Momai Apparels Announces IPO Worth Rs 41 Crore

Incorporated in 2010, Momai Apparels, a subsidiary of Ashapura Intimates fashion, has announced an Initial Public Offer of Rs 41 crore offering 55.63 lakh fully paid up shares at the price band of Rs 78-90 per share of face value Rs 10. Of the Rs 43 crore to Rs 50 crore to be raised, the company has said, Rs 7 crore will be used for setting up of land to acquire new manufacturing facility, of which Rs 24 crore for long term working capital and the rest to meet issue expenses and general corporate purposes. It is engaged into the business of manufacturing non-branded intimate garments such as bathrobes, nightwear, sportswear, leggings and camisole etc.
 
The shares will be getting listed on the BSE Small and Medium Enterprises (SME) platform. The issue will open on 25th September 2014 and will close on 30th September 2014. The proceeds will be used for acquisition of land for setting up new manufacturing facility, to meet long term working capital, meet issue expenses and general corporate purposes.
 
The company manufactures brands such as Valentine, NLine, N&D and Valentine Sports. The manufacturing facility at Bhiwandi, has 63562 sq.ft of carpet area and is well connected to the national highways and is in close proximity to Ashapura’s ware house. The company entered into an exclusive manufacturing agreement with Ashapura intimates fashion wherein, it was required to manufacture exclusively for Ashapura intimate fashions. However, from February 2014 this clause was removed and Momoi apparels can now manufacture garments for other customers as well.
 
The company believes the existing capacity is limited and needs to be increased to meet the growing demand. It plans to do so by setting up a manufacturing facility in Gujarat which will have a capacity of more than approximately 5 times its existing installed capacity in Bhiwandi. Of the expanded capacity, 85% of the production will be offered in domestic markets and the rest 15% to the international markets. The company has a variety of products for offering and has a good growth potential given that the global textile industry is expected to grow further at a Compounded Annual Growth Rate (CAGR) of 5% by 2020.
 
Coming to the financial performance of the company, the total revenue increased to Rs 117.54 crore in FY2014 from Rs 99.55 crore in FY2013. The net profit of the company increased to Rs 3.26 crore in FY2014  as compared to 1.95 crore in FY2013.
 
Investors must bid in multiples of 1600 shares and in multiples thereof. So, retail investors with lesser risk appetite are advised to avoid this IPO. Performance of its parent company on the bourses has been good. However we feel the factors like negative cash flow at operating levels and high competitive market is a big challenge for the company. With many listed entities still available at the lower valuations with a strong financial performance, we recommend the readers to avoid the IPO.