United Cotfab Limited

United Cotfab Limited is engaged in the manufacturing of high quality open end yarn catering to the textile industry. The manufacturing process adheres to stringent quality standards and is backed by advanced technology and machinery.  During the Financial Year 2020-23, Company was in the process acquisition of land admeasuring area of 7264 sq mtrs located at Village Timba, Taluka Daskroi, Ahmedabad, for setting up Manufacturing facility having an installed capacity of approx 9125 (MT) per annum. The Company commenced the production of cotton yarn in April 2023.  During FY 2022-23, the company was engaged in the business of trading of cotton yarn. In April 2023, the Company commenced the manufacturing of open ended cotton yarn. As per financial performance, United Cotfab Limited has posted total income / net profits of Rs - Cr / Rs (0.0011) Cr (FY21), , Rs 0.02 Cr / Rs 0.02 Cr (FY22), Rs 0.64 Cr / Rs 0.13 Cr (FY23) and Rs 115.52 Cr / Rs 8.66 Cr (FY24). So as per previous financials data, company has shown sudden rise in sales and profit and its due to starting of manufacturing from April 23. Company has posted an average EPS of Rs 4.03 and average RoNW of 32.45% for last three fiscals. Issue is priced at a P/BV of 2.41 as per NAV of Rs 29/- as on Post issue. If we attribute latest earnings of FY22, FY23 and FY24 on fully diluted equity post issue, then asking price is at a P/E of around 7,520.63, 863.82 and 13.88 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Beeline Capital Advisors Private Limited is associated with this SME IPO and handled 40 SME IPOs and in last 3 year. From last 10 SME IPOs, all opened above issue price or at par on the day of listing. As of now from last 10 SME IPOs, one trading below issue price and remaining are trading above issue price. ( As on 08.06.24 ) As per financials, United Cotfab Limited has shown very limited data, RoNW is 63.89% and P/E is respectively 7,520.63, 863.82 and 13.88 as per FY22, FY23 and FY24 earnings. So, issue looks fully priced. Company is engaged in the manufacturing of high quality open end yarn catering to the textile industry, which is highly competitive and fragmented business segment. Performance of BRLM is good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

• 1 Mr. Nirmalkumar Mangalchand Mittal
• 2 Mr. Gagan Nirmalkumar Mittal