Dolly Khanna's New Bet is this Smallcap Ethanol Stock

In India, the stock market is notoriously volatile and prone to huge swings in prices.

Take this year as an example.

The Indian share market is falling in 2022 and has taken down with it even fundamentally strong companies.

But all this noise doesn't seem to bother the super investors of India. They're able to make big profits by buying stocks when the market is down and selling when the tide turns up.

A classic buy low and sell high strategy!

What do we mean by super investor of India? Think Rakesh Jhunjhunwala, Ashish Kacholia, Sunil Singhania and other big names...

By investing in high-quality companies that are poised for long term growth, super investors are consistently beating the stock market returns.

All these investing gurus are as busy as they can be in the current volatile stock market environment.

Among the market gurus, one prominent name is Dolly Khanna.

According to latest data, Dolly Khanna has bought additional stake in a small-cap stock.

Read on to find out more...

A word about 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, which is managed by her husband Rajiv Khanna, is usually inclined towards more conventional stocks in manufacturing, textile, chemical, and sugar stocks.

Which Smallcap Stock did Dolly Khanna Buy Recently?

The company in question is Zuari Global - a sugar company.

According to the latest shareholding pattern of Zuari Global, Dolly Khanna bought 1.17% stake in the company or 348,622 shares in total.

Dolly Khanna's name was missing in the March 2022 shareholding pattern of Zuari Global. But her name appeared in the June shareholding data.

As per the exchange rules, every listed company must disclose the names of each individual shareholder who owns 1% or more of the company's shares in quarterly reports.

Why Did Dolly Khanna Buy into this Sugar Stock?

While we don't know why Khanna bought into it, there are some reasons that we can guess...

Between April 2022 to June 2022, shares of Zuari Global fell to a great extent.

From touching a high of Rs 200 in early April, the stock came down to Rs 124 within a span of two months.

One reason why Dolly Khanna may have taken plunge could be because she though it has become undervalued.

The company's latest book value is Rs 1,010. At the current price of Rs 156, it translates into a price to book value of 0.14.

Another reason could be the ethanol factor.

India's top ethanol stocks are in a sweet spot right now.

Zuari Global being a sugar company has exposure to ethanol business.

Experts are of the view that the company's sugar and ethanol business segment is expected to do well in the long-term.

In November last year, the company said its sugar mill has resumed operations for its ethanol plant.

According to the company's annual report, it's in the process of developing a distillery to produce ethanol in India and supply it to the state-owned oil marketing companies to meet their blending requirements as specified in the biofuel policy.

The company has strong future prospects and expects to grow the business to achieve a total capacity of 1,000 kilo liters per day of ethanol.

Read our detailed editorial on ethanol to know more: Ethanol Stocks are in a Sweet Spot. But for How Long?

While these two reasons may be compelling, the company's financials tell a different tale. For now at least...

Zuari Global has reported consecutive losses even after having consistent revenues.

It's also a high debt company.

Financial Snapshot

(Rs m, Consolidated)	FY17	FY18	FY19	FY20	FY21	FY22
Net sales	6,034	5,497	7,742	7,710	8,338	7,218
Sales growth (%)	8.9%	-8.9%	40.8%	-0.4%	8.1%	-13.4%
Operating profit	808	377	814	1,332	2,046	2,376
Operating profit margin (%)	13.4%	6.9%	10.5%	17.3%	24.5%	32.9%
Net loss	(259)	(310)	(1,284)	(3,669)	(930)	(396)
Total debt	8,262	11,530	14,710	19,242	22,172	24,403

Data Source: Ace Equity

How Zuari Global has performed recently

Ever since the news came out that Dolly Khanna has picked stake, the stock has been on a roll.

Yesterday, Zuari Global share price rallied 5%. Today too the momentum continued with shares surging another 5%.

However, over the year gone by, share price of Zuari Global has a flat growth to show. It's trading at the same levels from a year ago.

To know more, check out Zuari Global's latest news and analysis.

About Zuari Global

Zuari Global is the holding company of the diversified Adventz Group. The group comprises 23 companies in four verticals - agriculture, engineering & infra, lifestyle & real estate, and services.

The company's business activities are real estate, investment services, engineering services, management services, manufacturing and trading of furniture, manufacturing and sale of sugar and its by-products, ethanol, and generation of power.

To know more, check out Zuari Global financial factsheet and its latest quarterly results.

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...