Sanathan Textiles IPO invites bids: Analysts weigh on long-term prospects

Sanathan Textiles initial public offering (IPO) opens for subscription today, December 19, 2024. The IPO aims to raise Rs 54.58 crore 550 crore, comprising a fresh issue and an offer for sale.  The fresh issue includes 1.25 crore shares amounting to Rs 400 crore, while the offer for sale involves 0.47 crore shares aggregating Rs 150 crore. 

 

Sanathan Textiles raised Rs 165 crore from anchor investors on Wednesday, December 18 with key anchors including SBI Magnum Children’s Benefit Fund, Nippon India SmallCap Fund, HDFC Manufacturing Fund and Kotak Manufacture In India Fund. 

 

The company intends to utilize the net proceeds for repayment or pre-payment of certain borrowings, investment in its subsidiary Sanathan Polycot Private Limited to address its borrowings, and for general corporate purposes.

 

Sanathan Textiles IPO GMP

According to sources tracking the grey market platform, the mainline IPO’s last grey market premium is Rs 40. With the price band of Rs 321, and estimated listing price of Rs 361, the expected listing gain is at 12.46 per cent per share. 

 

Sanathan Textiles IPO price, lot size

Sanathan Textiles IPO’s price band is set between Rs 305 and Rs 321 per share. Retail investors can apply for a minimum of 46 shares per lot, requiring an investment of Rs 14,766. For non-institutional investors (NII), the minimum investment for sNII is 14 lots (644 shares), amounting to Rs 2,06,724, while for big NIIs, it is 68 lots (3,128 shares), amounting to Rs 10,04,088

 

Sanathan Textiles IPO allotment & listing

Sanathan Textiles IPO opens for subscription on December 19, 2024, and will close on December 23, 2024. The allotment of shares is expected to be finalized on December 24, 2024, with the listing tentatively scheduled for December 27, 2024, on both the BSE and NSE.  

 

Sanathan Textiles IPO lead managers

The issue is being managed by Dam Capital Advisors Ltd (formerly IDFC Securities Ltd) and ICICI Securities Limited, with KFin Technologies Limited acting as the registrar.  

 

Sanathan Textiles IPO financials

Sanathan Textiles Limited's revenue decreased by 10.9 per cent year on year (YoY) to Rs 2,979.8 crore in fiscal year 2023-24 (FY24) compared to Rs 3,345.02 crore in FY23. The company's profit after tax (PAT) fell by 12.3 per cent to Rs 133.85 crore from Rs 152.74 crore between the financial year ending with March 31, 2024 and March 31, 2023.

 

Post the IPO, the company will have a price to earnings multiple of 13.53 with an earning per share of Rs 23.73. So, should you invest your money? Here’s what analysts recommend!

 

Anand Rathi

At the upper band the company is valuing at 20.2x its FY24 EPS. Following the issuance of equity shares, the company's market capitalization stands at Rs 27,093.7 million, with a market cap-to-sales ratio of 0.9 based on its FY24 earnings. The global yarn industry and the demand for yarn products are expected to grow in the coming years, driven by the increasing demand for apparel from the fashion industry and the rapid expansion of e-commerce platforms. We believe that the issue is fairly priced and recommend “Subscribe – Long Term” rating to the IPO.

 

Bajaj Broking

Sanathan Textile's IPO valuation looks promising due to its strong financial health, evidenced by consistent revenue growth, profitability, and stable cash flow. The company's

strategic presence across polyester, cotton, and technical textile sectors diversifies its revenue streams, reducing dependency on any single segment. 

 

Additionally, its long- standing relationships with leading consumer brands and a low customer concentration mitigate market risks. The company's strategic focus on expanding manufacturing capacity, product innovation, and leveraging technology for sustainable practices further enhances its growth prospects, making it an attractive investment opportunity. Subscribe for the long-term. 

 

SMIFS Ltd

Sanathan's outlook is robust, driven by significant capacity expansions and strategic initiatives aimed at capturing the growing demand in the global and Indian textile industries. The company is increasing its manufacturing capacity from 223,750 MTPA at its Silvassa facility to 581,990 MTPA by FY27 a growth of 160 per cent by FY27, with the Punjab Manufacturing Facility's Phase 1 becoming operational in FY25 and Phase 2 in FY27. 

 

We recommend subscribing to the issue as a long term investment as these initiatives to increase production capacity by 160 per cent by FY27 and create new products, coupled with long-standing customer relationships and geographic diversification, position Sanathan well for sustained growth and increased market presence.