Midcap rout fails to keep FPIs away from these five stocks

Mumbai: The outlook for mid- and small-cap stocks appears bleak as these companies are likely to take a bigger hit than their bigger peers in the current downturn. While investors have mostly focused on buying blue-chips in the recent fall, some foreign funds looked at mid-cap stocks since April 1. Here are five smaller companies in which overseas investors have either bought afresh or increased their stakes:


METROPOLIS HEALTHCARE

American Smallcap World Fund has bought 10 lakh shares in Metropolis last week. The stock which corrected 37% since March 3 is one of the several private labs allowed for testing of Covid-19. While shutdown of clinics and hospitals OPD services will impact its B2B business which is unlikely to be offset by Covid-19 testing, analysts expect a sharp recovery in FY2022. “Post the sharp correction, we believe valuations at 27 times FY2022 estimated EPS adequately capture these risks,” said Chirag Talati, analyst, Kotak Securities.


THE PHOENIX MILLS

Schroder Investment Management has acquired 1.8% stake in The Phoenix Mills last week, taking its stake to 5.58%. The stock has declined 43% since February 25 as over 90% of its annuity income comes from retail malls and hospitality portfolio. However, its long-term story intact, according to analysts. “We expect the retail malls to bounce back to optimum operational efficiency,” said Biplab Debbarma, analyst, Antique Stock Broking.

TATA COMMUNICATIONS

Recently, East Bridge Capital Master Fund and University of Notre Dame DU bought 44 lakh and 15 lakh shares in Tata Communications respectively. The stock which corrected more than 50% between January and March, has recovered 70% since March 19. Even at the current valuations, analysts see value in the stock despite some short-term business disruption. “Tata Comm’s existing core business should not see much impact, anyway, barring some impact on the business from the media vertical in the short term,” said Rohit Chordia, analyst, Kotak Securities. “We believe the stock is now pricing in a pretty dismal long-term prognosis.”

EMBASSY OFFICE PARKS REIT

The American Balanced Fund (ABF) and Capital Income Builder picked up shares worth over ₹444 crore in Embassy Office Parks REIT through open market transactions earlier this month. The REIT’s unit price has corrected by 25% since early over concerns on medium-term office demand. However, analysts said its current portfolio over 50% of tenants in the technology domain cushions the Covid-19 blow. “While concerns over the medium-term demand outlook for offices remains a key risk, the recent rollback in the dividend distribution tax for investors, FY22 estimated distribution yield of 7.7% and high-quality tenant mix... makes risk-reward favourable” said Adhidev Chattopadhyay, analyst, ICICI Securities.

CARE RATINGS

Los Angeles-based FPA International Value Fund bought 5.19 lakh shares of Care Ratings last week. Care Ratings continues to face challenges on the revenue front due to lower credit growth and the subdued investment cycle leading to lower rating volumes for loans, bonds, and commercial paper, according to analysts. Gaurav Jani, analyst, Centrum Broking said, “Valuation remains attractive and we raise our PE multiple to 17.5 times FY22 estimated EPS to arrive at a target price of ₹695.”