Sanathan Textiles
IPO Size: Rs. 550 cr
- Rs. 400 cr Fresh Issue for repaying Rs. 300 cr, of Rs. 444 cr net debt
- Rs. 150 cr Offer for Sale (OFS) by the promoter (100% to drop to 80% post IPO)
Price band: Rs. 305-321 per share
M cap: Rs. 2,709 cr, implying 20% dilution
IPO Date: Thu 19th Dec to Mon 23rd Dec 2024, Listing Fri 27th Dec 2024
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Integrated Textile Company
Sanathan Textiles manufactures polyester yarn, cotton yarn and yarns for industrial and technical textiles, contributing 77%, 19% and 4% to its annual topline of Rs. 3,000 cr respectively. Current installed manufacturing capacity is at 2.2 lakh MTPA in Silvassa, which is 100% utilised.
Capacity Expansion
Sanathan is undertaking brownfield expansion of 0.11 MTPA, as also, establishing a greenfield plant in Punjab, to more than double capacity to 5.8 lakh MTPA by FY27E. Of this, 2.5 lakh MTPA greenfield capacity will be commissioned in FY25 itself, improving FY26E revenue forecast.
As of 30.6.24, net fixed assets stood at Rs. 924 cr, with capital work in progress of Rs. 373 cr. Fresh issue proceeds will retire the debt, taken to fund this capex.
Improving Margins
On FY24 revenue of Rs. 2,958 cr, value added products account for ~52%. With Rs. 248 cr EBITDA, margin was at 8%, with PAT at Rs. 134 cr, translating into a net margin of 4.5%.
For Q1FY25, revenue stood at Rs. 781 cr, with EBITDA margin expanding to 10% and net margin to 6%, leading to an EPS of Rs. 7, against Rs. 19 EPS for FY24.
Attractively Priced
On FY25E EPS of Rs. 28, shares are being offered by a PE multiple of 11x, on current year basis, which is seen attractive for 15% RoE and ongoing capacity addition. Peer Nitin Spinners, having FY24 revenue, similar to Sanathan at Rs. 2,900 cr and PAT of Rs. 132 cr, is trading at a current year PE multiple of 17x, despite lower RoE of 12% and a 1:1 debt equity ratio. Other similar sized peers like Nahar and Sutlej are loss making.
19th Dec 2024 at 10:02 am
19th Dec 2024 at 09:44 am