IPO listed on 27 Dec'24
Sanathan Textiles Ltd
Minimum Investment
₹ 14,766 / 46 shares
Grey market premium
₹ 87 (27% premium)
Issue price
₹ 321
Listing price
₹ 422
Listing gains
101 (31%)
Listing on
Dec 27, 2024
Our Verdict:
Neutral
- Sanathan Textiles Ltd (STL) reported a strong three-year average Return on Equity of 23% and Return of Capital Employed of 21% but saw a declining trend in revenue and net profit during FY22-24.
- At the upper price band, the P/E multiple works out to 20.2x and P/BV 1.6x.
- STL stands to gain from geopolitical tensions in Bangladesh and China's declining apparel exports to the US.
- Given these aspects, investors with a high risk-appetite may consider subscribing to the IPO for potential listing gains while those averse to risk should closely observe the company’s performance over the next two to three quarters to evaluate its financial stability before making an investment commitment.
About the company
Founded in
10 Oct'05
Managing director
Paresh Dattani
- STL is among the select few companies in India that operates across the polyester, cotton, and technical textile sectors, which are used in various industries, including automotive, healthcare, construction, sports and outdoor, and protective clothing.
- The company's products are produced at their Silvassa facility, which has a total installed capacity of 223,750 MTPA across its three yarn verticals, as of June 30, 2024.
STRENGTHS
- Diverse Product Portfolio: STL boasts a robust product lineup, featuring an extensive array of over 14,000 yarn product variants and more than 190,000 SKUs as of June 30, 2024. This diversity allows the company to cater to a wide range of applications and end-uses.
- Clientele: STL maintains long-standing partnerships with renowned consumer brands, including Welspun India, Techno Sportswear, Page Industries, D'Décor Home Fabrics, and Siyaram Silk Mills, among others. Additionally, it has sustained relationships with its top 10 customers for over a decade.
RISK FACTORS
- Deteriorating Financials: STL has experienced a significant deterioration in its financial performance, with operational revenue, EBITDA, and net profit witnessing compounded annual decline rates of -4%, -35%, and -39% respectively, from FY22 to FY24.
- Declining Profitability: There has been a notable erosion in STL's EBITDA margin, dropping from 16.88% in FY22 to 7.66% in FY24. Similarly, the net profit margin fell from 11.16% in FY22 to 4.53% in FY24, although it slightly recovered to 6.41% in Q1FY25.
- Decreasing Return Ratios: STL's Return on Equity and Return on Capital Employed have significantly declined from 43.95% to 11.09% and from 35.83% to 11.80%, respectively, from FY22 to FY24.
- Geographic Risk: In Q1FY25 and FY24, STL generated 62% and 65% of its operating revenue from Gujarat, Maharashtra, and Punjab, which highlights a geographic concentration risk in these Indian states.
- High Indebtedness: As of September 30, 2024, STL reported a substantial outstanding debt of Rs 1,393 crore, presenting numerous risks that could negatively impact its operations, financial results, and overall business conditions. Additionally, the covenants in debt agreements may restrict STL’s operational flexibility.
Issue details
Issue type
Mainstream
Issue size
₹ 550 crore
Fresh Issue
₹ 400 crore
OFS
₹ 150 crore
Price range
₹ 305 - 321
Lot size
46 shares
Issue Objective
STL intends to allocate the net proceeds from the fresh issue for the following purposes:
- To repay and/or prepay certain outstanding debts;
- To invest in its subsidiary, Sanathan Polycot Pvt Ltd, specifically for the repayment and/or prepayment of its debts; and
- General corporate purposes.
Dates
Bidding open
19 Dec'24
Bidding close
23 Dec'24
Allotment date
24 Dec'24
Refund date
26 Dec'24
Listing
27 Dec'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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