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18 December 2023

Karnika Industries IPO: Crafting Success in Threads

Introduction:

Karnika Industries IPO, a fixed-price issue of Rs 25.07 crores, unfolds a promising chapter in the company's narrative. The entire issue comprises a fresh offering of 32.99 lakh shares, indicating a strategic move towards expansion. Bidding for this IPO commenced on September 29, 2023, and concluded on October 5, 2023. The allotment process was concluded on Tuesday, October 10, 2023, with the shares making their market debut on NSE SME on October 12, 2023.

Pricing Dynamics:

With a per-share price set at ₹76, the IPO garnered substantial attention. The minimum lot size for an application was established at 1600 shares, requiring a minimum investment of ₹121,600. High Net Worth Individuals (HNIs) were offered a minimum lot size of 2 lots (3,200 shares), equating to ₹243,200.

Market Performance Overview:

As of December 15, 2023, Karnika Industries Limited (KARNIKA) was quoted at ₹132.85, representing a 4.77% decrease. The stock opened at ₹135.00, achieved a high of ₹135.00, and experienced a low of ₹132.60. The previous close stood at ₹139.50, with a total traded value of 56,000. This performance provides a snapshot of the stock's trajectory over the last few days.

Key IPO Highlights:

- IPO duration: September 29, 2023, to October 5, 2023
- Listing Date: October 12, 2023
- Face Value: ₹10 per share
- Issue Price: ₹76 per share
- Lot Size: 1600 Shares
- Total Issue Size: 3,299,200 shares, aggregating up to ₹25.07 Cr
- Fresh Issue: 3,299,200 shares, aggregating up to ₹25.07 Cr
- Issue Type: Fixed Price Issue IPO
- Listing At: SME, NSE

Equity Transition:

Pre-IPO, Karnika Industries had 9,100,300 shares in circulation. Post the IPO, this figure rose to 12,399,500 shares, signaling growth and a shift in market dynamics.

IPO Reservation Dynamics:

The IPO strategically allocated 3,299,200 shares, with 166,400 (5.04%) for Market Makers, 1,566,400 (47.48%) for Non-Institutional Investors (NIIs), and an equal 1,566,400 (47.48%) for Retail Individual Investors (RIIs).

IPO Timeline Snapshot:

- IPO Open Date: Friday, September 29, 2023
- IPO Close Date: Thursday, October 5, 2023
- Basis of Allotment: Tuesday, October 10, 2023
- Initiation of Refunds: Wednesday, October 11, 2023
- Credit of Shares to Demat: Thursday, October 12, 2023
- Listing Date: Thursday, October 12, 2023
- Cut-off time for UPI mandate confirmation: 5 PM on October 5, 2023

Lot Size Landscape:

Investors had the flexibility to bid for a minimum of 1600 shares and in multiples thereof. The table below outlines the investment parameters for retail investors and HNIs:

Application	Lots	Shares	Amount
Retail (Min)	1	1600	₹121,600
Retail (Max)	1	1600	₹121,600
HNI (Min)	2	3,200	₹243,200

Promoter Holdings Shift:

Promoters, namely Mr. Niranjan Mundhra, Mr. Shiv Shankar Mundhra, and Mr. Mahesh Kumar Mundhr, held 100% of shares pre-issue. Post the IPO, their stake transitioned to 73.39%.

Company Profile:

Incorporated in 2017, Karnika Industries Limited, formerly known as Karni International, specializes in the manufacturing and export of garments in India. The company's product portfolio covers a spectrum of kids' wear, including shorts, joggers, tees, winter wear, and infant wear, marketed under the brand KARNIKA and various sub-categories.
Karnika Industries boasts well-established manufacturing units equipped with modern machines for designing, quality inspection, ironing, and packing. The company's journey is marked by innovation, quality, and a commitment to customer satisfaction.

Financial Performance Overview:

As of March 31, 2023, Karnika Industries reported notable financials:

- Assets: ₹10,071.04 Lakhs
- Revenue: ₹12,605.62 Lakhs
- Profit After Tax: ₹826.74 Lakhs
- Net Worth: ₹1,806.83 Lakhs
- Reserves and Surplus: ₹896.80 Lakhs
- Total Borrowing: ₹5,245.53 Lakhs

Key Financial Indicators:

- Market Cap: ₹94.24 Crores
- P/E (x): 7.57
- Post P/E (x): 11.06
- Debt/Equity: 2.9
- EPS (Rs): 9.66
- RoNW: 45.76%

Objects of the Issue:

The net proceeds from the IPO are earmarked for:
- Meeting Working Capital Requirements - General Corporate Purposes - Meeting the Issue Expenses

IPO Review:

Suggests that Karnika Industries, involved in trading and marketing kids' wear procured on a job-work basis, has shown growth in its top lines. The bottom line boost for FY22 and FY23 raises investor interest. The issue seems fully priced based on FY23 earnings, making it an option for well-informed investors seeking long-term rewards.

IPO Subscription Status:

As of October 5, 2023, the Karnika Industries IPO witnessed robust subscription, reaching 3.07 times. The retail category was subscribed 2.91 times, while the Non-Institutional Investors (NIIs) subscribed 3.22 times.

Note: All financial figures are in INR (Indian Rupees), and market-related data is as of December 15, 2023.

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