The Buffett litmus test: 2 ‘Hidden’ small-caps with zero debt and high returns
Warren Buffett is a name that does not need any introduction. The world’s most successful investor who is currently worth over US$130Bn, Buffett is leaving behind a lot of lessons as he retires later this year. His approach to picking stocks to invest has been a masterclass for investors across the globe.
Especially in a market like India, where investors horde on to the latest “Trend”. It is important without a doubt to have checks and balances in place to ensure you don’t add dead horses in your portfolio. And if these are checks are articulated by Buffett himself, one can be at a little more peace as an investor.
We ran a screen on screener.in for companies with a market cap of over Rs 500 cr, with Return on Capital Employed (ROCE) over 25% and 5-year compounded profit of over 50% and debt closer to zero and picked the top 2 that made the cut. We skipped one company, as it had seen losses in the last decade, and that goes against Buffetts idea of consistent profits.
Here are the 2 small cap stocks that don’t make to the headlines but are silently passing 3 of Warren Buffets stock buying checks – Freedom from Debt, High ROCE (Return on Capital Employed), and consistent profits.
Wealth First Portfolio Managers Ltd
Incorporated in 2002, Wealth First Portfolio Managers Ltd is a client-centric, product agnostic
and independent wealth management firm in the business of wealth management.
With a market cap of Rs 1,355 cr, the company is an individual financial advisor (with no sub-brokers) and occupies 37th rank at all India level. It provides smart investment solutions through end-to-end handholding.
The company has been steady in making the most of the money it invests as capital. It is 5-year ROCE (Return on Capital Employed) is 41% and the current ROCE is 38%. The current industry median is just 9%. So, in simple words, for every Rs 100 Wealth First has invested as capital, it makes a profit of Rs 38 on it currently, while the overall industry averages just Rs 9.
The company got rid of all debt and is debt free, giving it the freedom to focus on growth without having to worry about interest payments.
The company’s sales have grown from Rs 10 cr in FY20 to Rs 52 cr in FY25, logging in a compound growth rate of 39% in the last 5 years.
The EBITDA (earnings before interest, taxes, depreciation, and amortization) for Wealth First grew from Rs 2 cr in FY20 to Rs 39 cr in FY25, which is almost an 82% compounded growth.
As for the net profits, the company has not seen any losses and has shown consistent growth in the last 5 years.
| Year | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| Profits/Cr | 1 | 13 | 19 | 14 | 42 | 34 |
The share prices of Wealth First Portfolio Managers Ltd were around Rs 54 in August 2020 which has grown to its current price of Rs 1,272 as on 11th August 2025. This is a jump of a strong 2,256% in 5 years. Rs 1 lac invested in the stock 5 years ago would have been close to Rs 23.5 lacs today.
At the current price of Rs 1,272, the stock is trading at a discount of about 26% from its all-time high price of Rs 1,720.
As for valuations, the company’s current PE is 36x, while the current industry median is 33x. The 10-Year median PE for the company is 20x. and the industry median for the same period is 23x.
In the latest investor presentation from August 2025, the company’s Managing Director, Ashish Shah has said that the company has received an In-Principle approval from SEBI to set up a Mutual Fund, which marks a major step in their long-term strategy to expand the product suite and become a comprehensive financial solutions provider. Also, the company has secured IRDAI’s approval to operate as a Direct Insurance Broker (Life & General), further enhancing the company’s service offerings.
Rajoo Engineers Ltd
Incorporated in 1986, Rajoo Engineers Ltd manufactures plastic-extrusion machinery in Gujarat. The company designs and manufactures machines and offers customised solutions as per customer’s requirement.
With a market cap of Rs 1,800 cr the company is one of the leading plastics extrusion machinery manufacturers in India and a market leader in blown film lines, sheet lines, thermoforming, and extrusion coating & laminating lines in the Indian subcontinent.
Just like Wealth First, Rajoo Engineers is also capital efficient with a current ROCE of 33%, and a 5-year ROCE of 22%. Which means, for every Rs 100 it spends as capital currently, the company makes a profit of Rs 33 which is probably one of the highest when compared to industry peers. The current Industry median ROCE is 16%.
The company is almost debt free which checks one of the boxes in the Buffett checklist.
The company’s sales jumped from Rs 99 cr in FY20 to Rs 254 cr in FY25, logging in a compound growth of 21% in the last 5 years.
EBITDA for grew at a compound rate 46% from Rs 7 cr in FY20 to Rs 47 cr in FY25.
As for the net profits, the company has been profitable for over a decade and recorded a compound growth of 91% in the last 5 years.
| Year | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| Profits/Cr | 2 | 12 | 15 | 11 | 21 | 38 |
The share price of Rajoo Engineers Ltd was about Rs 3.5 in August 2020. And as of 11th August 2025, the price is Rs 101, which is a jump of 2,785%. Rs 1 lac invested in the stock 5 years ago would have been close to Rs 29 lacs today.
At the current price of Rs 101, the company’s share is trading at a discount of almost 70% from its all-time high price of Rs 333.
Valuation wise, the company’s share is trading at a PE of 38x, which is same as the current industry median. The 10-year PE for the company is however 20x, while the industry median for the same period is 29x.
According to the company’s last investor presentation in February 2025, the company has made a strategic leap with a Rs 30 cr investment in its Yantralaya facility, which is now upgraded with advanced 5-axis vertical multitasking machinery from Japan. This big change could boost Rajoo’s production capacity by 40%, while elevating precision, efficiency, and total quality management standards. It also enables Rajoo to meet rising global demand for high-quality extrusion machinery with minimum human intervention during the set production and reduced dependency on manual processes.
The Verdict: Do These Underdogs Belong on Your Radar?
The two companies we dissected today, Wealth First Portfolio Managers and Rajoo Engineers deserve attention given their hold on profits and money management. They are probably on the watchlist or even portfolios of many investors. After all, they are fulfilling 3 conditions from a list of conditions that Warren Buffett would want to check off.
The big question is if and how these two companies will be able to sustain such financials or will the steam fizzle out? A straight record of no losses in the last decade and ability to make the most on the money invested as capital does show the future could be bright, but only time will tell.
For now, smart investors must add these stocks to their watchlists, to see how these companies fare in the short and long term.
Disclaimer:
Note: We have relied on data from www.Screener.in and www.trendlyne.com 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 educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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