Rachit Prints BSE SME IPO review (Not Rated)

•    The company is engaged in the business of manufacturing knitted and printed fabric for mattress industry.
•    It marked growth in its top and bottom lines for the reported periods.
•    Galloping bottom lines from FY24 onwards raise eyebrows and concern over its sustainability, as it operates 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:
Rachit Prints Ltd. (RPL) is engaged in the business of manufacturing of knitted and printed fabric for the mattress industry. It distributes product by offline model, and have developed a sustainable business model over the period. The company expanded its product portfolio by setting up of automated manufacturing facility to manufacture customized and specialised textile. RPL manufactures and sells its products in states like Assam, Delhi, Gujrat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Maharashtra, Odisha, Punjab, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal.

It is engaged in the manufacturing of Speciality fabric tailored for mattresses such as knitted fabric, printed fabric, warp knit, pillow fabric, Binding Tape and trading of the comforters and bedsheets. Its production process begins with yarn procurement and encompasses inhouse weaving, designing, printing, and finishing, resulting in knitted and printed fabrics crafted to meet clients' customized specifications. Specializing in knitted Fabrics, printed Fabrics, and warp knit, it sources yarn and chemicals to produce specialized textiles. The Company is specialised in converting yarn into fabric through knitting of fabrics and printing. Its raw material is ‘Cotton yarn’, ‘Viscose’, ‘Spun’, ‘Filament’ and ‘Dyed Yarn’ procured from Delhi and Haryana from which it produces fabric. The company primarily follows a B2B (business-to-business) model for products.

Its customers buy the printed fabric and knitted fabric from it in order to further sell them or produce. It produces products for leading brands like Sleepwell, Kurlon Enterprise Limited and Prime Comfort Products Private Limited. Majority of its work is on order basis. After an order is received, the company sends it to the factory to analyse the required raw material specification, designs and manufacturing specifications to have an idea about the raw materials available and raw materials needed to process the order in time. After checking the calculation for the balance raw materials needed, it makes them available for its factory workers to initiate the production. Once, the production gets completed it approves the quality and designs and then work towards the finishing of complete order. As of June 30, 2025, it had 96 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its book building route maiden IPO of 1308000 equity shares to mobilize Rs. 19.49 cr. (at the upper cap). The company has announced a price band of Rs. 140.00 – Rs. 149.00 per share of Rs. 10 each. The IPO opens for subscription on September 01, 2025, and will close on September 03, 2025. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.50% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 4.40 cr. for capital expenditure on plant and machinery, Rs. 9.50 cr. for working capital, Rs. 1.32 cr.  for part prepayment of term loans from bank, and the rest for general corporate purposes.

The IPO is solely lead managed by Khambatta Services Ltd., while Maashitla Securities Pvt. Ltd. is the registrar to the issue. Prabhat Financial Services Ltd. is the market maker, as well as a syndicate member. The issue is underwritten to the tune of 15.06% by Khambatta Securities, and 84.94% by Prabhat Financial Services.

The company has issued initial equity shares at par, and issued further equity shares in the price range of Rs. 17.10 – Rs. 80.00 per share (based on Rs. 10 FV) between March 2010, and September 2024. It has also issued bonus shares in the ratio of 6 for 8 in July 2024. The average cost of acquisition of shares by the promoters is Rs. 2.36, Rs. 3.26, and Rs.5.71 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 3.63 cr. will stand enhanced to Rs. 4.94 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 73.55 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total Income/Net Profit of Rs. 32.39 cr. / Rs. 0.32 cr. (FY23), Rs. 37.11 cr. / Rs. 2.03 cr. (FY24), and Rs. 41.78 cr. / Rs. 4.56 cr. (FY25). Galloping bottom lines from FY24 onwards raise 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 reported an average EPS of Rs. 8.70, and an average RoNW of 32.49%. The issue is priced at a P/BV of 4.24 based on its NAV of Rs. 35.17 as of March 31, 2025, but its post-IPO NAV data is missing from offer documents. 

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 16.13, and based on its FY24 earnings, the P/E stands at 36.25. Thus, based on its recent financial data, the issue appears aggressively priced.

The company has posted PAT margins of 1.00% (FY23), 5.47% (FY24), 10.94% (FY25), and RoCE Margins of 6.41%, 27.98%, 29.61%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends since its incorporation. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

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

MERCHANT BANKER’S TRACK RECORDS:
This is the 15th mandate from Khambatta Securities in the last three fiscals (including the ongoing one). Out of last 12 listings (including 2 mainboard), 2 opened at discount, and the rest with premium ranging from 2.02% to 306.88 % on the date of listing.