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Shree Ram Twistex IPO: Invest in Cotton Yarn
18 Feb
Summary
- IPO opens February 23, aims to raise ₹110.24 crore.
- Company faces risks from customer concentration.
- Cotton sourcing and quality compliance are key concerns.
The initial public offering (IPO) for Shree Ram Twistex, a manufacturer of various cotton yarns, is scheduled to open for subscription on Monday, February 23, and will conclude on Wednesday, February 25. This IPO represents a fresh issue of 1.06 crore shares, with the objective of raising ₹110.24 crore. The share price is set within a range of ₹95 to ₹104.
The company's Red Herring Prospectus highlights several key risks for potential investors. A significant concern is customer concentration, as the top 10 customers represented 90% of revenue in the nine months ending December 31, 2024. Furthermore, operations are geographically concentrated in Gujarat, which accounted for approximately 91.73% of total revenue during the same period.
Additional risks include dependence on a limited number of cotton suppliers, stringent quality compliance requirements from buyers, and product concentration, with a substantial portion of revenue derived from Carded Cotton Yarn, Combed Cotton Yarn, and ELI Twist Yarn. The company is also undertaking a solar power project, which carries execution risks, and is involved in ongoing legal proceedings.
Investors should also note past instances of delays in statutory dues payments and indirect foreign exchange exposure due to exports through merchant exporters. The company also cautions about dividend uncertainty, which will depend on future earnings and financial conditions.
