7x earnings, a 59% fall: Vijay Kedia and Dolly Khanna’s latest smallcap bets

She had dropped off its shareholder list after March 2025. The stock trades below its book value. On the surface, a software-led payments firm and a plastic cup maker have little in common. But both have been marked down hard, both grew sales at over 20% a year for five years, and both now trade at a lower PE than the median for their industry. The question is whether the market has priced in too much bad news, or not enough.

FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now #1 Zaggle’s 59% Wipeout: Why Kedia Replaced Kacholia in the September Quarter Zaggle Prepaid Ocean Services helps companies manage what their staff spend. It issues prepaid and corporate cards, and runs software for expense claims, vendor payments and employee rewards.

As of FY26, it served 3,915 corporate customers and about 39 lakh users. It came to the market in September 2023 at an IPO price of Rs 164. The timing of Kedia's entry is the story. On 17th August 2026, the stock fell 20% after its June quarter profit dropped 33%. On the same day, the company disclosed that its appeal against an income tax demand for AY 2022-23 had been dismissed. The next day, according to bulk deal data on the exchange, Kedia Securities bought 20 lakh shares at Rs 164.72, almost exactly the IPO price, for about Rs 33 cr.

These aren’t the first small cap names added to Kedia’s portfolio recently, Recently, I also wrote about 2 more small cap stocks Vijay Kedia invested in, which you must read about. Then came the twist. Ashish Kacholia had held 2.16% of Zaggle in June 2026. In the September filing, his name is missing. Individual holders are named in these filings only once they own 1% or more, so his stake has at least shrunk under that mark.

Whether he sold everything is unknown. What is clear is that one well-known smallcap investor reduced his position in the same quarter another chose to buy. Five Years of 50% Sales Growth, But Thinner Margins The long-term growth record is hard to fault. Financial YearFY21FY22FY23FY24FY25FY265Y CAGRSales (Rs cr)2403715537761,3031,85350%EBITDA (Rs cr)2860487111518145%Net Profit (Rs cr)194223448713348% Source: Screener.in EBITDA is operating profit before other income.

Sales have grown nearly eight-fold in five years, and profit has grown about seven-fold. The catch is in the margins. Operating margin was 16% in FY22. It has sat at 9 to 10% since. Zaggle earns more as it grows, but it keeps a smaller slice of each rupee. Sales rose 18% from a year earlier, but net profit fell from Rs 26 cr to Rs 17 cr, and margin slipped to 7%. Management attributed the drop to approximately Rs 3 crore in integration costs for DICE, a newly acquired expense software business—noting that related revenue is only expected to reflect from the September quarter onwards.

The deal itself was reworked into an asset purchase for Rs 68 cr, down from Rs 123 cr earlier. Management also kept its FY27 target of about 40% revenue growth. Zaggle is also looking abroad. On 22nd October 2026, it set up a wholly owned subsidiary in the Abu Dhabi Global Market, with a starting capital of USD 10,000. It is a small first step, but it points to Gulf ambitions. The FCF Reality: Profit vs.

Cash Conversion The share price of Zaggle was around Rs 158 on its listing day in September 2023 and as of closing on 26th October 2026 it was Rs 152. That is below the IPO price, 73% below its January 2025 peak, and about 9% under what Kedia paid. On valuations, the stock trades at a PE of 17x compared to the current industry median of 20x. Its median PE since listing in 2023 is 65x, while the 10-year industry median is 31x.

The stock has gone from one of the priciest names in its group to one of the cheaper ones. Smart money has been leaving. Domestic institutions held 14.56% in December 2024 and just 2.69% by September 2026. Foreign investors fell from 9.17% to 2.49% over the same period. Small shareholders filled the gap. Their number rose 42% to about 1.29 lakh. One more figure deserves attention: free cash flow was negative Rs 113 cr in FY26, so the profits are not yet turning into cash. #2 Rajshree Polypack: Dolly Khanna Returns to a Packaging Stock at 7x Earnings Incorporated in 2011, Rajshree Polypack makes the plastic cups, tubs, lids and sheets that hold your curd, ice cream and takeaway food.

Its products also include printed sleeves and moulded parts. Dairy, quick-service restaurants and online food delivery are among the end markets management says are growing. It also runs a paper-based food packaging joint venture, Olive Ecopak. Dolly Khanna has been here before. She held 1.16% in December 2024 and 1.08% in March 2025, then vanished from the list for five quarters. She also returned to Rain Industries in the same quarter, a sign she is revisiting old names rather than chasing new ones.

The September 2026 filing shows her back with 7.78 lakh shares, or 1.05%. At the current price, that is worth only about Rs 1.4 cr, a small bet even in her Rs 323 cr portfolio. This addition comes after the brutal clean up Dolly Khanna did in the last quarter. A Record Quarter With 77% Profit Growth Financial YearFY21FY22FY23FY24FY25FY265Y CAGRSales (Rs cr)12719925227433033221%EBITDA (Rs cr)18263333414520%Net Profit (Rs cr)9101110141714% Source: Screener.in EBITDA is operating profit before other income.

FY21 was affected by the pandemic, which flatters the growth rates. Sales have grown about 21% a year, though the base year was hit by Covid and FY26 sales were flat. Profit has grown more slowly, as interest and depreciation rose with new capacity. The June 2026 quarter was the best in the company's history. Sales rose 25% to Rs 103 cr, and net profit jumped 77% to Rs 7.26 cr. In its earnings call, management said it plans no major capex this year and aims to cut debt by 15 to 20%.

Land has been bought in eastern India for a future plant, but that spend is on hold. Existing plants are running at about 80 to 85% of capacity, and management believes the current setup can support sales of Rs 420 to 430 cr. On 15th October 2026, CARE Ratings assigned the company's bank loans a BBB+ rating with a stable outlook. It is also 66% below its March 2024 high. At a PE of just 7x, the stock is valued at roughly a third of the current industry median of 18x.

The 10-year median PE for the company is 17x while the industry median for the same period is 19x. The stock is priced at about 0.7 times book value. A few reasons stand out. Return on equity has averaged just 8% over three years. The cash conversion cycle has stretched to 197 days, so a lot of money is stuck in stock and unpaid bills. Borrowings have climbed from Rs 21 cr in FY21 to Rs 123 cr. The Olive Ecopak joint venture lost about Rs 19 cr in FY26, though management is aiming for at least breakeven at the pre-tax level this year.

Its latest accounts show contingent liabilities of Rs 140 cr, slightly more than the company's entire market value. It is also a tiny, thinly traded stock with a market cap of about Rs 131 cr. A few large orders can move the price sharply in either direction. Vijay Kedia vs Dolly Khanna: Two Ways to Buy a Beaten-Down Smallcap These are two different kinds of bet. Kedia's Rs 33 cr position in Zaggle is a wager that a fast-growing business has been sold too hard on one bad quarter and a tax ruling.

Its next test is whether DICE revenue arrives in the September quarter and margins start to recover. Dolly Khanna's return to Rajshree Polypack is a classic value play. It is a dull, profitable manufacturer trading at a deep discount to its peers. The test there is whether better quarters can bring down debt and free up cash before the market loses patience. Neither stock has rewarded buyers lately.

Zaggle is already below Kedia's purchase price, and Rajshree has more than halved from its peak. Cheap can get cheaper. It may help to track both on a watchlist and let the next two quarterly results show which of these bets the numbers support. 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, including filings made available on the BSE website.

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. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers