Parag Parikh Fund Increases Stake in M&M-Backed Small-Cap Company with 84 per cent Dividend Payout Ratio: Watch Out!

Trading below the industry Price-to-Earnings (PE) ratio, Swaraj Engines Ltd. presents a potentially candidate to keep on your watchlist.

The Parag Parikh Conservative Hybrid Fund is an open-ended hybrid scheme that predominantly invests in debt instruments. This fund is a balanced investment vehicle, combining fixed income investments, equity investments, and Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The fund's equity investments prioritize stocks with strong cash flows, focusing on higher dividend payouts or buybacks. The strategy is to select stocks that offer a 'margin-of-safety' and to capitalize on 'special situations' as they arise.

Parag Parikh Conservative Hybrid Fund's investment approach emphasizes stocks with robust cash flows, reflecting in higher dividend payouts or buybacks. This strategy ensures a steady income stream and a cushion against market volatility. The fund's managers are adept at identifying and leveraging special situations to maximize returns, thereby maintaining a balanced risk-reward profile.

For the quarter ended June 2024, the shareholding pattern revealed that the Parag Parikh Conservative Hybrid Fund has increased its stake in Swaraj Engines Ltd., a Small-Cap stock. The fund's stake rose from 1.25 per cent in March 2024 to 1.75 per cent in June 2024. This move signifies the fund's confidence in the company's growth potential and strategic value.

Established in 1985 in Mohali, Punjab, Swaraj Engines Limited (SEL) primarily supplies engines to the Swaraj Division of Mahindra & Mahindra Ltd. (M&M). The company manufactures and supplies diesel engines ranging from 22 HP to over 65 HP and is equipped with high-precision quality analyzing machines. Additionally, SEL produces hi-tech engine components and has supplied over 1.6 million engines for Swaraj tractors to date.

Mahindra and Mahindra (M&M) hold a substantial 52.12 per cent stake in Swaraj Engines Ltd. under the promoter category, indicating a strong backing and strategic importance to M&M's operations.

Swaraj Engines boasts an impressive dividend payout ratio of approximately 84 per cent. This ratio reflects the percentage of the company's earnings paid out as dividends to shareholders, indicating a shareholder-friendly policy and robust cash flow management.

Trading below the industry Price-to-Earnings (PE) ratio, Swaraj Engines Ltd. presents a potentially candidate to keep on your watchlist. The stock is up by 19.69 per cent in 2024.

Disclaimer: The article is for informational purposes only and not investment advice.