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28 September 2023

Sahaj Fashions IPO: Crafting Fabrics, Weaving Opportunities

Introduction:

Sahaj Fashions Limited, established in 2011, is a notable player in the fabric manufacturing industry. The company specializes in producing fabric for garment making, home furnishings, and industrial applications. Their diverse product range includes cotton suiting fabric, shirting fabric, polyester-based and cotton-polyester blended fabrics, among others.

IPO Overview:

The Sahaj Fashions IPO, a fixed-price issue worth Rs 13.96 crores, comprises a combination of a fresh issue of 4,476,000 shares amounting to Rs 13.43 crores and an offer for sale of 176,000 shares aggregating to Rs 0.53 crores. The IPO subscription period commenced on August 25, 2023, and concluded on August 29, 2023. The allotment process was finalized on September 1, 2023, with shares officially listed on NSE SME on September 6, 2023. The IPO was offered at a price of ₹30 per share, with a minimum lot size of 4,000 shares, necessitating a minimum investment of ₹120,000 for retail investors. High Net Worth Individuals (HNIs) had to apply for a minimum of 2 lots (8,000 shares), totaling ₹240,000.

Key Players:

Khambatta Securities Limited acted as the book running lead manager for the Sahaj Fashions IPO, while Bigshare Services Pvt Ltd served as the registrar for the issue. Nnm Securities was the market maker for the IPO.

Stock Performance:

As of September 27, 2023, Sahaj Fashions Limited's stock (Arrow) was trading at ₹27.05 with an open of ₹27.30 and a close of ₹27.00. The stock's previous close was ₹28.00, with a total traded value of 48,000 shares.

Ownership Structure:

Promoters of Sahaj Fashions include Mr. Rohit Toshniwal, Ms. Sadhana Toshniwal, Mr. Norat Mal Choudhary, Ms. Prabha Lakhotia, Mr. Rakesh Choudhary, Mr. Mukul Lakhotia, and Mr. Nitin Toshniwal. Pre-issue shareholding stood at 97.95%, which adjusted to 100% post the IPO.

Financial Performance:

Sahaj Fashions Limited demonstrated a steady financial performance with consistent growth in assets, revenue, and profits over the years. As of February 28, 2023, the company's total assets amounted to ₹7,179.34 lakhs, generating substantial revenue of ₹9,101.07 lakhs. Profits after tax recorded an impressive growth of ₹288.71 lakhs, contributing to a strong net worth of ₹1,724.07 lakhs, along with reserves and surplus of ₹982.85 lakhs. Total borrowings stood at ₹1,519.24 lakhs.

Performance Indicators:

Key performance indicators for Sahaj Fashions IPO included a post-issue Price-to-Earnings (P/E) ratio of 13.7 and a Market Capitalization of ₹39.5 crores.

Performance Indicators:

Key performance indicators (KPIs) for the Vishnu Prakash R Punglia IPO include a Price-to-Earnings (P/E) ratio of 13.61, a Return on Capital Employed (ROCE) of 33.72%, a Debt/Equity ratio of 0.8, Earnings Per Share (EPS) of ₹10.41, and a Return on Net Worth (RoNW) of 38.31%.

Objectives of the Issue:

The net proceeds from the IPO were allocated for the following purposes:

1. Meeting working capital requirements, including margin money.
2. Prepayment or repayment of certain secured borrowings availed by the company.
3. General corporate purposes and offer expenses.

Expert Opinion:

Noted that Sahaj Fashions operates in a highly competitive and fragmented industry. While the company showcased strong performance in FY23, the IPO appeared to be fully priced. The inconsistency in its financial performance raised concerns, leading to the perception that the IPO was greedily priced. Investors were advised to exercise caution and consider the "High Risk/Low Return" nature of this offering.

Subscription Status:

The Sahaj Fashions IPO received a subscription rate of 7.75 times as of August 29, 2023. Retail investors displayed significant interest with a subscription rate of 11.72 times, while other categories also participated actively.

Conclusion:

Sahaj Fashions Limited, with its extensive product range and steady financial performance, has carved a niche for itself in the fabric manufacturing industry. The IPO reflects the company's aspirations for growth and expansion. However, potential investors need to consider the competitive landscape and the perceived pricing of the IPO before making investment decisions.

Read More IPO related blogs - Vishnu Prakash R Punglia IPO