SHREE KARNI FABCOM LIMITED - leader in Technical Textiles

Stock Opportunities
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Incorporated in March 2018, Shree Karni Fancom Limited specializes in Woven Fabrics, Knitted Fabrics, Coated Fabrics, and 100% polyester, and sources yarn, resin, acrylic, and coating chemicals to produce specialized technical textiles.

Product Portfolio - Application
A) Interlining Fabric - Jackets, wallet and hard luggage
B) Tafeta Fabric - Back-packs, rain cover, umbrella, vehicle cover, soft and hard
luggage
C) Matty Fabric - Soft and hard luggage, back-packs
D) Air Mesh - Backpacks, shoes, chairs, masks, helmets, medical arch support.
E)PU Coated Matty - Back Packs
F) WR Coated Lining - Back-packs, rain cover, umbrella, vehicle cover, soft and hard
luggage
G) AF Coated Lining - Back-packs, soft and hard luggage
H) PVC and EVA Lamination - Soft Luggage

Expansion
Company is setting up a new dyeing facility (backward integration) and manufacturing of bags (forward integration ). It has purchased land in close vicinity to its existing facility

Management

  1. Rajiv Lakhotia
  2. Manoj Kumar Karnani
  3. Raj Kumar Agarwal
  4. Radhe Shyam Daga

Manufacturing Set up

  1. Knitting Unit - 90 tonnes/month
  2. Weaving Unit - 70000 mtrs/day
  3. Dyeing/coating Unit - 100000 mtrs/day

To ensure to supply quality products which meet the applicable standards, they have set up a Research and Development facility (“R&D facility”), which consists of quality assurance and quality control teams who check and conduct various tests in their ‘in-house laboratory’ on the fabrics at various stages starting from grey cloth to the finished fabrics manufactured.

Acquisition
Company has acquired a 66.67% stake in IGK Technical Textile LLP w.e.f. October 31, 2023, which is engaged in weaving, coating, sizing, and embossing of specialized technical textiles.

IPO Details
Co. raised 42.5 Crs through the IPO and got listed on March 14, 2024.
The Net proceeds will be utilized for:

  1. Funding the capital expenditure setting up a dyeing unit in Navsari District, Surat, Gujarat;
  2. Funding the purchase of new machinery
  3. Working capital requirements of the company;
  4. General Corporate Purposes.

Clientele
Khadim, VIP, Samsonite, Bata, Hidesign, Tommy Hilfiger, Safari, Benetton, Swiss Military etc

Financials-

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Key Ratios

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Red Flags -

  1. The company availed Interest Free loan from the promoters - 2378.76 Lakhs
    (couldn’t understand what the company is planning on - It means their PAT would have been much lower if they would charge interest on this loan amount)

2.The capacity utilisation is very low.

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  1. Top ten Clients cater to 74.23 % of the revenue (as of latest data in Nov’23) - Needs to diversify its clientele.

Disclosure:
Invested

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About loan from promoters and debt from 22:10 - i don’t think it’s a red flag Ankita mam, usually promoters charge interest on loans… also most of it went into growth, they have plans to convert this debt into equity in the next 3 years… in my view it shows the aggression of promoters to grow the business

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Well, definitely it shows aggression. But in financial terms, technically if we don’t consider interest on loans that means our profit is inflated.
If they are planning to convert to equity later why didn’t they do it before IPO?
Its not a BIG red Flag but still there are many questions unanswered.

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Management takes a pay cut to fund growth. They could’ve diluted as well - and a lot more during their IPO time. Brought the IPO at a great valuation. Interesting visits - recently from the Niveshaay and concept investwell team and other HNIs. Shows management quality.

The pay cut may also look like the company maybe in trouble - but based on the potential future export orders, capacity expansions from their clients (safari increasing by 50% and vip now being potentially acquired by a PE firm) and their recent capacity addition - leading to forward integration into being a contract manf and backward integration into dyeing ops to increase margins - everything seems fine imv.

I may be wrong in my views. I am biased and invested.

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https://nsearchives.nseindia.com/corporate/SHREEKARNI_18012025182027_Intimation_SKFL_AS.pdf

Raises 40 cr to cover for financing wc & pre ops for upcoming capacities. There are some decent names in the preferential.

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@Shubham96
Do you have any idea how do these preferentials even come about? All I know is everything post-facto, i.e. after a preferential allotment is finalized and disclosures are made to the stock-exchange. I am specifcally looking to understand what happens behind the scenes?
Who approaches first-the investor or the company?

As an example, we can see Debashish Neogi, as a preferential allottee. Let’s assume he was not an investor till then. Was it that the company approached these investors? How did it even shortlist whom to approach, etc?
If I myself wanna participate or get calls in these allotments, what would it take?