Silkflex Polymers (India) coming with IPO to raise Rs 18.11 crore

Silkflex Polymers (India)

• Silkflex Polymers (India) is coming out with an initial public offering (IPO) of 34,82,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 52 per equity share. 
• The issue will open for subscription on May 7, 2024 and will close on May 10, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 5.20 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Shreni Shares.
• Compliance Officer for the issue is Sourabh Sharma.

Profile of the company

The company is engaged in the trading of the textile printing inks and water-based wood coating polymers products of a Malaysian based brand- ‘Silkflex’ produced by Silkflex Polymers SDN BHD (Silkflex Malaysia). Silkflex Malaysia, is one of the garment printing ink manufacturers of Malaysia. Silkflex Malaysia manufactures its products through its manufacturing unit located in Malaysia and the same products are then supplied around the globe through its authorised agents. The list of countries where Silkflex Malaysia supplies the products includes India, Thailand, Turkey, Russia, Sri Lanka, Bangladesh and Indonesia.

The company offers a wide variety of products of textile printing ink products and wood coating polymers products. The Company has entered into an agreement with Silkflex Malaysia on October 01, 2016, for distribution and selling, the water-based textile printing inks products of Silkflex. It also entered into agreement with Silkflex Malaysia on October 01, 2019 for distribution and selling, the wood coating polymers products of Silkflex Malaysia. These agreements also give it the rights to use the brand name of Silkflex in India. Further, by virtue of Technology Transfer Agreement (TTA) dated July 25, 2023, Silkflex Malaysia has permitted it to be the manufacturer of its products in India and agreed to provide full right, technology relating to products like Silkbond 35 and binder for table glue products.

Silkflex products are certified to ZDHC Confidence Level 3 (Zero Discharge of Hazardous Chemicals). ZDHC aims to remove harmful chemicals from production and the supply chain to protect workers, consumers and the environment. Silkflex ensures that the products not only conform to the requirements of ZDHCs manufacturing restricted substances list but also to the strict manufacturing restricted substances list of global brands and retailers. Silkflex products are also accredited with Eco-Passport certificate issued by Oeko-Tex and GOTS-version 7 (Global Organic Textile Standard) certificate.

Proceed is being used for:

• Acquisition of land
• Funding of capital expenditure requirements of the company towards purchase of Plant and Machineries
• Funding working capital requirements of the company
• General corporate purposes 

Industry overview

India’s textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, with the capital-intensive sophisticated mills sector at the other end. Wood coatings are generally created by combining various layers of shellac, drying oil, lacquer, varnish, etc. where every layer is followed by sanding. Whereas, on the contrary, waterborne wood coatings are made from a wide range of resins which include acrylic, polyester, polyurethane, fluoropolymer, waterborne powder, etc. 

The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach $190 billion by 2025- 26. India has a 4.6% share of the global trade in textiles and apparel. Moreover, India is the world's 3rd largest exporter of Textiles and Apparel. The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-10% and is the 5th largest technical textiles market in the world. India’s sportech industry is estimated around $1.17 million in 2022-23. The Indian Medical Textiles market for drapes and gowns is around $9.71 million in 2022 and is expected to grow at 15% to reach $22.45 million by 2027. The Indian composites market is expected to reach an estimated value of $1.9 billion by 2026 with a CAGR of 16.3% from 2021 to 2026 and the Indian consumption of composite materials will touch 7,68,200 tonnes in 2027.

The future of the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. India is working on various major initiatives to boost its technical textile industry. Owing to the pandemic, the demand for technical textiles in the form of PPE suits and equipment is on the rise. The government is supporting the sector through funding and machinery sponsoring. Top players in the sector are achieving sustainability in their products by manufacturing textiles that use natural recyclable materials. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players like Marks & Spencer, Guess and Next into the Indian market. The growth in textiles will be driven by growing household income, increasing population and increasing demand by sectors like housing, hospitality, healthcare, etc.

Pros and strengths

ZDHC certified: Silkflex products are certified to ZDHC Confidence Level 3 (Zero Discharge of Hazardous Chemicals). ZDHC aims to remove harmful chemicals from production and the supply chain to protect workers, consumers and the environment. Silkflex ensures that the products not only conform to the requirements of ZDHCs manufacturing restricted substances list but also to the strict manufacturing restricted substances list of global brands and retailers. Silkflex products are also accredited with Eco-Passport certificate issued by Oeko-Tex and GOTS-version 7 (Global Organic Textile Standard) certificate.

Well established relationship with clients: The Company generates its revenue from domestic operations; it has trusted buyers who give repeated orders at frequent intervals. The repetition of orders is basically owing to the quality of the product it provides and also the healthy relationship it maintains. Visits with customers are kept regularly to understand their needs, concerns and address them personally. It understands that the textile & furniture industry is highly competitive and maintaining healthy relationship with its customers will help the company to be in the competition.

Strong Marketing Practices: The efficiency of the marketing and sales network is critical to the success of the company. It produces distinctive marketing and advertising campaigns that generate high customer engagement. This marketing and campaigns include workshops, exhibitions and seminars including training programmes for product handling. To retain its customers and acquire new customers, its team having adequate experience and competencies, regularly interact with them through workshops, exhibitions, seminars and focus on gaining an insight into the additional needs of customers. Their technical teams give technical demonstration to its customers on regular interval for new developing techniques & usage of products.

Risks and concerns

Working capital requirement: Its business demands working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unables to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects. It intends to continue growing by expanding its business operations. This may result in increase in the quantum of its current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of fund, in a timely manner, or at all, to meet the requirement of working capital could adversely affect its financial condition and result of its operations.

Delays or defaults in client payments: It may be subject to working capital risks due to delays or defaults in payment by clients. In addition, any delay or failure on its part to supply the required quantity or quality of products, within the time stipulated, to its customers may in turn cause delay in payment or refusal of payment by customers. It typically extends credit terms to few of its customers. Such defaults/delays by its customers in meeting their payment obligations to it may have a material effect on its business, financial condition and results of operations.

Dependent on third party transportation: It depends on transportation services to deliver its products to its customers. It outsources the delivery of its products to either third-party logistics companies or as mutually agreed shipment terms as decided with the customers. Transportation strikes could have an adverse effect on its ability to deliver its products to its customers. In addition, transportation costs in India have been steadily increasing over the past several years. Continuing increases in transportation costs or unavailability of transportation services for its products may have an adverse effect on its business, financial condition, results of operations and prospects.

Outlook

Silkflex Polymers (India) is engaged in the trading of the textile printing inks and water-based wood coating polymers products of a Malaysian based brand- ‘Silkflex’ produced by Silkflex Malaysia. Silkflex Malaysia, is one of the garment printing ink manufacturers of Malaysia. Silkflex Malaysia manufactures its products through its manufacturing unit located in Malaysia and the same products are then supplied around the globe through its authorised agents. The list of countries where Silkflex Malaysia supplies the products includes India, Thailand, Turkey, Russia, Sri Lanka, Bangladesh and Indonesia. On the concern side, it faces competition from various domestic and international players. It foresees this competition to continue to grow as the demand for its products increases. Most of its competitors in the regional level are from the unorganized sector of the industry. It intends to continue competing vigorously to capture more market share and manage its growth in an optimal way.

The company is coming out with an IPO of 34,82,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 52 per equity share to mobilize Rs 18.11 crore. On performance front, revenue from operations had increased by 22.96% from Rs 2782.47 lakh in Fiscal 2022 to Rs 3421.33 lakh in Fiscal 2023. This increase was due to increase in sales of products during the year. The company reported a net profit of Rs 78.59 lakh in Fiscal 2023 as compared to a net profit of Rs 68.59 lakh in Fiscal 2022 which got increased due to higher revenue from operation during the year. Meanwhile, it intends to focus on increase in volume of sales. As a trading company it wants to focus on larger volume of sales and further addition of new products in its portfolio to achieve its targeted sales. It is participating every year in Garments Machinery Manufacturers & Suppliers Association (GMMSA) garment exhibition held at Ludhiana, Knit Show exhibition at Tirupur. It also arranges seminars in regular interval to update the technical knowledge by its products.