- Price band set at ₹95‑₹105; no grey‑market premium suggests pricing may be spot‑on.
- Fresh issue of 1.06 cr shares means 100% of proceeds stay with the company.
- Debt repayment, working‑capital boost, and growth capex are the three pillars of use‑of‑funds.
- FY25 profit jumped 22% to ₹8 cr; revenue rose 10% to ₹255 cr, indicating scaling momentum.
- Sector: Indian cotton‑yarn market is consolidating; peers like Vardhman and Grasim are expanding capacity.
Most investors overlook the fine print of a modest‑size textile IPO—that was a mistake.
Shree Ram Twistex IPO: Core Deal Structure
The Rajkot‑based yarn manufacturer is launching a main‑board IPO on February 23, remaining open until February 25. The offer comprises only a fresh issue of 1.06 crore equity shares priced between ₹95 and ₹105 per share, with a face value of ₹10. No offer‑for‑sale component means existing shareholders are not off‑loading stakes, and the entire capital raised—estimated at roughly ₹1,060 million at the top of the band—will stay in the firm.
Use‑of‑Funds: Debt, Working Capital, and Growth Engine
Management earmarks the proceeds for three strategic buckets:
- Debt repayment: Current long‑term borrowings sit around ₹300 million. Reducing leverage will improve the debt‑to‑equity ratio, potentially unlocking lower cost of capital.
- Working‑capital cushion: Seasonal demand swings in denim and terry fabrics demand liquidity. An enhanced cash buffer can smooth order‑to‑cash cycles.
- General corporate activities: This umbrella covers capex for new compact‑ring‑spun lines, automation upgrades, and expansion into lycra‑blended yarns—a higher‑margin segment.
Financial Snapshot: Growth Amidst a Maturing Textile Cycle
For FY25, Shree Ram Twistex posted revenue of ₹255 cr, a 10.1% YoY increase, and net profit of ₹8 cr, up 22% from the prior year’s ₹6.55 cr. The six‑month interim (Q1‑Q2 FY25) showed ₹132.1 cr revenue and ₹7 cr profit, underscoring a strong second‑half momentum.
Key ratios:
- EBITDA margin expanded to roughly 12% from 10% a year ago, reflecting better pricing power in value‑added yarns.
- Debt‑to‑EBITDA ratio currently sits near 2.5x, indicating manageable leverage but room for improvement post‑debt retirement.
Sector Trends: Why Indian Yarn Makers Are in the Spotlight
India’s cotton‑yarn market, valued at over $12 bn, is experiencing a modest demand rebound after a pandemic‑induced slump. Two forces are driving the resurgence:
- Domestic consumption: Rising per‑capita apparel spend and government push for “Make in India” fabrics.
- Export opportunities: Favorable rupee rates and trade agreements open new lanes to Bangladesh, Vietnam, and the Middle East.
Within this backdrop, compact ring‑spun yarns—offering higher strength and better fabric quality—are gaining market share. Shree Ram Twistex’s product mix, which includes compact and slub yarns plus lycra blends, aligns directly with this premium shift.
Competitive Landscape: How Peers Are Positioning Themselves
Industry giants such as Vardhman Textiles and Grasim Industries have recently announced capacity additions and technology upgrades. However, their scale means they are less nimble in targeting niche segments like Lycra‑blended fabrics, where Shree Ram Twistex holds a differentiated edge.
Adani Enterprises’ recent foray into technical textiles signals a potential new competitor, but its focus remains on high‑performance polymers rather than traditional cotton yarns. This creates a sweet spot for Twistex to capture market share without direct head‑to‑head price wars.
Historical Lens: What Past Small‑Cap Textile IPOs Teach Us
Looking back at the 2019‑2020 wave of textile IPOs (e.g., Alok Industries’ secondary offering, Vardhman’s follow‑on), two patterns emerge:
- Companies that allocated proceeds to debt reduction and capacity modernization tended to outperform the sector average by 3‑5% over the next 12 months.
- Those that relied heavily on one‑off working‑capital boosts without strategic capex saw price compression once the market corrected.
Shree Ram Twistex’s balanced use‑of‑funds approach mirrors the successful playbook, suggesting upside potential if execution is disciplined.
Grey Market Sentiment: Zero Premium, Zero Surprise?
Current grey‑market data shows a premium of ₹0, implying market participants expect the listing price to match the top of the IPO band (₹105). A zero premium can mean two things: either the price is already fair, or the market has not priced in the growth catalysts. Savvy investors should assess whether the implied valuation leaves room for a “buy‑the‑dip” if the share opens slightly lower.
Investor Playbook: Bull vs. Bear Cases
Bull Case:
- Debt reduction improves leverage, lowering financing costs and freeing cash flow for dividend or buy‑back.
- Expansion into lycra‑blended yarns taps a higher‑margin niche with limited competition.
- Sector tailwinds (domestic apparel spend, export incentives) provide top‑line upside.
- Zero grey‑market premium may present a pricing inefficiency; share could trade below ₹105 on debut.
Bear Case:
- Textile margins are sensitive to cotton price volatility; a sudden input cost surge could compress earnings.
- Large peers may engage in aggressive pricing, squeezing smaller players.
- If the IPO is fully subscribed at the top of the band, the effective cost of equity may be higher than projected, limiting upside.
- Execution risk: New capex projects can face delays, eroding expected returns.
Bottom line: Investors with a medium‑term horizon and appetite for sector‑specific upside might consider a modest allocation, while risk‑averse readers should weigh the execution uncertainties before committing.
How This IPO Fits Into a Diversified Portfolio
For a balanced Indian equity portfolio, adding a small‑cap textile player can provide exposure to domestic consumption trends without overwhelming concentration risk. Pairing Shree Ram Twistex with defensive staples (e.g., FMCG) and growth‑oriented tech names creates a tilt toward both stability and upside.
As always, perform due diligence, consider your risk tolerance, and consult a qualified advisor before taking a position.