The consolidation comes on the back of stretched valuations, tighter liquidity, macro pressures such as higher interest rates and a weaker rupee, softer earnings trends, and an unusually heavy pipeline of new IPOs absorbing investor flows.
The small and mid-cap segment has undergone a full year of correction, making valuations far more reasonable.
Against this backdrop, here’s a look at four fundamentally strong small-cap stocks that are currently down sharply from their 52-week highs.
#1 EMS
EMS is a multidisciplinary engineering, procurement, and construction (EPC) company, based in Delhi, specialising in comprehensive water and wastewater management solutions.
Established in 1998, the company offers turnkey services encompassing the collection, treatment, and disposal of water and wastewater.
EMS plays a crucial role in water and wastewater management in India, offering comprehensive solutions for sewage treatment, water supply, and effluent management.
The company specialises in designing, constructing, operating, and maintaining water treatment plants (WTPs) and sewage treatment plants (STPs), contributing significantly to urban sanitation and clean water initiatives.
Over the past three years, its revenue has grown at a CAGR of around 39%, while profit has expanded at a strong CAGR of about 32.6%.
Its three-year average ROE & ROCE stand at 20% and 25.8%, respectively.
The company operates with a low debt-to-equity ratio of 0.1.
So far in 2025, up to 5 December 2025, the stock has declined from its 52-week high of ₹1,016 (touched on 18 December 2024) to ₹416, a drop of around 59%.
This decline can be attributed to the ongoing FII selling, with foreign investors reducing their holdings consistently since the March 2024 quarter. FII ownership slipped sharply from 2.78% in the March 2024 quarter to just 0.15% by the September 2025 quarter.
The weakness was further compounded by a soft September 2025 quarter.
For the September 2025 quarter, the company’s revenue from operations dropped 26% to ₹172 crore, while net profit fell from ₹67 crore to ₹36 crore.
EMS Ltd intends to strengthen its presence in the water and wastewater segment as its core focus, while selectively participating in electrical and building projects for eligibility and diversification.
#2 Anant Raj
Anant Raj operates in the real estate development, construction, and infrastructure sectors, having a portfolio spanning residential townships, group housing, IT parks, and more.
It has developed 9.96 million square feet (MSF) of real estate, including residential, commercial, and IT parks, and has a 6 MW operational data centre capacity.
Over the past three years, its revenue has grown at a CAGR of around 64.6%, while profit has expanded at a strong CAGR of about 105.7%.
Its three-year average ROE & ROCE stand at 7.5% and 8.6%, respectively.
Its balance sheet remains strong, reflected in a modest 0.1 debt-to-equity ratio.
So far in 2025, up to 5 December 2025, Anant Raj has declined from its 52-week high of ₹947.25 (touched on 8 January 2025) to ₹526.3, a drop of around 44%.
This weakness can be linked to mutual funds trimming their holdings. Mutual fund ownership has been steadily reduced since March 2025 — from 4.95% to 4.46% in the June 2025 quarter, and further down to 4.28% in the September 2025 quarter.
Anant Raj expects revenue from data centre and cloud services to rise to ₹1200 crore by FY27 and further scale up to $1 billion ( ₹8,870 crore) by FY32, supported by India’s position as one of the fastest-growing data centre markets in the Asia-Pacific region.
#3 Shakti Pumps
The company is a leading integrated manufacturer of energy-efficient submersible pumps, motors, and solar pumping systems.
Its diverse product portfolio includes pumps (submersible, solar, and sewage), motors for electric vehicles (EVs), controllers, inverters, and mounting structures for solar solutions.
It has an annual manufacturing capacity of 1.1 million units, of which 500,000 are for pumps and motors, variable frequency drives/inverters (400,000), and structures (200,000).
The company caters to many sectors – solar, agriculture, domestic, commercial, industrial, and sewage & drainage.
Over the past three years, its revenue has grown at a CAGR of around 28.8%, while profit has expanded at a strong CAGR of about 84.7%.
Its three-year average ROE & ROCE stand at 19.9% and 30.1%, respectively.
Its balance sheet remains strong, reflected in its zero-debt status.
So far in 2025, up to 5 December 2025, Shakti Pumps has fallen from its 52-week high of ₹1,398 (touched on 9 January 2025) to ₹585, a decline of around 58%.
This decline may be driven by promoter selling. The promoters trimmed their stake from 51.61% in the June 2025 quarter to 50.3% in the September 2025 quarter.
In addition, the company posted a tepid Q2 performance, which further weighed on sentiment.
In Q2FY26, the company saw revenues at ₹6,664 m, a growth of 5% YoY. Net profits at the company fell to ₹907 m from ₹1,014 m YoY.
The revenue growth was primarily impacted by the extended monsoon, which impacted installations during the period.
The net profits and margins on the hand took a hit as prices of key raw materials such as copper, steel, and solar panels increased by around 3-4%, thereby impacting margins.
Also, the recent GST changes led to changes in the scope of final orders in some regions for solar pumps.
Going forward, the company’s rooftop business is expected to become a significant contributor to its revenue in the coming year.
#4 Godfrey Phillips
It primarily manufactures cigarettes. The company has been in the cigarette business in India for over eight decades.
Its portfolio comprises established cigarette brands such as Four Square, Red & White, Stellar, Cavenders, and it also undertakes manufacturing & distribution of the Marlboro brand of cigarettes.
It has also diversified into segments such as mouth fresheners, paan masala, zarda, and retail.
Over the past three years, its revenue has grown at a CAGR of around 27.6%, while profit has expanded at a strong CAGR of about 38.1%.
Its three-year average ROE & ROCE stand at 21.1% and 27.1%, respectively.
Its balance sheet remains strong, reflected in its zero-debt status.
So far in 2025, up to 5 December 2025, Godfrey Phillips has fallen from its 52-week high of ₹3945 (touched on 9 January 2025) to ₹2780, a decline of around 30%.
The decline can be linked to sustained FII selling. Foreign investors have been reducing their exposure since the September 2024 quarter, with their stake dropping from 10.85% in September 2024 to 7.94% in September 2025.
Amid this ongoing selloff, the sharpest reduction came in the September 2025 quarter, when FIIs cut their holding by 1.4%, marking the biggest quarterly drop.
Going forward, the company aims to broaden its portfolio and tap into new growth opportunities.
Should you consider investing in a fundamentally strong small-cap stock trading at a discount?
A fundamentally strong small-cap stock trading at a steep discount can offer an attractive opportunity, but only when backed by clear earnings visibility, stable balance sheet strength, and credible long-term growth drivers.
While sharp corrections often reset valuations to more reasonable levels, investors should still assess whether the decline is due to temporary market sentiment or deeper structural issues.
If the fundamentals remain intact and future prospects look solid, such stocks can turn into rewarding long-term compounding stories once sentiment recovers.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
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
