Dolly Khanna buys fresh stake in this smallcap petrochem stock

Chennai-based petrochemical company, Manali Petrochemical, is Dolly Khanna’s new bet.
Chennai-based petrochemical company, Manali Petrochemical, is Dolly Khanna’s new bet.

Summary

  • The ace investor has picked stake in this FII loving, zero-debt smallcap company.

Since the beginning of this calendar year, theIndian share markets have been falling. It has taken down with itfundamentally strong companies as well.

Amid this volatility, the super investors of India are as busy as they can be. They look for the most undervalued stocks that are poised forlong term growth.

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

Among the investing 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.

Who is Dolly Khanna?

Dolly Khanna is a Chennai-based large 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?

Chennai-based petrochemical company, Manali Petrochemical, is Dolly Khanna’s new bet.

According to thelatest shareholding pattern of Manali Petrochemical, Dolly Khanna holds 1.88 m shares in total giving her 1.09% stake in the company.

However, it is not certain whether the ace investor bought all these shares in one go during the June quarter.

Dolly Khanna's name was missing in the March 2022 shareholding pattern of Manali Petrochemical. 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.

Alongside Manali Petrochemical, this smallcap sugar stock has also captured Dolly Khanna’s interest.

Why Did Dolly Khanna Buy into this Petrochemical Stock?

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

#1 Improved financial performance

For the year ended March 2022, the company reported nearly twofold increase in its net profit.

During the same period, net sales grew 64% YoY reaching 16.7 bn.

Have a look at the table below showing net sales growth and some key fundamental ratios over the past five years.

Source: Equitymaster
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Source: Equitymaster

The company is also debt-free having no long-term debts.

#2 Commercial agreement with Econic Technologies

In July 2022, Manali Petrochemical announced the execution of the long-form agreement with UK-based based Econic Technologies.

Last year in September 2021, the companies signed a memorandum of understanding for new polyol technologies.

Polyols are useful in the production of flexible and rigid foams, elastomers, adhesives, sealants, and coatings.

These products find application across a wide range of necessary everyday products, from mattresses, automotive interiors to sports and footwear.

Under the agreement, the companies will work together to introduce a more environmentally friendly polyol, in the US$ 28 bn global polyol market.

The signing of this agreement sets the stage for the initiation of the MPL-Econic partnership.

It will comprise a two-year demo scale-up at the 1,300 ltr reactor at Manali Petrochemical’s plant 1.

The following three years will be spent on industrial scale-up of the technology at the company’s 12,000+ reactors as well as the commercialisation of CO2-containing polyols.

Econic’s patented catalyst and process technology will not only develop a greener product but also be cost efficient. This will improve the profitability of the company at large.

The technology helps incorporate tailored amounts of CO2 into polyols to meet the exact requirements for material properties, such as strength, water resistance, et cetera.

Thus, the polyols can be customised to suit customer requirements.

In an increasingly eco-conscientious world, the green polyols will also help the company gain a competitive edge in the global markets.

#3 Foreign institutional investors (FIIs)

Another factor here could be foreign investors.

While FIIs have lately remained net sellers in the overall markets, they have been increasing their stake in the company for last five quarters.

FIIs have been increasing their stake in the company for last five quarters.
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FIIs have been increasing their stake in the company for last five quarters.

While all these reasons are compelling enough, do remember not to plunge into a company's stock just because a market guru has bought some stake.

Investing in smallcaps is not that simple!

How the stock of Manali Petrochemical India has performed recently

Manali Petrochemical share price have remained very volatile in the past one year and have given 28.7% returns to its investors.

The scrip has a 52-week high quote of 149.7 touched on 21 April this year while the stock touched its 52-week low of 80.1 on 24 August last year.

Source: BSE India
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Source: BSE India

The stock currently trades at a price-to-book value multiple of 1.7 times with a marketcap of 18.2 bn.

As of June 2022, promoters hold 44.9% stake in the company. Institutional holding in the company increased by 0.15% and stood at 3.05% as of June 2022.

About the company

Incorporated in 1986, Manali Petrochemical is a part of the AM international group. It manufactures and supplies innovative polyurethane raw materials and blended systems.

It caters to a variety of industries like automotive, paints, food, appliances, and pharmaceuticals, among others.

The company operates in Singapore through its wholly-owned subsidiary AMCHEM Specialty Chemicals.

It has a presence in the UK through its step-down subsidiaries AMCHEM Specialty Chemicals and Notedome.

To know more, check out Manali Petrochemicals news and analysis.

Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

(This article is syndicated from Equitymaster.com)

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