4 small-cap stocks held by more than 20 mutual fund houses

Summary: Small-cap companies often come with the tag of high risk, high reward. Yet, the fact that several fund houses continue to bet on them shows growing conviction in their potential. Here, we look at four small-cap stocks that caught the fancy of multiple mutual funds…

Small-cap stocks are where fortunes can be made, or lost. They are riskier and more volatile compared to large and mid caps. Yet, they’re also where mutual fund managers go scouting for tomorrow’s leaders. A small-cap company that cracks the right market, scales efficiently and sustains profitability can potentially deliver outsized returns over time.

So, which small-cap names are fund managers backing today? Our results show a diverse mix of businesses, from IT to HR solutions, financial advisory and housing finance.

So, without much ado, here are the four small-cap favourites of mutual funds as of August 2025.

#4 Birlasoft

Held by: 21 of 44 fund houses

Fund houses with the most sizeable stake in the company

• Kotak Mahindra Mutual Fund: 6.74 per cent 
• HDFC Mutual Fund: Nearly 2.5 per cent 
• ICICI Pru Mutual Fund: Over 2 per cent 

Key metrics of the company

• Value Research Rating: 4 stars
• P/E: 22
• Revenue growth in the last three years: 7.1 per cent
• RoCE: 22 per cent
• RoE: 16.3 per cent

What does the company do

Birlasoft is a Pune-based IT services firm that helps companies worldwide with digital transformation. It works in areas such as cloud, automation, data analytics, customer experience and enterprise systems. The company also develops industry-specific solutions in fields like supply chain management, insurance and engineering, serving clients across banking, healthcare, manufacturing, energy and more. 

#3 TeamLease Services

Held by: 22 of 44 fund houses have a sizable stake in this small-cap company

Fund houses with the most sizeable stake

• Franklin Templeton India Mutual Fund: Over 7 per cent
• Nippon India Mutual Fund: Nearly 6.5 per cent
• Mirae Asset Mutual Fund: Nearly 4.5 per cent
• ICICI Pru Mutual Fund: Over 4 per cent
• UTI Mutual Fund: Over 4 per cent
• SBI Mutual Fund: Around 4 per cent
• HDFC Mutual Fund: Over 2 per cent

Key metrics of the company

• Value Research Rating: 3 stars
• P/E: 27.8
• Revenue growth in the last three years: 18 per cent
• RoCE: 14.5 per cent
• RoE: 13 per cent

What does the company do

TeamLease Services, headquartered in Bengaluru, is a leading HR solutions company offering staffing, recruitment, payroll, training and compliance services across India and abroad. Its services span IT, telecom, BFSI, healthcare, retail, e-commerce and more, covering everything from temporary staffing to corporate training and apprenticeships. The company also provides support, including payroll management, HR tech platforms, and workplace essentials such as PPE (Personal Protective Equipment) and sanitisation. 

#2 Prudent Corporate Advisory Services

Held by: 23 of 44 fund houses

Fund houses with the most sizeable stake in the company

• DSP Mutual Fund: Over 4 per cent
• Kotak Mahindra Mutual Fund: Over 4 per cent

Key metrics of the company

• Value Research Rating: 5 stars
• P/E: 58.7
• Revenue growth in the last three years: 32.9 per cent
• RoCE: 46 per cent
• RoE: 34.1 per cent

What does the company do

Prudent Corporate Advisory Services, based in Ahmedabad, offers financial advisory and distribution services to individuals, corporates, HNIs (high net worth individuals) and ultra HNIs in India and abroad. Its offerings include mutual funds, insurance, PMS (portfolio management services), loans against securities and unlisted securities, as well as bonds, FDs (fixed deposits), AIFs (alternative investment funds), NPS (National Pension System) and stockbroking. The company also offers real estate services.

#1 Can Fin Homes

Held by: 25 of 44 fund houses

Fund houses with the most sizeable stake in the company

• Axis Mutual Fund: 3.21 per cent
• Nippon India Mutual Fund: 1.57 per cent
• HSBC Mutual Fund: 1.39 per cent
• HDFC Mutual Fund: 1.3 per cent

Key metrics of the company

• Value Research Rating: 5 stars
• P/E: 11.3
• Revenue growth in the last three years: 23.1 per cent
• RoCE: 9.4 per cent
• RoE: 18.2 per cent

What does the company do

Can Fin Homes, headquartered in Bengaluru, is a housing finance company that has been around since 1987. It offers a range of loans, including housing loans such as PMAY-linked schemes and affordable housing, as well as non-housing options, including mortgage, site, education and personal loans. The company also provides fixed and cumulative deposits, serving individuals, builders, corporates and pensioners through its network of branches and loan centres across India.

The bottom line

Small-cap companies can deliver strong gains, but they come with sharp ups and downs. Just because a stock is widely owned by fund houses doesn’t mean it automatically fits your portfolio. The key is to evaluate whether its business fundamentals, valuations and your own risk appetite align before taking the plunge.

If you’re looking for well-researched small-cap ideas backed by detailed analysis, check out Value Research Stock Advisor. Our service helps you separate potential long-term winners from the noise, helping you build wealth over the long term.

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Also read: The 5 most bought small-cap stocks by mutual funds in August