Shree Balaji BSE SME IPO review (Not Rated)

•    The company is engaged in trading, doing job works and manufacturing of cotton sarees.
•    It outsources around 95% of products through job works and does marketing in B2B segment.
•    The company marked average growth in its top and bottom lines for the reported periods.
•    It is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears greedily priced.
•    Only well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Shree Balaji (Mala) Textiles Ltd. (SBMTL) is a contract manufacturer and wholesaler of cotton sarees in India’s B2B cotton sarees wholesale segment. Having started trading in sarees in the initial stage, today the company is doing job work and manufacturing activities. Its products are recognised in textile industry under its own brand name “Mala Saree”. The Company operates into B2B business model, focusing on selling its products through a network of approximately more than 105 brokers, approx.13 dealers, 69 wholesaler and approximately 3000 retailers as of March 31, 2026 spread across Central, East, North, Northeast, South and West parts of India.

Company’s products are manufactured through job workers as well as at its own manufacturing facility. The processes which are inherent in the manufacturing of cotton sarees are carried out both by the job workers and at its manufacturing facility. Approximately 95% of its products are manufactured through job workers. In the cotton saree manufacturing industry, a significant portion of manufacturing is carried out through job work units. 

This operating model is adopted to strategically leverage the inherent advantages of job work arrangements, primarily; (i) contract manufacturers typically operate large-scale facilities that offer economies of scale, enabling cost efficient production, and (ii) they are strategically located within established textile hubs, where access to raw materials, skilled labour, and efficient, cost-effective transportation infrastructure is readily available. 

By engaging job workers, it is able to optimize operational efficiency, manage costs effectively, and benefit from the well-developed textile ecosystem without incurring substantial capital expenditure on in-house manufacturing facilities. As of March 31, 2026, it had 47 employees on its pay roll and additional 5 contract labourers.

ISSUE DETAILS/ CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 2700000 equity shares of Rs. 10 each to mobilize Rs. 18.90 cr. at the upper cap. The company has announced the price band of Rs. 66 – Rs. 70 per share of Rs. 10 each. The minimum application to be made is for 4000 shares and in multiples of 2000 shares thereon, thereafter. The issue opens for subscription on July 22, 2026 and will close on July 24, 2026. The shares will be listed on BSE SME. The IPO constitute 27.26% of the post-IPO paid-up capital of the company. From the net proceeds of the equity issue, the company will utilize Rs. 16.50 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by GYR Capital Advisors Pvt. Ltd., and KFin Technologies Ltd. Is the registrar to the issue. Mansi Share & Stock Broking Pvt. Ltd., is the market maker. GYR Capital Advisors Pvt. Ltd. is a syndicate member and Intellect Stock Broking Ltd. is a sub-syndicate member.

After issuing initial equity capital at par value, the company issued/converted further equity shares in the price range of Rs. 50 – Rs. 60, between March 2006, and March 2010. It has also issued bonus shares in the ratio of 9 for 1 in September 2025. The average cost of acquisition of shares by the promoters is Rs. NA per share.

Post-IPO, company’s current paid-up equity capital of Rs. 7.21 cr. will stand enhanced to Rs. 9.91 cr. Based on the upper band of the IPO pricing, the company is looking for a market cap of Rs. 69.34 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total income/ net profit, of Rs. 195.89 cr. / Rs. 2.46 cr. (FY24), Rs. 193.44 cr. / Rs. 4.95 cr. (FY25), Rs.  212.40 cr. / Rs. 5.85 cr. (FY26). The company posted static top lines for the FY24 and FY25, but bottom line marked improvement. The company is operating in a highly competitive and fragmented segment, that may bring pressure on its margins going forward.

For the last three fiscals, the company has reported an average EPS of Rs. 6.92 and an average RoNW of 20.70%. The issue is priced at a P/BV of 1.83 based on its NAV of Rs. 38.17 per share as of March 31, 2026, but its post IPO NAV data is missing from the offer documents. 

If we attribute FY26 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 11.84, and based on FY25 earnings, the P/E stands at 14.03. The issue appears greedily priced based on its recent super earnings. 

The company has posted PAT Margins of 1.26% (FY24), 2.56% (FY25), 2.76% (FY26), and RoCE margins of 14.41%, 18.17%, 15.65%, respectively for referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown N R Vandana Tex, and Saraswati Saree as its listed peers. They are currently trading at a P/E of 15.7, and 9.06 (as of July 16, 2026> however, they are not truly comparable as peers on apple-to-apple basis. 

MERCHANT BANKER’S TRACL RECORD:
This is the 37th mandate from GYR Capital Advisors in the last three fiscals (including ongoing fiscal), and out of the last 11 listings, 2 listed at par, and the rest with premium ranging from 4.92% to 90.0% on the date of listing.