Cedaar Textile NSE SME IPO review (May apply)

•    The company is engaged in the manufacturing and marketing of quality Melange yarn in B2B segment.
•    The company posted inconsistency in its top and bottom lines for the reported periods.
•    Based on its recent financial data, the issue appears aggressively priced discounting all near term positives.
•    It is operating in a highly competitive and fragmented segment.
•    Well-informed/cash surplus investors may park for long term.

ABOUT COMPANY:
Cedaar Textile Ltd. (CTL) is engaged in the manufacturing of Quality Melange Yarn for use in the household textile, woven goods, and hosiery. The Company Objective is to cater the Top Line Customers Overseas and in India, who produce Garments for renowned Fashion Brands. Its production process begins with procurement of Raw material from the suppliers and processed the same in machine by mixing the different fabrics like cotton, polyester, viscos, acrylic and other fibers. The Company Objective is to cater the Top Line Customers Overseas and in India, who produce Garments for renowned Fashion Brands.

The Company offers the widest range of Raw white Yarns, Melange Yarns, Solid Top dyed Yarns, and Grey Fancy Yarns in Cotton, Polyester, Acrylic, Viscose, Tencel, Modal, and other Fibers. All Yarns are being offered with sustainability as the prime focus, in 100% Organic, Recycle Fibers (Polyester & Cotton) for a Green Environment and Conservation of natural resources. The company’s focus is on Innovation, Customer Orientation, R & D, Technology Up Gradation, Digitalization, ERP, Continuous Improvement, and Moving towards Green Energy. The Company manufactures and sells its products like Yarn, Technical Textile IFR, Fabrics, and Dyed Yarn. As of June 01, 2025, it had 583 employees on its payroll. It also hires contract labourers as and when required.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4350000 equity shares of Rs. 10 each to mobilize Rs. 60.90 cr. at the upper cap. It has announced a price band of Rs. 130 – Rs. 140 per share. The issue opens for subscription on June 30, 2025, and will close on July 02, 2025. The minimum number of shares to be applied is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 31.34% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 8.00 cr. for installation of rooftop solar PV system for captive use, Rs. 17.00 cr. for modernization of machines, Rs. 24.90 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Fast Track Finsec Pvt. Ltd., and Skyline Financial Services Pvt. Ltd., is the registrar to the issue. NNM Securities Pvt. Ltd. is a market maker. The issue is underwritten to the tune of 15% by Fast Track Finsec, and 85% by NNM Securities Pvt. Ltd.

The company has issued initial equity shares at par value, and issued further equity capital at a fixed price of Rs. 140 per share in September 2024. It has also issued bonus shares in the ratio of 29 for 1 in February 2024. The average cost of acquisition of shares by the promoters is Rs. 0.00, Rs. 1.47, Rs. 19.82, Rs. 31.03, and Rs. 34.51 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 9.53 cr. will stand enhanced to Rs. 13.88 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 194.30 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 220.44 cr. / Rs. 7.99 cr. (FY22), Rs.  161.88 cr. / Rs. 4.59 cr. (FY23), Rs. 191.01 cr. / Rs. 11.05 cr. (FY24), For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 7.06 cr. on a total income of Rs. 113.91 cr. IT has posted inconsistency in its top and bottom lines for the reported periods.

For the last three fiscals, the company has reported an average EPS of Rs. 11.18 and an average RoNW of 64.66%. The issue is priced at a P/BV of 2.20 based on its NAV of Rs. 63.70 as of December 31, 2024, but its post-IPO NAV data is missing from offer documents.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 20.65. Based on FY24 earnings, the P/E stands at 17.59. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 3.67% (FY22), 2.86% (FY23), 5.83% (FY24), 6.30%, (9M-FY25), and RoCE margins of 18.22%, 15.91%, 26.90%, 18.21%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Shiva Texyarn, and Vardhman Textiles as their listed peers. They are trading at a P/E of 23.0, and 15.9 (as of June 26, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 11th mandate from Fast Track Finsec in the last five fiscals including the ongoing one.  From the last 10 listings, 1 listed at par and the rest with a premium ranging from 0.83% to 201.20%, on the listing date.