Dolly Khanna Trims Stake in Smallcap Cement Stock, FMCG Company

Investing in stocks requires two crucial decisions, knowing the right moment to buy and sell.

Timing is everything. Sell too soon, and potential gains slip away; sell too late, and you risk missing out on valuable opportunities while facing potential losses.

While plenty of financial literature exists on when to make these moves, finding the best strategy remains a challenge.

To sidestep the hassle of developing their own winning strategy and to mimic the achievements of their beloved market gurus, many individuals choose to replicate their investment moves. This saves time and uncovers promising stocks without the need for extensive research.

One such notable investor whose every move is eagerly tracked is Dolly Khanna. Recently, she adopted a bearish stance on two stocks.

In today's article, we'll take a look at two stocks that Dolly Khanna has chosen to divest from.

Who is Dolly Khanna?

Dolly Khanna is a Chennai-based investor known for picking lesser-known midcaps and smallcaps. She has been investing in stocks since 1996.

Dolly Khanna's portfolio, managed by her husband Rajiv Khanna, is usually inclined towards more conventional stocks in manufacturing, textile, chemical, and sugar stocks.

Which stocks did Dolly Khanna cut down on and why?

#1 KCP

The first stock in which Dolly Khanna trimmed her stake is KCP.

KCP is a diversified business group with interests in heavy engineering, sugar, cement, hydel power, information technology, and biotechnology.

The ace investor recently trimmed her holding by 0.56%.

While we don't know why Khanna trimmed her stake in KCP, there are some reasons that we can guess...

During the recent financial year, the company's financial performance witnessed a decline.

For the financial year 2023, the company reported a revenue of Rs 22.9 bn, showing a modest increase of 6.7% YoY compared to the previous year.

However, the operating profit of the company took a substantial hit. It stood at Rs 1.7 bn for the fiscal year 2023, marking a significant decline of 53.6% YoY compared to Rs 3.7 bn in the previous year. This decline was primarily attributed to a notable 20% increase in operating expenses.

Furthermore, the company's profit for the year also experienced a sharp decline of 62.5% YoY, amounting to Rs 897 m compared to Rs 2,391 m in the corresponding quarter of the previous year.

This decline was primarily caused by heavy losses incurred in the company's sugar segment during the December 2022 quarter, which significantly impacted on the overall profit.

Additionally, it is important to note that a major portion of the company's revenue is derived from the cement sector.

The cement industry has been grappling with various challenges for a considerable time. The profit margins of cement companies have been under pressure due to high power and fuel costs.

Input materials such as coke and pet coke witnessed a surge in prices, and power and fuel costs escalated compared to the same period the previous year. These factors further exacerbated the difficulties faced by the company in maintaining profitability.

On a broader perspective, Dolly Khanna has been divesting her stake in the company in small proportions for a long time. She started divesting during the June 2021 quarter. Take a look at the table below.

To know more check out the company's factsheet and quarterly results.

Dolly Khanna's Total Stake in KCP (June 2021-June 2023)

Quarter Ending	Jun-21	Sep-21	Dec-21	Mar-22	Jun-22	Sep-22	Dec-22	Mar-23	Jun-23
Total Stake	4.33	4.13	3.92	3.7	3.39	3.04	2.43	2.25	1.69

Data source: Equitymaster

#2 Ajanta Soya

The second stock in which she trimmed her stake is Ajanta Soya.

According to the data available on the exchanges, Dolly Khanna's stake in the company dropped below 1% recently. In the March 2023 quarter, the investor held a 1.3% stake in Ajanta Soya with 1.1 million (m) shares.

Ajanta Soya is engaged in the manufacturing of vanaspati and various kinds of refined oil with shortening products for bakery, such as biscuits, puffs and other applications. The company also manufactures and markets edible oils.

The company recently filed its shareholding pattern for June 2023 and Khanna's name was missing from the shareholders' list who own more than 1% stake in a company. It is difficult to ascertain whether he completely exited the company or just sold some shares.

While we do not know the exact reasons why the investing guru decided to sell the stake, there are some explanations.

One possible reason for Dolly Khanna's concerns could be the company's underperformance in the recent quarter. Ajanta Soya reported a disappointing set of numbers in the March 2023 quarter, further adding to the growing list of worries.

The company witnessed a significant decline in revenue, with a YoY drop of 15.5% to Rs 2,782 m.

Additionally, the company reported a net loss of Rs 4 million, against a net profit of Rs 91 million in the same quarter of the previous year. This decline can be attributed to lower demand from the rural sector.

Ajanta Soya Quarterly results

Rs m, consolidated	Mar-23	Mar-22	Dec-22	YoY(%)	QoQ(%)
Total revenue	2,782	3,294	3,220	-15.5	-13.6
Operating profit	6.3	105	5.2	-94.0	21.1
Net profit / loss	-4	91	-2	-	-

Data source: Equitymaster

Furthermore, for the financial year 2023, the company's revenue recorded an 8.2% YoY decrease, amounting to Rs 12.4 bn, down from Rs 13.5 bn in the same quarter of the previous year.

The net profit for the financial year 2023 also experienced a substantial decline of 94.7% YoY, reaching Rs 22.3 m compared to Rs 421 m. This decline was primarily influenced by rising input costs and staff costs.

Another factor that may have concerned Dolly Khanna is the continuous decline in the company's share price.

Over the past year, the shares of the company have witnessed a significant downturn, plummeting by 45%. This downward trajectory in the share price adds to the overall concerns surrounding the company's performance.

For more details, see the Ajanta Soya company fact sheet and quarterly results.

To conclude

While this approach might seem appealing, it has several potential drawbacks. First, they can be less liquid than investing in individual assets. This means that it may be more difficult to sell a replicating portfolio quickly if needed.

Second, mimicking portfolios may not track the performance of the target portfolio perfectly. This is because the underlying assets in the replicating portfolio may not always move in the same way as the target portfolio.

Additionally, the risk tolerance, investment size, and time horizon of successful investors often differ from those of retail investors.

Blindly following their actions without assessing one's own risk profile and investment goals can be risky.

Therefore, it is important for investors to conduct thorough research and analysis before making investment decisions. Rather than blindly following gurus, it is advisable to focus on investing in fundamentally strong companies that align with individual goals and risk tolerance levels.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...