Karnika Industries IPO Review: Karnika Industries Limited is coming up with its Initial Public Offering. This is an SME (small and medium size enterprise) which is going to be listed on NSE SME. The IPO will open for subscription 29th September 2023, and closes on 4th October 2023.

This article will provide a comprehensive review of the IPO, including an in-depth analysis of the company’s financials,  as well as the strengths and weaknesses of karnika industries.

Karnika Industries IPO Review – About The Company

Karnika is a distinguished manufacturer, trader, and exporter of children’s garments. The company primarily focuses  on manufacturing a wide range of kids’ wear through job work, including shorts, joggers, capris, tees, rompers, sleep suits, pyjamas, winter wear, and infant wear.

It operates two state-of-the-art manufacturing units in West Bengal, equipped with all the necessary high-tech machinery for designing, sample preparation, quality inspection, ironing, and packing of garments.

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In addition to manufacturing, It is also engaged in the trading of boys’ and girls’ wear. Which cater to B2B bulk orders based on the specific design and quantity requirements of the clients.

The  products are marketed under the brand name ‘Karnika’, with subcategories such as Karnika Care, Karnika Cool, Karnika Cube, Karnika Life, Karnika Key, and Karnika Club.

Karnika has a global footprint with 16.58% of our total sales exported to countries like Jeddah, Kuwait, Dubai, and Doha.

Revenue- The revenue composition is 87.5% from manufacturing through job work and 12.4% from garment trading.

Karnika Industries IPO Review – Industry Overview

India’s textile sector, one of the oldest industries in the country, spans from hand-spun and hand-woven textiles to capital-intensive sophisticated mills. Its strength lies in its diverse production base of a wide range of fibers/yarns, from natural ones like cotton, jute, silk, and wool, to synthetic/man-made ones like polyester, viscose, nylon, and acrylic.

India is the world’s largest producer of cotton, with an estimated production of 362.18 lakh bales during the 2021-22 cotton season. The domestic consumption for the same period is estimated at 338 lakh bales. By 2030, cotton production in India is projected to reach 7.2 million tonnes due to increasing consumer demand.

The Indian textile and apparel industry is expected to grow at a 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26. India holds a 4% share of the global trade in textiles and apparel. The Indian Kids Wear Market was valued at $21.24 billion in 2023 and is projected to grow at a CAGR of 4.23% through 2029.

Government initiatives like production-linked incentives support domestic manufacturers. Abundant raw materials like cotton, wool, and silk are readily available. To attract private equity and employment, the government introduced various schemes such as the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS), and Mega Integrated Textile Region and Apparel (MITRA) Park scheme.

Karnika Industries IPO Review – Financial Highlights

Over the past years, Karnika Industries has demonstrated significant financial growth. The net worth of the company has notably increased from INR 3.78 Cr in March 2021 to INR 18 Cr in March 2023. In the same period, the company’s revenue has seen a significant surge, escalating from INR 47.7Cr to INR 126 Cr.

The net worth of the company has impressively expanded from INR Cr 3.7Cr  in March 2021 to INR 18 Cr in 2023. The Profit After Tax (PAT) has also seen a positive trend, improving from INR 81 lakhs in March 2021 to INR 8.2 Cr in March 2023.

However, it’s crucial to note that the company’s borrowing has also seen an upward trend, increasing from INR 15.7 Cr in March 2021 to INR 52.4 Cr in March 2023.

As of the year 2023, the Earnings Per Share (EPS) of the company stands at 9.66.

FINANCIAL METRICS

(Source: RHP of the company)

Competitors of the company

Karnika Industries faces competition from numerous unorganized players in both the domestic and international markets.

Some of the industrial peers include SP Apparels Limited and Veekayem Fashion and Apparels Limited.

Strengths of the Company:

  • The company’s strength lies in its ability to provide customers with fabric alternatives for their existing collections, thereby creating significant added value in terms of pricing, quality, and delivery terms.
  • With a diverse product portfolio that caters to various segments, the company is able to fulfil customer requirements effectively. It manufactures a wide range of kids’ wear based on market needs and requirements.
  • The company upholds high service standards, delivering consistent quality. Its well-established manufacturing units are equipped with all the necessary high-tech machines and tools required for modern manufacturing. These units handle everything from designing and sample preparation to quality inspection, ironing, and packing of garments.
  • Karnika Industries Limited has long term  client relationships and high levels of customer satisfaction. The company has built a robust client base through these long-standing relationships, leading to repeat orders and an enhanced customer retention strategy. The satisfaction of Karnika Industries Limited’s clients is a testament to the company’s commitment to timely deliveries, easy order placement, and exceptional customer service.

Weaknesses of the Company:

  • A significant portion of the company’s revenue is concentrated among its top ten customers, contributing to the majority of its operations. This high dependence on a limited client base could pose a risk, as any loss of business from one or more of these key clients may adversely affect the company’s revenues and profitability.
  • The company’s manufacturing process is heavily reliant on job work. Any interruption in the job work process could prevent it from completing the orders, significantly affecting its  financial conditions and business operations.
  • The garment fashion market in the country is highly competitive, with numerous players across various segments, including third-party e-commerce platforms. The company may struggle to adapt to changing market trends and customer requirements in the fashion market
  • The company’s weaknesses include a high dependence on a few key suppliers and customers. The majority of our purchases come from our top ten suppliers, and any disruption in these relationships could significantly affect our business operations.

Karnika Industries IPO Review – GMP

 As of 28th september 2023, The GMP for karnika industries is not yet available 

Karnika Industries IPO Review – Key IPO Information

PARTICULARSDETAILS
IPO Size25.07Cr
Fresh Issue25.07Cr
opening date 29th september 2023
closing date4th october 2023
face value ₹10 per share
price band₹76 per share
lot size 1600 shares
Minimum lot 1 (1600 shares)
maximum lot 1 (1600 shares)
Investment amount ₹1,21,600
listing date 13th october 2023

Promoters:  Mr. Niranjan Mudhra, Mr. Shiv Shankar Mudhra and Mr. Mahesh Kumar Mundhra are the promoters of the company 

Book Running Lead Manager:  Beenline capital advisor private limited

Registrar to the Offer:  skyline financial private  services limited 

The Objective of the Issue: 

The company intends to utilize the net proceeds from the issue towards the funding of the following objects:

  • To Meet Working Capital Requirement.
  • General Corporate Purpose.
  • To Meet the Issue Expenses.

In Closing

The future of Karnika Industries appears promising, reflecting the overall positive outlook of the Indian textiles industry, which is buoyed by strong domestic consumption and export demand. Despite an increase in borrowing over the years, Karnika Industries has experienced tremendous growth due to its scalable business model and high levels of customer satisfaction. Further, it is well-positioned to capitalize on these opportunities.

However it is important to note that this is an SME IPO  where the minimum investment amount is ₹1,21,600  Which is higher than mainline IPO.

What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written by Niharika Jadhav

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