3 Microcaps FIIs bought more of in Q2 FY27—Including a 276% sales growth story

However, the trend reversed sharply in October again as FIIs withdrew Rs 46,849 crore from Indian equities across the first eight trading sessions of the month, taking their total outflows in 2026 beyond Rs 3 lakh crore. Higher US bond yields and a stronger dollar have made dollar-denominated assets more attractive, while elevated crude oil prices and the shift of foreign capital towards North Asian markets have added to the pressure on Indian equities.

Why FIIs Are Rotating Into Indian Microcaps Despite ₹46,849 Cr Outflows? Meanwhile, the overall Indian equity market has been under pressure, and during the July-September quarter, Nifty 50 fell around 6%. However, Nifty Microcap 250 delivered a positive return of around 8.7% during the quarter, climbing from 24,143 on June 30 to 26,250. Interestingly, FIIs raised their stake in quite a few microcap stocks during the quarter.

FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now In this article, we will explore three microcap stocks that saw the highest FII stake jump during the quarter (data as of 15 October) and try to find out why FIIs are adding more of these stocks to their portfolio. #1 MIC Electronics: Railway Orders And LED Displays Put Growth In Focus MIC Electronics Ltd. is engaged in the business of designing and manufacturing LED street lights, indoor and outdoor video displays, mobile displays, and LED lighting systems.

The company’s product portfolio includes electronic and telecommunication equipment and telecom software. The LED displays are used by Indian Railways, sports stadiums, transportation hubs, and public information systems. Indian Railways is one of MIC Electronics' primary clients, supported by a dedicated product range that includes integrated passenger information systems, passenger announcement systems, and emergency lighting units for coaches.

FIIs raised their stake by 14.78 percentage points during the July-September quarter, taking the total holding to 20.36% at the end of the quarter. The top two FIIs that initiated fresh stakes during the quarter are: Ebisu Global Opportunities Fund Ltd., which bought an 8.65% stake Unico Global Opportunities Fund Ltd., which bought an 8.10% stake Why MIC’s ₹175.67 Cr Pending Railway Order Book Hinges on Execution?

The ongoing projects that the company has been working on include integrated passenger information systems (IPIS), passenger announcement and passenger information systems (PAPIS), emergency lighting units (ELU) for railway coaches, and a smart meter prototype along with defence-grade electronics manufacturing. The company had total orders worth Rs 269.87 crore for fiscal year 2027, of which Rs 175.67 crore was pending execution.

Apart from this, the company also has bids worth Rs 118.25 crore in the pipeline. Though the order book provides revenue visibility, actual execution—how smoothly the company converts pending orders into revenue, secures additional projects, and improves profitability—will be critical for sustaining growth. MIC Q1 Sales Surge 277%, But Operating Margins Collapse to 9.74% The consolidated revenue of the company for the April-June quarter stood at Rs 43.72 crore, surging 276.6% YoY from Rs 11.61 crore in the corresponding quarter last fiscal year.

However, operating profit grew only 3.6% to Rs 4.26 crore from Rs 4.11 crore, while net profit rose 27.5% to Rs 2.13 crore from Rs 1.67 crore during the period. Meanwhile, operating profit margin (OPM) sharply declined to 9.74% from 35.40% a year earlier, reflecting a drop in the company’s operating efficiencies. The difference between revenue growth and operating profit growth, alongside the margin contraction, makes profitability a key metric to track in subsequent quarters.

Low 0.20x Debt-to-Equity Cushions MIC’s Sub-Par 8.67% ROCE The return on capital employed (ROCE) of the company stood at 8.67%, lower than the industry median of 16.2%; however, the debt-to-equity (D/E) ratio stood at 0.20x, slightly lower than the industry median of 0.26x. 1-Year Share Price Chart of MIC Electronics Ltd. #2 Virtuoso Optoelectronics: Capacity Expansion Driving Business Growth Virtuoso Optoelectronics Ltd. manufactures consumer durables and electronic products and offers a wide range of products, which includes room air conditioners, commercial refrigeration products, deep freezers, compressors, and electronic manufacturing services.

Virtuoso also manufactures components for these products and is expanding its manufacturing capabilities to increase backward integration and move up the value chain. These 2 rivals trade at up to a 52% discount FIIs raised their stake by 6.23 percentage points during Q2FY27, taking their total holding to 17.52% at the end of the quarter. Malabar India Fund Ltd. emerged as the largest foreign institutional holder, increasing its stake to 13.59% from 7.91% in the previous quarter, while India Insight Value Fund raised its stake to 3.84% from 3.25% during the period.

Virtuoso Targets 1.8 Million AC Units and 6 Million Compressors The company is expanding production capacity across air conditioners, compressors, electronic manufacturing services, and deep freezers. Management said it is aiming to increase air conditioner manufacturing capacity from 1 million units to 1.8 million units over the next 12 to 15 months and compressor capacity up to 6 million from the current capacity of 2.8 million units.

Virtuoso is also expanding its deep-freezer manufacturing capacity from 1.5 lakh units to 2.5 lakh units by Q3FY27 and then to 4 lakh units by next fiscal year. The company has also acquired a 22-acre parcel of land to consolidate its compressor business over the next one to three years. Management also stated that they expect the air conditioners business to contribute around 55% to 60% of revenue in FY27, while compressors are expected to account for about 15%.

Virtuoso Q1 Revenue Jumps 85% as Raw Material Costs Squeeze Margins The consolidated revenue of the company for the April-June quarter rose around 85% YoY to Rs 376.6 crore from Rs 203.2 crore a year ago. Along with the revenue growth, profitability improved as well, with net profit increasing to around Rs 9 crore from Rs 6.4 crore during the period, up 41% YoY. Earnings before interest, tax, depreciation, and amortisation (EBITDA) also surged to Rs 35.1 crore from Rs 21 crore a year earlier; however, EBITDA margin narrowed by roughly 100 basis points to 9.3% during the period.

According to the management, the dip in the margins was due to rising costs of raw materials, which continued to put pressure on margins. The management said imported components, including copper, aluminium, and compressors, had affected costs, with price increases being passed on to customers with a lag. Despite near-term input pressures, the company is targeting an EBITDA margin of 9% to 10% for FY27, while improvement from backward integration and more stable input prices could support margins over time.

Why Virtuoso’s 0.81x Debt-to-Equity Ratio Trails Industry Peers On capital efficiency, Virtuoso posted an ROCE of 9.66%, at par with the industry median, while the D/E ratio stood at 0.81x, higher than the industry median of 0.12x. This indicates a relatively higher debt burden compared to industry peers, driven by ongoing debt-funded capital expenditure. 3-month Share Price Chart of Virtuoso Optoelectronics Ltd.

Note: Virtuoso Optoelectronics Ltd. migrated from BSE SME platform to the NSE and BSE mainboard on1 July 2026 #3 Sobhagya Mercantile: Coal Mining, Steel Plant, Irrigation Project In Focus Sobhagya Mercantile Ltd. operates across infrastructure construction, mining, equipment leasing, and allied activities and has also diversified into steel manufacturing. The company also offers customer-focused solutions across private and public entities, catering to diversified projects.

FIIs raised their stakes by 5.39 percentage points during the July-September quarter, taking the total holding to 19.22% at the end of the quarter. Nova Global Opportunities Fund PCC – Touchstone emerged as the top buyer amongst the FIIs during the quarter, buying a 6.26% fresh stake in the company. Coal Mining, Critical Minerals And Steel Business Expansion Sobhagya Mercantile’s growth outlook spans infrastructure, coal mining, critical minerals, and steel manufacturing.

The Marki Mangli-IV coal mine in Maharashtra has environmental clearance for a production capacity of 0.2 million tonnes per annum (MTPA), while the proposed integrated steel plant at Konsari, Gadchiroli, awaits progress on industrial land allotment. The company is also expanding into nickel, chromium, and cobalt mineral projects via a subsidiary company, Vadakhol Asoli Mining Pvt Ltd. Sobhagya’s 40% JV Stake Unlocks ₹104.21 Cr in Irrigation Revenue Visibility Adyal L.I.S., a joint venture between Sobhagya Mercantile and S.S.

Fabricators & Manufacturers Pvt. Ltd received a Rs 260.53 crore order for the construction of the Adyal Lift Irrigation Scheme under the Gosikhurd Project in Chandrapur district, Maharashtra. Sobhagya Mercantile holds a 40% stake in Adyal L.I.S while S.S. Fabricators & Manufacturers Pvt. Ltd. holds the remaining 60% in this joint venture. The order was awarded by the Vidarbha Irrigation Development Corporation in June 2026, and is expected to be executed over 33 months, offering revenue visibility for the next 11 quarters.

Sobhagya Q1 Revenue Drops 20.9% Amid Margin Compression Sobhagya Mercantile’s revenue declined 20.9% YoY to Rs 41.37 crore in the June quarter from Rs 52.32 crore a year earlier. Operating profit fell 23.7% to Rs 5.94 crore from Rs 7.79 crore, while OPM narrowed to 14.36% from 14.89% during the period. Net profit also declined 27.4% to Rs 4.08 crore from Rs 5.62 crore in the year-ago quarter. Returns And Debt Position Offer Some Support Though the revenue and profit declined during the April-June quarter, the company had an ROCE of 23.4%, significantly above the industry median of 14.7%, along with a D/E ratio of 0.05x, which is also lower than the industry median of 0.2x, reflecting the company’s operating efficiencies. 1-Year Share Price Chart of Sobhagya Mercantile Ltd.

Is FII Buying Backed By The Growth Story? The rise in FII holdings in these three microcap stocks comes alongside expansion plans across railway electronics, consumer durables, infrastructure, and mining. But to achieve sustainable revenue growth and improved profitability, timely execution of orders, capacity expansion, and new projects are required. For now, investors can add these stocks to their watchlists and see how their growth plans translate into financial performance.

Screener.in throughout this article. Only in cases where the data was not available have we used an alternate, but widely used and accepted source of information. The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Maumita Mitra is a seasoned writer specializing in demystifying the world of investment for a broad audience. She has a keen eye for detail and a knack for explaining complex financial concepts in the simplest manner possible. Disclosure: The writer and her dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities, or other related investments of issuers and/or companies discussed therein.

The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives and resources, and only after consulting such independent advisors as may be necessary.