Only 4 mid caps pass Raamdeo Agrawal's magic '25-25-25' rule

Summary: Few investors in India command Raamdeo Agrawal’s kind of stock-picking pedigree. So, we used his timeless investing framework—ROCE above 25 per cent, profit growth above 25 per cent and valuation below 25x—to spot mid caps that blend all three together. Only four names made the cut. Find them below.

When it comes to spotting wealth creators early, few investors command the kind of street cred that Raamdeo Agrawal does. As the co-founder and chairman of Motilal Oswal Financial Services, Agrawal has built his investing empire on an unyielding commitment to deep research, disciplined frameworks and long-term conviction.

Among his many investing mantras, one stands out for its elegant simplicity: the ‘Magic 25-25-25 rule’.

What’s the magic about it? It’s a quick way to zero in on companies that combine three rare qualities—efficiency, growth and value. Agrawal looks for companies that deliver:

• Return on capital employed (ROCE) above 25 per cent: A sign of strong capital efficiency and allocation.
• Profit growth above 25 per cent: Proof of robust business momentum.
• P/E ratio below 25: To ensure the stock is not overpriced.

How we found those that pass the muster

It’s a high bar to clear. Most companies can ace one or two of these metrics, but very few tick all three boxes. So we decided to look for those rare few that do.

Using Value Research’s Stock Screener, we filtered the mid-cap universe for the following:

• Five-year average ROCE: More than 25 per cent
• Five-year annual EPS growth: More than 25 per cent
• P/E ratio: Less than 25 times trailing earnings.

The results threw up a handful of names: just four mid-cap companies cleared the above filters.

In other words, they carry the rare mix Agrawal swears by—businesses that combine capital efficiency and earnings compounding, without being overly expensive—perfect for spotting a potential compounding story. Here’s a brief look at the four who made the cut.

1) BLS International

BLS International processes visa, passport and consular applications for governments worldwide, handling everything from document verification to biometric collection. With operations across 60 plus countries, it’s the world’s second-largest player in visa outsourcing. Its tech-driven, asset-light model has enabled rapid global expansion though its high dependence on government contracts remains a key risk.

2) Jindal Stainless

Jindal Stainless is India’s largest producer of stainless-steel flat products across 200, 300, 400 and duplex grades used in automobiles, railways, construction and consumer goods. Its integrated plants in Odisha and Haryana together produce 2.9 million tonnes annually. Backed by R&D partnerships with IIT Kharagpur and JBM Auto, global acquisitions in Spain and India, and Rs 3,600 crore in planned capex, the company is expanding capacity and strengthening its product mix.

3) National Aluminium Company (NALCO)

One of Asia’s largest fully integrated aluminium producers, NALCO operates across bauxite mining, alumina refining, smelting and power generation. Aluminium accounts for nearly three-fourths of its revenue, supported by full smelter utilisation and captive coal and power assets.

The company is investing around Rs 30,000 crore to expand its alumina refinery, set up a new 5-lakh-tonne smelter at Angul, and develop additional bauxite mines—moves that strengthen raw-material security and lay the foundation for its next phase of growth.

4) Redington India

Redington India is among the largest distributors of IT products and mobility solutions in the country. In simple words, it moves IT hardware and software like PCs, smartphones, servers, cloud licences, etc., for over 450 global brands, including Apple, which is its largest vendor by revenue contribution at nearly 30 per cent. 

The company operates in over 40 countries, including frontier markets in Africa and West Asia, where few global competitors venture. For Q1 FY26, it earned 50 per cent of its revenue and 76 per cent of its profit from the SISA region (Singapore, India & South Asia).

Raamdeo Agrawal’s ‘Magic 25-25-25’ rule isn’t a magic wand but a powerful compass. Filters like these can point investors toward businesses with the traits of future wealth creators, as these four companies show.

Yet, screening is only the first step. To separate the truly enduring compounders from the merely promising ones, you need deeper research and conviction.

That’s where Value Research Stock Advisor comes in. Our analysts go beyond the numbers to identify companies with lasting competitive edges and the potential to build serious long-term wealth. Check out which stocks we believe could be India’s next great compounders.

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Also read: These 3 mid caps pass Buffett's 20%+ ROE and ROCE test