Kalahridhaan Trendz Limited SME IPO: Should you apply?

After Interiors & More, Thaai Casting, and Atmastco Limited, the fourth IPO we will cover this week is Kalahridhaan Trendz Limited (KTL) - a company that dyes and processes textiles. In this article, we will explore different aspects of KTL's business to help you evaluate if it is worth an investment. To know about all SME IPOs, join our WA group. 

Kalahridhaan Trendz SME IPO: Key IPO Details

• IPO Open & Close Date: 15 February to 20 February

• Share Price: Rs 45

• Lot Size: 3000 Share

• Issue Details: Fresh Issue of Rs 22.49 crore 

• Promoter Holding Pre and Post-Issue: 96.22% and 68.24%

• Lead Managers: Interactive Financial Services

• Market Makers: Sunflower Broking

Kalahridhaan Trendz SME IPO: What is their business?

KTL is engaged in manufacturing and trading of fabric with embroidery works, trading of grey cloths, purchasing of grey cloth, and printing and dyeing for preparing suiting, shirting, and dress materials for sale in the B2B market only. They are preparing the suiting, shirting & dress material products and focus on the wholesale market. 

They are the first-stage wholesalers who directly supply the material to the wholesalers. In the case of the Embroidery Segment, they undertake the embroidery work for their own business and also on behalf of the other clients. Also, they get embroidery work outsourced. 

The company also deals in the purchase and sale of grey clothes and the suiting, shirting, and dress materials. KTL has two embroidery knitting machines, having a capacity of 15000 meters per day. As a part of an expansion of business activities, as a part of forward integration, they have also taken over the textile Dying and printing business unit on a rent basis in February 2018, where they carry out the dying and printing of suiting, shirting, and dress materials for their use and on job work too. 

The main business activities can be mainly divided into two segments:

• Embroidery Knitting activities 

• Cloths dying and Printing activities

Kalahridhaan Trendz SME IPO: Who are listed peers?

The listed peers are SPL Industries, Kitex Garments, and Monte Carlo Fashion. In this section, we cover their FY23 financials to give you an idea of where the company stands:

• In revenue terms, Monte Carlo is the largest player, while KTL is the smallest player.

• Monte Carlo has the best earnings per share (EPS) among peers, followed by KTL.

• Looking at PE, KTL's PE is most attractive, much lower than the peers.

• KTL has the highest Return On Net Worth among peers.

Check the table below for exact numbers.

Kalahridhaan Trendz SME IPO: How are financial numbers looking?

Below are the financial numbers of KTL from recent years:

• KTL has reported a total income of Rs 132.36 crore, Rs 183.91 crore, and Rs 184.17 crore in FY21, FY22, and FY23, respectively. The top line has been stagnant in this period.

• They have reported EBITDA of Rs 4.11 crore, Rs 6.22 crore, and Rs 13.77 crore for FY21, FY22, and FY23. The EBITDA has increased due to an increase in margins - 3.11%, 3.60%, and 7.48% for the same period.

• KTL reported Profit After Tax (PAT) of Rs 1.10 crore, Rs 2.46 crore, and Rs 6.66 crore for FY21, FY22, and FY23, respectively. The PAT margins have increased from 0.84% in FY21 to 3.62% in FY23.

• The Return on Capital Employed (ROCE) for FY21, FY22, and FY23 is 10.16%, 10.35%, and 17.39%, respectively. 

• The debt to equity ratio has increased from 1.32 in FY21 to 3.19 in FY23.

Kalahridhaan Trendz SME IPO: What are the risks with their business?

Below are certain risks associated with KTL's business:

• The company does not own the Dyeing and Printing unit and Godown.  

• The top ten buyers of their product (66.28% in FY23) and top ten suppliers (64.44% in FY23) for raw materials contribute the majority of revenue and source of raw materials. They do not have long-term agreements with the customer or supplier. 

• KTL's business is dependent on their manufacturing facilities and they are subject to certain related risks.

• The company has not executed any agreement with any of their laborers who are on a work basis.  

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