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SANATHAN TEXTILES IPO

IPO Details

-
-
46 Shares
₹ 14,766
₹ 305 – 321
₹ Up to 550 Cr

Issue timeline

  • -
  • 24-Dec-2024
  • 26-Dec-2024
  • 26-Dec-2024
  • 27-Dec-2024

Subscription Status

Shareholder -
Qualified Institutional Buyers -
Non-Institutional Investor -
Retail Individual Investor -
Employee -
Total -

About Company

Sanathan Textiles Limited IPO

Like the last few years, this year too, the previous two weeks of December will be record-breaking IPOs - we have 10 confirmed IPOs already. The first IPO we will cover is Sanathan Textiles Limited (STL), a polyester yarn manufacturer and a global supplier of Cotton Yarn.

The IPO opens for subscription on 19 December and closes on 23 December. Let us examine the various aspects of STL's business to help you decide whether to subscribe or invest in the IPO.

Below are the key details related to the STL IPO:

  • Issue Size: Rs 550 crore
  • Price Band: Rs 305 - Rs 321
  • Lot Size: 46 Shares
  • Issue Details: Fresh Issue of Rs 400 + Remaining OFS
  • Market Cap: At the upper price band, Rs 2709.37 crore
  • Retail Share Offered: 35%
  • Minimum Investment: Rs 14766

Sanathan Textiles IPO: The Business

STL is one of the few companies (amongst peer groups) in India with a 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. Based on their operating income, they had a market share of 1.7% in the overall Indian textile yarn industry as of FY24.

They also have a high share of value-added products such as dope-dyed, superfine/micro, functional, industrial, and technical yarn, cationic dyeable, and specialty yarn, which are produced after extensive in-house research. These value-added products are tailor-made to customer requirements and have properties and characteristics that are distinctive from their other products.  

Their business is divided into three separate yarn business verticals, consisting of:

(a) Polyester yarn products

(b) Cotton yarn products

(c) Yarns for technical textiles and industrial uses.

The products are manufactured at their facility at Silvassa. Over the years, the company has scaled up its production and as of June 30, 2024, their facility at Silvassa had a total installed capacity of 223,750 MTPA across the three yarn verticals. As of June 30, 2024, they had more than 925 distributors in 7 countries comprising India, Argentina, Singapore, Germany, Greece, Canada and Israel.

Sanathan Textiles IPO: Industry Overview

The contribution of the textile, apparel, and leather industries in India in the overall manufacturing GVA of the country improved to 11.2% in FY23, up from 10.9% in FY12. In absolute terms, the GVA of the textile, apparel, and leather industry at current prices grew to Rs 3,955 billion in FY23 on a base of Rs 1,532 billion in FY22, thereby registering a CAGR of 9.0%.  

The global textile industry had grown consistently between CY18 to CY23, barring CY20, which saw a decline due to Covid-19. Going ahead, the industry is expected to grow at a CAGR of 2.5 - 3.5% between CY23 to CY27 to reach ~$1,780-1,830 billion in CY27. Increasing demand for apparel from the fashion industry coupled with the growth of e-commerce platforms is expected to drive the market over the forecast period. Volume-wise, the industry is expected to grow from 193 billion tons in CY23 to 210-220 billion tons in CY27, registering a CAGR of 2.0 - 3.0%.

As of CY23, China, Bangladesh, and Vietnam were the top three exporters of textiles with a share of 33%, 6%, and 5% respectively; compared to CY19, when China, Bangladesh, and Germany were the top three exporters. India’s share in overall global trade remained constant at ~4% and stood at $35 billion in CY23.

Indian textile and apparel industry is projected to grow at a CAGR of 6.0-7.0% between FY24 and FY28, reaching a value of Rs 12,400-12,500 billion in FY28. During this period, exports are expected to grow at a CAGR of 4.5-5.5% while domestic industry is expected to grow at slightly higher pace of 7.0-8.0%.  

Sanathan Textiles IPO: Listed Peers

As per the RHP, the company has mentioned five companies as its peers - KPR Mills, Vardhman Textiles, Indo Count Industries, Filatex India, and Garware Technicals Fibres. In this section, we will compare the FY24 financials of all the companies to give you an idea of where STL stands among peers. Here are important numbers:

  • In revenue terms, Vardhman has the highest revenue, followed by KPR and Filatex. Sanathan has the lowest revenue among its peers.
  • Garware Technicals has the highest earnings per share (Rs 102.16), followed by KPR (Rs 23.56), Vardhman (Rs 22.20), and Sanathan (Rs 18.60).
  • KPR has the highest (18.48%) Return on Net Worth (RoNW) among peers. Sanathan is fourth on the list with a RoNW of 10.42%.
  • KPR has the highest (19.55%) EBITDA margins, followed by Garware (19.15%), and Vardhman (15.63%).

You can refer to the below table for details.

 

Sanathan Textiles IPO: Financials

In this section, we will look at the company's financials from recent years:

  • Sanathan Textiles reported revenue of Rs 3185.32 crore, Rs 3329.21 crore, and Rs 2957.50 crore for FY22, FY23, and FY24, respectively. Revenue has declined in this period.
  • The EBITDA for FY22, FY23, and FY24 were Rs 537.61 crore, Rs 259.53 crore, and Rs 226.58 crore, respectively. The EBITDA margins for the same period were 16.88%, 7.80%, and 7.66%, respectively.
  • The company has posted an Adjusted profit of Rs 35.44 crore for FY22, Rs 152.74 crore for FY23, and Rs 133.85 crore for FY24. The PAT margins for the same period were 11.16%, 4.59%, and 4.53%, respectively.
  • The Return on Capital Employed (ROCE) for FY22, FY23, and FY24 was 35.83%, 15.54%, and 11.80%, respectively.
  • Net debt to EBITDA ratio for FY22 was 0.69 - it has increased to 1.54 in FY24.
  • The Working Capital Cycle has been reduced from 65 days in FY22 to 54 days in FY25.

 

Sanathan Textiles IPO: Competitive Strengths

Below are some of the competitive strengths of the company:

  • They are one of the few companies (amongst peer groups) in India with a presence across the polyester, cotton, and technical textile sectors.  
  • The company constantly seeks to innovate and design products that are unique in color, property, and characteristics to suit specific customer requirements.
  • Fully integrated Yarn manufacturing plant set up at a strategic location with equipment supplied by domestic and globally renowned players.
  • STL has a long-standing association with leading consumer brands with a low customer concentration.  

Sanathan Textiles IPO: Risks

Below are some of the risks associated with their business:

  • They do not have long-term agreements for the supply of their raw materials. If they are unable to procure raw materials of the required quality and quantity, at competitive prices, their business, results of operations, and financial condition may be adversely affected.
  • If they are unable to gauge the demand for their products accurately and are unable to maintain an optimal level of inventory, the business will be impacted.
  • Their relationship with their distributors is critical to the business. During the quarter ended June 30, 2024, FY24, FY23, and FY22, 96.55% 94.48%, 93.01%, and 93.31%, respectively, of their total revenue from operations was attributable to the distributors.
  • They may not be able to successfully manage the growth of the business if they are unable to effectively implement their strategies.
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Sanathan Textiles IPO

₹ 14,766
46 Shares

Subscription Status

Shareholder -
Qualified Institutional Buyers -
Non-Institutional Investor -
Retail Individual Investor -
Employee -
Total -

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*The financials mentioned above are sourced from DRHP/ RHP documents.

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