Business of the Company
The company is in the business of cotton yarn spinning with manufacturing facilities located in South India. There are two factories housed around 2.85 lakh square feet in Tamil Nadu. The spinning division in Dindigul, Tamil Nadu has an installed capacity of 29,232 spindles, producing around 16 tonnes of cotton yarn per day. The weaving division located in Coimbatore, Tamil Nadu, has an installation of 28 Sulzer projectile machines.
The company is part of the larger Bannari Amman Group which has a turnover of Rs.12000 million and net worth of Rs. 4500 million.
Financials
The net sales from the products sold was 596.34 million in 2003, 721.24 mn in 2002 and 696 mn in 2005, but the PAT has risen over the three years from 94.21 million to 92.99 million to 146.8 million in the last year. 24% of the revenue generated has been from exports last fiscal. The PAT has been able to outgrow the sales the positive mismatch exists because there has been additional income from windmill of Rs. 25.61 million in this fiscal which has not been there before. The EPS has been 20.94, 20.29 and 23.32 for the last three years.
This is a fresh issue of 7 million shares out of which 2.45 million shares are reserved for the public and the total outstanding shares post issue would be 15,751,250 shares.
Objects of the Issue
The funds are being raised with mainly three purposes in mind. First is the expansion in spinning and weaving capacities, second is the setting up of processing and garment / home textile facilities and third is the installation of wind mills in a bid to manage the power costs.
Following are brief descriptions of the increase in capacities planned because of the expansion –
To increase the yarn production capacity from 16000 kgs to 45000 kgs by increasing the spinning capacity by 75,600 spindles which will increase the total installed capacity to 104,832 spindles.
Increasing the weaving capacity by installing 60 numbers of looms and taking the count to 88 looms with a production capacity of around 10000 meters of woven fabric per day.
To set up a woven fabric processing unit with an installed capacity of 30,000 metres per day. The capacity of the processing unit will be predominantly used by the garment and home textile division.
To set up a unit with an installed capacity to process 15,000 meters per day of woven fabric to produce 0.8 million pieces per annum. This unit will manufacture home textiles viz., bed-sheets, curtains, table cloths and pillow covers for the export market.
There are presently 4 windmills with of 1250 KVA each and there is a plan to install additional capacity of 10.4 MW after which the total capacity would come out to be 15.4 MW.
Conclusion
The price band for the IPO has been fixed between Rs.115 and Rs.135. The P/E mutliple for the same comes out between 5 and 6 in this range. This seems to be decent pricing for a company of this size operating in a growing industry and investors can take an exposure to this IPO.
The following table shows the upcoming IPO that have been covered under this section and their status. You can click on any of these to read more about them.
