pathlab revenues have jumped from Rs 237 Cr in Mar 2011 to Rs 1,452 Cr by Dec 2020. Again a consistent revenue growth at a CAGR of 20%. The profits have increased from 29 Cr in Mar 2011 to Rs 241 Cr by Dec 2020 at an exceptional CAGR of 24%. Share price has increased from Rs 900 in Dec 2015 to currently at Rs 2400 in Feb 2021 at an exceptional CAGR of 21%. Currently, it has a market cap of Rs 20,000 Cr.
If we look at the future growth prospects, according to the new research report “Indian Diagnostic Services Market Outlook 2020”, the diagnostic services market is expected to continue growing at 27.5% for next five years. Factors like increasing awareness about preventive healthcare and consolidation of diagnostic industry from urognized to organized player would be the key factors for growth of Dr Lal Pathlab.
#6 Endurance technology
Established in 1985, Endurance technology is one of the leading automotive component manufacturers having a diversified portfolio of technology-intensified products in the category of aluminium casting and machining, suspension, transmission and braking system. It also provide end to end auto component services including design, development, Testing, Validation,, Manufacturing, Delivery, and aftermarket sale for a wide range of technology-intensive auto component products
In the last 10 years, Endurance revenues have jumped from Rs 2346 Cr in Mar 2010 to Rs 6,915 Cr by Mar 2020 at a CAGR of 11.5%. The profits have increased from 4 Cr in Mar 2010 to Rs 566 Cr by Mar 2020 at a mind blowing CAGR of 64%. Since its IPO in Oct 2016, the share price has jumped from Rs 626 to currently at Rs 1470 in Feb 2021 at a brilliant CAGR of 22%. Currently, it has a market cap of Rs 20,600 Cr.
If we look at the future growth prospect, India’s automobile industry is the world’s fourth largest automobile market in the world. One of the biggest trend of 21st century is electric vehicles. Government has s strong focus on building the eclectic vehicle ecosystem in the country and every vehicle manufacturing company including 2w, 3w and 4w would need auto components. Not only India, there is a huge demand of auto components from all over the world and that’s where Endurance comes into picture with very bright growth prospects.
Established in 1999, IRCTC is Indian Railway Catering and Tourism company operating in 4 business segments including internet ticketing, packaged drinking water, travel and tourism and catering.The biggest advantage of IRCTC is the monopoly in the market it operates. IRCTC is the only Company authorized to sell railway tickets online. Only company to distribute packaged drinking water across all stations as well as trains in India. Only authorized entity to provide catering services in trains.
In the last 5 years, IRCTC revenues have jumped from Rs 1059 Cr in Mar 2015 to Rs 2,275 Cr by Mar 2020 at a CAGR of 16.5%. The profits have increased from 131 Cr in Mar 2015 to Rs 529 Cr by Mar 2020 at an exceptional CAGR of 32%. IRCTC recently had the IPO in Oct 2019 at a price band of Rs 320. It opened at more than 100% listing gain and is currently trading at Rs 1550 within 1.5 years. Currently, it has a market cap of Rs 24,800 cr.
If we look at the future growth prospects, IRCTC has immense growth potential in every sector it operates. In ticketing booking segment, there is huge growth in online ticket booking. Factors such as rising internet penetration, availability of low cost data, affordable smartphones, increasing usage of debit/credit card and other payment channels will augment growth in this segment. In drinking water category, increasing awareness about the importance of safe drinking water to maintain good health along with rise in per capita income is creating a demand for bottled water in India. In travel and tourism sector, there is huge growth in both domestic and international tourism. IRCTC is aggressively foraying into rail based tourism and has made tie ups with various hotels and other tourism companies. It also plans to position itself as a full-fledged event management company.In catering, there is a high demand on quality food and the growth is driven by urbanization, rising income level, internet penetration and various choices of cuisines in India. IRCTC has launched many new restaurants and has tie with various vendors to provide both online and offline catering services.
#4 Mindtree - IT
Founded in 1999, Mindtree is in the business of Information Technology. It is a part of L&T group. The company deals in e-commerce, mobile applications, cloud computing, digital transformation, data analytics, Testing, enterprise application integration and enterprise resource planning.
In the last 10 years, Mindtree revenues have jumped from Rs 1509 Cr in Mar 2011 to Rs 7,909 Cr by Dec 2020 at a CAGR of 18%. The profits have increased from 102 Cr in Mar 2011 to Rs 999 Cr by Dec 2020 at a CAGR of 25%. Its share price has increased from Rs 100 in Feb 2011 to currently at Rs 1688 in Feb 2021 at an exceptional CAGR of 33%. Currently, it has a market cap of Rs 27,7000 Cr.
If we look at the future growth prospects, we all know that the biggest theme is digital. Be it any sector, technology would be a key differentiator. Ecommerce is the future of retail, UPI and online payments are the future of banking, machine learning and automation is the future of manufacturing and the list goes on. Today, every company needs a digital presence. And keep themself updated to stay competitive. Themes like cloud computing, machine learning, automation, advance analytics would continue to grow and companies like Mindtree would continue to grow.
#3 IDFC First Bank
In 2014, RBI granted the approval to IDFC limited to set up a private bank in India. So IDFC limited demerged to create IDFC bank in 2015. Later, in 2018 IDFC bank and capital first bank merged to create a new entity called IDFC First.
So IDFC First is the newest member of the elite group of private banks in India. And banking is one of the most profitable business segments. It is not easy to get RBI approval for private bank.
In the last 4 years, IDFC First revenues have jumped from Rs 8,578 Cr in Mar 2017 to Rs 15,987 Cr by Dec 2020 at a CAGR of 16.8%. The profits have fallen from 1019 Cr in Mar 2017 to Rs -2,843 Cr by Mar 2020 and then it has recovered to current level of 423 Cr by Dec 2020. The losses were on account of NPAs.
Now you might ask why I am suggesting a company with losses? The reason is my belief in the turnaround story of IDFC First. Earlier, IDFC had a major focus on wholesale banking but now, under the leadership of Mr. V Vaidyanathan, IDFC First bank is transforming into the retail segment. Mr V Vaidhyanathan has an exceptional track record of founding and growing Capital First 10 times in a short span of 6 years before it was merged with IDFC.
Banking is the backbone of the economy and every money transaction is via banks. So for the economy to grow, banks would play a key role and IDFC First being a small player has a huge scope of growth for the next 10-20 years.
Since its listing, the share price has fallen from the high of Rs 80 in Oct 2016 to currently Rs 48 and that’s where I see immense upside potential in the long term. Currently, IDFC first has a market cap of 27,000 Cr.
#2 Relaxo Footwear
Established in 1976, Relaxo footwear is in the business of manufacturing affordable and quality footwears including slippers and shoes. Started with just one product - The hawai chappal, today Relaxo manufactures 400 different types of shoes and slippers. Some of the popular brand of Relaxo include: Relaxo which is an iconic brand of Hawai slippers, Bahamas, sparx and Flite. Relaxo produces over 7.5 lacs pairs of footwear, every day.
In the last 10 years, Relaxo revenues have jumped from Rs 554 Cr in Mar 2010 to Rs 2,410 Cr by Mar 2020 at a CAGR of 16%. The profits have increased from 38 Cr in Mar 2010 to Rs 226 Cr by Mar 2020 at a CAGR of 20%. Its share price has increased from Rs 14 in June 2011 to currently at Rs 887 in Feb 2021 at an exceptional CAGR of 55% and it is one of the biggest wealth creators of Indian corporate history in the last 10 years. Currently, it has a market cap of Rs 22,000 Cr.
Over the period of time, Footwear has evolved from being a mere necessity to an important fashion accessory. With growing urbanisation and ever-increasing penetration of internet, the buying behaviour of the Indian consumer is changing rapidly .There is growing awareness about latest trends among consumers. Now even the consumer from tier II, tier III cities and rural markets have become brand-centric. Aspirations for latest global trends has increased the frequency of shopping. This trend would continue to fuel the growth of Relaxo footwear.
#1 Astral Polytechnic
Established in 1996, Astral Polytechnic is one of the fastest growing piping companies of India with a comprehensive range of piping and adhesive. Astral is one of India’s largest manufacturer of Chlorinated Poly Vinyl Chloride (CPVC) and Poly Vinyl Chloride (PVC) plumbing systems used across industries.
In the last 10 years, Astral Polytechnic revenues have jumped from Rs 402 Cr in Mar 2011 to Rs 2,677 Cr by Dec 2020 at a CAGR of 22%. The profits have increased from 28 Cr in Mar 2010 to Rs 248 Cr by Mar 2020 at a brilliant CAGR of 25%. Its share price has increased from Rs 20 in Feb 2011 to currently at Rs 2000 in Feb 2021 at an exceptional CAGR of 58% and again it is one of the biggest wealth creators of Indian corporate history in the last 10 years. Currently, it has a market cap of Rs 30,000 Cr.
If we look at the future growth prospect, the key trends include consolidation in the industry from unorganized to organized market, government initiatives like Housing for all, Nal se jal, etc and replacement of traditional and corroded iron pipes infrastructure of entire country with low cost and high quality plastic pipes would continue to fuel the growth for Astral Polytechnic for a long time.