Friday, April 23, 2010

IPO ANALYSIS: MANDHANA INDUSTRIES LIMITED – GROWTH FOCUSED: APPLY




The Maharastra based textile/garment manufacturer and exporter is entering the capital market with an IPO of 83, 00,000 shares of Rs 10/- each in the price band of Rs 120-130. The issue opens on 27-04-10 and closes on 29-04-10. Edelweiss Capital Limited and Axis Bank Limited are the BRLM. The issue constitutes 25.06 percent of the fully diluted post issue paid-up capital of the company. The company plans to raise around Rs 100 cr.

PROMOTERS: Purushottam Mandhana, Biharilal Mandhana, Manish Mandhana, Priyavrat Mandhana and Purushottam Mandhana (HUF).


BUSINESS:


Mandhana Industries Limited (MIL) is a vertically integrated textile and garment manufacturing company having presence across operations ranging from yarn dyeing to garment manufacturing. The operations and facilities enable the company to manufacture a wide variety of value-added fabrics and garments through the integrated operations comprising of dyeing of yarns and fabrics, weaving operations for fabrics, processing solutions for both, fabrics and garments, garment manufacturing, domain expertise in providing sampling and designing for both fabrics and garments.

MIL has positioned itself as a multi-product, multi-fibre and multi-market player ensuring the targeted markets with diverse mix of domestic fabrics and garments as well as the international garment markets. 

OBJECTS OF THE ISSUE


  •  Setting up of new garment manufacturing facility at MIDC, Tarapur Maharashtra.
  •  Expansion of yarn dyeing and weaving facility at MIDC, Tarapur.
  •  Margin Money  for Working Capital; 
  • Funds for General Corporate Purpose.


FINANCIALS --RS IN CRORES


07
08
09
TOTAL INCOME
240.33
406.95
463.25
NET PROFIT
 19.43
 35.30
 36.56

EPS (RS)
  
   9.25
 
 15.89

 16.14


 RISKS AND CONCERNS

  • Potential conflict of interest with promoters having other companies in the same line of business.
  • Some of the independent directors have been issued shares at a discount as compared to other shareholders

  • The degree of competition is very high on both, fabrics as well as garments side, with many small and large players. Margin expansion is extremely difficult in an industry with a large number of players. The company will have to continuously innovate producing new designs and focus on improving the operational efficiency through technological improvements in order to maintain margins.    


VALUATION AND RECOMMENDATIONS


MIL has a healthy revenue growth at a CAGR of 47 per cent driven by increased weaving, dyeing and garmenting capacities over the past 3 years. The business model is focused on low volume and high value products, which provide higher margins. At Rs 120-130 price band, the company demands a valuation of less than 10 PE of its FY 09 earnings, on the fully diluted post issue equity.  REASONABLY PRICED. APPLY AT LOWER BAND.

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