Crisil assigns grade 3/5 to Mandhana Industries IPO
Crisil has come out with research report on Mandhana Industries IPO. It has assigned grade 3/5 to the IPO. MIL aims to raise approximately Rs 1.15 billion by this proposed public issue of 3,775,000 equity shares of face value Rs 10.
Crisil report on Mandhana Industries IPO
CRISIL has assigned a CRISIL IPO Grade 3/5 to the proposed initial public offer of Mandhana Industries (MIL). This grade indicates that the fundamentals of the issue are average relative to other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The offer price for the issue may be higher or lower than the level justified by its fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, the graded instrument’s future market price or its suitability for a particular investor.
The grading reflects the company’s design oriented operations in niche segments of both fabrics and garments business. The company’s Europe based design-focused client profile has helped it to sustain volumes and margins in a period of turmoil for Indian garment exporters. MIL’s ability to create a shelf of fabric and garment designs gives it an edge while dealing with its design-focused client profile in the casual wear segment.
However, the company is likely to face challenges in scaling up its design-focused garment business model to four times its current capacity, as planned, without compromising on the margins. Moreover, the ongoing uncertainty in the global currency markets has the potential to impact MIL’s business especially in the backdrop of competition from the Chinese players. The grading also reflects the potential conflict of interest on account of MIL’s promoters having another entity in the same line of business, catering to bottom wear (MIL caters to tops).
About the company and the issue
MIL is a Mumbai based company, engaged in the production of fabrics for domestic market and garments largely for export markets. The company dyes yarn, converts cotton yarn into grey fabric and also processes grey fabric into finished fabric at its three facilities in Tarapur in Maharashtra. The company procures yarn mainly from Alok Industries and Vardhman Textiles. It also buys fabric which is dyed, texturised and provides various finishes like stone finish, oil repellant, water repellant, peach finish, silicon finish etc.
The company has 1.8 million kg of yarn dyeing capacity, 18 million m of fabric weaving capacity and 20.4 million m of fabric processing capacity at Tarapur in Maharashtra. In addition, it has forward integrated into garmenting, with two units in Bangalore and a smaller unit in Mumbai, having an aggregate capacity to produce 3 million pieces per annum. The company has 3,248 employees on its rolls as on November 30, 2007.
For 2006-07, the company’s total income and net profits were Rs 2,416.6 million (Rs 1,831million) and Rs 194.3 million (Rs 121.3 million), respectively. MIL has reported an increase in operating income and net profit in 2005-06 and 2006-07, driven by increased weaving and dyeing and garmenting capacity.
MIL aims to raise approximately Rs 1.15 billion by this proposed public issue of 3,775,000 equity shares (1,258,333 warrants convertible into shares after 18 months) of face value Rs 10. The company plans to utilise the proceeds to expand its yarn dyeing capacity to 3 million kg per annum, its weaving capacity to 30 million m, its processing capacity to 51.6 million m and garmenting capacity to 14 million pieces per annum.
