Best Multibagger Stocks in India 2023: Meaning, Features, Risks, And More (2024)

Last Updated on Dec 28, 2023 by Anjali Chourasiya

In early December 2023, as many as 190 smallcap stocks turned into multi-baggers this year, and 143 of them also hit their lifetime highs, as per the data by Ace Equity. However, identifying such stocks is not a walk in the park. Whilst multibagger stocks are the ones that give manifold returns, it should not be the only metric to discover them. So, what other factors should you consider?

In this article, let’s explore the best multibagger stocks in India (2023) and learn how to identify multibagger stocks, their features and the risks involved.

What are multibagger stocks?

Multibagger stocks are equity shares of a company that have generated multiple times higher returns than its associated cost of acquisition. In simple terms, a stock that doubles its price is called a two-bagger. Similarly, a stock that has risen multiple times its initial investment value is called a multibagger stock.

The wealth creation with a multibagger stock can happen over a long horizon of time through gradual compounding. These stocks are generally small-cap or mid-cap with a significantly high potential to grow.

Best multibagger stocks in India – Updated December 2023

Note: To find out the best multibagger stocks of 2023, we used the Tickertape Stock Screener with the following filters.

• Stock Universe: Nifty500
• The closing price of stocks is Rs. 50 and above
• 5Y CAGR of 50% and more
• Positive net income to ensure the companies are profitable

Note that the data discussed is as of 12th July 2023, and we have only used a few metrics to screen multibagger stock; you can use others based on your preference. For instance, if you want to look for multibagger penny stocks below Re. 1, you can set the close price to less than Re. 1.

Note that these stocks are in no order of preference. Please note that these stock selection criteria and the stocks are provided for informational purposes only; it is essential to conduct your own research.

Details of top 3 multibagger stocks in India

Adani Green Energy Ltd

Founded in 2015, Adani Green Energy Ltd is one of India’s largest renewable energy companies with a market cap of Rs. 2,53,476.88 cr. The company has a renewable energy portfolio of ~20,434 MW. Adani Green Energy Ltd is the only company on this list that has wind, solar, and hybrid power as its product offering.

• The stock has a 5-yr ROI of 6.15% and 5-yr absolute returns of 3,760.55%.
• The stock is 6.48x as volatile as Nifty.
• The profitability score of the stock is 8.7 out of 10, showing good signs of profitability and efficiency.
• The stock is overpriced but is not in the overbought zone.
• Over the last 5 yrs, the market share increased from 7.69% to 25.7%.

To learn more about Adani Green Energy Ltd, click here.

Tanla Platforms Ltd

Incorporated in 1995, Tanla Platforms Ltd is an end-to-end solutions provider in the telecom infrastructure. The company also develops and markets computer software while offering messaging, voice, Internet of Things (IoT), and other cloud communications solutions. Tanla Platforms has a development centre in Hyderabad and a worldwide marketing office in the United Kingdom, catering to a global audience.

• The stock has 5-yr absolute returns of ​​3,514.17%.
• The stock is 4.72x as volatile as Nifty.
• The stock is overpriced but is not in the overbought zone.
• The performance and profitability of the stock are 7.9 and 7.6, respectively.
• Over the last 5 yrs, market share increased from 2.94% to 6.02%.

To learn more about Tanla Platforms Ltd’s performance, click here.

Fertilisers And Chemicals Travancore Ltd

Incorporated in the year 1943, Fertilisers And Chemicals Travancore Ltd stands as one of the biggest fertiliser enterprises in the country. The company’s main products are Ammonia, Sulphuric Acid, Ammonium Phosphate-Sulphate (FACTAMFOS), Ammonium Sulphate, Zincated Ammonium Phosphate, Caprolactam, and also complex fertilisers.

• The stock has 5-yr absolute returns of 1,909.54%.
• The stock is 6.91x as volatile as Nifty.
• The stock is overpriced but is not in the overbought zone.
• Fertilisers And Chemicals Travancore Ltd is amongst the top performing stocks with a performing score of 9.2 out of 10.
• Over the last 5 yrs, market share increased from 1.91% to 2.36%.

Know more about Fertilisers And Chemicals Travancore Ltd here.

Features of multibagger stocks

1. Growing sales and profit: Consistently growing sales and profit of a company are healthy indicators. A growing Earning Per Share (EPS) is an excellent indicator of the increase in the wealth of a company.
2. Low debt: Too much debt can sink a company. Therefore, it is wise to check a company’s debt and related ratios. A higher debt-to-equity ratio indicates that the company is aggressively financing its growth with the help of external funds.
3. Competitive advantage: The company should have a sustained competitive advantage in the market. The quality of the underlying business is a crucial factor in determining if the company can survive the storms and emerge from them.
4. Ability to expand: The company should have the capability to expand free cash flow in order to fund future expansions or dividends. Multiple factors play a role here, from strong leadership and management to the quality and scalability of the products/services of the company.
5. Better returns: There are various metrics that help understand a company’s operational efficiency and the resulting future growth potential. Two such metrics are Return on Equity (ROE) and Return on Capital Employed (ROCE). They should be observed to check if the stock is performing well or not.
6. High-profit margins: Another good indicator of a multibagger stock is improved profit margins. If the company is gradually adjusting prices and fine-tunes its expenses, its profits are likely to increase.

How to identify multibagger stocks?

If we go by the meaning of the word ‘multibagger,’ it refers to a stock that generates over 100% return (or multiple bags). There are small-cap stocks that generate returns several times higher than the cost of acquisition in real life. We all wish that we had the power to tell the happenings of the future. It would allow us to gauge our chosen stock’s performance and verify whether it is a multibagger. Unfortunately, such things are only limited to reel life.

In real life, it is imperative to understand that such stupendous returns don’t happen overnight. The transition from a small-cap to a mid-cap and finally becoming a large-cap share would demand your patience and perseverance. You also need an eye to unearth potential.

Here are some aspects that would help you identify potential multibagger stocks:

Look for what the industry has to offer

The first and foremost thing that you need to understand is not regarding the stock but the industry to which it pertains. Understand the upcoming trends and which sectors are poised to benefit the most from them. For example, there is an increasing drive to go electric in the vehicles sector. So electric mobility will seemingly gain traction (not that we are recommending it to you!). Make sure the company you are betting on belongs to one of these industries.

Look at the company’s product portfolio

The next step is to look at a company’s shares and delve deeper into its product portfolio. The motive is to understand their core competencies and if they have the potential competitive edge over others. To figure out the right companies, look for the latest developments in the sectors you are interested in and then look for the right companies that seem to be the biggest contenders for growth and expansion.

Check the debt levels

The debt ratio signifies the debt portion of the total capital that an organisation utilises for its operation. Typically, a ratio of 0.5 or lower represents lower debt in the company’s capital structure. The higher the debt, the more likely the company’s cash flow will be unstable. A positive and free-flowing cash flow shows growth potential.

Look into the earnings and valuation

The next step is to dive deeper into its recent financials and figure out its earnings growth. A growing EPS is an excellent indicator of an increase in wealth. After that, figure out the stocks that are undervalued. If the company’s shares are underpriced, there is a high chance of becoming a multibagger stock.

Look for future potential

Looking into past financial statements is an indicator of present performance, but it won’t necessarily reflect the future. It is not an IPL auction, and you need not place your bets based on past performance alone.

To find out true potential, look into the organisation’s management and promoter holding. A strong management team is more likely to drive growth and bring about success. Also, look for companies with high promoter holding, as it is an indicator of confidence in whatever they are trying to create. Tickertape’s promoter holding filter allows you to check the percentage of the company’s common stock held by promoters.

Risks of investing in multibagger stocks

Here are the potential risks involved in investing in multibagger stocks

• It demands bulk purchases, exposing the investor to substantial risk if the stock collapses. The higher the risk is, the greater the reward: a notion that people follow while investing in penny stocks. But it can soon become a bane if the stock starts collapsing.
• Many people invest in a value trap or an economic bubble because of the high temporary demand for the underlying product/service. It is often caused by bulk investors to create an artificial bull setup and then pull off the trigger by short-selling.
• The investment is locked for a sizable time. Most multibaggers take over two decades to bloom, meaning that you will have to resist selling them in the upcoming few years. It also results in capital blockage for you.
• You can fall into trick trades, i.e., artificial inflation caused by others investing in it. Most of these are small-cap stocks with low market capitalisation, exposing themselves to the risk of being easily manipulative.
• These stocks suffer from low liquidity and performance issues in their initial days. It means that any rumour around them has the power to trigger a price collapse. Such stocks can take months to recoup.

On a closing note

Multibagger stocks are investors’ favourites. They give multifold returns and keep your portfolio green. However, before making any investment decision, it is better to do your research or consult your financial advisor.

FAQs