Borana Weaves IPO opens today: Should you subscribe to it?

The initial public offering (IPO) of Borana Weaves is set to commence today, that is, Tuesday, May 20 and will remain open for bidding until Thursday, May 22. The shares are priced between Rs 205 and Rs 216 each, with applications to be made in lots of 69 shares. The company aims to raise Rs 144.89 crore entirely through the sale of 67,08,000 new equity shares.

Based in Surat, Borana Weaves was incorporated in 2020 and specialises in the production of unbleached synthetic grey fabric. This type of fabric serves as a foundational material for various industries, including fashion, textiles, and interior design, where additional processing such as dyeing and printing is often applied.

For the first nine months ending December 31, 2024, Borana Weaves reported a net profit of Rs 29.31 crore on revenue of Rs 215.71 crore. In the fiscal year 2023-24, the company achieved a net profit of Rs 23.59 crore with revenue totalling Rs 199.90 crore. Borana Weaves shall have a market capitalisation of Rs 575.54 crore.

The IPO sees 75% of shares reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors (NIIs), and the remaining 10% for retail investors. Beeline Capital Advisors is acting as the sole book-running lead manager, while Kfin Technologies has been appointed as the registrar for this issue. The allotment is scheduled to be finalised on Friday, May 23, with shares expected to begin trading on both the BSE and NSE on Tuesday, May 27.

Ahead of its IPO, Borana Weaves allocated 30.18 lakh equity shares at a price of Rs 216 apiece to 11 anchor investors and raised a total of Rs 62.20 crore. Anchor book included names like Pine Oak Global, Innovative Vision Fund, Chhattisgarh Investments, Rajasthan Global Securities, Saint Capital Fund, Aarth AIF Growth Fund and others.

The grey market premium (GMP) for Borana Weaves is currently at Rs 55 per share, indicating a 25.46% potential gain for investors based on recent unofficial market trends. This suggests that investors could potentially make a profit of Rs 3,795 per lot of 69 shares if these trends persist. 

The IPO's objective is not just fund-raising but also to enhance the company's market visibility and financial flexibility. This move is strategic for Borana Weaves, allowing them to capitalise on growth opportunities in the synthetic fabric industry while attracting a broader investor base. Here's what analysts said about the IPO of Borana Weaves IPO:

Anand Rathi Shares & Stock Brokers
Rating: Subscribe for long-term
Borana Weaves is well-placed to establish direct and strategic regional presence to ensure efficient product delivery and maintain high levels of service responsiveness, thereby reinforcing customer trust and loyalty. On valuation, based on annualised FY25, it is seeking PE of 14.7 times, FY24 earnings PE stands at 24.4 times and the issue is fully priced.

We believe that company’s shift to water jet loom could benefits over long term with high yields further capitalizing its top and bottom lines additionally changing fashion trends, rising brand awareness, and fast-changing styles are boosting demand for India’s synthetic textiles stand to gain in both domestic and exports," it said with 'subscribe for long term' rating.
 

Arihant Capital Markets
Rating: Neutral
Borana Weaves is poised for growth in the synthetic textile market, with India’s polyester demand projected to reach 6.7M tonnes by 2025. Its capacity expansion to 34,60,32,000 meters, advanced water jet looms, and 204 customers in 2024 drive market share gains, expect 20-30 per cent revenue growth with stable margins, said Arihant Capital with a 'neutral' rating.

SMIFS
Rating: Subscribe
Borana Weaves company aims to deepen its presence in Gujarat's textile hubs while leveraging urbanization trends and the growing demand for synthetic textiles. While the company has the lowest market share compared with peers in terms of revenue, the recent capacity expansion is expected to grow its top line more in comparison to its peers, said SMIFS.

"We recommend to subscribe to the issue as Borana has the highest Ebitda margin and ROE and ROCE amongst peers in FY24 and is expected to grow more in comparison to its peers due to its capacity expansion initiatives, expanding customer base and diversification into high margin products with its investments in water jet looms, folding machines and warping machines," it said.

SBI Securities
Rating: Subscribe with caution
Borana Weaves is valued at FY25 annualized P/E and EV/Ebitda multiple of 14.4 times/10.3 times respectively of its post-issue capital at upper price band. The company’s revenue, Ebitda and PAT, achieved CAGR of 116.8 per cent, 182.1 per cent and 262.1 per cent to Rs 199 crore, Rs 41 crore and Rs 24 crore respectively during FY22- FY24 period, said SBI Securities.

"Given the favorable industry outlook and the company’s diversification and expansion plans, we recommend the investors to subscribe the issue for a long-term horizon, however looking at the relatively smaller scale of business and smaller historical track record, investors should note that it will fit in a high-risk, high-return investment profile," it said.

SMC Global Securities
Rating: Neutral (1.5 stars)
Borana Weaves' transition from conventional methods to water jet loom technology has delivered notable operational benefits. It has recorded strong revenue and profit growth in the last three years, supported by its presence in high-demand textile segments, backward integration through in-house yarn production and upcoming expansion via a new manufacturing unit, said SMC Global.

"These factors position the company well for future growth. However, with 84.24 per cent of its operational revenue derived from grey fabric sales, the business remains highly concentrated. Any disruption in production, or adverse changes in demand or pricing for grey fabric, could significantly impact its performance," it said.

Bajaj Broking
Rating: Subscribe for long-term
Borana Weaves is engaged in the business of producing and marketing of unbleached synthetic grey fabrics for the B2B segment. It posted spectacular growth since FY23 onwards with rise in top and bottom lines. Its shift from conventional process to water jet loom process yielded the desired benefits, said Bajaj Borking.

"Based on its financial data, the issue appears fully priced. Well-informed investors may park funds for medium term. Based on FY24 earnings, the P/E stands at 24.41. Thus, the issue is fully priced," it said.