Sanathan Textiles IPO

Between April 1, 2021, and September 30, 2024, Sanathan Textiles manufactured over 3,200 active yarn varieties. The company also managed more than 45,000 stock-keeping units (SKUs). As of June 30, 2024, it produced a diversified portfolio of over 14,000 yarn varieties and 190,000 SKUs.

As of June 30, 2024, the company's manufacturing facility in Silvassa had a total installed capacity of 223,750 metric tonnes per annum (MTPA) across its three yarn segments.

Sanathan Textiles produces polyester chips using purified terephthalic acid (PTA) and monoethylene glycol (MEG). These chips are further processed into polyester yarn through various intermediate steps, which allow for customisation and specific properties to suit different applications.

Over the years, the company has established relationships with numerous well-known brands, including Welspun India Limited, Valson Industries Limited, G.M. Fabrics Private Limited, Premco Global Limited, Creative Garments Textile Mills Private Limited, Banswara Syntex Limited, AYM Syntex Limited, Techno Sportswear Private Limited, Haren Textiles Private Limited, Khosla Profil Private Limited, Tulip Elastics Private Limited, Ganesha Ecosphere Limited, Udyogi International Private Limited, Page Industries Limited, D'Décor Home Fabrics Private Limited, Siyaram Silk Mills Limited, Duvalli S.A., G.M. Syntex Private Limited, Maruti Rub-Plast Private Limited, Geosys India Infrastructures Limited, Wildcraft India Limited, SRF Limited, RSWM Limited, Sangam (India) Limited, Ateliers Reunis De Filature, Abhay Trading Company and Ascent Yarns Private Limited

Sanathan Textiles exported its products to 14 countries as of June 30, 2024, and to 27 and 29 countries during FY24 and FY23, respectively. The company also maintained a robust distribution network of over 925 distributors across seven countries, including India, Argentina, Singapore, Germany, Greece, Canada, and Israel.

The company claims to be committed to environmental protection. By June 30, 2024, it had installed rooftop solar projects at its Silvassa facility with a capacity of 2.35 MW, contributing 0.86% of its total energy consumption during FY24. These projects use renewable energy resources to reduce the environmental impact.

Sanathan Textiles operates a ‘Zero Liquid Discharge’ system at its facility, ensuring that no industrial wastewater is released into surface water, significantly reducing environmental pollution. Additionally, the company produces recycled products under the brand name Sanathan Reviro.

The company's operating facility is ISO 9001:2015 certified for quality management systems and ISO 45001:2018 certified for occupational health and safety management. It also holds the Standard 100 certification by OEKO-TEX, which verifies that its textiles are tested and free from harmful substances.

Sanathan Textiles does not have long-term agreements for sourcing raw materials, and so it relies heavily on a few key suppliers. If the required quality and quantity of raw materials cannot be sourced at competitive prices or there is a delay in the procurement of materials, the company's business, financial condition, and operational results could be negatively impacted.

A significant portion of the company's revenue comes from its distributors. During the quarter ended June 30, 2024, 96.55% of total revenue was attributed to distributors, compared to 94.48% in FY24, 93.01% in FY23, and 93.31% in FY22. Any loss of distributor relationships or failure to maintain successful partnerships could severely affect operations and financial performance.

The company's revenue from operations decreased by 11.17%, from Rs 3,329.21 crore in FY23 to Rs 2,957.50 crore in FY24. Similarly, profit after tax (PAT) dropped by 12.37%, from Rs 152.74 crore in FY23 to Rs 133.85 crore in FY24. If the company fails to maintain or grow its revenue, profit, or margins, that could negatively impact its business operations and growth strategies.

A large portion of the company's revenue comes from customers in Gujarat, Maharashtra, and Punjab. Gujarat contributed Rs 164.41 crore (21.08%) in the quarter ended June 30, 2024, and Rs 529.74 crore (18.64%), Rs 596.20 crore (17.91%), and Rs 611.41 crore (19.19%) in FY24, FY23, and FY22, respectively, to the revenue from operations. Maharashtra contributed Rs 249.70 crore (32.01%) in the quarter ended June 30, 2024, and Rs 1,024.70 crore (36.06%), Rs 1,059.21 crore (31.82%), and Rs 883.76 crore (27.74%) in FY24, FY23, and FY22, respectively, to the revenue from operations. And Punjab contributed Rs 73.49 crore (9.42%) in the quarter ended June 30, 2024, and Rs 295.39 crore (10.40%), Rs 371.08 crore (11.15%), and Rs 277.05 crore (8.70%) in FY24, FY23, and FY22, respectively to the revenue from operations. Any adverse developments in these regions could hit the company’s operations and revenue generation capabilities.

As of September 30, 2024, the company’s total outstanding indebtedness was Rs 1,393.01 crore. Any inability to repay or service these loans could adversely impact the company’s financial position.

The company’s operations are centred around its Silvassa facility. Any major disruption at the unit could adversely impact production and financial results.

The top 10 customers contributed Rs 193.64 crore (24.79%) in the quarter ending June 30, 2024, and Rs 685.02 crore (23.16%), Rs 734.06 crore (22.05%), and Rs 653.08 crore (20.50%) in FY24, FY23, and FY22, respectively to the revenue from operations. Any loss of any of these customers or any cancellation or changes to customer orders could negatively impact business performance and financial stability.

The polyester yarn segment is the largest contributor to the company’s revenue. The segment contributed Rs 600.46 crore (76.87%) in the quarter ended June 30, 2024, and Rs 2,284.49 crore (77.24%), Rs 2,600.41 crore (78.11%), and Rs 2,448.88 crore (76.88%) in FY24, FY23, and FY22, respectively to the revenue from operations. A downturn in this segment, or a failure to innovate and adapt to industry changes, could adversely impact operations and profitability.

The company is involved in certain ongoing legal cases. Any adverse judgments in any of these cases can be detrimental to the company’s business prospects.