How To Find Value Stocks In India

Last Updated – November 2021

| Discount Brokers in India - Samco Securities — Best Value Stocks to Buy in Bharat

In this commodity, we will cover,

– What is value investing
– A well-researched and well-rounded list of the best value stocks to buy now
– Things to consider while deciding the best value stocks to buy
– A model portfolio to proceeds optimal exposure to the all-time value stocks in the Indian marketplace
– Portfolio companies
– A detailed table providing a snapshot of the parameters based on which the value stocks were evaluated, compared and weighed to arrive at the list of all-time value stocks to buy

What is Value Investing?

Investing in value stocks is a strategy which focuses on ownership undervalued stocks of strong companies and property them over a long period of time. Investment in these stocks focuses on investment in quality companies that you think are undervalued and this decision is backed by strong key analysis.

Benjamin Graham coined the term value investing and is likewise known as father of value investing, sums up the crux of value investing in his archetype book 'The Intelligent Investor': An investment operation is one which, upon thorough assay, promises prophylactic of principal and an adequate return. Operations not meeting these requirements are speculative. Warren Buffett, protégé of Benjamin Graham embraced and mastered the value investing approach and went on to go the richest investor ever.

Summary Table for all-time Value Stocks to buy now

Sr. No.	Company Name	BSE Scrip Code	NSE Symbol	CMP (as on November 02, 2021)	Rating	Industry
1	Sonata Software Ltd.	532221	SONATSOFTW	753.0	0.5	IT – Software
2	Avanti Feeds Ltd.	512573	AVANTI	569.0	3.0	FMCG
3	HCL Technologies Ltd.	532281	HCLTECH	985.0	4.0	IT – Software
iv	KEI Industries Ltd.	517569	KEI	736.0	0.v	Cable
5	Aurobindo Pharma Ltd.	524804	AUROPHARMA	994.0	two.0	Pharmaceuticals & Drug
6	Castrol Bharat Ltd.	500870	CASTROLIND	143.0	4.v	Lubricants
vii	Coal India Ltd.	533278	COALINDIA	148.0	2.0	Mining & Minerals
8	Cummins Republic of india Ltd.	500480	CUMMINSIND	881.0	0.5	Car & Ancillaries
9	Excel Industries Ltd.	500650	EXCELINDUS	1166.0	0.5	Chemicals
10	Oracle Financial Services Software Ltd.	532466	OFSS	3624.0	four.0	Information technology – Software
11	Central Depository Services (Bharat) Ltd.	North.A.	CDSL	1035.0	0.5	Finance
12	Oil & Natural Gas Corporation Ltd.	500312	ONGC	118.0	0.5	Rough Oil
13	Gujarat Country Petronet Ltd.	532702	GSPL	331.0	2.0	Gas Transmission
14	Mphasis Ltd.	526299	MPHASIS	2155.0	3.0	IT – Software
fifteen	ITC Ltd.	500875	ITC	202.0	4.v	FMCG
16	Persistent Systems Ltd.	533179	PERSISTENT	2930.0	3.0	Information technology – Software
17	Balkrishna Industries Ltd.	502355	BALKRISIND	2299.0	2.0	Automobile & Ancillaries
xviii	Finolex Industries Ltd.	500940	FINOLEXIND	184.0	2.0	Plastic Products
nineteen	TTK Prestige Ltd.	517506	TTKPRESTIG	9426.0	3.0	Consumer Durable
twenty	Pidilite Industries Ltd.	500331	PIDILITIND	2179.0	four.0	Chemical

Investing in value stocks is a strategy which focuses on ownership undervalued stocks of potent companies and holding them over a long menstruum of fourth dimension. Investment in these stocks focuses on investment in quality companies that yous call up are undervalued and this conclusion is backed by stiff key analysis.

Benjamin Graham coined the term value investing and is also known as male parent of value investing, sums upwardly the crux of value investing in his classic book 'The Intelligent Investor': An investment operation is i which, upon thorough analysis, promises safety of principal and an acceptable render. Operations not meeting these requirements are speculative. Warren Buffett, protégé of Benjamin Graham embraced and mastered the value investing approach and went on to become the richest investor ever.

Value investing is a strategy which consists of cherry picking those stocks that has their electric current value much lesser than the intrinsic value. Only if the visitor has potential to grow, then the electric current investment is cheaper as the market place price volition eventually ascent and see its intrinsic value. This difference tin be capitalised to making hefty returns. Picking up value stocks works on a process of finding out stocks that are currently undervalued; buying them at much lower price and staying with them until they gain and provide excellent returns.

In simple terms, value investing is an investment approach that seeks to turn a profit from identifying undervalued stocks. It is based on the thought that each stock has an intrinsic value, i.e. what it is truly worth. Through fundamental analysis of a visitor, an investor can determine what this intrinsic value is. The sole idea is to purchase stocks that trade at a significant discount to their intrinsic values (i.e. they are cheaper than their truthful value – which would requite an investor a margin of rubber). Once an undervalued stock is purchased, the stock price eventually rises towards its intrinsic value, and makes a profit in the long run.

Generally, value investors use margin of safety to demand run a risk associated with any purchases. It means purchasing a share when its prices are lower than a detail limit. Thus, even if an investment turns sour most a specific company, losses, if whatever, would not be catastrophic. Therefore, greater the difference between the intrinsic value and the current stock price, the greater the margin of safety is for value investors looking for investment opportunities.

Things to consider while deciding the best value stocks to buy

Investors are advised to analyze and understand the visitor to be invested in earlier ownership any stock. A few characteristics which should be kept nether one's radar while investing in these value companies: company'southward run-style i.e. its long-term plans, its business principles, financial stability with healthy upper-case letter structure forth with identification of management efficacy running the organization.

Value investors should also identify a keen deal of importance on companies that pay consistent dividends.

Some useful valuation techniques are used to compare stocks from the same industry and analyse if information technology'due south over or under valued. Relative valuation multiples such as P/E, P/B, EV/EBITDA, P/S are famously used. Another well known valuation method is Discounted Cashflows. This valuation style uses a number of parameters right from free cash flows of the company to cost of capital to reach the concluding truthful value which is so compared to the current market price of the stock to judge if the company is fairly valued. Certain investors as well expect at the PEG ratio instead of PE which compares the PE to the growth of the company. Only not all multiples will requite y'all the aforementioned value hence certain investors use the blended valuation technique.

It is the weighted boilerplate of various intrinsic values by different methodologies. It is important for an investor to see which valuation technique best applies depending on the company's business organization model. For instance for capital intensive companies it is best to use the EV/EBITDA multiple.

Investors investing in this basket of stocks should expect for immediate, market-beating returns and consistency of operation while taking on moderate run a risk. Since these stocks are meant to be held for a longer time menses, the growth averages out over time and returns are consistent.

Looking at a few stocks from our model portfolio:

Sonata Software Ltd.

Sonata Software Ltd. provides varied IT services namely IT consulting, product engineering services, application development, awarding direction, managed testing, business organization intelligence, infrastructure management, packaged applications, and travel solutions. During FY2021, the visitor derived virtually of its acquirement from India accounting for nearly 73% of business. Sonata Software has an established position in the IT services sector and is i of the leading players catering to the travel, tourism, and logistics verticals. It operates a software distribution concern for companies such as Microsoft, Oracle, and IBM and has longstanding relationships with clients and has been actively adding customers. Its financial chance profile is marked by a salubrious capital construction and debt protection metrics with a low debt to equity ratio of 0.ten times, supported by a salubrious net worth of Rs. 905 Crs.

Its financial take chances profile is besides supported by a comfortable liquidity position of Rs. 677 Crs equally on March 31, 2021. It derives nearly 27% of its revenue from overseas; this exposes the company to the risk of economical slowdown in these regions, every bit well equally regulatory changes such every bit restriction on H1B visas. Additionally, Sonata also operates with a high concentration risk of clients. Moreover, the travel and tourism sector, which contributed to almost one-5th of revenue, may be adversely impacted in the near term due to the Covid-nineteen pandemic. Company has over the years steadily improved its business risk profile, with fabric increase in revenue share of high-margin It services business.

It has achieved substantial and sustained growth in revenue and profit – CAGR of over 17% in the five years. In add-on to this, Sonata has a payout ratio of almost more than than 50% in the past eight years maintaining a robust fiscal risk profile.

Avanti Feeds Ltd.

Avanti Feeds manufactures and sells shrimp feed and exports processed shrimp. Information technology has a total shrimp feed capacity of 600,000 million tonnes per annum (mtpa), of which lx,000 mtpa is in Gujarat and remaining 540,000mtpa in Andhra Pradesh. Company commands a market share of about 48% in the domestic feed business. Its shrimp processing subsidiary, Avanti Frozen Foods which has an installed capacity of 22,000mtpa, is one of the leading shrimp exporters in the country. Thai Marriage holds around 24.21% stake in the company and 40% pale in Avanti Frozen Foods which is among the largest shrimp, fish and pet food manufacturers and processed seafood producers, with a strong marketing and sales network worldwide beyond the earth.

This strategic partnership provides Avanti with the technical know-how in feed formulation and shrimp processing, and admission to its global marketing network. Avanti Feeds has a healthy cash residual of Rs. 61 Crs with minimal term debt repayment requirement. Greenbacks flow from operations continued to be robust at Rs. 383 owing to increased scale and robust working capital letter management which is sufficient to fund dividend payments and pocket-size capex requirements. The Income Tax Section conducted a search on the premises of Avanti Feeds and its subsidiaries recently but the search did not impact the operations and the authorities take not initiated whatsoever coercive actions or proceedings such as freezing of banking company accounts, seizure of stocks, etc.

Withal, any adverse finding in this regard in the future would have a negative impact on its stock price. Moreover, the Company is too exposed to raw cloth risk but has exhibited an ability to manage raw material cost volatility finer. Risk of any disease outbreak on shrimps could also impact the feeds and processing division of Avanti feeds.

Oracle Financial Services Software Ltd.

Oracle Fiscal Services Software Limited (Oracle) is a globe leader in providing It solutions to the financial services manufacture and is a majority owned subsidiary of Oracle Corporation. Oracle provides a wide range of technology solutions covering Retail Cyberbanking Corporate Cyberbanking and Payments. The products business which comprises production licensing consulting and support is the company's principal business organisation segment. The two other smaller business segments contain consultancy services business and the business procedure outsourcing services business organization. Oracle has established an extensive global presence across leading markets through its sales and marketing network. It's topline has grown at a CAGR of 4% and bottom line has grown at a CAGR of 11% over v years.

The Company has clogged an operating margin of 88% from production business, most 9% from service business and remaining from BPO services in FY2021. Oracle's dividend yield is amongst the highest in its industry at 5.52%. This It solutions provider has a history of financing bulk of working capital requirement, capital expenditure and other requirements through its operating cash menstruation. Primal risk which the company has identified is increased contest from vendors with digital solutions and new players, negative pricing pressure every bit customers seek to streamline their Information technology budgets on back of uncertainties caused past COVID-19 pandemic, etc. Company operates with the all-time fiscal chance contour of zero-debt and has stated the cash generated from operations volition be sufficient to satisfy the foreseeable capital expenditure and working uppercase requirements in hereafter.

Gujarat Land Petronet Ltd.

Gujarat Country Petronet Ltd. (GSPL) derives strength from its established position equally ane of the largest players in the gas transmission business organization in Republic of india together with its leadership position in Gujarat, strategic location with connexion to all major natural gas supply sources; along-with its synergies with Gujarat State Petroleum Corporation group which has presence beyond the energy (natural gas) value chain. GSPL operates with an open-access model which supplements good for you profitability for the company. The Visitor as well has a majority stake in Gujarat Gas Ltd. which is Bharat's largest city gas distribution company in its kitty.

GSPL has a 2,620 km long pipeline network which is the second largest gas transmission pipeline network operator in the land, subsequently GAIL. Total operating income decreased by around 5.78% YoY in FY21 which was primarily driven by impact on transmission volumes. Further, its capital structure was comfortable with an overall debt to equity ratio of 0.24 as on March 31, 2021. GSPL has adequate liquidity which is characterized by sufficient cushion in its accruals vis-à-vis debt repayment and the greenbacks and bank balance equally on March 31, 2021 stands at Rs. 409 Crs. In the event of any significant change in Government policy and the tariff, the revenues generated from the pipeline may exist impacted.

Accordingly, GSPL remains exposed to regulatory risk obligations. In improver to this, in that location exist risks associated with its large-size capex and investment plans being implemented through its ii JVs of around Rs. 13,000 Crs to be funded with a debt to equity ratio of 70:30.

Mphasis Ltd.

Mphasis is a mid-sized IT company primarily engaged in providing It / ITeS / BPO services catering to clients in the banking and capital markets, emerging industries, information technology, communication and entertainment and insurance. Company derives its revenues primarily from software services & projects, licensing arrangements & awarding services, infrastructure outsourcing services. It'due south financial profile remains healthy marked by stable earnings, sizable internet worth, and strong liquidity with big cash reserves, healthy capital construction and coverage metrics. The revenues grew by 9.94% YoY during FY2021 which was supported past higher club executions and new deal wins.

Mphasis' operating margins have remained at 19% in FY2021 aided by enhanced scale and operating efficiencies. Given the Blackstone Group's parentage, Mphasis has access to its investment portfolio and has leveraged the aforementioned since its acquisition. With Blackstone expanding its AUM beyond verticals and geographies, new opportunities for client wins would continue. Equally of March 2021, the company'due south greenbacks and cash equivalents were robust at Rs. 1,062 Crs. Mphasis is likewise vulnerable to pricing pressure from peers, moderate calibration of operations, foreign currency fluctuations, higher revenue share of fourth dimension and material contracts, wage aggrandizement, challenges of preparation and geo-political risks, with approx. 77% of revenues derived from Northward America.

Pidilite Industries Ltd.

Pidilite operates with two master divisions: pigment emulsions and adhesives. Over the years, the visitor diversified into branded consumer and boutique products, and industrial specialty chemicals, which deemed for approx. 77% and 23%, respectively of sales in FY2021. Too the mother brand, Fevicol, Its prominent brands include Steelgrip, Dr. Fixit, M-seal, Fevicryl, Fevikwik, Fevistik, Fevilite, Fevibond, and Acron. The Company witnessed robust overall volume growth in FY2021 with volumes of consumer and bazaar segment growing and industrial products segment growing in higher double-digit. Financial hazard contour is marked by a healthy internet worth of Rs. 5,593 Crs as on March 31, 2021 and debt to equity ratio of 0.06. Debt protection metrics remained strong with interest coverage of about 42 times. Networth is expected to improve farther, led by healthy accretion to reserves over the medium term. Key risks include substantial capital letter expenditure, acquisition or unrelated diversification which may lead to deterioration of capital profile and substantial erosion of liquidity forth with meaning weakening of operating performance or profitability in future.

Coronavirus has destroyed economies and wiped out years of savings. In times like these, for companies, cash in paw allows them to continue operations and incur costs without having to borrow money. During such a challenging environment, markets are probable to reward companies that are generating high gratis cash flows and thus tin service their debt (deleveraging) and other fixed obligations through cash accruals and reinvestments. Hence, investors should focus on such stocks for their portfolio.

For the most part, investment in value stocks is associated with long-established companies that have steady (but not rapid) growth rates, insufficiently stable acquirement, and consistent profitability. The thought behind investing in value stocks is more often than not not to make you rich overnight and that is not the goal. If you've heard the expression: ho-hum and steady wins the race, it is one of the best ways to summarize the strategy behind value investing.

Watch our video on how to analyse and selection Value Stocks for investments

Model Portfolio

In order to get an exposure to Best Value Stocks, you would need a full of Rs. 31,700 for the below curated portfolio as of July 02, 2021.

Company Name	Weightage	CMP (equally on November 02, 2021)	Quantity	Total (Rs.)
Sonata Software Ltd.	17%	753	vii	five,271.0
Avanti Feeds Ltd.	9%	569	5	ii,845.0
Oracle Fiscal Services Software Ltd.	23%	3624	2	7,248.0
Gujarat State Petronet Ltd.	10%	331	x	iii,310.0
Mphasis Ltd.	14%	2155	2	4,310.0
Pidilite Industries Ltd.	27%	2179	4	viii,716.0
	100%	Total		31,700.0

The below tabular array covers some of the nearly important factors while evaluating value stocks such as render ratios including RoE and RoCE, operating margins, sales and earning growth and market cap among others.

Sr. No.	Company Proper name	BSE Scrip Code	NSE Symbol	CMP (as on Nov 02, 2021)	Rating	Industry	Marketplace Cap (in Crs)	Promoter Holding	Compounded Sales Growth (5 years)	Compounded Profit Growth (5 years)	Operating Profit Margin (%)	Price to Earnings (times)	Cost to Book (times)	EV/EBITDA	Debt to equity (times)	Dividend Yield (%)	Return on Equity (%)	Return on Upper-case letter Employed
1	Sonata Software Ltd.	532221	SONATSOFTW	753.0	0.5	Information technology – Software	7923.0	28.20%	17.00%	9.00%	eight.97%	32.50	8.75	xviii.00	0.ane	2.69%	31%	42.00%
ii	Avanti Feeds Ltd.	512573	AVANTI	569.0	three.0	FMCG	7746.0	43.69%	16.00%	19.00%	eleven.20%	21.50	iv.40	13.90	0	0.90%	22.eighty%	32.30%
3	HCL Technologies Ltd.	532281	HCLTECH	985.0	4.0	IT – Software	267201.0	sixty.33%	19.00%	15.00%	26.60%	24.00	iv.46	12.60	0.xi	1.02%	20.00%	26.10%
4	KEI Industries Ltd.	517569	KEI	736.0	0.five	Cable	6609.0	xl.xxx%	12.00%	34.00%	eleven.00%	24.20	3.72	thirteen.90	0.xvi	0.27%	sixteen.60%	21.50%
5	Aurobindo Pharma Ltd.	524804	AUROPHARMA	994.0	2.0	Pharmaceuticals & Drug	58254.0	51.90%	12.00%	21.00%	21.thirty%	10.xc	2.66	10.20	0.24	0.40%	27.50%	xviii.50%
6	Castrol India Ltd.	500870	CASTROLIND	143.0	iv.5	Lubricants	14135.0	51.00%	-2.00%	-one.00%	28.50%	20.twenty	9.99	12.twoscore	0.00	2.10%	41.xc%	56.80%
seven	Coal India Ltd.	533278	COALINDIA	148.0	2.0	Mining & Minerals	90993.0	66.10%	-3.00%	-ii.00%	20.sixty%	7.xvi	2.49	3.56	0.sixteen	8.47%	37%	46.ten%
eight	Cummins Bharat Ltd.	500480	CUMMINSIND	881.0	0.5	Automobile & Ancillaries	24431.0	51.00%	-two.00%	-3.00%	thirteen.40%	38.fifty	5.25	24.30	0.01	one.70%	14.00%	17.fifty%
9	Excel Industries Ltd.	500650	EXCELINDUS	1166.0	0.five	Chemicals	1466.0	52.80%	eleven.00%	22.00%	16.10%	20.sixty	1.72	x.90	0.01	0.86%	9.xvi%	13.00%
10	Oracle Fiscal Services Software Ltd.	532466	OFSS	3624.0	4.0	IT – Software	31214.0	73.35%	4.00%	eleven.00%	49.50%	17.70	4.56	10.ten	0.01	5.52%	26.thirty%	36.70%
11	Cardinal Depository Services (Bharat) Ltd.	Due north.A.	CDSL	1035.0	0.5	Finance	10813.0	xx.00%	23.00%	24.00%	62%	54.00	12.xxx	39.50	0	0.43%	25.00%	32.40%
12	Oil & Natural Gas Corporation Ltd.	500312	ONGC	118.0	0.v	Crude Oil	149013.0	lx.40%	24.00%	-2.00%	xiii.70%	9.46	0.67	4.44	0.56	4.22%	seven.37%	x.10%
xiii	Gujarat State Petronet Ltd.	532702	GSPL	331.0	2.0	Gas Transmission	18684.0	37.threescore%	63.00%	28.00%	31.00%	11.60	ii.92	five.34	0.24	0.threescore%	28.50%	38.fifty%
fourteen	Mphasis Ltd.	526299	MPHASIS	2155.0	3.0	IT – Software	40335.0	56.00%	10.00%	14.00%	18.50%	33.xx	6.18	xx.90	0.18	i.62%	19.70%	24.00%
fifteen	ITC Ltd.	500875	ITC	202.0	4.5	FMCG	249131.0	0.00%	v.00%	vii.00%	34.50%	18.90	iv.13	12.50	0	v.31%	21.00%	28.l%
16	Persistent Systems Ltd.	533179	PERSISTENT	2930.0	3.0	IT – Software	22389.0	31.thirty%	13.00%	10.00%	16.30%	53.70	8.01	29.00	0.04	0.48%	16.10%	21.20%
17	Balkrishna Industries Ltd.	502355	BALKRISIND	2299.0	2.0	Automobile & Ancillaries	44441.0	58.30%	12.00%	21.00%	31.30%	38.2	7.41	23.ten	0.17	0.74%	21.10%	23.90%
xviii	Finolex Industries Ltd	500940	FINOLEXIND	184.0	ii.0	Plastic Products	11404.0	52.50%	7.00%	26.00%	28.sixty%	15.fifty	3.63	10.50	0.06	one.09%	28.80%	35.60%
19	TTK Prestige Ltd.	517506	TTKPRESTIG	9426.0	3.0	Consumer Durable	13065.0	70.41%	8.00%	fourteen.00%	14.lxx%	57.30	8.68	37.00	0.06	0.53%	16.20%	20.eighty%
20	Pidilite Industries Ltd.	500331	PIDILITIND	2179.0	4.0	Chemical	110719.0	70.nineteen%	6.00%	7.00%	23%	97.90	19.80	62.seventy	0.06	0.32%	22.fifty%	29.thirty%

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