Cedaar Textile Limited's debut in the primary market has been remarkable. The company's initial public offering (IPO) of ₹60.90 crore opened on June 30th and closed on July 2nd. During this period, the issue was oversubscribed by 12.26 times, clearly indicating investors' confidence in the company's business and future prospects.
Institutional Investors Showing the Most Interest
The IPO received the best response from QIBs (Qualified Institutional Buyers), who subscribed 37.88 times. This was followed by retail investors at 9.73 times and the NII category at 5.04 times. Thus, Cedaar Textile's issue saw a good response from all categories.
What is Cedaar Textile's Business?
Cedaar Textile Limited specializes in the manufacturing of melange yarn in the textile industry. Melange yarn is a special type of blended yarn used in hosiery, innerwear, home fabrics, and woven garments. Cedaar Textile not only supplies yarn to brands in India but also serves international fashion brands, strengthening its global connections.
The Company's Customers and Market
Cedaar Textile's customers include fashion brands in the US, Europe, and the Middle East, in addition to India. This is why the company is considered an export-oriented unit. This global reach sets it apart from other small and mid-cap yarn companies.
IPO Price and Share Details
The company had set a price band of ₹130 to ₹140 for its IPO. Within this range, Cedaar Textile issued 43.50 lakh new equity shares. The funds raised from this issue will be used by the company for business expansion and production improvement.
Why the Fluctuation in GMP?
On the first day of the IPO opening, Cedaar Textile's GMP (Grey Market Premium) went up to ₹17, which reached ₹25 on July 1st. However, on the last day of the issue, i.e., July 2nd, it decreased to ₹10 and has now stabilized at this level. This change indicates that investor sentiment became somewhat cautious before the listing.
Where will the Funds from the IPO be Used?
The company has decided to allocate the funds received from the IPO into three major areas:
- Expenditure on Solar System Installation: Cedaar Textile will install a grid-connected solar PV rooftop system at its manufacturing unit at a cost of ₹8 crore. This will save on electricity expenses and also move the company towards green energy.
- Investment in Machinery Upgradation: Approximately ₹17 crore will be spent on the modernization of machinery. This will speed up the production process and improve quality.
- Working Capital: The company has allocated ₹24.90 crore to meet working capital needs, which will facilitate day-to-day operations.
Use of Remaining Funds
The remaining amount from the IPO will be used by the company to meet general corporate needs and the cost of the issue. This includes activities such as marketing, distribution, branding, and research.
Market's Focus on Cedaar Before Listing
Given the subscription and GMP status of the IPO, the market is waiting for the listing of Cedaar Textile. There is also attention on whether the stock will maintain a good hold after listing due to the large participation of institutional investors.
Cedaar Textile's IPO has become a topic of discussion among investors. Its business structure, fund utilization plan, and current market sentiment make it an interesting SME issue.
