The Smallcap Queen’s Conviction – Why She Won’t Sell

For the value investor, a plunging share price is rarely a warning siren. They often take it as an invitation to the next multibagger. Ace investor Dolly Khanna, the queen of small caps, has built a fortune by showing how to invest in smallcaps, while the broader market panics at the sight of them. While the average investor runs to sell at the first hint of trouble, Khanna’s portfolio reveals a striking stubbornness.

Two of her favourite holdings are currently trading near their 52-week lows. Both companies offer solid sector beating dividend yields but their stock prices have been hammered by fears of cheap imports, margin pressures, and shifting market moods over the past 6 months. An average investor might have dumped these holdings long ago to chase the next big trend. But not Dolly Khanna. She continues to hold both the stocks, is absorbing the brutal paper losses with absolute calm.

This conviction raises an important question for retail investors who follow her trades. Is the market ignoring the cash-generating power and coming recovery of these two dividend darlings? Or has the queen of small caps finally walked into a classic value trap?

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Southern Petrochemicals (SPIC): A 3.3% Dividend Yield Play at 52-Week Lows

Incorporated in 1993, Southern Petrochemicals Industries Corporation Ltd (SPIC) is engaged in manufacturing and selling Urea and Nitrogenous chemical fertilizers.

With a market cap of Rs 1,224 cr, the company’s product offerings include Primary nutrients, Secondary Nutrients, Water Soluble Fertilisers, Organic Fertilisers, Non-edible de-oiled Cake Fertilisers, pesticides, industrial products, etc.

Dolly Khanna bought a 1.7% stake in the company worth Rs 32 cr as per the exchange filings for the quarter ending June 2025. And as of the quarter ending December 2025, this holding is now 2.6% with a value of 30 cr.

SPIC is its solid dividend yield. The company has a current dividend yield of 3.3% while its peers from the industry average barely 0.1%. In simple words, it means that for every Rs 100 invested in the stock, the company gives back Rs 3.3 back annually to investors, which is exceptional for a sector that typically reinvests most of its capital into high-cost operations.

Analyzing SPIC’s Fundamentals: Can Record Profits Offset Debt Concerns?

Let us look at the financials of the company before we go to the stock price decline.

The sales of the company have grown at a compounded rate of 8% from Rs 2,079 cr in FY20 to Rs 3,086 cr in FY25. For the 3 quarters of FY26, ending in December 2025, the company has logged sales of Rs 2,372 cr.

EBITDA (earnings before interest, taxes, depreciation, and amortization) went from Rs 113 cr to Rs 284 cr in the same period, which is a compounded growth of about 21%. And between April and December 2025, EBITDA of Rs 254 cr has been logged by the company.

The company recorded a compounded profit growth of 19% from Rs 67 cr in FY20 to Rs 156 cr in FY25. For the first 3 quarters of FY26, net profits of Rs 182 cr have been recorded already, meaning that the company is headed towards a strong end to FY26.

The share price of Southern Petrochemicals Industries Corporation Ltd was around Rs 32 in March 2021 and as of closing on 6th March 2026 it was Rs 61, which is the stocks 52-week low.

The 50% Re-rating: Why the Market Spooked on SPIC

With FII (Foreign Institutional Investors) holdings dropping from over 6.5% to 4.92% by December 2025 and growing concerns over a stretched balance sheet as borrowings surged from Rs 471 cr to Rs 722 cr between June and September 2025, the stock saw a significant re-rating, causing it to lose nearly half its value from its 52-week peak despite the company’s high dividend yield.

As for valuation, the company’s stock is trading at a PE of a modest 6x, while the industry median is 18x. The 10-Year median PE for the company is 10x which is same as the industry median for the same period.

Despite the decline to 52-week lows, SPIC presents a classic value vs. price conundrum. While the debt surged to Rs 722 cr at the end of September 2025, the company managed to get it down to Rs 449 cr at the end of December 2025. And while FII selling have clearly spooked the market, the underlying earnings power highlighted by a record Rs 182 cr net profit in just nine months of FY26, suggests that the business remains fundamentally robust.

For a patient investor, this correction may perhaps represent a margin of safety play, where the lucrative cash payouts provide a floor while the company works toward deleveraging its balance sheet. That is possibly what Dolly Khanna has her eyes set on.

GHCL Ltd: A Virtually Debt-Free Bet on a Soda Ash Turnaround

Incorporated in 1983, GHCL Ltd (formerly Gujarat Heavy Chemicals Limited) is one of India’s leading manufacturers of Soda Ash (Anhydrous Sodium Carbonate).

With a market cap of Rs 4,231 cr, GHCL with a market share of over 26% is the 2nd largest manufacturer of soda ash in India. The company’s clientele includes names like Hindustan Unilever, P&G, Borosil Renewable, Saint Gobain, Patanjali, Hindustan Zinc, Piramal amongst others.

Dolly Khanna bought 1% stake in the company worth Rs 61.5 cr as per the exchange filings for the quarter ending March 2025. And as per the quarter ending December 2025, this holding has gone to 1.1% and the current value is close to Rs 46 cr.

Before we get to the reason behind this decay, let us look at the financials of the company.

Khanna’s Big Turnaround Bet?

The numbers below show that the company’s sales have witnessed a bumpy ride in the last 5-years. And for the 3 quarters of FY26 sales of Rs 2,274 cr have been logged.

FYFY20FY21FY22FY23FY24FY25
Sales (Rs Cr)3,3052,4913,0524,5513,4473,183

The EBITDA saw an upwards trend till FY23, post which it slipped. And between April and December 2025, the company logged an EBITDA of Rs 513 cr.

FYFY20FY21FY22FY23FY24FY25
EBITDA (Rs Cr)7296057301,503851877

Looking at the net profits, the company has not seen any losses in the last decade, but in the last 5 years it witnessed a decline and is currently trying to jump back. In the first 3 quarters of FY26 ending in December 2025, profits of Rs 357 cr have been logged.

FYFY20FY21FY22FY23FY24FY25
Net Profit (Rs Cr)3973266501,142794624

The share price of GHCL Ltd was Rs 230 in March 2021 and as of closing on 6th March 2026 it was Rs 460, which is a jump of 100%.

In the last 6 months, the stock has corrected by over 30% from around Rs 660 and is trading closer to its 52-week low of Rs 451.

Is GHCL a Turnaround Candidate or a Value Trap?

This decline to 52-week lows is possibly due to the severe pricing pressure in the soda ash segment, which accounts for approximately 98% of its revenue.

This margin compression fuelled by a surge in cheap imports from China and cooling global demand, resulted in a 37% year-on-year drop in net profit for the December 2025 quarter. This fundamental deterioration, combined with the stock breaking below all key long-term moving averages, has severely dampened market sentiment despite the company’s debt-free status and modest valuation.

The share is trading at a PE of 8x while the current industry average is 18x. The 10-year PE for the company is 7x and the industry PE for the same period is 15x.

This financial strain, combined with some major investors cutting their stakes, has destroyed market confidence. With the company now caught in a temporary margin-compression cycle and trading at multi-month lows, investors are fleeing the stock to avoid further risk.

In the end, GHCL is a virtually debt-free play caught in a possible temporary pricing storm. While cheap imports from China have squeezed recent profits, the company’s core business remains incredibly strong. Khanna possibly is looking past the current cycle, and this 30% price drop does not probably bother her as it is the turnaround she is betting on.

Yielding to Temptation or to Fundamentals?

The divide between a market panic and a calculated bet often comes down to one’s time horizon. While the broader market treats a 52-week low as a structural failure, value investors like Dolly Khanna often view it as a seasonal discount. In the cases of SPIC and GHCL, the numbers tell a story of short-term friction meeting long-term resilience.

SPIC is navigating a deleveraging phase with record nine-month profits, while GHCL is weather-proofing its margins against a global soda ash glut. Both are trading at valuations significantly below their industry peers, offering a rare combination of high yields and debt-light safety nets.

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The big question here is if the current price drop is a reflection of a broken business model, or simply the market’s inability to see past the next quarter? Khanna’s refusal to budge suggests she believes the cash flow will eventually silence the bears. Add this stock to a watchlist and keep an eye on them to find out.

Disclaimer:

Note: We have relied on data from www.Screener.in and www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. 

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article. 

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