Borana Weaves IPO 2025: A Comprehensive Analysis
Surat-based textile manufacturer Borana Weaves Limited has filed its Red Herring Prospectus (RHP) for an initial public offering (IPO) set to open on May 20, 2025. The company, specializing in synthetic grey fabric and polyester textured yarn (PTY Yarn), aims to raise capital through a fresh issue of 67.08 lakh equity shares(₹144.89 crores) at a face value of ₹10 each. This article dives deep into the company’s financial health, growth trajectory, risks, and whether this IPO aligns with investor interests.
Company Overview: The Textile Powerhouse from Gujarat
Borana Weaves Limited was incorporated in 2020 and has rapidly scaled operations across three manufacturing units in Surat, Gujarat. The company produces unbleached synthetic grey fabric, a foundational material for dyeing and printing used in apparel, home textiles, and technical textiles. Additionally, it manufactures PTY Yarn by processing polyester-oriented yarn (POY Yarn).
Key Highlights
- Promoters: The Borana family, including Mangilal Ambalal Borana, Ankur Mangilal Borana, and Rajkumar Mangilal Borana, along with HUF entities and Borana Filaments Private Limited.
- Market Presence: Over 98% of revenue comes from customers in Gujarat, leveraging Surat’s status as India’s textile hub.
- Manufacturing Capacity: 174.96 million meters of grey fabric annually (as of December 2024), with plans to expand via a new unit (Proposed Unit 4).
IPO Details: Dates, Price Band, and Objectives
Issue Structure
- Fresh Issue: Up to 67.08 lakh equity shares (₹144.89 crores).
- Price Band: ₹205 to ₹216 per share.
- Listing: BSE and NSE.
- Bid Dates: May 20–22, 2025 (Anchor investor bidding on May 19).
Use of Proceeds
The company aims to deploy ₹98.47 crore (subject to final pricing) for:
- Expanding Production Capacity: Setting up Proposed Unit 4 in Surat (₹71.35 crore).
- Working Capital Requirements: ₹26.5 crore.
- General Corporate Purposes: Up to 25% of proceeds.
Financial Performance: Growth Amidst Challenges
Borana Weaves has demonstrated robust revenue growth, though risks loom. Below is a breakdown of its financials:
Revenue and Profitability
| Metric | 9M FY2025 (Dec 2024) | FY2024 | FY2023 | FY2022 |
|---|---|---|---|---|
| Revenue (₹ lakh) | 21,161.52 | 19,905.56 | 13,539.90 | 4,233.40 |
| PAT (₹ lakh) | 2,930.63 | 2,358.64 | 1,630.09 | 179.86 |
| PAT Margin (%) | 13.85% | 11.85% | 12.04% | 4.25% |
| Debt (₹ lakh) | 5,403.35 | 6,909.77 | 3,889.32 | 2,731.23 |
Growth Drivers:
- Revenue CAGR (2022–2024): 116.84%, fueled by demand for grey fabric and PTY Yarn.
- Debt Management: Debt-equity ratio improved from 15.10 (FY2022) to 0.70 (9M FY2025).
Concerns:
- Customer Concentration: Top 10 customers contributed 44.7% of revenue in 9M FY2025.
- Related-Party Transactions: 13.93% of revenue from Promoter Group entities in 9M FY2025.
Risk Factors: Navigating the Textile Landscape
While Borana Weaves shows promise, investors must weigh these risks:
1. Geographic Concentration
- Customers: 98% revenue from Gujarat-based clients.
- Suppliers: 90% of POY Yarn sourced from Gujarat.
- Risks: Regional economic downturns, natural disasters, or regulatory changes could disrupt operations.
2. Regulatory Hurdles
- Proposed Unit 4: Requires post-construction approvals (e.g., pollution control, fire safety). Delays could stall expansion.
- Past Lapses: Unit 3 operated without environmental clearance until January 2025, exposing regulatory vulnerabilities.
3. Dependency on Promoter Group
- Raw Material Procurement: 7.17% of POY Yarn sourced from R&B Industries (Promoter Group entity).
- Leased Properties: Manufacturing units and corporate office leased from Promoters, risking rent hikes or non-renewal.
4. Inventory Management
- Inventory Turnover Days: Increased from 32 (FY2022) to 55 (FY2023), indicating potential overstocking risks.
5. Market Competition
- Price Sensitivity: Grey fabric faces competition from imports and synthetic alternatives.
- Innovation Lag: Limited R&D investment compared to global peers.
Industry Outlook: India’s Textile Sector
India’s textile industry, valued at $223 billion in 2023, is poised to reach $350 billion by 2030 (IBEF). Key trends:
- PLI Scheme: ₹10,683 crore incentive to boost man-made fiber (MMF) production.
- Export Growth: Textile exports hit $44 billion in FY2023, driven by the US, EU, and UAE markets.
- Sustainability Shift: Rising demand for eco-friendly fabrics like bamboo viscose.
Borana’s Positioning: The company’s focus on synthetic grey fabric aligns with India’s MMF push but lacks diversification into high-margin technical textiles.
Valuation and Peer Comparison
Borana Weaves’ valuation will hinge on its price-to-earnings (P/E) ratio post-listing. Key peers include: The market capitalisation of Borana Weaves IPO is Rs 575.54 Cr.
- Welspun India: P/E of 18.5 (as of May 2025).
- Arvind Limited: P/E of 12.3.
- KPR Mill: P/E of 20.1.
Borana’s Edge: Lower debt and high growth rates could justify a premium, but customer concentration may cap valuations.
Expert Opinions
- Nikhil Shah, BRLM (Beeline Capital): “Borana’s scalable model and Gujarat’s textile ecosystem position it for long-term growth.”
- Market Analyst, Mumbai: “The IPO’s success depends on pricing. A P/E over 25 may deter investors given sector risks.”
Should You Invest?
Pros:
- Strong revenue and PAT growth.
- Debt reduction efforts.
- Government tailwinds for MMF.
Cons:
- Over-reliance on Gujarat.
- Regulatory risks for Proposed Unit 4.
- High promoter influence.
Verdict: Suitable for risk-tolerant investors bullish on India’s textile sector. Monitor post-listing performance and diversification efforts.
Conclusion
Borana Weaves’ IPO offers a mix of growth potential and inherent risks. While its financials reflect a company on the rise, geographic concentration and regulatory dependencies warrant caution. Investors should scrutinize the final price band and industry trends before committing.
DISCLAIMER
______________
“BrightStake” is only an Educational Platform and is not registered under any SEBI Regulations. All Information on this page is for Educational and Entertainment purposes only. Our content does not constitute any Trading or Investment advice. We make no representation of the Timeliness, Accuracy, Profitability, or Suitability of any share on this Website, and we cannot be held liable for any Irregularity or Inaccuracy. Our research is solely for educational purposes, so please build your knowledge with us and use your strategy for investment.
