IPO Alert: Sanathan Textiles files for ₹1,300-crore initial public offering

The textile sector in India plays an important role in the country’s economic activity. Together, the textile, leather and apparel industries contributed around 13% to the gross value added in fiscal 2020.

The global textile industry is estimated to have reached $978 billion in fiscal 2021 and is expected to grow at a compound annual rate of 4-5% through 2026. Meanwhile, the domestic textile market is projected to grow at 7-9% during that period.

Sanathan Textiles Limited recently filed a draft red herring prospectus with market regulator SEBI to raise funds through an initial public offering. The estimated size of the offering is in the range of ₹1,200-1,300 crores.

Sanathan Textiles plans to raise ₹500 crores via a fresh issue of equity shares. There will be an offer for sale of up to 11,400,000 shares by promoters. Additionally, the company may consider a pre-IPO placement of shares aggregating up to ₹100 crores.

The company intends to use ₹325 crores from the net proceeds for prepayment or repayment of loan. It will deploy ₹65 crores for funding working capital requirements and use the remaining funds for general corporate purposes.

Yarn Manufacturer

Sanathan Textiles is one of the few companies in India that have a presence across the polyester, cotton and technical textile sectors. All three yarn verticals are housed under a single corporate entity. As of September 30, 2021, the company had a diversified product portfolio with the capability to manufacture more than 12,900 varieties of yarn products. It has more than 100,000 stock keeping units, which are used in various forms, and for varied end uses.

The Mumbai-based company has scaled up its annual yarn production capacity from 4,500 metric tons in 2006 to 221,050 metric tons in 2021, supplying across a broad spectrum of industries including sportswear, activewear & innerwear, home textiles, travel & leisure, healthcare and automobile.

Sanathan Textiles’ customer base mainly includes Arvind Ltd, Trident Ltd, Welspun India Ltd, Page Industries Ltd and D’décor Home Fabrics Pvt Ltd. It also serves Creative Group, Ascent Yarns and Paragon, which in turn cater to consumer brands like DKNY, Calvin Klein, Zara, US Polo Association, Adidas, Nike, H&M, Levis and Uniqlo.

Key Numbers

Sanathan Textiles reported a total income of ₹1,932.9 crores for the quarter ended March 31, 2021, compared to ₹2,123.4 crores in the previous year. The company had a net profit of ₹185.6 crores in the March quarter, against ₹46 crores in the same quarter of the prior year.