Dolly Khanna Trims Stake in This Smallcap Chemical Stock

Dolly Khanna, a prominent investor in the Indian investing community, requires no introduction. With a notable presence and successful track record, she is one of the renowned investors in the Indian investing community.

During the March 2023 quarter, this seasoned investor was busy rejigging her portfolio.

According to recent data, Khanna exited one counter while trimming her stake in 10 counters during the quarter. The latest information from Trendlyne indicates that she further reduced her stake in another company on Friday.

This portfolio adjustment has ignited speculation among market participants.

Before going into details, let's take a brief look at Dolly Khanna's journey and what are some of her top stock picks.

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.

Dolly Khanna started her investment journey in 1996. However, her stock investments became publicly known in early 2010.

Khanna has a reputation for holding onto her investments for the long term and not being swayed by short-term market volatility.

Which stock did Dolly Khanna cut down on and why?

The latest shareholding pattern of Pondy Oxides shows that Dolly Khanna has marginally trimmed her stake in the chemical company during the March 2023 quarter.

The ace investor sold 2,000 shares in the company, bringing her investment down to 3.1% from 3.12% in December 2022 quarter.

Khanna had initially bought a 3.6% stake or 211,461 equity shares in the chemical manufacturing company in the March 2022 quarter.

From a broader perspective, Dolly Khanna has been gradually divesting her stake in the company in small proportions, which began during the September 2022 quarter. This could possibly indicate a lack of confidence in the company's prospects.

While we do not know for sure what exactly the reason is for the investing guru to sell her stake, there are some explanations.

#1 Profit booking

Shares of Pondy Oxides have zoomed 12.5% last month, following a surge of 17% in the past three months. This upward trend was catalysed by an increase in demand.

Further, stabilising costs prices of raw materials (iron ore) in the domestic markets are fueling the rally.

Also, in the past three years, the stock has turned out to be a true multibagger stock, giving returns of 400.5%.

Considering this, it appears that Dolly Khanna has opted to book partial profits in the company.

#2 Weak quarterly results and muted outlook

The company also reported weak results for the March 2023 quarter, driven by a slowdown in demand.

For the March 2023 quarter, the company reported a 9.9% YoY decline in revenue, amounting to Rs 3.7 billion (bn) compared to Rs 4.1 bn in the same quarter the previous year.

Due to the decrease in revenue, the earnings before interest, taxes, depreciation, and amortisation (EBITDA) also declined by 22.5% YoY to Rs 194.5 m from Rs 250 m in the same quarter of the previous year.

Consequently, the net profit of the company came in lower by 17.6% YoY at Rs 116.3 million (m), down from Rs 141.3 m in the corresponding quarter last year.

The net profit margin also declined from 3.4% in the December 2021 quarter to 2.9% in the December 2022 quarter.

Industry experts are of the view that for the next couple of quarters, factors such as industry-wide inflation, sustainability concerns, supply chain disruptions, and demographic challenges will dent the profit margins.

Additionally, concerns about global economic slowdown persist for firms that are heavily reliant on exports or discretionary sectors.

Exports for Indian companies are expected to remain subdued due to weak demand, and inflationary pressures.

Although the first quarter of the year may bring some relief in terms of input cost pressures and logistics costs, sluggish exports remain short-term challenges.

This underwhelming outlook for the upcoming quarter could also be one of the reasons for trimming the stake.

How shares of Pondy Oxides and Chemicals have performed recently

Pondy Oxides and Chemicals rose around 18.7% in the past one year. over a month, the share price has gone up by 12%.

Pondy Oxides and Chemicals share price touched its 52-week high price of Rs 684.4 on 14 September 2022. Its 52-week low was Rs 233.5 touched on 22 June 2022.

Pondy Oxides and Chemicals is currently trading at a PE (price to earnings) multiple of 8.7 times.

About Pondy Oxides and Chemicals

Pondy Oxides & Chemicals manufactures metal oxides and plastic additives. The company produces zinc oxide, lead sub oxide, litharge red lead, and liquid stabilizers of polyvinyl chloride (PVC).

Through a subsidiary, Pondy manufactures epoxy oil stabilisers and paint driers. Pondy Oxides and Chemicals is a leading secondary lead smelter in India.

These products are provided to companies like those that make batteries, chemicals, and PVC extruded and moulded products.

For more details, check out Pondy Oxide and Chemical's factsheet and quarterly results.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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