Kaytex Fabrics NSE SME IPO review (May apply)

•    The company is engaged in fast-fashion fabric solutions and manufacturing related products.
•    The company posted growth in its top and bottom lines for the reported periods.
•    Profit margins achieved for FY24 and FY25 raise eyebrows and its sustainability as it is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Only well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Kaytex Fabrics Ltd. (KFL) is a fast-fashion fabric solutions and manufacturing company, combining technology, design, and traditional craftsmanship to deliver textile and fashion products. It manages the entire process—from yarn to finished fabric production—ensuring quality and the ability to quickly adapt to changing market demands. KFL specialize in creating fabrics from a variety of fibres, including cotton, viscose, modal, acrylic, nylon, linen, and polyester. Its focus on digital printing—allows it to create customizable designs suited to the fast-paced nature of the fashion industry. Digital textile printing referred to as direct-to-garment or digital garment printing, is a process of reproducing variety of digital images/prints on textiles and garments using specialized or modified inkjet technology. 

It works perfect for printing photos, detailed patterns, graphically complex designs and tonal transitions. It has a wide range of end-use applications across various fashion and apparel, home textiles, interior design, advertising and promotional materials, sportswear and activewear, accessories, industrial applications and home décor. Its advantages over conventional printing methods include: high-quality printing, customization and flexibility, time efficiency, cost-effectiveness, environmental sustainability, versatility in fabric types, consistent quality and access to global market. Digital textile printing, while still a relatively small segment, is gradually gaining traction due to design flexibility and elimination of costly screens and preparation processes, reducing production time and minimizing waste, increasing demand for digital printing significantly. The increasing demand for personalized and customized products is a major catalyst and digital textile printing technology enables the creation of highly individualized and intricate patterns that are not easily achievable with traditional textile printing methods. 

The growth can be attributed to several factors, including increasing demand for customized fabrics, rapid advancements in digital textile printing technology, and a growing preference for sustainable and eco-friendly printing methods. Fast fashion, e-commerce platforms, rising disposable incomes, growing population, and changing consumer preferences, is creating a strong demand for digital textile printing. (Source: D & B Report). In addition to fabrics, it has expanded into fashion products in womenswear, offering ready-to-stitch suits, co-Ord sets, shawls, scarves and stoles. By combining fashion trends with craftsmanship, KFL creates products that meet the needs of today’s consumers. Its approach and innovativeness allow it to deliver products that cater to both brands and individual customers as per current market situation. As of June 30, 2025, it had 612 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 3878400 equity shares of Rs. 10 each to mobilize Rs. 69.81 cr. at the upper cap. It has announced a price band of Rs. 171 – Rs. 180 per share. The issue consists of 3199200 fresh equity shares issue (worth Rs. 57.59 cr. at the upper cap), and an OFS (Offer for Sale of 679200 shares (worth Rs. 12.22 cr. at the upper cap). The issue opens for subscription on July 29, 2025, and will close on July 31, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples of 800 shares, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.39% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 30.00 cr. for working capital, Rs. 2.56 cr. for capex on construction of additional warehouse, Rs. 3.73 cr. for capex on construction of dedicated sales office, Rs. 5.01 cr. for capex on purchase of advanced fabric processing system, and the rest for general corporate purposes. 

The IPO is solely lead managed by Socradamus Capital Pvt. Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Gretex Share Broking Ltd. is a market maker, as well as a syndicate member.

The company has issued entire initial equity shares at par value. It has issued bonus equity shares in the ratio of 22 for 1 in September 2024. The average cost of acquisition of shares by the promoters/ selling stakeholders is Rs. 0.38 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 11.50 cr. will stand enhanced to Rs. 14.70 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 264.59 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 99.34 cr. / Rs. 5.59 cr. (FY23), Rs. 125.03 cr. / Rs. 11.31 cr. (FY24), Rs. 153.22 cr. / Rs. 16.91 cr. (FY25). 

For the last three fiscals, the company has reported an average EPS of Rs. 11.44 and an average RoNW of 32.53%. The issue is priced at a P/BV of 4.13 based on its NAV of Rs. 43.54 as of March 31, 2025, and at a P/BV of 2.46 based on its post-IPO NAV of Rs. 73.24 per share (at the upper cap). 

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 15.65. Based on FY24 earnings, the P/E stands at 23.41. Thus, the issue appears aggressively priced.

For the reported periods, the company has posted PAT margins of 5.64% (FY23), 9.05% (FY24), 11.06%, (FY25), and RoCE margins of 25.81%, 32.72%, 33.25%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has adopted a dividend policy in January 2025, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Veekayem Fashion, Banswara Syntex, Donear Ind., as their listed peers. They are trading at a P/E of 19.3, 22.8, and 16.8 (as of July 25, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 2nd mandate from Socradamus Capital in the last two fiscals including the ongoing one.  The only listing that took place so far opened at a premium of 75.93% on listing date.