Sanathan Textile IPO: Public Issue Sees Tepid Subscription On Day 1, GMP Hints Strong Listing; Check Dates

The initial public offering (IPO) of Sanathan Textiles Ltd, a polyester yarn manufacturer, has opened for subscription on Dalal Street today. The Rs 550 crore public issue will remain open for bidding until December 23, with a price band of Rs 305 to Rs 321 per share. This IPO marks another entry in India's textile sector.

Subscription Status

By 2:36 pm on the first day of bidding, Sanathan Textiles' IPO was subscribed 30%, receiving bids for 37.64 lakh equity shares against the total offer of 1.19 crore shares. Retail investors led the early interest, with their portion subscribed 54%. Meanwhile, the Non-Institutional Investors (NII) segment saw a 14% subscription, and the Qualified Institutional Buyers (QIB) were yet to place their bids.

The IPO's lot size is set at 46 shares, with a minimum investment requirement of Rs 14,766 for retail investors.

Grey Market Premium (GMP)

Sanathan Textiles shares are trading at a premium of Rs 40 in the grey market, indicating an estimated listing price of Rs 361. This reflects a 12.46% rise over the upper price band of Rs 321. The GMP has remained steady since December 18, following a jump from Rs 25 on December 17.

IPO Structure & Fund Allocation

The IPO comprises a fresh issue of 1.25 crore equity shares, raising Rs 400 crore, and an offer-for-sale (OFS) component of 47 lakh shares, amounting to Rs 150 crore. Promoter and promoter group entities, including key stakeholders such as Paresh Dattani and Vajubhai Investments Pvt Ltd, are participating in the OFS.

The net proceeds from the fresh issue will be utilized for repayment or prepayment of certain borrowings, investment in the subsidiary, Sanathan Polycot Pvt Ltd, to address debt repayment, and general corporate purposes to support growth.

About Sanathan Textiles

Sanathan Textiles is a player in India's textile yarn industry, with a portfolio encompassing polyester yarn products, cotton yarn products, and yarns for technical textiles and industrial applications. The company operates a state-of-the-art manufacturing facility in Silvassa, with an installed capacity of 223,750 metric tonnes per annum (MTPA).

As of September 30, 2024, the company offers over 3,200 active yarn varieties and manages 45,000 stock-keeping units (SKUs). It also has the capability to manufacture 14,000+ yarn varieties and 190,000+ SKUs for diverse applications, from apparel to industrial uses.

According to a CRISIL report, Sanathan Textiles commands a 1.7% market share in the Indian textile yarn industry by operating income.

Growth Potential

The Indian textile and apparel industry is projected to grow at a compound annual growth rate (CAGR) of 6-7% between fiscal 2024 and fiscal 2028. Domestic demand is expected to rise at a CAGR of 7-8%, while export growth is estimated at 4.5-5.5%.

On the global stage, steady demand for yarn products further enhances the company's growth prospects. Its diversified offerings across polyester, cotton, and technical textiles position it well to cater to market needs.

The IPO allotment is expected to be finalized on December 24, 2024. Refunds to unsuccessful bidders and the crediting of equity shares to eligible investors' demat accounts are scheduled for December 26, 2024. Sanathan Textiles shares are likely to debut on the BSE and NSE on December 27, 2024.

IPO Management

The IPO is being managed by DAM Capital and ICICI Securities, serving as the book-running lead managers. KFin Technologies has been appointed as the registrar.