Sonaselection India Opens Rs 141.57-Crore IPO With Price Band Set at Rs 94 to Rs 99

Bhilwara-headquartered integrated textile manufacturer Sonaselection India Ltd. has launched its initial public offering (IPO) to raise ₹141.57 crore from the primary market. The offering opened for subscription on September 17 and is scheduled to conclude on September 21.

The book-built issue is entirely a fresh issue of 1.43 crore equity shares with a face value of ₹10 each, carrying no offer-for-sale (OFS) component from existing promoters. The basis of allotment is set to be finalized on September 22, followed by the initiation of refunds and credit of shares to demat accounts on September 23. The shares are scheduled to debut on both the National Stock Exchange (NSE) and BSE on September 24.

Issue Details and Structure

The company has set a price band of ₹94 to ₹99 per share. Retail investors can bid in lots of 150 equity shares, requiring a minimum application amount of ₹14,850 at the upper end of the price band.

The net proceeds from the fresh capital raise are slated for key balance-sheet and capacity milestones:

• Debt Reduction: ₹80.00 crore is earmarked for full or partial repayment or pre-payment of outstanding debt obligations.
• Capital Expenditure: ₹50.61 crore will fund the procurement and installation of new plant and machinery at the company’s primary manufacturing unit situated in Hamirgarh, Bhilwara, Rajasthan.
• General Corporate Purposes: The remaining balance will support ongoing corporate operational needs and issue-related expenses.

Business Model and Financial Performance

Incorporated in February 2022, Sonaselection India initially acquired a processing unit from Sona Processors (India) Limited through a slump sale before scaling into value-added fabric manufacturing. The company converts greige fabric into finished products, including 100% cotton, cotton-lycra stretch, polyester blends, and polyester-viscose materials, alongside job-work processing services. Through its subsidiary, Sionnah Enterprises, it has also expanded downstream into readymade garments.

Financially, Sonaselection India has seen swift scale expansion, driven by its shift to a manufacturing-led operational model. Between FY24 and FY26, the company posted a compound annual growth rate (CAGR) of 107% in revenue, 73% in operating EBITDA, and 61% in profit after tax (PAT). In FY26, revenue from operations stood at ₹516.95 crore, delivering an EBITDA margin of 16.4% and a return on net worth (RoNW) of 39.05%.

Key Concerns and Analyst View

At the upper price band of ₹99 per share, the company commands a post-issue price-to-earnings (P/E) multiple of approximately 16.5 times based on FY26 earnings. Brokerages, including SBI Securities and Swastika Investmart, have assigned a "Neutral" stance on the issue, pointing to several structural and liquidity constraints:

• Negative Operating Cash Flows: The company reported negative operating cash flows of ₹14.2 crore in FY25 and ₹110 crore in FY26.
• Leverage and Working Capital: Elevated leverage reflected in a debt-to-equity ratio of 2.48 times, alongside elevated working capital cycles featuring 109 inventory days and 73 receivables days.
• Geographic and Customer Concentration: The business has heavy exposure to Rajasthan, which contributed 37.3% of revenue and 96% of raw material procurement in FY26, alongside dependence on a limited customer roster without long-term supply agreements.

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