Executive Summary
United Cotfab Limited is set to launch an IPO on the BSE SME platform, offering 5,184,000 equity shares at a fixed price of INR 70 per share, aiming to raise INR 36.29 crores. This report provides an in-depth analysis of United Cotfab’s financial statements, valuations, and a comparative analysis with industry peers based on authoritative data.
Company Overview
United Cotfab Limited manufactures high-quality open-end yarn for the textile industry. Transitioning from trading to manufacturing, the company commenced production in April 2023. Their operations are backed by advanced technology, ensuring stringent quality control and sustainability practices.
Financial Statement Analysis
Income Statement
- Revenue Growth: The company’s revenue increased significantly from INR 44.20 lakhs in FY23 to INR 11,529.41 lakhs in FY24.
- Profitability: Profit after tax (PAT) surged from INR 1.60 lakhs in FY22 to INR 866.65 lakhs in FY24.
- EPS: Earnings per share (EPS) improved from INR 0.02 in FY22 to INR 5.04 in FY24.
- Margins: The PAT margin improved to 7.52% in FY24 from 31.51% in FY23.
Balance Sheet
- Total Assets: The company’s total assets increased from INR 1,559.95 lakhs in FY22 to INR 8,168.46 lakhs in FY24.
- Equity and Liabilities: Both equity and liabilities have shown a consistent increase, with the debt-equity ratio standing at 3.42 as of March 31, 2024.
- NAV per Share: Net Asset Value per share increased from INR 6.63 in FY22 to INR 11.30 in FY24.
Cash Flow Statement
- Operating Activities: Improved cash flow from operating activities due to a significant increase in sales and efficient inventory management.
- Investing and Financing Activities: Reflecting the company’s strategic investments and reliance on debt financing for expansion.
Financial Analysis Table
| Particulars | FY22 | FY23 | FY24 |
|---|---|---|---|
| Revenue (INR lakhs) | 0.02 | 44.20 | 11,529.41 |
| Profit After Tax (INR lakhs) | 1.60 | 13.93 | 866.65 |
| EPS (INR) | 0.02 | 0.14 | 5.04 |
| Total Assets (INR lakhs) | 1,559.95 | 5,367.71 | 8,168.46 |
| Debt-Equity Ratio | 1.13 | 3.85 | 3.42 |
| NAV per Share (INR) | 6.63 | 9.65 | 11.30 |
Valuations
IPO Valuation
- Offer Price: INR 70 per share.
- Market Capitalization Post-IPO: INR 120.33 crores.
- P/E Ratio: 13.89 based on FY24 earnings.
Comparative Analysis
| Company | CMP (INR) | Revenue (INR lakhs) | Face Value (INR) | P/E Ratio | EPS (INR) | RoNW (%) | NAV per Share (INR) |
|---|---|---|---|---|---|---|---|
| United Cotfab Limited | 70.00 | 11,529.41 | 10 | 13.89 | 5.04 | 63.89 | 11.30 |
| Lagnam Spintex Limited | 49.43 | 30,465.93 | 10 | 8.93 | 5.53 | 10.35 | 53.36 |
| PBM Polytex Limited | 89.92 | 20,220.84 | 10 | 9.12 | 0.43 | 0.24 | 83.75 |
| Vippy Spinpro Limited | 172.81 | 5,632.26 | 10 | 9.47 | 15.02 | 18.25 | 121.50 |
Investment Recommendation
Pros
- Strong Revenue Growth: Significant increase in revenue and profitability in the latest fiscal year.
- Technological Advancement: Modern manufacturing facilities ensuring high-quality output.
- Sustainability: Commitment to environmentally friendly manufacturing practices.
Cons
- High Debt: Elevated debt-equity ratio indicating reliance on debt financing.
- Competitive Market: Operating in a highly competitive and fragmented textile industry.
- Sustainability of Earnings: Concerns over the sustainability of the current profit margins.
Subscription Recommendation Score
Based on the comprehensive financial analysis and valuation comparison, United Cotfab Limited’s IPO is recommended with a score of 3 out of 5. This score suggests that while the IPO presents a solid investment opportunity, particularly for well-informed and cash-surplus investors, there are notable risks that need to be carefully considered.