Avi Ansh Textile Limited, operating in the yarn sector since 2005, has carved a niche for itself as a manufacturer and exporter of 100% cotton yarn, including both combed and carded cotton yarn. By 2012, the company had reached a production capacity of approximately 4,500 MT of cotton yarn annually, supported by 26,314 spindles.

IPO Details

The Avi Ansh IPO is a Fixed Price Issue amounting to ₹25.99 Crores, consisting of a Fresh Issue of 41.93 Lakh shares. The subscription period is set from September 20, 2024, to September 24, 2024. The allotment is expected to be finalized on or around September 25, 2024, with shares listed on the NSE SME on a tentative date of September 27, 2024.

The share price is fixed at ₹62 per equity share, with a minimum lot size of 2,000 shares. Retail investors are required to invest a minimum of ₹1,24,000, while High-Net-Worth Individuals (HNIs) must invest a minimum of 2 lots (4,000 shares), totaling ₹2,48,000.

The book-running lead manager for this IPO is 3Dimension Capital Services Limited, and Skyline Financial Services Private Limited acts as the registrar. Nikunj Stock Brokers Limited is designated as the sole Market Maker.

Market Sentiment and GMP

As of 12:09 PM on September 23, 2024, the Avi Ansh Textile IPO showed a subscription status of 2.39 times on its second day. The Grey Market Premium (GMP) is currently estimated between ₹10 to ₹12, indicating potential listing gains of 15% to 20%. However, it's crucial to note that trading based on GMP is unregulated, and these figures should be treated as informational rather than definitive price indicators.

Financial Performance

Avi Ansh Textile has demonstrated consistent growth over the years. The revenues from operations for the fiscal years 2024, 2023, 2022, and 2021 were ₹14,214.65 lakhs, ₹12,149.57 lakhs, ₹12,016.76 lakhs, and ₹7,264.30 lakhs, respectively. The EBITDA figures for these years were ₹963.68 lakhs, ₹455.54 lakhs, ₹619.17 lakhs, and ₹558.04 lakhs, showcasing the company’s operational efficiency.

The Profit After Tax (PAT) for the same periods were ₹331.35 lakhs, ₹28.74 lakhs, ₹155.55 lakhs, and ₹68.20 lakhs, respectively. These results indicate a positive trend in profitability.

For the Avi Ansh Textile IPO, shares are being offered at a pre-issue EPS of ₹3.39 and a post-issue EPS of ₹2.37. The pre-issue P/E ratio stands at 18.28x, while the post-issue P/E ratio is 26.16x, compared to the industry average of 28x. The company’s Return on Capital Employed (ROCE) is 15.88%, and the Return on Equity (ROE) is 20.88% for FY24, suggesting that the IPO is fairly priced within the industry context.

Use of IPO Proceeds

The proceeds from the Avi Ansh IPO will be utilized for the following purposes:

₹2011.94 Lakhs for Working Capital requirements.

₹394.76 Lakhs for Term Loan Repayment.

₹56.29 Lakhs for General Corporate Purposes.

Conclusion and Recommendation

Given the company’s established position in the yarn sector, solid financial performance, and the expected Grey Market Premium, investors should approach the Avi Ansh Textile IPO with caution. While potential listing gains are indicated, it is advisable for investors to avoid this IPO for significant gains or long-term investment due to its relatively higher P/E ratio compared to industry standards.

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