Kalahridhaan Trendz Limited is engaged mainly in the business of manufacturing and trading of Fabric with embroidery works, Trading of grey cloths, purchase of grey cloth and printing and dyeing for preparing suiting, shirting and dress materials for sale it in the B2B market only. They are preparing the suiting, shirting & dress material products and focus on the whole sale market. They are the first stage wholesalers, who directly supply the material to the wholesalers. In case of Embroidery Segment, the Company undertake the embroidery work for its own business as well as on behalf of the other clients. In addition to this they also get embroidery work out sourced. The company also deals in purchase and sell of grey cloths as well as the suiting, shirting and dress materials. They have two embroidery knitting machines having capacity of 15000 meters per day. As a part of expansion of business activities, as a part of forward integration, they have also taken over the textile Dying and printing business unit on rent basis in February, 2018, where they are carrying out the dying and printing of suiting, shirting and dress materials for the own use as well as on job work too. The main business activities can be mainly divided in to two segments. 1. Embroidery Knitting activities 2. Cloths dying and Printing activities As per financial performance, Kalahridhaan Trendz Limited has posted total income / net profits of Rs 132.36 Cr / Rs 1.11 Cr (FY21), Rs 183.90 Cr / Rs 2.46 Cr (FY22), Rs 184.17 Cr / Rs 6.66 Cr (FY23) and Rs 84.35 Cr / Rs 4.79 Cr (upto Q2 FY24). So as per previous financials data, company has shown average sales growth, but sudden rise in net profit just before IPO is very surprising. Also, trade receivables are around 29% of FY23 revenue. Company has posted an average EPS of Rs 4.92 and average RoNW of 27.58% for last three fiscals. Issue is priced at a P/BV of 1.70 as per NAV of 26.42 as on post issue. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 31.41, 11.61 and 8.08 respectively, which looks fairly priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Interactive Financial Services Limited is associated with this SME IPO and handled 13 SME IPOs in last 3 year. From last 13 SME IPOs, four opened below issue price and remaining opened above issue price or at par on the day of listing. As of now from last 13 IPOs, ten are trading below issue price and remaining are trading above issue price. ( As on 10.02.24 ) As per financials, Kalahridhaan Trendz Limited has shown average results, RoNW is 36.75% and P/E is respectively 31.41, 11.61 and 8.08 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fairly priced, but trade receivables are high and sudden rise in net profit raises concerns. Company is engaged in manufacturing and trading of Fabric specifically Embroidery Knitting & Cloths dying and Printing, which is highly competitive and fragmented segment. Performance of BRLM is poor. So, we give AVOID rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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