Shree Karni Fabcom Limited is engaged in the manufacturing of technical textiles tailored for diverse industries such as luggage, medical arch support, chairs, shoes, and apparels. The production process begins with yarn procurement and encompasses weaving, coating, printing, and finishing, resulting in knitted and woven fabrics crafted to meet the clients' customized specifications. Specializing in Woven Fabrics, Knitted Fabrics, Coated Fabrics, and 100% polyester, they source yarn, resin, acrylic, and coating chemicals to produce specialized technical textiles. The Company specialised in converting yarn into fabric through knitting of fabrics. The outsource weaving, coating, sizing and embossing of specialized technical textile to the Subsidiary, IGK Technical Textile LLP. The product applications span a wide spectrum, including luggage, roofing, agriculture net, vehicle covers, tents, armed forces fabric, sports kits, chairs, medical arch support, umbrellas, and raincoats. The manufacturing unit is equipped with automated machines for manufacturing of specialized technical textile with installed capacity of 70,000 meters per day for weaving, 90,000 kilos per month for knitting, 50,000 meters per day for poly acrylic and polyurethane coating, 15,000 meters per day for PVC / 8,000 meters per day for EVA lamination and 40,000 meters per day heat embossing. They market and sell under the brand ‘SKFL’. They propose to utilize a portion of the Net Proceeds of this Issue towards setting up of dyeing facility and forward integration for manufacturing of bags at land already purchased in very close vicinity to the existing manufacturing set up. Guided by experienced promoters - Radheshyam Daga, Manoj Kumar Karnani, Raj Kumar Agarwal, and Rajiv Lakhotia—the company has evolved from trading specialized technical textiles to establishing an automated manufacturing facility. Prior to incorporation of the Company, the promoters were engaged in the business of trading of specialized technical textile used in luggage industry. During the year 2018, the Promoters incorporated Shree Karni Fabcom LLP and in the year 2020, the Company expanded its product portfolio by setting up an automated manufacturing facility to manufacture specialized technical textile. The Company manufactures and sells its products across India. Recently, the Company has acquired 66.67% stake in IGK Technical Textile LLP w.e.f. October 31, 2023, which is engage in weaving, coating, sizing and embossing of specialized technical textile. The subsidiary operation comprises woven, coating, and embossing facilities. As per financial performance, Shree Karni Fabcom Limited has posted total income / net profits of Rs 32.90 Cr / Rs 1.53 Cr (FY21), Rs 83.65 Cr / Rs 5.15 Cr (FY22), Rs 127.04 Cr / Rs 5.55 Cr (FY23) and Rs 75.99 Cr / Rs 8.13 Cr (upto 30.11.2023 FY24). So as per previous financials data, company has shown good growth, but sudden increase in net profit, just before IPO generates doubts. Company has posted an average EPS of Rs 25.27 and average RoNW of 21.34% for last three fiscals. Issue is priced at a P/BV of 6.17 as per NAV of 36.77 as on 30.11.23. 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 31.18, 28.91 and 13.16 respectively, which looks fully priced. As per RHP, there are no listed peers. On BRLM's front, Horizon Management Private Limited is associated with this SME IPO and handled 2 SME IPOs in last 1 year. From last 2 SME IPOs, one opened below issue price and remaining opened above issue price or at par on the day of listing. As of now from last 2 SME IPOs, one is trading below issue price and remaining opened above or at par issue price. ( As on 01.03.24 ) As per financials, Shree Karni Fabcom Limited has shown good results, RoNW is 21.34% and P/E is respectively 31.18, 28.91 and 13.16 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced, but sudden rise in net-profit in H1 FY24 is very surprising. Company is in business of manufacturing technical textiles tailored for diverse industries such as luggage, medical arch support, chairs, shoes, and apparels, which is highly competitive and fragmented segment. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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