Sonaselection India

Sonaselection India

By Geetanjali Kedia
about 7 days ago

IPO Size: Rs. 142 cr, entirely Fresh Issue

  • To repay Rs. 80 cr of Rs. 284 cr gross debt as of 31.7.26
  • Brownfield capex of Rs. 51 cr, to optimize process rather than enhance capacity

Price band: Rs. 94-99 per share

M cap: Rs. 563 cr (IPO is 25% of m cap)

IPO Date: Thu 17th Sep to Mon 21st Sep 2026, Listing Thu 24th Sep 2026

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

 

Rajasthan-based Textile Manufacturer

Sonaselection India is a 4 year old Bhilwara, Rajasthan based integrated yarn dyeing and processing company for making textile fabrics like cotton, lycra, polyester. Its manufacturing facility in Bhilwara has an installed capacity of 82.44 million meters per annum, which was 83% utilized in FY26.

From fabric manufacturing, company is forward integrating into readymade garment manufacturing. Also, in May, 2026, it entered into a memorandum of understanding with a technical textile manufacturer to make value-added military-specification fabrics.  

 

High Growth and Healthy Margins

Established only in FY22, company’s revenue has scaled rapidly – jumping from Rs. 94 cr in FY23 to Rs. 516 cr in FY26. It has healthy margins - 40% gross and 16% EBITDA, with FY26 net profit of Rs. 34 cr, implying 6.6% net margin. On equity of Rs. 43 cr (face value Rs. 10each), EPS for FY26 stood at Rs. 8.1.  

Given the nature of business, company need for working capital is high, with debtors of Rs. 104 cr and inventory Rs. 154 cr, as of 31.3.26, representing 2.5 months and 3.5 months of outstanding sales. Need for working capital will keep a tab on growth rates going forward.

 

High Leverage  

Gross debt has risen from Rs. 258 cr as of 31.3.26 to Rs. 284 cr as of 31.7.26, with long-term debt rated lowest investment grade rating of BBB/Stable by Crisil.

Balance sheet is highly leveraged, with net debt to equity ratio of 2.4:1, to moderate to 0.8:1, post repayment from IPO proceeds. Even the net debt to EBITDA ratio of 3x will contract only to 2.1x, again not comforting.

While company’s RoCE stands between 17-20% due to 2.8x fixed asset turnover ratio, the high leverage leads to a RoE of 39%, for FY26. Post listing though, RoE is expected to moderate to the mid-teens.

 

In-line Pricing

M cap of Rs. 563 cr and an Enterprise Value of Rs. 762 cr implies a current year PE multiple of close to 12x, on FY27E EPS of Rs. 8.5, with a revenue multiple of 1.5x. Larger peer and Bhilwara based Nitin Spinners with Rs. 3,200 cr topline and 6% net margin is ruling at 15x PE and 1.5x EV/revenue multiple. Garment maker S P Apparels, with 6% net margin on Rs. 1,600 cr topline, is trading at PE of 20x and revenue multiple of 1.6x, while yarn maker Ambika Cotton with 9% net margin on Rs. 800 cr topline is trading below 11x PE, 1x revenue, despite zero debt although RoE is lower.

Textile sector generally enjoys low discounting for moderate return ratios and need for large working capital. While Sonaslections’s growth track record is impressive, high leverage is not giving confidence, especially due to small scale of operations.  

Promoter, holding 86% stake as of date, did Rs. 31 cr secondary sale in July-end at Rs. 90 per share and Rs. 101 per share, averaging a sale price of Rs. 97 per share.