Shlokka Dyes BSE SME IPO review

•    The company is in the business of manufacturing reactive dyes which is extensively used in textile industry.
•    While it marked growth for FY23 to FY25, its top line declined sharply for FY24.
•    It is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
Shlokka Dyes Ltd. (SDL) is engaged in the business of manufacturing of “Reactive Dyes”, a category of Synthetic Organic Dyes extensively utilized in the textile industry. The company is offering a diverse portfolio of dyes, including Direct Dyes, Basic Dyes, Vat Dyes, Digital Printing Dyes, and Paper Dyes etc., catering to wide range of industries such as textiles, leather, paper, and paints etc., Its Reactive Dyes are available in primary Colors such as black, blue, red, orange, and yellow, along with numerous variants of these shades, each identified by an internationally recognized Colour Index Number. These dyes are suitable for a broad spectrum of textile applications, including cotton fabrics, garments, dress materials, bed sheets, and carpets. 

With their versatile applications and superior quality, SDL dyes provide reliable solutions to meet the diverse needs of clients across various industries. Its manufacturing facility, situated in the state of Gujarat, holds ISO 9001:2015 (Quality Management), ISO 14001:2015 (Environmental Management) and ISO 45001:2018 (Occupational Health & Safety) certification in the manufacturing of Dyes and Intermediates. SDL’s manufacturing facility situated at C/54, GIDC, Saykha, Dist. Bharuch – 392140 which is admeasuring land spread across approximately 5000 sq. meter. together with construction of factory shed/building of about 5731.81 sq. metre. It boasts a robust installed capacity of 9000 MT per annum, enabling it to meet diverse client demands effectively. Further, its Manufacturing Facilities are equipped with requisite machineries and in-house testing Laboratory to keep a constant check on quality of product. As of March 31, 2025, it had 19 employees on its payroll and additional 33 contract workers in various department.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6350400 equity shares worth Rs. 63.50 cr. at the upper cap. The company has announced a price band of Rs. 95 – Rs. 100 per share of Rs. 10 each. IPO opens for subscription on September 30, 2025, and will close on October 06, 2025. The minimum application to be made is for 2400 shares and in multiple of 1200 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 29.66% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 28.00 cr. for working capital, Rs. 6.13 cr. for capex on plant and machinery, Rs. 11.50 cr. for repayment/prepayment of certain borrowings, and the rest. for general corporate purposes.

The IPO is solely lead managed by Interactive Financial Services Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Aftertrade Broking Pvt. Ltd. is the market maker.

The company has issued initial equity shares at par value, and issued further equity at a price of Rs. 7085 per share between August 2022, and September 2023. It also issued bonus shares in the ratio of 555 for 1 in September 2024. The average cost of acquisition of shares by the promoters is Rs. 8.04 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 15.06 cr. will stand enhanced to Rs. 21.41 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 214.09 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 87.96 cr. / Rs. 0.60 cr. (FY23), Rs. 61.69 cr. / Rs. 4.92 cr. (FY24), Rs. 103.46 cr. / Rs. 10.01 cr. (FY25). While it marked growth in its bottom lines for the reported periods, it posted declined top line for FY24 raising eyebrows.

For the last three fiscals, the company has reported an average EPS of Rs. 4.48, and an average RoNW of 17.37%. The issue is priced at a P/BV of 5.54 based on its NAV of Rs. 18.06 as of March 31, 2025, but its post-IPO NAV data is missing from the 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 21.37, and based on its FY24 earnings, the P/E stands at 43.48. Thus, the issue appears aggressively priced.

The company has posted PAT margins of 6.83% (FY23), 7.97% (FY24), 9.68% (FY25), and RoCE Margins of 6.71%, 25.46%, 36.14%, 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, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Deepak Chemtex, Vipul Organic, Ishan Dyes, as its listed peers. They are currently trading at a P/E of 10.8, 80.1, and 253.0 (as of September 29, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 27th mandate from Interactive Financial in the last four fiscals. Out of the last 15 listings, 4 opened at discount, 1 at par, and the rest with premium ranging from 3.63% to 90% on the date of listing.