Everyone is looking for opportunities that can turn out to be multibaggers.
The question is – How does one screen for such stocks at an early stage?
We believe one good way to screen for such stocks is as follows:
Look for Preferential allotment of warrants/shares to Promoters/Insiders in companies in which there’s been a decent correction in stock price (40-50% or more) and the major or the entire allocation is to Promoters/Insiders.
Let’s look at a case study – Refex Industries.
Before that, in the month of April 2025, we have released the following new stock recommendations:
- On 11th Apr’25, we released a new recommendation under “Insider Bets” subscription. You can read about it by clicking HERE
- On 16th Apr’25, we released a new Special situation opportunity for our Alpha + members. You can read about it by clicking HERE
Refex Industries case study
- Before FY 19, Refex was primarily into Refrigerant gas business and some other segments. Sales were Rs 70-80 crore annually and PAT around Rs 1-5 crore
- FY 19 onwards, company started coal and ash handling business and the sales jumped to around Rs 400-600 crore and profit before tax to around Rs 30-60 crore
- In comparison to FY 21, FY 22 was a slightly down year with sales down by 30% and EBITDA down by 10-11%
- From Apr’21 to Aug’22, the stock traded largely in the range of Rs 20-30
- On 29th Jul’22, the company announced that a meeting of Board of Directors will be held on 5th Aug’22 to consider a proposal for raising of funds
- On 5th Aug’22, the Board approved the issue of 11.05 lakh shares to Promoters at an issue price of Rs 130/- per share. Since then the face value of stock has split from Rs 10/- to Rs 2/-, so the effective issue price was Rs 26/- per share
- At that time the stock was quoting around 26-27 odd levels
- We believe, it was an interesting event as Promoters opted for issuance of equity shares and the entire allocation was to themselves
Source: Screener
- While FY 22 ended with just Rs 444 crore sales and 61 crore operating profit, in FY 23, performance improved significantly with sales of Rs 1,629 crore and operating profit of Rs 175 crore
- Probably, the promoters were anticipating a major improvement in the business and thus opted for preferential issue of shares at Rs 26/- each
There might be many cases where the business and the stock may not have done well, post allotment of warrants to promoters during low phase. However, the idea is, screening for such stocks can be a good starting point for further research and to catch the turnaround stage early.
Hope you found the blog post useful and it added value to your investment decisions. Sign up for more interesting stock ideas and industry notes.
Disclaimer: This is not a recommendation to buy/sell any of the stocks mentioned above. The securities quoted are for illustration only and are not recommendatory.
Ekansh Mittal
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