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Scouring the small-cap landscape for potential wealth creators comes naturally to many investors. And why not? Small, fast-growing companies offer the promise of massive gains. While growth is an important variable, an equally important component of the equation—value—often goes unnoticed. To strike the right balance, we used a screener for small caps with a Growth Score above seven and a Valuation Score above six to filter consistent earnings performance and reasonable pricing relative to fundamentals.
This approach helped us narrow down a focused list of eight stocks. From this list, we have picked Tanla Platforms and Can Fin Homes for a closer look. Both companies not only meet our growth and valuation criteria but also demonstrate strong business models and steady execution—key traits to watch in the small-cap space.
| Company | Market cap (Rs cr) | 5-year profit after tax growth (%) | P/E ratio | 5-year median P/E |
|---|---|---|---|---|
| Can Fin Homes | 9641 | 18 | 1.9* | 2.6 |
| Tanla Platforms | 6290 | 38 | 12.6 | 24.9 |
| Ashoka Buildcon | 5360 | 61 | 3.6 | 9.6 |
| Ashapura Minechem | 3267 | 46 | 13.9 | 14.9 |
| Ugro Capital | 1769 | 49 | 0.8* | 1.2 |
| CIAN Agro | 1150 | 35 | 30.7 | 96.2 |
| Kothari Petrochemicals | 959 | 39 | 14.8 | 13.0 |
| MK Exim (India) | 269 | 107 | 14.8 | 16.7 |
|
Data as of April 27, 2025 Considered P/B ratio for Can Fin Homes and Ugro Capital |
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Tanla Platforms
Tanla operates in cloud communications, enabling businesses to interact with customers seamlessly. It has two key segments: the enterprise business, which drives 91 per cent of revenue, and the digital platform segment, contributing a modest 9 per cent.
Over the past five years, Tanla's annual revenue has compounded by 16 per cent, while net profits have surged by 38 per cent. A large part of this success comes from the explosion of OTP-driven communications, fuelled by the unified payments interface (UPI) boom in India, which catapulted the enterprise business.
But Tanla's digital platform segment, despite its small size, is the crown jewel, delivering 33 per cent of gross profit with gross margins of over 90 per cent! The company's pivot into this space—through the launch of Trubloq and Wisely—positions it at the forefront of the fast-growing CPaaS (Communications Platform as a Service) market, which allows businesses to offer seamless customer engagement through WhatsApp, chatbots, and SMS. As messaging through these non-traditional channels grows, Tanla is well-positioned to capitalise on this shift.
However, the enterprise segment, once the bedrock of Tanla's growth, is now a commoditised business. Competition is fierce, margins are thinning and alternative communication methods are rendering its traditional offerings increasingly irrelevant. While OTP-driven messaging has seen explosive growth, this trend is unlikely to sustain at the same pace.
Market sentiment has already priced in these risks. Tanla's stock currently trades at a P/E ratio of 13, a sharp 50 per cent discount to its five-year median. While this reflects investor skepticism, it also signals a potential opportunity if Tanla can successfully leverage its digital business to offset the pressures on its enterprise segment.
Can Fin Homes
Can Fin Homes has carved out a niche as one of India's most disciplined housing finance players, targeting salaried and middle-income borrowers primarily in semi-urban and urban markets. Its reputation rests on conservative lending practices, a sharp focus on operational efficiency and the unwavering backing of its parent Canara Bank .
Over the last five years, the company has compounded its assets under management (AUM) by 11 per cent annually while maintaining healthy asset quality. As of FY25, its gross NPA ratio was just 0.87 per cent. The tight credit control is also reflected by its decent five-year median return on assets (ROA) of 2 per cent with profit margins remaining healthy around 3.8 per cent. These numbers indicate that Can Fin's conservative approach to lending has translated into solid profitability.
Its current growth is supported by improving disbursements in core states like Karnataka and Telangana, aided by digital initiatives and a strategic push towards self-employed non-professional (SENP) borrowers. New branch additions and a growing share of non-housing loans like loans against property are also helping lift yields and diversify the portfolio.
However, risks persist. Competitive intensity is rising, especially from private banks and fintechs aggressively targeting affordable housing, which could pressure the lenders' spreads over time. The stock trades at a P/B ratio of 1.9 times, well below its peers trading at 3-4 times. While this discount reflects Can Fin's more conservative growth trajectory, its peers enjoy higher growth rates, commanding premium valuations as a result.
Before you leave
Small-caps often promise rapid growth but that alone is not enough. Valuations must offer a reasonable entry point relative to future risks. While our screener helps filter for both these factors, it's not enough on its own. The stocks are not our recommendations and require granular assessment of competitive pressures, the sustainability of margins, and their ability to adapt. A strong past track record should always be weighed against the evolving market landscape.
In case you wish to get a curated list of stocks picked by our analysts, check out our recommendation service— Value Research Stock Advisor —which will get you meticulously researched stock recommendations and ready-to-invest portfolios, updated every month.
Also read: 4 small caps you wish you spotted earlier
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