Sanathan Textile IPO to open on December 19: Here are some key insights from RHP

Sanathan Textile IPO: Sanathan Textile’s initial public offering (IPO) is set to open for subscription on Thursday, December 19 and close on Monday, December 23. The yarn manufacturer has established a price band of ₹305 to ₹321 per equity share with a face value of ₹10.

Investors can bid for a minimum of 46 shares per lot, and in multiples thereafter. Retail investors will need to invest at least ₹14,766 to participate.

The IPO allotment is expected to be finalised on Tuesday, December 24, 2024, with the listing anticipated on both BSE and NSE on Friday, December 27, 2024.

The IPO consists of a fresh issue worth ₹400 crore and an offer for sale (OFS) of ₹150 crore by promoter-selling shareholders, bringing the total issue size to ₹550 crore. Promoter shareholders participating in the OFS include Paresh Vrajlal Dattani, Ajay Vallabhdas Dattani, Anilkumar Vrajdas Dattani, Dinesh Vrajdas Dattani, Vajubhai Investments Private Limited, Vallabhdas Dattani HUF, Sonali Ajaykumar Dattani, Dattani Dineshkumar Vrajdas HUF, Beena Paresh Dattani, and Anilkumar Vrajdas Dattani HUF.

The company plans to use the proceeds from the fresh issue for the repayment of specific borrowings, investments in its subsidiary for debt reduction, and general corporate purposes.

DAM Capital and ICICI Securities are serving as the book-running lead managers for the IPO, while KFin Tech has been appointed as the registrar.

Key Insights from Sanathan Textile’s RHP

Increased Contribution to Manufacturing GVA: The textile, apparel, and leather industries’ share in India’s overall manufacturing GVA rose to 13.1 per cent in FY22, up from 10.9 per cent in FY12. In absolute terms, the GVA of this sector grew at a CAGR of 11.2 per cent, reaching ₹4,435 billion in FY22 from ₹1,532 billion in FY12.

Rising Investments in Textile and Apparel Sector: Investments in the textile and wearing apparel segment in India grew at a CAGR of 4.4 per cent between FY12 and FY22, increasing from ₹2,052 billion to ₹3,151 billion. The number of textile and apparel factories also rose to approximately 30,210 in FY22 from 27,958 in FY12. Government initiatives, such as the Amended Technology Upgradation Fund Scheme (ATUFS) and the Scheme for Integrated Textile Parks (SITP), have supported this growth.

Dominance of Natural Fibres in the Market: Natural fibres accounted for 44 per cent of the market share in CY2023, driven by their sustainable and versatile applications in fashion. Polyester held the second-largest share at 29 per cent, owing to its durability and wide range of uses, including cushioning, insulation, and industrial products.

India Among Top Global Textile Exporters: India was the sixth-largest textile exporter globally in CY2022, maintaining a 4 per cent share in global trade with exports valued at USD 39 billion. The China-plus-one policy and improvements in India’s textile infrastructure are expected to bolster its position in global trade.

Opportunities in the US Apparel Market: India stands to benefit from the declining share of China’s apparel exports to the US, which dropped from 31 per cent in CY2018 to 21 per cent in CY2022. The US, as the largest consumer and importer of apparel, offers a significant opportunity for Indian exporters.

Projected Growth in Indian Textile and Apparel Industry: The Indian textile and apparel market, estimated at ₹9,450–9,550 billion in FY24, is projected to grow at a CAGR of 6–7 per cent to reach ₹12,500–12,700 billion by FY28. Domestic demand is expected to outpace export growth, driven by rising incomes, urbanisation, and the shift to man-made fibers.

PLI Scheme for the Textile Sector: The Performance-Linked Incentive (PLI) scheme allocates ₹106.8 billion in incentives to the textile sector, aiming to generate ₹3 trillion in turnover and ₹190 billion in fresh investments over five years. It is also expected to create 7.5 lakh jobs and promote high-value MMF fabrics and technical textiles.

Integrated Presence Across Key Segments: Sanathan Textile is among the few companies in India with a presence across polyester, cotton, and technical textiles. As of December 2023, the company offered over 2,800 active yarn varieties and 30,000 SKUs, catering to diverse customer needs.

Strong Relationships with Leading Brands: The company has established relationships with prominent consumer brands, including Welspun India, Siyaram Silk Mills, D’Décor Home Fabrics, and Wildcraft India.

Financial Performance Highlights: Sanathan Textile reported revenue of ₹22,013.69 million for the nine months ended December 2023 and ₹33,292.13 million for FY23. EBITDA for FY23 stood at ₹2,595.30 million, with profit after tax at ₹1,527.41 million. The company reduced its total borrowings from ₹5,411.63 million in April 2021 to ₹3,740.14 million by February 2024.

State-of-the-Art Manufacturing Facility: Sanathan Textile operates a manufacturing facility in Silvassa, with a production capacity of 223,750 MTPA as of December 2023. The company began operations in FY06 with an installed capacity of 4,500 MTPA.