Kaytex Fabrics IPO Lists at 20% Discount Despite Strong Subscription

The fast-fashion fabric manufacturer, Kaytex Fabrics Limited, made a disappointing debut on NSE SME on August 5, 2025. After closing its IPO bidding between July 29 - July 31, 2025, the company commenced trading with a 20% discount at ₹144, reflecting investor concerns about aggressive pricing despite exceptional subscription response and strong positioning in the textile manufacturing sector.

Kaytex Fabrics Listing Details

Kaytex Fabrics Limited launched its IPO at ₹180 per share with a minimum investment of 1,600 shares costing ₹2,88,000. The IPO received exceptional response with a subscription of 42.70 times - individual investors leading at 47.85 times, NII at 43.19 times, whilst QIB participation remained moderate at 31.16 times, indicating strong retail interest in the textile manufacturing business model.

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First-Day Trading Performance Outlook

Listing Price: The Kaytex Fabrics share price opened at ₹144 on NSE SME, representing a discount of 20% from the issue price of ₹180, delivering losses for investors despite strong subscription response, highlighting market scepticism about textile sector valuations and company fundamentals.

Growth Drivers and Challenges

Growth Drivers:

Strong Financial Performance: Revenue surged 23% to ₹153.22 crore in FY25 with PAT jumping 49% to ₹16.90 crore, reflecting robust demand for fast-fashion fabrics and operational efficiency improvements in the textile sector.

Integrated Manufacturing Capabilities: Single-stop solution for customers with integrated unit offering multiple capabilities across digital printing, weaving, jacquards, and embroidery, ensuring quality control and operational flexibility.

Diverse Product Portfolio: Comprehensive range including digital printed fabrics, jacquard fabrics, corduroy fabrics, dobby fabrics, and ready-to-stitch garments under brands "Rasiya", "Kaytex", and "Darbaar-e-Khaas" serving varied market segments.

Established Distribution Network: Well-established network with low customer concentration serving 497 customers across tier 1 cities to rural markets, providing stable revenue streams and market penetration.
 

Challenges:

High Valuation Concerns: Trading at elevated P/E of 15.65x post-IPO with concerns about sustainability of profit margins in the highly competitive and fragmented textile segment.

Market Competition: Operating in intensely competitive textile manufacturing sector with numerous established players and pricing pressures affecting profitability and market share.

Raw Material Dependencies: Heavy reliance on suppliers for quality raw materials like yarns, dyes, chemicals, and fabrics, exposing the company to supply chain disruptions and cost fluctuations.

Sustainability Questions: High profit margins achieved in FY24 and FY25 raise eyebrows about sustainability in the competitive textile manufacturing environment.
 

Utilisation of IPO Proceeds

Infrastructure Development: ₹2.56 crore for warehouse facility construction and ₹3.73 crore for dedicated sales office in Amritsar, supporting operational expansion and market reach enhancement.

Technology Upgradation: ₹5.01 crore for advanced fabric processing system purchase to enhance printing, dyeing, and processing capabilities at the existing Amritsar facility.

Working Capital Funding: ₹30 crore for incremental working capital requirements supporting inventory management and business operations in the textile manufacturing sector.
 

Financial Performance of Kaytex Fabrics

Revenue: ₹153.22 crore for FY25, showing strong 23% growth from ₹125.03 crore in FY24, reflecting robust demand recovery and market expansion in the fast-fashion textile segment.

Net Profit: ₹16.90 crore in FY25, representing impressive 49% growth from ₹11.31 crore in FY24, indicating improved operational efficiency and margin expansion despite competitive textile market pressures.

Financial Metrics: Strong ROE of 40.43%, impressive ROCE of 33.25%, moderate debt-to-equity of 0.76, solid RoNW of 33.76%, healthy PAT margin of 11.06%, strong EBITDA margin of 19.68%, Price to Book Value of 4.13, and market capitalisation of ₹264.59 crore.

While concerns over aggressive pricing and profit margin sustainability persist, the company's exceptional subscription response, strong financial growth trajectory, integrated manufacturing capabilities, and established distribution network provide a foundation for expansion, though investors should monitor competitive positioning and margin sustainability in the evolving textile manufacturing sector.