K K Silk Mills BSE SME IPO review (Not Rated)

•    The company is engaged in the business of manufacturing fabrics and garments.
•    It posted growth in its top and bottom lines for the reported periods.
•    The sudden boost in its bottom lines from FY25 onwards raises eyebrows and concern over its sustainability.
•    Based on its recent financial data, the issue appears aggressively priced. 
•    There is no harm in skipping this pricey and dicey bet.

ABOUT COMPANY:
KK Silk Mills Ltd. (KSML) is engaged in the business of manufacturing of fabrics as well as garments. Its range of garment products covers all the age group segments such as kids wear, men’s wear, women’s wear. The company uses variety of knitted fabrics such as 100% cotton, 100% polyester, blended (cotton and polyester) and printed polyester fabrics in the production of garments.

It manufactures the fabric which used in variety of products such as mens shirts wear- formal and casual wear, Shervani material, ladies wear - dress material, burkha material, kushan cover material etc. The company sells its knitted fabrics largely to domestic garment manufacturers. It has approximately 5422 sq. mtrs. size area manufacturing plant located at Umbergaon, Valsad.

Its extensive product line includes a wide range of plain, twill, sateen, dobby, structured, and fil-afil fabrics, each of which is made with the utmost care and attention to detail. With a commitment to quality, innovation and customer satisfaction, the company is dedicated to become trusted manufacturer in the textile and garment industry. It is committed to providing clients with a range of products that not only align with international fashion standards, but also set new standards for quality and design. KSML’s aim is to offer a collection of suiting and shirting fabrics, corporate wear, men's wear, and ready-made garments that not only meet, but surpass the expectations of clients and elevate their style. As of March 31, 2025, it had 191 employees including 26 contract workers. 

ISSUE DETAILS:
The company is coming out with its maiden book building route IPO of 7500000 equity shares of Rs. 10 each at par value to mobilize Rs. 28.50 cr. at the upper cap.  The issue opens for subscription on November 26, 2025, and will close on November 28, 2025. The company has announced a price band of Rs. 36 - Rs. 38 per share. Post allotment, shares will be listed on BSE SME. The minimum application to be made is for 6000 shares and in multiples of 3000 shares thereon, thereafter. The issue constitutes 33.42% of the post-IPO paid-up capital of the company. From the net proceeds, it will utilize Rs. 3.15 cr. for capex for plant and machineries including installation, mechanical and electrical work, Rs. 17.86 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes. 

The IPO is solely lead managed by Axial Capital Pvt. Ltd., while MUFG Intime India Pvt. Ltd., is the registrar to the issue. Aftertrade Broking Pvt. Ltd. is the market maker as well as a syndicate member. The issue is underwritten to the tune of 15% by Axial Capital and up to 85% by Aftertrade Broking. 

Having issued the initial equity capital at par value, the company issued further equity shares in the price range of Rs. 50 – Rs. 150 between September 2000, and September 2013. It has also issued bonus shares in the ratio of 1 for 1 in August 2018, and 1 for 1 in March 2025. The average cost of acquisition of shares by the promoters is Rs. 2.68, Rs. 4.40 and Rs. 7.90 per share.  

Post-IPO, company’s current paid-up equity capital of Rs. 14.94 cr. will stand enhanced to Rs. 22.44 cr. Based on the upper band of the IPO pricing, the company is looking for a market cap of Rs. 85.27 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total income / net profit, of Rs. 189.26 cr. / Rs. 1.06 cr. (FY23), Rs. 191.37 cr. / Rs. 2.26 cr. (FY24), Rs. 221.43 cr. / Rs. 4.68 cr. (FY25). For Q1 of FY26 ended on June 30, 2025, it posted a net profit of Rs. 1.51 cr. on a total income of Rs. 54.51 cr. Quantum jump in net profits from FY25 onwards raises eyebrows and concern over its sustainability as it is operating in a highly competitive and fragmented segment. 

For the last three fiscals, the company has posted an average EPS of Rs. 2.19, and an average RoNW of 8.58%. The issue is priced at a P/BV of 1.38 based on its NAV of Rs. 27.60 per share as of June 30, 2025, but its post-IPO NAV data is missing from the offer documents.

If we attribute annualized super earnings of FY26 on post-IPO paid-up capital, then the issue price is at a P/E of 14.07, and based on its FY25 earnings, the P/E stands at 18.18. Thus, the issue appears aggressively priced. 

For the reported periods, the company has posted PAT margins of 0.56% (FY23), 1.18% (FY24), 2.11% (FY25), 2.78% (Q1-FY26), and RoCE margins of 8.08%, 9.31%, 12.44%, 3.42% respectively for the referred periods. 

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

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Banswara Syntex, Sangam India, and Siyaram Silk, as its listed peers. They are currently trading at a P/E of 19.4, 54.4, and 16.5 (as of November 21, 2025). However, they are not truly comparable on an apple-to-apple basis. Such comparison appears to be an eyewash. 

MERCHANT BANKER’S TRACK RECORD:
This is the 1st mandate from Axial Capital in the ongoing fiscal. It has no track records for any past mandates.