Neelam Linens & Garments (India) Ltd. (NLGIL) is a Maharashtra-based company engaged in the processing and trading of home furnishing products. It specializes in supplying bedsheets, pillow covers, towels, and other soft home furnishings to global clients, including in the USA, Australia, and the Far East. The company sources surplus or slightly imperfect fabric and enhances it with value-added services like dyeing, embroidery, and stitching before distributing it to discounted retail outlets globally.

The company also entered the apparel market in 2023 and generates revenue from the sale of import licenses, including those received from government incentives. These licenses include Remission of Duties and Taxes on Export Products (RODTEP) and Rebate of State & Central Taxes and Levies (ROSCTL), which it sells at a discount to importers in the market.

The Neelam Linens and Garments IPO is a fresh issue of 54.18 lakh shares, amounting to ₹13.00 Crores. The IPO price band is set between ₹20 and ₹24 per share. Retail investors must apply for a minimum of 6,000 shares (₹144,000), while High-Net-Worth Individuals (HNIs) must apply for a minimum of 12,000 shares (₹288,000). The subscription period runs from November 08 to November 12, 2024, with the IPO's allotment scheduled for November 13, 2024, and listing on the NSE SME set for November 18, 2024.

Neelam Linens’ financial performance has been somewhat static, with total income of ₹104.74 Crores in FY24 and net profits of ₹2.46 Crores. The company posted an average EPS of ₹1.75 for the last three fiscal years. However, its debt-equity ratio of 3.12 as of June 30, 2024, raises concerns about its financial health, especially when coupled with its inconsistent performance.

For the IPO, the price band suggests a P/E ratio of 19.67 based on FY24 earnings and 15.09 based on annualized FY25 earnings. The issue is priced at a P/BV of 1.46 based on its NAV of ₹16.41 as of June 30, 2024. However, considering the company's high debt load and inconsistent performance, the IPO appears fully priced and carries significant risk.

Use of Proceeds: The funds from the IPO will be used for:

1. Capital expenditure for purchasing embroidery machines (₹5.57 Crores).
2. Repayment/prepayment of borrowings (₹4.00 Crores).
3. General corporate purposes.

Comparison with Peers: The company lists Loyal Textiles and Bannari Amman Spinning as peers in the home textiles industry, though these comparisons may not be entirely relevant due to differences in scale and business models.

Merchant Banker’s Track Record: Expert Global Consultants is the book-running lead manager for the IPO. The firm has successfully managed 13 mandates in the past three years, with a track record of premium listings in most cases, though some listings opened at a discount.

IPO Subscription Status: As of the first day of subscription (November 8, 2024), the Neelam Linens IPO has been subscribed 2.72 times, reflecting moderate investor interest.

Conclusion/Investment Strategy: While Neelam Linens and Garments operates in a competitive segment, its financial inconsistency, high debt-equity ratio, and fully priced valuation make this IPO a high-risk investment. Given the limited upside potential and the company’s financial challenges, this IPO may not be an attractive option for long-term investors. It is advisable to skip this IPO.

The Upcoming IPOs in this week and coming weeks are Mangal Compusolution, Onyx Biotec, Rosmerta Digital, NTPC Green, Avanse Financial and Black Buck.

The Current active IPO are  Niva Bupa Health and Neelam Lines and Garments.

For more insights into financial trends , visit our Top News Headlines. You can also explore investment opportunities in the market and apply for upcoming IPOs through our Best IPO to Apply Now section.