N R Vandana NSE SME IPO review (May apply)

•    The company is engaged into production and marketing of cotton textile products like sarees, salwar suits, bed sheets etc.
•    The company posted growth in its top and bottom lines. However, sudden boost in its bottom lines from FY24 onwards surprises.
•    Based on recent financial data, the issue appears fully priced. 
•    With IPO funding, the company aims to expand its business activities.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
N R Vandana Tex Industries Ltd. (NRVTIL) is engaged into designing, manufacturing and wholesale business of cotton textile products including a variety of high-quality cotton sarees, salwar suits and bed sheets. Its products are recognised in textile industry under own brand name “Vandana” and “Tanaya”. The Company has been awarded “Best Debutant – Apparels” by Ajio Business Partnership Meet – 2022. It operates into B2B business model, focusing on selling its products through a network of 1397 wholesalers as of March 31, 2025 spread across 31 states and union territories in India and through a channel of B2B e-commerce platform.

Its manufacturing process includes cutting, dyeing, embroidery, sewing, embellishments, finishing, inspection and packing. It also outsources certain manufacturing on job work from time to time and provides the technical specifications such as designs, pattern, quality, fabric etc. to them who, based on its specifications begin the manufacturing process. As on March 31, 2025 the company had engaged 229 job workers for manufacturing process.

As on March 31, 2025 it had presence in 31 states and union territories and has generated revenue 2.46 % from the south region, 2.10 % from the north region, 88.10 % from the east region and 7.34 % from the west region. Further, the company actively engages with potential clients through direct visits and leverages strong local market connections to expand its reach.

The company offers diverse range of products to various segments of the market that include printed sarees and embroidery sarees, unstitched salwar suits (“salwar suits”) and bedsheets across different price points thereby catering to customers across all market segments. It purchases raw materials like grey fabric, ready-to-use bleached or dyed fabric, and printed fabrics which undergoes bleaching or dyeing before being processed into sarees, salwar suits, and bedsheets at its Manufacturing units or external job units. As on March 31, 2025, it has catered over 1397 network of wholesalers and product catalogue features a diverse range of more than 1500 distinct SKUs. As of April 30, 2025, it had 86 employees on its payroll and additional 34 contract workers. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6198000 equity shares of Rs. 10 each to mobilize Rs. 27.89 cr. at the upper cap. It has announced a price band of Rs. 42 – Rs. 45 per share. The issue opens for subscription on May 28, 2025, and will close on May 30, 2025. The minimum number of shares to be applied is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.61% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 5.00 cr. repayment/prepayment of certain borrowings, Rs. 16.28 for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Marwadi Chandarana Intermediaries Brokers Pvt. Ltd., and Cameo Corporate Services Ltd., is the registrar to the issue. Alacrity Securities Ltd. is the market maker and Marwadi Chandarana Intermediaries Brokers Pvt. Ltd. is a syndicate member.

The company has issued initial equity shares at par value, and issued further equity capital in the price range of Rs. 25 – Rs. 100 per share between March 2003 and January 2024. It has also issued bonus shares in the ratio of 424 for 100 in October 2024. The average cost of acquisition of shares by the promoters is Rs. 0.38, Rs. 1.10, and Rs. 1.91 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 17.10 cr. will stand enhanced to Rs. 23.29 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 104.83 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. 195.60 cr. / Rs. 1.67 cr. (FY23), Rs. 220.21 cr. / Rs. 4.19 cr. (FY24), and Rs. 271.10 cr. / Rs. 8.27 cr. (FY25). The company marked growth in its top and bottom lines for the reported periods. However, surge in bottom lines from FY23 onwards raise eyebrows and concern over its sustainability.

For the last three fiscals, the company has reported an average EPS of Rs. 3.57 and an average RoNW of 20.16%. The issue is priced at a P/BV of 2.28 based on its NAV of Rs. 19.74 as of December 31, 2024, and at a P/BV of 1.70 based on its post-IPO NAV of Rs. 26.46 per share (at the upper cap).

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 12.20. Based on FY24 earnings, the P/E stands at 24.46. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 0.92% (FY23), 1.95%, (FY24), 3.17% (FY25), and RoCE margins of 11.22%, 13.82%, 18.08%, respectively for the referred periods.  

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

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD:
This is the 3rd mandate from Marwadi Chandarana in the last four fiscals including the ongoing one.  From the last 2 listings, all listed with a premium of 90% on the listing date.