Why did Dolly Khanna increase her stake in this leading branded apparel small-cap stock?

Something interesting has happened in the small-cap space over the past few months. The BSE small cap index is nearing its all-time high, hit in January this year.

Chartist Brijesh recently highlighted that the The broader index has yet to gain momentum with a larger index.

Meanwhile, Equitymaster’s small-cap expert Richa Agarwal points to both upside in small-caps and the need for caution.

The smallcap/sensex ratio is above the long-term median of 0.44, but is well below previous highs.

It seems there’s a lot of money chasing small-cap stocks.

India’s top investment gurus have also expressed their bullish stance on select small-cap stocks.

For example, Vijay Kedia increased exposure to small cap stocks Elecon Engineering last quarter.

Meanwhile, Ashish Kacholia took a position in a small-cap stock that’s up 1,000 percent in 5 years.

Added to this is Dolly Khanna. Released data shows that the star investor has increased its exposure to a small-cap stock in the textiles space.

A word about Dolly Khanna…

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

Dolly Khanna’s portfolio, managed by her husband Rajiv Khanna, typically leans towards more conventional stocks in manufacturing, textiles, chemicals and sugar.

Which Smallcap Stock Did Dolly Khanna Buy and Why?

Monte Carlo Fashions’ latest ownership pattern shows that Dolly Khanna added 0.71 percent stake in the apparel company during the July-September 2022 quarter.

As of September 2022, her stake in the company is 2.49 percent. In the previous quarter, she held 1.8 percent of the shares.

Khanna has held an interest in Monte Carlo Fashions since the December quarter of 2021.

While we don’t know why Khanna added the presence in Monte Carlo, there are a few reasons we can guess…

Monte Carlo is one of those Top Textile Company in India.

Over the past few quarters, Monte Carlo has delivered outstanding revenue and earnings growth.

In the June quarter of 2022, the textile company reported record sales as cotton prices fell and strong store expansions.

The company opened 11 new Exclusive Brand Outlets (EBOs). It is planned to open a total of 30 storage facilities by the end of March 2023.

In an IPO filing, the company said it was seeing strong demand across all segments in terms of revenue, with things returning to normal.

A month ago, the company announced its September 2022 results, in which revenue showed a 5 percent growth.

The company said revenue for the quarter was good on the back of end-of-season sales and encouraging festival and wedding seasons across India.

It strengthened its retail presence by opening 14 new EBOs and now has a total of 335 EBOs.

Looking ahead, the company has a strong order book for the summer season.

Meanwhile, the winter season has started early in some parts of India this year. Monte Carlo dominates the winter wool clothing segment with a market share of over 50 percent. Around 26 percent of sales come from this segment.

The improvement in quarterly performance and the upcoming winter season could be the reasons why Dolly Khanna became bullish in Monte Carlo.

Monte Carlo will also benefit from the center’s PLI program. This year, the company qualified for the government’s Production-Based Incentive (PLI) scheme for the textile sector.

The textile company is currently trying to increase its online presence.

How Monte Carlo has developed in 2022

In 2022, Monte Carlo’s share price has increased by 13 percent. Today the stock is up 1 percent and is trading at Rs 690 per share.

Monte Carlo has a 52-week high of Rs 908 set on Sep 15, 2022 and a 52-week low of Rs 425 set on May 30, 2022.

Monte Carlo Stock Price in 2022

Monte Carlo has had a good track record of paying dividends and rewarding shareholders through buybacks since 2015.

For 2022 the Board recommended a final dividend of Rs 200 i.e. Rs 20 per share.

Take a look at the table below that compares Monte Carlo to its competitors in terms of various parameters.

About Monte Carlo

Monte Carlo Fashions is a fashion house offering apparel products for men, women and tweens.

The company was initially introduced as an exclusive wool brand. Today it has a well diversified presence in different categories such as cotton, home textiles and children’s wear. It has also gained importance in the manufacture and supply of accessories such as ties, belts and socks.

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

This article is syndicated by Equitymaster.com.

(Except for the headline, this story was not edited by NDTV staff and was published by a syndicated feed.)