Sanathan Textiles IPO - Issue Details, Allotment And Listing Date, Financials, Strategies, Risks: DRChoksey

Deven Choksey Research Report

Sanathan Textiles will launch its initial public offering on December 19 and the offer closes for subscription on Dec. 23. The manufacturer of textile yarn has set the price band between Rs 305 and Rs 321 at the face value of Rs 10 per share.

The Rs 550 crore IPO comprises of a fresh issue of 1.25 crore shares worth Rs 400 crore and an offer-for-sale component of 47 lakh shares, amounting to Rs 150 crore. 

Sanathan Textiles shares are set to be listed on the NSE and BSE on Dec. 27.

Outlook and Valuation:

Sanathan Textiles, a manufacturer of textile yarn with a strong focus on polyester yarn, is positioned for substantial growth in the coming years. With its existing capacity being fully utilized, the company is set to more than double its production capacity by FY25 with the addition of a new facility in Punjab dedicated to polyester yarn.

Looking ahead, product mix shift towards value-added products and growing international sales is likely to boost profitability and strengthen the overall financial performance. Sanathan’s valuation appears fair, with a P/E ratio of 20 times and an EV/Ebitda of 13 times compared to its peers in the industry.

The company enjoys a diverse client base, reflecting its strong market reach, and demonstrates robust operational efficiency with a Fixed Asset Turnover Ratio of 3.2x and a short working capital cycle of 54 days for FY24, which is better than many of its competitors.

Considering these factors, strategic capacity expansion, and an on par valuation we assign a “Neutral” rating.

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