I was recently looking at Kilitch Drugs (India). The stock came in our radar as the company has approved a rights issue of Rs 50 crore for a Greenfield project.
While digging deeper in the company, I found some interesting details regarding actions taken by the promoters in 2021-22 and will share details below to understand how can one screen for stocks which may end up performing well in future.
Investing is probabilistic and the idea is to invest in stocks where the probability of good returns might be higher. The question is – How does one screen for such stocks?
Before that: Here’s the list of new stock recommendations made recently:
- On 3rd Jul’25, we released a new recommendation under “(opens in new tab)Insider Bets” subscription. Herein the Promoters have infused substantial capital into the company and all through preferential allotment of shares to themselves. You can read about it by (opens in new tab)clicking HERE
- On 9th Jul’25, we released a new Special situation opportunity for our (opens in new tab)Alpha + members. It’s based on Promoter change in a company with downside protection through open offer price. You can read about it by (opens in new tab)clicking HERE
- On 30th Jul’25, we released a new long term stock recommendation for our (opens in new tab)Alpha/Alpha + members. It’s a chemical company trading at deep valuation discount and Promoter recently bought shares from open market. You can read about it by (opens in new tab)clicking HERE
Coming back to turnaround or potential multi-bagger opportunities, we believe one good way to screen for such stocks is as follows:
Look for Preferential allotment of shares/warrants to Promoters in companies in which there’s been a decent correction in stock price (40-50% or more) and where major allocation is to Promoters
Let’s look at – Kilitch Drugs
- In Jan’19, the stock recorded a high of around 220 odd levels
- Operationally as well, the company recorded highest sales in FY 19 (till then) and highest PBT of last 4-5 years
- Thereafter, due to the correction in small-mid cap space and covid-19 correction in Mar’20, the stock reached a low of 82 odd levels in Mar’20
- For FY 20, the company’s sales also dipped to Rs 53 crore from Rs 82 crore in FY 19 and PBT dropped to Rs 2 crore from Rs 9 crore in FY 19
- FY 21 saw a recovery in sales to Rs 68 crore and PBT to Rs 5 crore
- The performance continued improving in FY 22 and the stock also recovered to around 180 odd levels in Dec’21
- On 15th Dec’21, the company announced that a meeting of Board of Directors will be held on 20th Dec’21 to raise funds by issuance of equity warrants through preferential allotment to Promoters
- On 20th Dec’21, Board of Directors approved preferential issue of 5 lakh warrants at a price of Rs 177.15/- to promoters (very important promoter action in our view)
- Post the announcement, the stock ran up sharply to around 260 odd levels by Jan’22, but thereafter started correcting and came back to 170 odd levels by Feb’22
Source: BSEINDIA
- I believe, the entire allocation to Promoters was a significant event and probably indicated that Promoters were anticipating good performance ahead
- In FY 22, the sales of the company increased to Rs 114 crore from Rs 68 crore in FY 21 and PBT increased to Rs 10 crore from Rs 5 crore
- For FY 25, the company closed the year with Rs 198 crore sales and PBT of Rs 34 crore
Source: Screener
- While appreciation in stock price is one thing, what we particularly like is the improvement in financial performance since the preferential allotment to Promoters in Dec’21
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
Research Analyst
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