Gajanand International Limited, a well-established player in the cotton manufacturing industry, launched its Initial Public Offering (IPO) from September 9 to September 11, 2024. With the company's increasing presence and reputation, this IPO garnered significant interest in the market, leading to a subscription of 14.28 times on the final day of bidding. Gajanand International Limited has quickly grown since its founding in 2009, leveraging its cutting-edge, technology-based factory that produces contamination-free and sustainable cotton products.

Overview of the Gajanand International Limited IPO

The Gajanand International IPO is a Fixed Price Issue amounting to ₹20.64 crores. The IPO comprises a fresh issue of 57.36 lakh shares, priced at ₹36 per share, with a minimum lot size of 3,000 shares. For retail investors, the minimum investment stands at ₹108,000, while High-Net-Worth Individuals (HNIs) must invest in at least two lots, totaling ₹216,000. The funds raised from the IPO will be utilized to meet the working capital requirements, general corporate purposes, and cover the expenses related to the IPO.

The company appointed FAST TRACK FINSEC PRIVATE LIMITED as the book-running lead manager, and SKYLINE FINANCIAL SERVICES PRIVATE LIMITED is serving as the registrar for this issue. Nikunj Stock Broker Limited acts as the sole market maker for the IPO, ensuring liquidity in the market once shares are listed on the NSE SME platform.

Subscription Details and Demand

The Gajanand IPO witnessed substantial interest from retail investors, institutional buyers, and HNIs, leading to a 14.28x subscription rate. This robust demand highlights the company's potential in the competitive cotton industry. Investors who applied for shares can check the IPO allotment status on September 12, 2024. The tentative listing date for the shares is set for September 16, 2024, on the NSE SME exchange.

For those eagerly awaiting the allotment results, the process is straightforward. Investors can visit the registrar's website and enter their PAN, application number, or DP Client ID to check their status.

Financial Performance and Growth

Gajanand International Limited's financials have shown steady growth over the years. From FY22 to FY24, the company saw a significant increase in revenue, from ₹6,176.21 lakhs in FY22 to ₹10,874.81 lakhs in FY24. This rise indicates strong demand for the company’s sustainable and contamination-free cotton products. Similarly, the company's EBITDA increased from ₹123.82 lakhs in FY22 to ₹404.07 lakhs in FY24, reflecting improved operational efficiency. The company’s Profit After Tax (PAT) saw a jump from ₹2.85 lakhs in FY22 to ₹223.73 lakhs in FY24, showcasing its growing profitability.

With a pre-issue EPS of ₹1.71 and a post-issue EPS of ₹1.18, the company's P/E ratio stands at 21.05x (pre-issue) and 30.50x (post-issue), compared to the industry average of 62.45x. The company’s Return on Capital Employed (ROCE) for FY24 is 29.72%, while its Return on Equity (ROE) is 19.30%, reflecting its efficient capital use.

Grey Market Premium (GMP) and Potential Listing Gains

The Grey Market Premium (GMP) for Gajanand International Limited’s IPO has been fluctuating between ₹3 and ₹4, signaling potential listing gains of 10% to 12%. However, it is important to note that GMP is an unofficial indicator of market sentiment and does not guarantee actual performance. Investors should rely on thorough financial analysis and expert reviews rather than speculative GMP figures before making investment decisions.

IPO Review and Recommendations

Gajanand International Limited is a promising company in the cotton manufacturing sector with a solid growth trajectory and a state-of-the-art factory focused on sustainability. However, despite strong subscription numbers and positive financial growth, investors should consider the relatively high P/E ratio and weigh the company’s long-term potential.

Experts recommend that investors avoid the IPO for listing gains, as the Grey Market Premium indicates only modest short-term profits. However, those with a long-term investment horizon and interest in the cotton industry might find value in the company’s strong ROCE and ROE.

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Conclusion

In conclusion, the Gajanand International Limited IPO presents an interesting opportunity for investors looking to tap into the cotton manufacturing industry. While the company has shown solid financial growth, potential investors should approach with caution, especially considering the relatively high P/E ratio and the uncertain listing gains indicated by the Grey Market Premium. For investors with a long-term perspective, the company’s focus on sustainability and contamination-free cotton could offer growth potential in the future.

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