India has a rich heritage of the handloom industry and the aesthetics of its drapes. The beauty of this industry is in the vast variety of its products. Moreover, there is heavy segmentation and an informal market for sarees in India. Every city has its specific saree markets and famous shops.
Fashion evolves, preferences change, but over so many decades, the popularity of traditional ethnic handlooms has not changed. There are nearly 115 different saree weaves in India, like Banarasi, Kanchivaram, Paithani, Patola, and many more. Indian women love wearing the six yards and carrying their beauty. There is no doubt why the Indian saree industry is expected to grow at 5%-6% by 2029!
Investors also seek variety in their portfolios. The stock market has a few such unique businesses. Investors have a unique opportunity to invest in this growth with the initial public offer (IPO) of Saraswati Saree Depot Ltd. However, it is advisable to understand the business and the company thoroughly before investing. Let’s analyse these aspects in detail.
Know more about textile industry: Textile industry in India – The foundation of fashionable clothing trends
About Saraswati Saree Depot Ltd
The Kolhapur-based company was established in 1966 by Lt. Laxmandas Dulhani. Since its inception, the Dulhani family has been in charge of its operations. Their main business has been saree, and they are predominantly a B2B (business to business) or wholesaler.
Since 2017, the company has started expanding in the kurti, pant-shirt piece, lehenga, etc, segment.
M/s Saraswati Saadi Depot was incorporated as Saraswati Saree Depot Pvt Ltd in 2021 by the family for succession. Today, it has served 13000 unique customers in FY 2024. The company has a network of nearly 900 weavers in India. It manufactures from the seven sources in the country:
- Varanasi
- Bengaluru
- Surat
- Mau
- Madurai
- Dharmavaram
- Kolkata
Products
Owing to its experience in the industry and rich heritage of India, the company has a diverse product range. Saree contributes nearly 90% of its revenue. Moreover, it sells kurti, blouse pieces, pant-shirt pieces, lehenga, bottoms, chunaris, etc. Its saree portfolio has categories based on weave, fabric, patterns, occasions, etc.
As of FY 24, nearly 65% of the retail apparel market is unorganised. However, growing per capita income and fashion trends can create space for brands to improve their share.
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Saraswati Saree Depot Ltd IPO details
| IPO size | ₹160.01 crores |
| Start date | August 12, 2024 |
| End date | August 14, 2024 |
| Price band | ₹152 to ₹160 |
| Lot size | 90 shares |
| Fresh Issue | 104 crores |
| Face Value | ₹10 |
The company is raising funds for objectives like working capital and general corporate motives. Its IPO registrar is Bigshare Services Pvt Ltd. Moreover, the minimum investment for retail investors is ₹14,400.
Currently, the company’s shareholders are mainly Mahesh Dulhani and Rajesh Dulhani, with an aggregate 25% holding. Other shareholders are members of the promoters group. This total 100% holding would reduce.
Saraswati Saree Depot Ltd GMP
The IPO seems gaining attraction among investors since the start. On August 12,2024, (day 1) the IPO was subscribed 2.01 times on the National Stock Exchange (NSE). Only the retail segment was subscribed 3.18 times.
Similarly, on the Bombay Stock Exchange (BSE), the total subscription is 4.37 times. Retail investors subscribed by 5.39 times. On day 1, non-institutional investors are spot subscribing heavily to the IPO (on both exchanges).
Key financials
| Particulars | FY 2024 | FY 2023 | FY 2022 |
| Revenue from operations | 610.90 | 601.89 | 549.57 |
| Net profit | 29.52 | 22.97 | 12.30 |
| EBITDA margin | 6.73% | 5.66% | 3.79% |
| Return on equity | 58.88% | 96.15% | 196.81% |
| Net worth | 64.90 | 35.38 | 12.40 |
| Earnings per share | ₹8.92 | ₹6.94 | ₹3.72 |
| Return on capital employed | 64.46% | 98.06% | 169.07% |
| Total units sold | 1.60 crores | 1.57 crores | 1.47 crores |
Source: RHP Saraswati Saree Depot Ltd
The company’s financials have marked a profitable business for the last few years. In 2014, the company gained 200 crore sales. The steady growth of the company’s net profit is due to its constant expansion in new clothing segments.
Nearly 78% of its revenue is from Maharashtra, followed by 16% from Karnataka. The sale of saree is driven by festivals and occasions. So, during the festive season from September to November, the company earned 37% of its revenue as of FY24.
Improving net profit and EBITDA margin indicates that the company is in a sound position. However, its pace is quite slow compared to other companies in the industry. As of FY24, the top ten weavers contribute nearly 25% of its revenue. The industry P/E is, on average 46.57.
SWOT analysis
The SWOT analysis helps summarise a company’s financial and non-financial metrics, along with other overall aspects.
| Strength | Weakness | Opportunity | Threat |
| Strong customer base all over the country. Mainly in western and southern India. | The return on assets (ROA) ratio is declining, which may hamper the efficiency. | The company is planning an expansion into Men’s ethnic wear. The category is estimated to increase nearly 10% by 2029. | Fast fashion and high informal market in the saree industry. Customers don’t check the brand, but quality and money. |
| The company’s financials are in a sound position. Multiple product categories and bulk purchase capacity from weavers/ suppliers. | The negative cash flow for the past two years is one of the biggest upsets for investors. | Increasing social media provides opportunities for brand collaborations and e-commerce marketing and sales. Nearly 35% market unorganised. | Revenue focused in Maharashtra and Karnataka. Dependency on third-party suppliers/ weavers. |
Summary
The saree industry seems a very unique and attractive investment for many. Yet, there are very few organised players in the industry. So, an approximate 5-6% growth of the saree industry, may turn out to be promising. Saraswati Saree Depot Ltd IPO is an opportunity that may uniquely diversify investor’s portfolios.
The strong product positioning poses a noteworthy reason for investment. Moreover, the company has been in the B2B segment for more than 50 years, which provides it with an edge of experience.
The company’s IPO starts on August 12, 2024, and ends on August 14, 2024. Investors should analyse the company’s business and other aspects in detail while making any investment decision.
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