Shanti Spintex Limited

Shanti Spintex Limited was Incorporated in 2010, the Company is primarily engaged in manufacturing and selling of denim fabrics. In 2016, the Company established its fabric weaving unit at Dholi, Dholka, Ahmedabad on plot area measuring to 8660 sq. mtrs.  The Company has 96 airjet looms installed at Dholi unit which has an annual installed capacity of weaving 1,92,72,000 mtrs of denim fabrics. The airjet looms installed by them, utilize a technique where a jet of compressed air is used to insert the weft (crosswise) yarn into the warp (lengthwise) yarn to create the raw fabrics also known grey fabrics. They manufacture various type of denim fabrics such as power stretch spandex denim, knit denim, light weight denim, rigid denim, over dyed denim and flat finish 3/1 denim. The production facility has capability to produce grey fabrics in various designs such as twill weave, knit dobby weave, structure dobby weave, broken twill weave and satin weave. They offers denim fabrics in diverse spectrum of shades such as indigo blue, IBST, sulphur black, sulphur grey, halogen blue and ecru colour. The operations encompass utilization of diverse type of yarns such as cotton yarn, ring yarn, viscose yarn, slub yarn, cotton spandex, polyester spandex, tencel, lyocell etc. which are procured  from domestic market. In addition to yarn, they also directly procure grey fabrics from the market, which are subsequently sent for finishing, and is then sold to customers. They outsource the yarn dyeing and grey fabrics finishing process to third parties. In Nov 22, they have commissioned a wind energy power plant ('Wind Farm') of combined capacity of 2 MW in the village Likhala, District Amreli, Gujarat. The Company has outsourced all operations and maintenance activities relating to Wind Farm to a third party. The electricity generated from the Wind Farm is adjusted by UGVCL against the electricity bill of manufacturing facility. Further, they have recently installed the 852 kw rooftop solar plant at the Dholi unit. As per financial performance, Benchmark Computer Solutions Limited has posted total income / net profits of Rs 112.93 Cr / Rs 3.37 Cr (FY21), Rs 255.26 Cr / Rs 4.86 Cr (FY22), Rs 370.71 Cr / Rs10.12 Cr (FY23) and Rs 162.37 Cr / Rs 5.23 Cr (upto Q2 FY24). So as per previous financials data, company has shown good growth. Company has posted an average EPS of Rs 5.10 and average RoNW of 13.91% for last three fiscals. Issue is priced at a P/BV of 1.62 as per NAV of 43.11 as on 30.09.23. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 24.29, 11.67 and 11.29 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Hem Securities Limited is associated with this SME IPO and handled 34 SME IPOs in last 3 years. From last 10 IPOs, all opened above issue price or at par on the listing day. As of now from last 10 IPOs, all are trading above issue price. ( As on 13.12.23 ) As per financials, Shanti Spintex Limited Limited has shown good growth, RoNW is 18.07% and P/E is respectively 24.29, 11.67 and 11.29 as per FY22, FY23 and annualised FY24 earnings. So, issue looks reasonably priced. Company is in business of manufacturing and selling of denim fabrics, which is highly competitive and fragmented segment. Performance of BRLM is good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

• 1 Bharat Bhushan Omprakash Agarwal
• 2 Rikin Bharatbhushan Agarwal