Piotex Industries coming with IPO to raise Rs 14.47 crore

Piotex Industries 

• Piotex Industries is coming out with an initial public offering (IPO) of 15,39,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 94 per equity share. 
• The issue will open for subscription on May 10, 2024 and will close on May 14, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 9.40 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Mahendra Singh Rajpoot.

Profile of the company

Piotex Industries is in business of contract manufacturing and trading of yarn, fabric and cotton bales. Its Products are used for various purposes such as garments & home furnishings, etc. It engages in trading of cotton bales. It also manufactures cotton yarn through out-sourcing model (Job-work) which is almost always in demand by the garment manufacturing industry. The company is engaged mainly in 2 activities: Trading of Cotton Bales, Synthetic Fiber, Cotton Yarn and Fabric: The company was established in Oct 2019, and till then the company has started trading business of Cotton Bales and Cotton Yarn in the textile hub of Maharashtra viz. Malegaon, Ichalkaranji and Bhiwandi. Also company supply the cotton yarn to Burhanpur and Ahmedabad. This business is already going on day to day, and also added fabric trading business from 2022-23. Also Company has a Sole Selling Agency agreement with Babasaheb Deshmukh Industries for their finished product i.e. Cotton Yarn; and In the same way company started manufacturing through job work and Fabric Weaving job in which company provides the Yarn to jobworkers and weaving unit and they do the process of weaving on contracted charges and return the finished goods. The finished goods i.e. Fabric is then sold to customers.

It ensures the consistent quality of the Cotton Yarn as from the beginning it has the power of selection and control of raw material from Ginning. The company also focuses in high quality of yarn and fabrics utilizing best technology, at the most competitive prices and maintaining long term association with its clients. The level of advancement in job work process determines the productivity of machines and labour, which in turn, determines the production and profitability of the Company. Its technical team is equipped with modern technology and processing techniques by virtue of which it is able to ensure quality output. 

The company's team of skilled professionals comprises project managers and quality assurance specialists. The vast experience and expertise in their respective domains enable them to deliver solutions that are of the highest quality and meet the highest industry standards. Its Business Process includes production & use of yarn during the manufacturing process. It endeavours to satisfy customers by continuous improvement through process innovation and quality maintenance. It focuses on producing quality product to increase customer satisfaction and develop a positive brand image in the industry. Its management and team have enabled the company to maintain continuing customer relations, ensuring repeat order flows.

Proceed is being used for:

• Funding the working capital requirement 
• General corporate purpose

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. The fundamental strength of the textile industry in India is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool, to synthetic/man-made fibres like polyester, viscose, nylon and acrylic.

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% share of the global trade in textiles and apparel. India is the world’s largest producer of cotton. Estimated production stood at 362.18 lakh bales during cotton season 2021-22. Domestic consumption for the 2021-22 cotton season is estimated to be at 338 lakh bales. Cotton production in India is projected to reach 7.2 million tonnes by 2030, driven by increasing demand from consumers. In FY23, exports of readymade garments (RMG) cotton including accessories stood at $7.68 billion till January 2023. It is expected to surpass $30 billion by 2027, with an estimated 4.6-4.9% share globally. 

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

Existing client relationship: It has maintained good relationship with its major customers. It is successful in building a strong client base for its business. Its existing relationships help the company to get repeat orders from its customers. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy. Its existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business.

Technical Expertise: It has the best technology for manufacturing of the cotton yarn & cotton fabric through job work. The technology is suitable for manufacturing of fabrics viz. 100% Cotton and cotton blended grey fabric etc. The updated technology also helps the company to achieve cost efficiency as a result of higher production. 

Timely fulfilment of orders: Timely fulfilment of the orders is a prerequisite in its industry. The company has taken various steps in order to ensure adherence to timely fulfilment and also to achieve greater cost efficiency at its existing unit. The company constantly endeavors to implement an efficient business process so as to ensure cost efficiency in procurement.

Risks and concerns

Dependence upon third party transportation services: It does not have an in-house transportation facility and it relies on third party transportation and other logistic facilities at every stage of its business activity including for procurement of products from its suppliers and for transportation of products to its customers. For this purpose, it hires services of transportation companies. However, it has not entered into any definitive agreements with any third-party transport service providers and engages them on a needs basis. 

Depends on top ten customers: Its top ten customers have contributed 97.74%, 98.59% and 88.65% of its revenues for the period ended March 31, 2024, March 31, 2023 and March 31, 2022 based on Restated Financial Statements. However, its top customers may vary from period to period depending on the demand and thus the composition and revenue generated from these customers might change as it continues to add new customers in normal course of business. Further majority of its business is concentrated in one customer. Since its business is concentrated among relatively few significant customers, also it has its promoter group entities as its customers. It could experience a reduction in its results of operations, cash flows and liquidity if it losses one or more of these customers or the amount of business it obtains from them is reduced for any reason, including but not limited on account of any dispute or disqualification.

High working capital requirements: Its business requires significant amount of working capital and major portion of its working capital is utilized towards inventories and trade receivables. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

Outlook

Piotex Industries is in business of contract manufacturing and trading of yarn, fabric and cotton bales. Its Products are used for various purposes such as garments & home furnishings, etc. It engages in trading of cotton bales. It also manufactures cotton yarn through out-sourcing model (Job-work) which is almost always in demand by the garment manufacturing industry. On the concern side, its business requires significant amount of working capital and major portion of its working capital is utilized towards inventories and trade receivables. Besides, its industry faces moderate competition from scattered unorganized players in the domestic market. It has a number of competitors who manufacture and trade products, which are similar to the company.

The company is coming out with an IPO of 15,39,600 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 94 per equity share to mobilize Rs 14.47 crore. On performance front, revenue from operations had increased by 37.73% from Rs 8600.58 lakh in Fiscal 2023 to Rs 11845.92 lakh in Fiscal 2024. The change was primarily due to increase in sales of products. The company reported a net profit of Rs 300.80 lakh in Fiscal 2024 as compared to a net profit of Rs 288.75 lakh in Fiscal 2023. Meanwhile, the company constantly endeavors to improve its business process, and will increase service activities to optimize the utilization of resources. IT has invested significant resources, and intends to further invest in its activities to develop customized systems and processes to ensure effective management control. It regularly analyzes its existing policies to be carried out for providing its products which enables the company to identify the areas of bottlenecks and correct the same. This helps the company in improving efficiency and putting resources to optimal use.