Garment Mantra BSE RI issue review - (Avoid)

•    The company is engaged in the garment manufacturing/trading and selling for all ages.
•    It gets major work done on third party contract basis. 
•    The company posted inconsistency in its financial performance for reported periods.
•    Based on its financial data, the issue appears fully priced.
•    Nearly threefold equity base post-RI may face its servicing issue.
•    There is no harm in skipping this “High Risk/Low Return” pricey bet.

ABOUT COMPANY:
Garment Mantra Lifestyle Ltd. (GMLL) is primarily engaged in the three business divisions i.e., (a) garment manufacturing; (b) trading of knitted fabric and knitted garments; and (c) selling of knitted garments which are manufactured garment products covering all age group segments such as men’s wear, ladies’ wear, boys’ wear, girls’ wear and family wear.

The company uses a variety of knitted fabrics such as 100% cotton, 100% polyester, blended (cotton and polyester) and printed polyester fabrics in the production of garments. It has well-established manufacturing units for designing, preparation of sample, quality inspection, ironing and packing of Garments that is equipped with all the necessary hi-tech machines and tools that are required for a modern manufacturing unit. GMLL is getting sewing done of its products through job work, all the other activities related to the product manufacturing like cutting, checking, ironing, packing and dispatching from its in-house facilities. Company’s products are available in India through a network of wholesalers and distributors. Its business process includes use of yarn and fabrics during the manufacturing process. Besides, it is also able to offer customers fabric alternatives for their existing collections thus, create important added values in terms of pricing, quality and delivery terms.

The Company started its garment and fabrics business and the production unit for manufacturing of garments in Nethaji Apparels Park (“NAP”). NAP is registered as a Company under section 25 of the Companies Act 1956 invited apparel exporters in the region to register with the Association for a plot in the Apparel Park. The Company is an entrepreneur-driven and well-managed organization focused on meeting consumer requirements for meeting their fashion and lifestyle requirements by offering products and services of the finest quality.

On March 25, 2025, the Company has officially launched Stitch Stylee, an online fashion platform to expand its retail presence and tap into the growing e-commerce market. As of March 29, 2025, it had 17 full-time employees and 24 temporary employees on its payroll.

ISSUE DETAILS:
The company is offering Rights Issue (RI) of 391497795 equity shares of Re. 1 at a fixed price of Rs. 1.20 per share to mobilize Rs. 46.98 cr. The RI is opening for subscription on April 30, 2025, and will close on May 14, 2025. The company is asking for Rs. 0.30 per share on application for number of shares applied and the balance in one or more calls from time to time as determined by the company. The company is offering RI in the ratio of 39 for 20 to its eligible stakeholders as of the record date of April 17, 2025. Post allotment, shares will be listed on BSE. The company is spending Rs. 1.50 cr. for this RI process, and from the net proceeds, it will utilize Rs. 34.00 cr. for working capital, and Rs. 11.48 cr. for general corporate purposes.

The RI is self-managed by the company and Bigshare Services Pvt. Ltd. is the registrar to the issue. 

Post-RI, company’s current paid-up equity capital of Rs. 20.08 cr. will stand enhanced to Rs. 59.23 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 71.07 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company (on a consolidated basis) posted a total income/net profit of Rs. 204.11 cr. / Rs. 3.59 cr. (FY22), Rs. 172.24 cr. / Rs. 0.92 cr. (FY23), Rs. 164.29 cr. / Rs. 2.47 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 1.57 cr. on a total income of Rs. 97.65 cr. Thus, while it posted degrowth in its top lines for the reported periods, it marked inconsistency in its bottom lines. Nearly three-fold equity post RI, may face its servicing issue.

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

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 539216 (FV Re.1).
The scrip last closed on cum-right basis at Rs. 2.00 on April 16, 2025, and opened on an ex-right basis at Rs. 1.60 on April 17, 2025. Since then, it has marked a high/low of Rs. 1.93 / Rs. 1.51. The scrip last closed at Rs. 1.52 as of April 25, 2025. For the last 52 weeks’ it has posted a high/low of Rs. 2.98 / Rs. 1.05. The counter is currently under ASM LT: Stage 1.

The promoters’ holding has been constant at 30.18% for the last three quarters ended with March 31, 2025. The counter is well managed above the par value to lure investors.