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Analysts mostly recommended that investors subscribe to the issue, considering it is fairly priced and the company has a robust outlook.
SMIFS Ltd: Subscribe
The brokerage wrote in its note that the company’s strategy to reduce debt by ₹300 crore will positively impact its bottom line, enhancing financial stability and profitability.
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.
Assigning a ‘subscribe’ rating for a long term, it said that these initiatives to increase production capacity by 160% 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.
Anand Rathi: Subscribe – Long Term
At the upper price band, the company is valuing at 20.2x its FY24 EPS. Following the issuance of equity shares, the company’s market capitalisation stands at ₹2,709 crore, 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.
The brokerage believes that the issue is fairly priced and recommended a ‘Subscribe – Long Term’ rating to the IPO.
Sanathan Textiles IPO: GMP and price band
Shares of Sanathan Textiles are commanding a GMP of ₹40, which indicates a premium of over 12% over the issue price.
The company has fixed a price band of ₹305-321 per share, where investors can bid for 46 shares in one lot and in multiples thereafter.
The offer is being made through the book-building process, wherein not more than 50% of the offer will be available for allocation on a proportionate basis to qualified institutional buyers, 15% of the offer has been set aside for non-institutional investors, and 35% for retail individual investors.
Sanathan Textiles IPO: Other details
The company has garnered ₹165 crore from anchor investors ahead of its initial public offering that opened for public subscription today.
Foreign and Domestic Institutions who participated in the anchor included SBI Mutual Fund, Nippon India Mutual Fund, HDFC Mutual Fund, Kotak Mutual Fund, Bandhan Mutual Fund, SBI General Insurance Company, Societe Generale, PineBridge Global Funds, Edelweiss Trusteeship, Whiteoak Capital, and Ashoka India Equity Investment Trust.
Company description
Sanathan Textiles is one of the few companies (amongst their peer group) in India with presence across the polyester, cotton and technical textile (which find application in multiple end-use segments including automotive, healthcare, construction, sports and outdoor, and protective clothing) sectors and based on their operating income, they had a market share of 1.7% in the overall Indian textile yarn industry as of Fiscal 2024.
Currently, all the three yarn verticals are housed under a single corporate entity.
DAM Capital Advisors Limited, and ICICI Securities Limited are the book-running lead managers, and KFin Technologies Limited is the registrar of the issue.
The allotment for the Sanathan Textiles IPO is expected to be finalised on December 24, while the company’s shares will be listed on BSE, NSE with tentative listing date fixed as December 27.
