Why FIIs sharply raised stakes in these 3 stocks – all from the same sector

Interestingly, their top three picks within the consumer services sector belong to the same sub-sector: retail. This points to continued interest in select retail companies even as foreign investors have turned net sellers in the broader equity market. To identify these stocks, we looked at consumer services companies that recorded an increase of more than 2 percentage points in FII shareholding during the July-September quarter and zeroed in on the three with the biggest jumps.

Now let’s try to figure out what made FIIs raise their stakes in these retail 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 #1 Lenskart Solutions: FIIs Raise Stake By 5.5 Percentage Points, PAT Rises 273.8% Lenskart Solutions Ltd., an eyewear retailer operating across India and foreign markets, witnessed FIIs raising their stake by 5.5 percentage points during the July-September quarter, taking the total holding to 18.26% at the end of the quarter.

Domestic institutional investors (DIIs) also increased their stake by 3.25 percentage points to 26.8%. The company is a technology-driven eyewear company offering design, manufacturing, and retail of prescription eyeglasses, contact lenses, and accessories. 455 New Stores Added In Nine Months The company added 455 net new stores between November’25 and August’26, which was the fastest expansion in the history of the company.

Moreover, Lenskart also entered 140 new towns across the country during the period. Management sees further room to expand in India, with more than 6,100 pin codes still without a Lenskart store. The company is also investing in building more manufacturing capacity and supply-chain integration across the brands to support growth and improve margins. International operations are also showing signs of business growth, with revenue from the segment growing at 38% during Q1FY27.

Same-Store Sales Grew 18.3%, Eye Tests Rose 42.7% During the April-June quarter, domestic same-store sales grew 18.3%, while same-pin-code sales increased 24%. Eye tests rose 42.7% to 63 lakh, supported by remote optometry across 786 stores. Eyewear volumes also increased 22.8% to 82 lakh units, indicating that growth is being supported by higher customer activity as well as store additions. Revenue Rises 43%, Operating Profit Jumps 75% Consolidated revenue of the company rose 43.3% YoY to Rs 2,714 crore in the July-September quarter, from Rs 1,894 crore a year earlier.

Operating profit increased 75% to Rs 588 crore from Rs 336 crore, while the operating profit margin expanded to 22% from 18% a year ago. Net profit rose to Rs 228 crore from Rs 61 crore, growing at 273.8% YoY during the period. ROCE at 8.08% Trailing Behind Industry Median Lenskart’s Return on capital employed (ROCE) stood at 8.08%, below the industry median of 15.02%, indicating relatively poor capital efficiency of the business; however, the company has a debt-to-equity (D/E) ratio of 0.35x, which is lower than the industry median of 0.52x, reflecting that the company uses debt relatively more efficiently than its peers.

5x PE Valuation Justified? The stock is trading at a price/earnings (P/E) ratio of 165.5x, which is significantly higher than the industry median of 30.3x, while the price/earnings to growth (PEG) ratio also stands at 1.5x, while the industry median is 0.5x, reflecting that the stock is relatively overpriced, even when adjusted for growth. 6-Month Share Price Chart of Lenskart Solutions Ltd. #2 Meesho: FIIs Increase Stake By 4.65 Percentage Points, DII Holding Also Goes Up Meesho Ltd. is an e-commerce platform that connects consumers with sellers.

The company targets underserved markets and affordable products across India. The platform helps small businesses and entrepreneurs reach consumers through technology-led discovery, logistics, and seller tools. FIIs raised their stake by 4.65 percentage points during the July-September quarter, taking the total holding to 9.84% at the end of the quarter. DIIs also increased their stake by 4.46 percentage points to 13.60% during the same period.

Annual Transacting Users Rise 29% To 274 Million During the April-June quarter, the company’s annual transacting users grew 29% YoY to 274 million while orders placed during the quarter also increased 29% to 725 million. Net merchandise value (NMV) rose 34% YoY to Rs 11,614 crore during the quarter. Transaction frequency improved 9% to 10.3%, indicating deeper engagement among existing users. The company also witnessed an increase in the seller base, with annual transacting sellers increasing 81% YoY to 1.04 million.

Sellers from Tier 2 towns and beyond accounted for 45% of the total base. Meesho Mall, Content Commerce Drive Growth Meesho Mall, the company’s branded marketplace, recorded 93% YoY growth in NMV, while transacting consumers increased 88%. The platform had more than 1,200 brands during the quarter, boosting sales. Content Commerce NMV grew 141% YoY, while active order-generating content pieces rose 143% to 1.7 million.

These initiatives are helping Meesho to expand product discovery and go beyond its core marketplace. Contribution margin up 48% but losses remain Revenues from operations (marketplace) grew 48% YoY to Rs 3,707 crore in Q1FY27, mainly driven by logistics efficiencies and better monetization. However, adjusted EBITDA (marketplace) remained negative at Rs 139 crore, compared with a loss of Rs 148 crore a year earlier.

The group reported a loss of Rs 136 crore for the quarter against the loss of Rs 289 crore a year earlier. ROCE Remains Negative Despite Low Debt ROCE stood at -39.97%, compared with the peer median of 1.52%. The D/E ratio was at 0.01x, again below the peer median of 0.19x, indicating limited reliance on debt and efficient management of debt as well. Is Meesho already trading at a premium? The enterprise value to sales (EV/Sales) ratio was at 7.06x, while that of the industry median stood at 3.53x, reflecting that the stock is relatively expensive compared to its peers. 6-Month Share Price Chart Of Meesho Ltd. #3 Eternal: FIIs Raise Stake By 3.92 Percentage Points, Net Profit Rises 92% Eternal Ltd. is the parent company of Zomato and Blinkit, the popular food delivery platform and the quick-commerce platform, respectively.

FIIs increased their stake by 3.92 percentage points during Q2FY27, taking the total holding to 33.01% at the end of the quarter. DIIs, however, reduced their stake by 2.99 percentage points to 36.22%.Blinkit Store Expansion To Accelerate In Tier 2, 3 Cities The company plans to speed up Blinkit's store additions, with a large part of the expansion focused on Tier 2 and Tier 3 cities. Management said these markets offer attractive payback periods and face less competition than larger cities.

The company also expects the growth in net order value (NOV) to pick up from the December quarter on a YoY basis. Food Delivery Margins To Remain Flat For 1-2 Years Eternal plans to continue investing in food delivery to attract new customers and encourage existing users to order more frequently. Management expects food delivery margins to remain broadly flat over the next one to two years as the company prioritises growth over margin expansion and also indicated that the competition in food delivery increased during the September quarter.

6% YoY to Rs 24,138 crore in Q2FY27, from Rs 13,590 crore a year earlier. Operating profit increased to Rs 752 crore from Rs 239 crore during the period, while the operating profit margin expanded to 3.1% from 1.8%. Net profit increased significantly by 92.3% to Rs 125 crore from Rs 65 crore. ROCE Beats Peer Median, Debt Stays Lower Eternal's ROCE stood at 2.48%, above the peer median of 1.52%, while the D/E ratio was at 0.18x, slightly below the peer median of 0.19x. 621x PE: Can Eternal Justify Its Valuation?

The stock is trading at a P/E ratio of 621.3x while the industry median is 49.4x, indicating the stock is relatively overvalued. PEG ratio is at 22x, significantly higher than the industry median of 0.7x, reflecting that the stock is relatively expensive even if adjusted for growth prospects. 6-Month Share Price Chart Of Eternal Ltd. Can growth turn into sustainable returns? The increase in FII holdings perhaps indicates confidence in these retail businesses, but sustaining that interest will depend on actual execution of the expansion.

Customer growth and market expansion will need to translate into consistent earnings, improved margins, and better capital efficiency. Valuations already reflect high expectations for growth, and investors will have to monitor whether business performance can meet those expectations. The next few quarters will be critical to see if these companies can translate their growth momentum into sustainable longer-term returns.

Perhaps add these stocks to your watchlist to see how the performance pans out from here. Disclaimer We have relied on data from www.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  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.