Siddhi Cotspin NSE SME IPO review

•    The company is engaged in the manufacturing and selling various value-added cotton yarns.
•    SCL posted growth in its top and bottom lines for the reported periods.
•    It is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the IPO appears aggressively priced.
•    Well-informed investors may park moderate funds for long term.

ABOUT COMPANY:
Siddhi Cotspin Ltd. (SCL) is primarily engaged in manufacturing and selling of Cotton Yarns. Its manufacturing process adheres to stringent quality standards and is backed by advanced technology and machinery. It has set up a Greenfield project of manufacturing value added and specialty cotton yarn at Unit No.13, Sub Plot No. 18, Survey No. 279 & 280, Village Dholi, Taluka Dholka, District Ahmedabad, Gujarat – 382240, with a total spinning capacity of 29,376 spindles. The installed unit is capable of producing cotton yarn including value added yarns. SCL’s current capacity of production is 90,11,850 Kgs for Cotton Yarn and 90,11,850 Kgs (can be used multiple times) for Value added yarn.

Its manufacturing facility is equipped with modern and automatic plant and machinery. The level of advancement determines the productivity of machines and labour, which in turn, determines the production and profitability of the Company. Its technical team in spinning is well equipped with modern spinning technology and processing techniques by virtue of which the company is able to ensure quality yarn. Technology is a crucial aspect of the cotton yarn industry. Its experienced team of technicians and operators ensure that every batch of cotton yarn produced meets the highest quality parameters. The company has implemented a comprehensive quality management system that covers every stage of production. 

It conducts rigorous testing and inspection of raw materials, intermediate products and final yarns to ensure they meet the specified standards. SCL is committed to sustainable manufacturing practices and environmental responsibility. Its processes are designed to minimize waste, conserve energy and reduce the environmental impact. The company has built strong relationship with a diverse range of clients, including textile manufacturers, garment exporters and distributors. Its emphasis on quality, reliability and timely delivery has helped it establish long term partnerships with customers.

It is manufacturing various value-added cotton yarns like Compact Carded Hosiery, Compact Combed Hosiery, Compact Carded Weaving, Compact Comb Weaving, Carded Weaving, Combed Weaving, Carded Hosiery, Combed Hosiery, Eli KW, Eli CW, Slub Yarn, Siro Slub Yarn, CSY-Lycra-Core Spin Yarn (Spandex), TFO Yarn - Double etc. The cotton yarn is used by many textile industries and has a good demand in the market. The yarn produced by it is mainly used in Denim industries. SCL’s main customers are located in the Gujarat Geographical area. Though it is not exporting directly, the company exports the cotton yarn to many countries through Merchant Exporters. As of March 31, 2025, it had 348 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its book building route maiden combo IPO of 6468000 equity shares to mobilize Rs. 69.85 cr. (at the upper cap). The IPO consists of 4944000 fresh equity shares (worth Rs. 53.39 cr. at the upper cap), and an Offer for Sale (OFS) of 1524000 equity shares (worth Rs. 16.46 cr. at the upper cap). The company has announced a price band of Rs. 102 – Rs. 108 per share of Rs. 10 each. The IPO opens for subscription on September 19, 2025, and will close on September 23, 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 NSE SME Emerge. The issue constitutes 26.50% of post-IPO paid-up equity capital of the company. From the net proceeds of the fresh issue, the company will utilize Rs. 8.97 cr. for repayment/prepayment of certain outstanding borrowings, Rs. 25.10 cr. for working capital, and the rest for general corporate purposes.

The IPO is solely lead managed by Swastika Investmart Ltd., while KFin Technologies Ltd., is the registrar to the issue. Jevin Stock Broker Pvt. Ltd., is the market maker as well as a syndicate member. The IPO is underwritten to the tune of 15.01% by Swastika Investmart, and 84.99% by Jevin Stock Broker. 

The company has issued initial equity shares at par, and issued further equity shares in the price range of Rs. 40.00 – Rs. 143.00 between March 2016, and November 2023. It has also issued bonus shares in the ratio of 340 for 100 in January 2024.The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 14.66, and Rs. 31.82 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 19.46 cr. will stand enhanced to Rs. 24.41 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 263.59 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total Income/Net Profit of Rs. 199.88 cr. / Rs. 6.02 cr. (FY23), Rs. 581.18 cr. / Rs. 12.18 cr. (FY24), and Rs. 724.66 cr. / Rs. 13.08 cr. (FY25). Surge in bottom lines from FY24 onwards surprises one and all. It is operating in a highly competitive and fragmented segment.

For the last three fiscals, the company has reported an average EPS of Rs. 5.99, and an average RoNW of 16.20%. The issue is priced at a P/BV of 2.65 based on its NAV of Rs. 40.82 as of March 31, 2025, but its post-IPO NAV data is missing from the offer documents.

If we attribute its FY25 earnings on post-IPO expanded equity base, then the asking price is at a P/E of 20.15, and based on its FY24 earnings, the P/E stands at 21.64. Thus, based on its recent financial data, the issue appears aggressively priced.

The company has posted PAT margins of 3.02% (FY23), 2.10% (FY24), 1.81% (FY25), and RoCE Margins of 8.46%, 14.84%, 14.88%, 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 offer document, the company has shown Lagnam Spintex, Pashupati Cotspin, United Polyfab, as its listed peers. They are currently trading at a P/E of around 11.0, 78.9, and 43.7 (as of September 16, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 14th mandate from Swastika Investmart in the last three fiscals (including the ongoing one). Out of last 10 listings, 1 opened at discount, 1 at par and the rest with premium ranging from 0.14% to 110.64% on the date of listing.