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15 October 2023

Sai Silks (Kalamandir) IPO: Weaving a Prosperous Future

Introduction:

Sai Silks (Kalamandir) Limited, a prominent name in the ethnic apparel and value-fashion industry, recently entered the stock market with a significant IPO. This book-built issue, valued at Rs 1,201.00 crores, was a combination of a fresh issue of 2.7 crore shares amounting to Rs 600.00 crores and an offer for sale of 2.71 crore shares totaling Rs 601.00 crores. The subscription window for the Sai Silks (Kalamandir) IPO opened on September 20, 2023, and closed on September 22, 2023. The allotment process was finalized on September 27, 2023, and the shares commenced trading on both BSE and NSE on the same day. The IPO was priced in the range of ₹210 to ₹222 per share, with a minimum lot size of 67 shares and a minimum investment of ₹14,874 for retail investors.

Key Market Players:

Motilal Oswal Investment Advisors Limited, HDFC Bank Limited, and Nuvama Wealth Management Limited were the book running lead managers for the Sai Silks (Kalamandir) IPO, while Bigshare Services Pvt Ltd served as the registrar.

Stock Performance:

As of October 6, 2023, Sai Silks (Kalamandir) Limited's stock was trading at ₹243.35, marking a 3.29% increase. The stock had opened at ₹235.95, reached a high of ₹246.50, and had a low of ₹235.95. The previous closing price was ₹235.60, with a total traded value of 18,25,115 shares. Notably, the stock hit a 52-week high of ₹258.85 on September 29, 2023, and a 52-week low of ₹227.40 on October 4, 2023.

Ownership Structure:

Before the IPO, the company had a pre-issue shareholding of 95.23%, which reduced to 60.80% post-issue.

Financial Insights:

Sai Silks (Kalamandir) Limited demonstrated robust financial performance. As of March 31, 2023, the company's assets stood at ₹1,220.45 crores, reflecting substantial growth. The company reported impressive revenue of ₹1,358.92 crores, indicating significant revenue growth. Profit after tax (PAT) reached ₹97.59 crores, showcasing substantial profitability. The net worth increased to ₹397.33 crores, with reserves and surplus at ₹373.27 crores. Total borrowing amounted to ₹345.50 crores.

Market Indicators:

Key performance indicators included a Price-to-Earnings (P/E) ratio of 27.37, a Post P/E ratio of 34.91, a Market Capitalization of ₹3,404.73 crores, a Return on Equity (ROE) of 27.96%, and a Return on Capital Employed (ROCE) of 23.55%.

Objectives of the Issue:

The net proceeds from the Sai Silks (Kalamandir) IPO were intended for various purposes, including:

1. Funding capital expenditure for the establishment of 30 new stores.
2. Funding capital expenditure for setting up two warehouses.
3. Meeting working capital requirements.
4. Repayment or pre-payment of certain borrowings.
5. General corporate purposes.

Expert Opinion:

Highlighted that after an unsuccessful attempt for its maiden IPO in February 2013, the company emerged as one of the top 10 retailers in ethnic wear with a major focus on sarees. While it faced challenges due to the COVID-19 impact until FY22, the company reported strong numbers for FY23, indicating growth prospects with the addition of new stores. Based on FY23 earnings, the issue appeared to be fully priced. Informed investors might consider investing for medium to long-term rewards.

Subscription Status:

The Sai Silks (Kalamandir) IPO garnered significant interest from investors, with an overall subscription rate of 4.47 times as of September 22, 2023. While retail investors showed less enthusiasm with a subscription rate of 0.91 times, the QIB category displayed high interest with a subscription rate of 12.17 times. The NII category also saw substantial interest, with a subscription rate of 2.54 times.

Conclusion:

Sai Silks (Kalamandir) Limited's IPO brought the colors and traditions of Indian ethnic wear to the stock market. Potential investors should carefully assess the company's product portfolio, expansion plans, competitive position, and financial stability before making investment decisions. As with any investment, diversification and prudent risk management are key when considering IPO opportunities, especially in the dynamic retail sector.

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