In this article, our readers will learn about stocks with high DII holdings to watch in 2024.
At the time of making investments, a range of factors are considered before purchasing a stock. However, one of the most critical measures which has the potential to indicate growth prospects is to understand the holdings of Domestic Institutional Investors.
But do you know who are the DIIs? Why retail investors are so much inclined stocks with high DII holdings?
Domestic institutional investors (DIIs) are those institutional entities which invest in the equity markets of their own country (in our case, it will be India). As oppose to the FIIs, that make investments from abroad, DIIs are the local entities which manage and invest funds in the domestic financial market. The investments of DIIs are focused on local companies, government securities, and certain domestic financial instruments. Since the DIIs invest in large amounts, it helps in overall stability and growth of local financial markets.
Who are the DIIs which are present in India? And do retail investors should invest blindly in the stocks with high DII holdings?
The DIIs who are present in India include mutual funds, insurance companies, banks and financial institutions, and pension funds. List of certain DIIs include HDFC Mutual Fund, ICICI Prudential Mutual Fund, SBI Mutual Fund, etc.
DIIs tend to conduct proper due diligence before making investments and their screening processes are up-to-the-mark.
With this in mind, allow us to introduce stocks with high DII holdings to watch in 2024.
1. Equitas Small Finance Bank Ltd
It is the leading Small Finance Bank providing a range of banking products as well as services to customers having a focus on helping financially unserved and underserved customer segments which are present in India.
The company has released financial results for quarter ended June 30, 2023 (or Q1 FY 2024), with PAT of INR 191 Cr, exhibiting a strong growth of 97% year-over-year. Credit growth of the company continues to remain strong, with its advance growing at 36% year-over-year and 6% quarter-over-quarter to touch INR 29,601 Cr despite Q1 seasonality. It registered strong disbursements growth of 47% year-over-year to INR 4,757 Crs.
The Bank has now delivered a 2%+ ROA and ~15% ROE in past 3 quarters due to strong credit growth, continued traction in retail deposits together with favourable credit cycle in urban/rural geographies.
It has created strong franchise that’s stable, scalable and sustainable. The bank now focuses on converting to a universal bank. Investments in technology are gaining momentum and this impact is expected to be felt over upcoming few years.
The bank’s GNPA saw an improvement by ~135 bps year-over-year to ~2.60% in 1Q24 in comparison to 3.95% in 1Q23.
To further improve the bank’s PCR, it has made some additional provisions of INR 13.99 crores during 1Q24. Its PCR saw an improvement to ~57.79% from ~56.90% in 4Q23 and ~48.46% in 1Q23. The bank’s Certificate of Deposit (CD) programme saw highest rating at A1+ from CRISIL, CARE along with India Ratings. It presently maintains ‘surplus’ liquidity in High Quality Liquid Assets (HQLA). Liquidity Coverage Ratio (LCR) of the bank as on 30th June 2023 came in at ~237%.
Coming to the shareholding pattern of the company, the DIIs increased their holdings to ~43.93% as on 4Q24.
2. Radiant Cash Management Ltd
The company caters to the broad set of outsourcing requirements related to cash management services for banks, FIs, organized retail and e-commerce companies in the country.
It has announced its results for 1Q24, with revenues of the company coming at INR 950.9 million, exhibiting a growth of ~12.7% on year-over-year basis. EBITDA margins of the company for the quarter came in at ~21.6% against ~25.9% in 1Q23, which represents decline of 420 basis points year-over-year.
Drop in EBITDA margins was seen due to initial expenses made in the newly started valuable logistics business. This has further scaled its cash vans business, and rise in employee costs for each of the verticals. The company’s underlying margins remained strong throughout verticals.
The company initiated the year on strong footing with stable growth throughout its verticals.
Its retail cash management and DBJ logistics businesses exhibit significant synergies, with both these segments demanding strong network, significant experience in handling valuable cargo, and solid process orientation.
Excellence in such areas provides it with the competitive advantage as the company enters valuables logistics market.
Regarding its shareholding pattern, it was noticed that promoters continuously maintained ~56.92% stake in this company. Holdings of DIIs came in at ~16.58% as per 2Q24.
3. Paradeep Phosphates Ltd
Paradeep Phosphates Limited has been categorised as India’s leading manufacturer and distributor of phosphatic fertilizers and urea.
It has declared financial results for the quarter ended 30th September, 2023.
2Q24 income of the company came in at INR 3,694 crores, exhibiting a rise of 28.72% in comparison to that in 2Q23. EBIDTA for the quarter saw an increase year-over-year by 42.38% to INR 266.98 crores and profit before tax (PBT) grew year-over-year by 77% to INR 120.36 crores.
The company achieved good set of numbers in 2Q24. Its Q2 production volumes went up by ~25% year-over-year and sales volumes increased 78% year-over-year, which led to the ~28.72% rise in its topline and 42% growth in its EBIDTA year-over-year.
Its total sales volumes in 1H came in ~14,29,227 MT, exhibiting a rise by 82% year-over-year.
The company saw a strong improvement in its short-term leverage as a result of increased velocity in subsidy receivables.
Stake of promoters came in at ~56.08%, with DIIs stake coming at ~23.56% as of 2Q24.
Conclusion
The above are some of the stocks with high DII holdings to watch in 2024 and investors can consider going long on such scrips, subject to their investment horizon and risk appetite. While DIIs should be used as the parameter for evaluating the company’s growth potential, should this be used in isolation?
Well, not really! We believe that the investors should also analyse the trends in the holdings of DIIs (i.e., whether they have increased or decreased over the time period). Apart from this, investors should also check the fundamentals of the company and views of the overall industry.
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