Introducing the IPO and why it matters
Sanathan Textiles, a major player in India’s textile yarn market, is gearing up for its much-anticipated ₹550 crore IPO. Scheduled to open on December 19, 2024, and close on December 23, 2024, this book-built issue aims to fuel the company’s growth plans and strengthen its market position.
With a price band of ₹305-₹321 per share, the IPO includes a fresh issue of ₹400 crore and an offer for sale (OFS) of ₹150 crore. This launch has sparked significant interest, given Sanathan Textiles’ broad product portfolio and strategic position in the global textile yarn industry.
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A brief history of Sanathan Textiles
Established in 2005, Sanathan Textiles has carved a niche in manufacturing polyester yarn, cotton yarn, and technical textiles. Its products cater to diverse sectors like automotive, healthcare, construction, and sportswear.
- The company boasts a 1.7% market share in the Indian textile yarn industry, according to a CRISIL report.
- As of September 2024, it has over 3,200 active yarn varieties and more than 45,000 stock-keeping units (SKUs).
Sanathan’s manufacturing facility in Silvassa operates at a robust installed capacity of 223,750 MTPA, enabling it to meet domestic and global demand. The company exports to 27+ countries, including India, Argentina, Singapore, Germany, and Israel.
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Why is Sanathan Textiles going public?
The company aims to leverage the IPO proceeds to:
- Repay borrowings: ₹400 crore will go toward reducing debt for both the parent company and its subsidiary, Sanathan Polycot Pvt. Ltd.
- Corporate growth: Enhance operational capacity and drive innovation.
- General corporate purposes: Strengthen overall financial stability.
This strategic fundraising aligns with the company’s focus on expanding its product range and market reach while improving operational efficiency.
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Financial performance at a glance
Sanathan Textiles has experienced mixed financial results, with revenue and profit declining in FY24 compared to FY23.
| Period | Revenue (₹ Cr) | Profit After Tax (₹ Cr) | Assets (₹ Cr) | Net Worth (₹ Cr) |
| FY22 | 3,201.46 | 355.44 | 1,796.47 | 987.39 |
| FY23 | 3,345.02 | 152.74 | 1,906.67 | 1,140.13 |
| FY24 | 2,979.80 | 133.85 | 2,203.68 | 1,273.98 |
| Q1 FY25 | 787.76 | 50.07 | 2,529.53 | 1,324.06 |
Despite a 12% drop in PAT between FY23 and FY24, the company continues to maintain a healthy asset base and net worth growth, indicating long-term stability.
Key IPO details
| Particulars | Details |
| IPO Open Date | December 19, 2024 |
| IPO Close Date | December 23, 2024 |
| Price Band | ₹305-₹321 per share |
| Fresh Issue | ₹400 crore |
| Offer for Sale (OFS) | ₹150 crore |
| Lot Size | Minimum of 46 shares |
| Listing Date | December 27, 2024 |
| Stock Exchange | BSE, NSE |
| Total Issue Size | ₹550 crore |
Shareholding pattern
| Category | Pre-Issue (%) | Post-Issue (%) |
| Promoters (Nimbus Trust, Dattani Family) | 100% | Reduced proportionally |
| Public | 0% | Not disclosed |
Fund utilisation plan
Sanathan Textiles plans to allocate IPO proceeds as follows:
- ₹400 crore: Debt repayment for the company and its subsidiary.
- Remaining funds: General corporate purposes to strengthen operational efficiency and fund working capital needs.
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Why should you invest in the Sanathan Textiles IPO?
Here’s why you should consider investing
- Sanathan Textiles Limited offers an extensive portfolio of over 14,000 yarn varieties and 192,640 SKUs, spanning polyester, cotton, and technical textiles, showcasing its diverse product offerings.
- The company has a strong focus on premium yarns, which accounted for 48.5% of its total sales in the nine months ending December 31, 2023.
- Operating from an advanced manufacturing facility in Silvassa with a capacity of 223,750 MTPA, the facility holds ISO 9001:2015, ISO 14001, and ISO 45001 certifications, ensuring high-quality standards.
- Sanathan Textiles enjoys long-standing partnerships with prominent brands like Welspun India and Siyaram Silk Mills, catering to 2,588 customers and working with 902 distributors across seven countries.
Watch out for these risks
- The company does not have long-term agreements with most of its customers, leaving it vulnerable to order cancellations or fluctuating demand, which could impact its financial and operational stability.
- With significant reliance on its Silvassa production facility, any operational disruptions or natural disasters could severely affect its operations and performance.
- The lack of contractual exclusivity with customers allows them to terminate relationships without prior notice, creating the potential for variability in sales and operational challenges.
- Previous audits have revealed weaknesses in internal financial controls, particularly in areas like payment recording and revenue recognition, which could lead to material misstatements and affect financial reliability.
Bottomline
Sanathan Textiles’ IPO is a strategic move to strengthen its financial footing and enhance its manufacturing capacity. With its diversified product portfolio and established global presence, the company is positioned for long-term growth. However, potential investors should weigh the advantages against the risks, particularly the declining profitability and high debt levels.
This IPO offers an opportunity to invest in a promising sector, but as with any investment, due diligence is key. If you’re looking for diversification in your portfolio with exposure to the growing textile industry, this IPO could be worth considering.
