Dolly Khanna Picks Stake in this Smallcap Stock; Shares Surge 8%

Every quarter, investors holding over 1% stake in a company must share their portfolio moves as part of their filings.

These filings can be goldmines, providing unique insights into recent decisions made by some of the best money managers.

So, let's look at the first such update for the quarter ended March 2024.

Today at a glance:

1. Dolly Khanna’s latest stock pick
2. Key factors that support this oil exploration company’s growth
3. Implications for YOU, dear investor!
4. Should you replicate the buying/selling decisions of super investors?

A word of caution at this point of time seems just about right... blindly replicating the trades of the so-called 'smart money' is a recipe for disaster.

While these super investors present a fascinating world of high returns and dynamic strategies, it's crucial to understand their approach and costs.

Coming back to Dolly Khanna's latest stock pick...

Shares of this oil exploration company surged over 8% on Friday after it became public that Dolly Khanna has taken a fresh stake in this company during the quarter under review.

Who is Dolly Khanna?

Dolly Khanna is a Chennai-based investor who is 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.

Why Did Dolly Khanna Buy this Oil Exploration Stock?

The stock in question is Selan Exploration Technology.

The company is engaged in the business of oil & gas exploration and production.

According to the latest filing by the company, during the March 2024 quarter, Dolly Khanna added over 1% stake in the company for an amount not exceeding Rs 81 million (m).

According to our smart money tracker, Dolly Khanna holds around 1.03% stake in Selan Exploration.

While we don't know why she added shares of Selan Exploration, there are some reasons that we can guess.

# Merger with Parent Company to Boost Growth

In September 2023, the company's board approved the merger of Antelopus Energy Private Limited and Selan Exploration Technology.

The merger was aimed at diversifying the company's portfolio across multiple sedimentary basins, both onshore and offshore.

Selan Exploration filed for the merger back in November 2023 and its currently awaiting market regulator's approval.

# Consistent Improvement in Earnings

For the past few quarters, the company has seen consistent improvement in sales metrics which has helped improve margins.

Oil exploration companies like Selan Exploration have been in focus ever since Brent Crude prices topped the $91 per barrel mark last year amid fears that the Israel-Palestine war may escalate to neighbouring countries.

The company is currently debt free.

Financial Snapshot

Rs m, standalone	FY19	FY20	FY21	FY22	FY23
Net Sales	933	896	488	772	1,179
Growth (%)	22%	-4%	-46%	58%	53%
Operating Profit	570	446	14	149	431
OPM (%)	61%	50%	3%	19%	37%
Net Profit	515	224	62	99	308
Net Margin (%)	55%	25%	13%	13%	26%
ROE (%)	16.6	6.9	1.9	3.0	9.0
ROCE (%)	17.4	9.9	-0.3	3.9	11.8
Dividend (Rs)	5.0	5.0	5.0	5.0	0.0
Debt to Equity (x)	0.0	0.0	0.0	0.0	0.0

Data Source: Ace Equity

What Next?

Going forward, the company has several activities to be undertaken in the coming quarters.

It has several Production Sharing Contracts (PSCs) with the Government of India for Bakrol, Lohar, Ognaj, and Karjisan fields.

It has also signed the long-pending crude offtake and sales agreement with Indian Oil Corporation, which is the Government's nominee as per the applicable provisions of the PSCs.

The company's strategy to interconnect gas pipeline between Bakrol, helps monetize gas reserves and reduce flaring of gas.

There have also been ongoing discussions with potential gas buyers for offtake of gas.

The recent QIP is expected to result in steady operations and fund its expansion plan. In January 2024, Selan got approval to launch a QIP for an amount not exceeding Rs 2.5 bn.

How Selan Exploration Share Price has Performed Recently

In the past 5 trading sessions, Selan Exploration share price has rallied over 13%.

In the past one year, the stock is up around 94%.

Selan Exploration has a 52-week high of Rs 592 touched on 20 February 2024 and a 52-week low of Rs 251 touched on 25 April 2023.

Here's a table comparing Selan Exploration with its peers -

Comparative Analysis

Company	Selan Exp	Aakash Exploration	Aban Offshore	Deep Industries	Asian Energy
ROE (%)	8.9	9.1	0.0	6.9	-14.1
ROCE (%)	11.8	11.1	0.0	9.3	-12.2
Latest EPS (Rs)	17.1	0.4	-53.8	14.9	2.2
TTM PE (x)	30.4	31.3	0.0	21.5	129.1
TTM Price to book (x)	2.1	2.1	-0.3	1.6	4.5
Dividend yield (%)	0.0	0.0	0.0	0.6	0.0
Industry PE	30.4
Industry PB	2.1

Data Source: Ace Equity

In Conclusion

Blindly replicating the decisions of the so-called investing gurus comes with some limitations:

• Offers a partial view.
• Can be dated, given their submission 90 days post-quarter.
• Omit short positions and cash reserves.

Sure, these individuals have teams diving into every detail of a company. But that doesn't mean you don't need to do your homework.

Read about your investments, stay updated, and trust but verify.

Use these filing as a starting point as they offer great insights.

That's it for today.

Stay healthy and happy investing!

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...