But the stock market is a place where volatility and opportunity go hand-in-hand. Investors are increasingly seeking refuge in companies that balance growth with financial prudence.
Enter debt-free mid cap stocks.
These are a unique class of companies that have the nimbleness of small enterprises with the stability that comes from having no debt.
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For investors eyeing the sweet spot between risk and reward, these companies not only promise explosive growth potential but also peace of mind.
In this article, we unveil five such companies across diverse sectors.
#1 Polycab India
Polycab India is a leading Indian electrical company that manufactures wires and cables, and sells consumer electrical goods.
It is the largest manufacturer of wires and cables in India, with a 25-26% share of the organised market.
It offers a varied range of wires and cables for retail and industrial use, catering to diverse industries. It is also one of the largest exporters of cables in India.
The company delivered solid top-line growth of 27% compounded annually over three years and a net-profit compound annual growth rate of 25%.
The company has not compromised on its balance sheet’s health. Total debt is at a comfortable ₹110.2 crore, and it has cash equivalents of ₹343.4 crore, making it a net debt-free company.
Looking ahead, Polycab expects to grow more than 1.5 times faster than the market.
It has achieved its initial goal of ₹20,000 crore of revenue by FY26 ahead of schedule.
Polycab’s engineering, procurement and construction (EPC) business has a robust order book, valued at ₹4,800 crore as of December, which is to be executed over the next two to three years. It expects a similar quarterly run rate in the EPC business over the next two years as it executes its order book.
The company is transitioning to a vertical-focused structure to capitalise on growth opportunities across different sectors.
It aims for revenue expansion across all fast-moving electrical goods (FMEG) product categories through product enhancements and influencer management programmes.
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The long-term earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin guidance for the cables & wires business remains steady at 11-13%.
However, the company has been operating at a better scale and realising margins around 14%.
Polycab expects the FMEG business to become profitable, which would add to its overall profitability.
It plans capex of ₹6,000-8,000 crore over the next five years. Looking at the size of the capex, the company may use some debt to fund it.
Recently, Aditya Birla Group (ABG) announced its entry into the cables & wires sector, which is expected to intensify competition for existing players. ABG will make a ₹1,800 crore investment in the cables & wires sector over two years. UltraTech Cement, its flagship company, will establish a manufacturing plant near Bharuch in Gujarat, with production expected to commence by December 2026.
In the long term, this news is definitely negative but the medium-term impact will be negligible, considering Polycab currently holds a significant position in the cables & wires market. However, the market has punished the stock and it has fallen drastically on this news.
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#2 Mazagon Dock Shipbuilders
Mazagon Dock Shipbuilders is a premier Indian shipyard that primarily builds and repairs ships, submarines and various other types of vessels, and provides related engineering products to its clients.
It serves both national and international clients, mainly catering the Indian defence services, specifically the navy and coast guard.
The stock has delivered a solid top-line growth of 33% CAGR over three years and a net-profit CAGR of 47% over the same period.
The return on equity (ROE) over the past three years has been 27%.
The company is net debt-free despite having long working-capital cycles.
Looking ahead, deliveries from the current order book are expected by the end of 2026, with activities continuing for about 1.5 to 2 years after delivery.
The existing order book is expected to be executed by the end of FY26 or FY27, barring 20% for spares and warranties.
The company is poised for significant growth and development as it is reviving the offshore vertical to provide an additional stream of revenue.
Future growth will depend on when large value orders materialise, such as additional submarines. It is bidding for eight next-generation Corvettes.
The company is exploring the establishment of a greenfield shipyard at Nhava Yard to enhance shipbuilding and repair capabilities. It expects to spend ₹4,000-5,000 crore to augment infrastructure.
While the company’s ambitious growth plans paint a promising picture for the future, its performance over the past year suggests markets recognise this potential.
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#3 Persistent Systems
Persistent Systems specialises in digital engineering and enterprise modernisation. In simple terms, it helps other businesses improve and update their technology and digital systems. It serves various industries, including healthcare, financial services, technology, and manufacturing.
Persistent operates with a financial strategy that supports growth without relying heavily on debt. It meets its funding requirements through a mix of equity, internal fund generation, and borrowings, ensuring that funds raised via term loans are used for their intended purposes and short-term funds are not used for long-term investments.
The stock has delivered a good top-line growth of 33% CAGR over three years and a net-profit CAGR of 36% over the same period.
The return on equity (ROE) over the past three years has been 24%.
The markets have handsomely rewarded this performance.
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Management has expressed confidence in its growth trajectory and has set ambitious goals. The company aims to achieve ₹200 crore in annual revenue by the end of FY27 and ₹500 crore by FY31.
It plans to achieve this through several strategic initiatives, including categorising core verticals into sub-verticals with focused scaling plans, doubling down on the top 100 customers which contribute about 80% of revenues, and enhancing focus on global capability centers.
A key component of its strategy involves infusing AI into every aspect of its vertical and service line offerings and leading with the platformisation of services.
Persistent is also focused on transitioning towards platform-driven services and shifting the business model to outcome-based engagements, leveraging both proprietary IP and IP built in collaboration with hyperscalers and other ecosystem partners.
#4 ICICI Lombard General Insurance Company
ICICI Lombard General Insurance is a general insurance provider that offers a range of products including motor, health, commercial lines, and crop insurance. It has emerged as the top motor insurance provider in India.
The stock has delivered top-line growth of 19% CAGR over three years and a net-profit CAGR of 9% over the same period. The return on equity (ROE) has been 17% over the past three years.
The company is net debt-free. General insurance companies typically don’t need debt due to upfront premium collections, investment income from the float, and low capital expenditure.
Its strong cash flow, regulatory reserves, and risk-averse nature allow it to operate sustainably without relying on borrowed funds.
Despite being a stable business, the stock price has been anything but stable over the past year.
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Looking ahead, management has said the company is poised to keep pace with the industry, with sustained growth and consistent profitability. A key strategy involves leveraging a multi-product, multi-distribution approach, alongside effective data utilisation, digital advancements, and new product launches.
ICICI Lombard aims for profitable growth within preferred segments and is seeking opportunities across various motor insurance categories. Expense management remains a priority. It expects the overall motor combined ratio to range from 65% to 67%, and anticipates a more sensible pricing environment in commercial lines.
Continued investments are planned for the retail health segment, alongside a focus on digital advancements, risk selection, and data analytics. The company aims to maintain an above-industry solvency ratio.
#5 HDFC Asset Management Company
HDFC Asset Management Company provides asset management services, acting as the investment manager for HDFC Mutual Fund and HDFC AMC AIF-II. It also offers portfolio management and advisory services to clients.
The company provides a range of savings and investment products, including mutual funds (both actively managed and passive options), portfolio management services, and alternative investment opportunities.
The stock has delivered top-line growth of 19% CAGR three years period and a net-profit CAGR of 9% over the same period. The return on equity (ROE) has been 17% over the past three years.
The stock has mimicked the capital-market sentiment over the past year. Here’s how the stock has performed in that time.
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HDFC AMC aims to have leadership in every product. It opened 25 new offices on 2 January 2025, largely beyond the top 30 cities. This is in addition to 24 new offices set up a year prior.
It is awaiting the final set of regulations for new asset classes and is working on creating the right set of products to gain share in this space.
The company is deepening its engagement with HDFC Bank and its subsidiaries and sees tremendous potential for collaboration.
Conclusion
In an economy where debt-laden balance sheets often crumble under pressure, these five debt-free midcaps offer resilience.
Their debt-free status offers a solid foundation, shielding them from interest-rate shocks and refinancing risks. But let’s be clear—being debt-free isn’t enough, and debt-free doesn’t mean risk-free.
The key takeaway? A strong balance sheet is just the starting point – execution, innovation and adaptability are what truly drive long-term success.
Happy investing!
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
