In the last 17-18 months, the broader markets are down around 15-20%. In the past, we have seen bear markets lasting 2-3 years. While one cannot be sure of the length of the bear market, it’s a good time to be actively looking for growth stocks at reasonable valuations with an investment horizon of 3-5 years.
One good way to screen for such stocks is by tracking Promoter’s actions. If they have been consistently buying from the open market or increase stake through preferential allotment, one could add such stocks to watch list.
Today, we will look at Roto Pumps and how the performance of the company has turned around with great returns by the stock after a major corporate event.
This analysis can help identify such opportunities in future.
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Before that: Here’s the list of new recommendations released by us in last few weeks
- For Insider Bets members – On 22nd Jan’26, we released our New stock report under “Insider Bets“ subscription. It’s a rare setup wherein Promoter is increasing stake via open market + preferential allotment, Valuations very reasonable at <10x earnings | <1x book and Earnings growth strong at 15%+ CAGR. You can access it by signing up HERE
- For Alpha/Alpha + members – On 31st Dec’25, we released a new long term investment recommendation for Alpha and Alpha + members. It’s a specialty products company which has delivered 20% + Sales and PAT CAGR, is net debt free, trading at attractive valuations with Price to Book value at 5 years low. You can access it by signing up HERE
Roto Pumps case study
- From FY 19 to FY 21, the performance of the company was largely stagnant
- During the period, consolidated sales remained range-bound between Rs 125 crore and Rs 135 crore; operating profit hovered around Rs 22-30 crore and PBT fluctuated between Rs 12 crore and Rs 18 crore with no clear upward trend
- However, since FY 21, there’s been a major turnaround in the performance of the company
- Sales are up from Rs 127 crore to Rs 298 crore, operating profit is up from Rs 28 crore to Rs 66 crore, and PBT is up from Rs 26 crore to Rs 53 crore
Source: Screener
- After trading in the Rs 8-12 range for around 2-3 years, the stock started doing well from Apr 2021 onwards
- Adjusted for the 1:1 bonus issue in Jul’23 and the 2:1 bonus issue in Jul’25, the stock went from around Rs 12 levels to an all-time high of around Rs 120, representing roughly a 10x return from the allotment price
Source: Screener
Question is, was there anything which could have alerted one to start tracking the stock and add to one’s watchlist before the significant improvement in performance and stock price happened?
- Yes, on 31st Mar’21, Board of Directors approved issue of convertible warrants to Promoters
- On 19th May 2021, members of Roto Pumps approved (through Postal Ballot) the issue of 2,50,000 warrants to Promoter/Promoter Group at an issue price of Rs 142.11 per warrant
- Adjusting for bonus and split – 30 lakh warrants at Rs 11.84 per warrant
- The warrants were subsequently allotted on 7th Dec 2021 and converted into equity shares on 27th Jan 2022
Source: BSEINDIA
- Importantly, 100% of the warrants were allotted to Promoters. This is a very strong signal of promoter conviction compared to cases where allotment is split between promoters and non-promoters
- The allotment price of Rs 11.84 was roughly in line with the prevailing market price — indicating promoters were willing to invest at market rates, not at a deep discount
- A significant increase in Promoter holding through open market purchase or major allotment to Promoters is always an interesting sign and calls for deeper analysis of such companies
- Promoter knows more than anyone else about the business operations and if they increase stake, many a times it could be because they are finding value or anticipating positive developments
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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