Sonaselection IPO gets 'Neutral' rating from analysts on cash flow concerns

Sonaselection India’s ₹141.57-crore IPO opened for bidding on Thursday and has drawn a Neutral view from brokerages. While its integrated manufacturing setup, diversified product portfolio and expanding customer base are positives, brokerages have raised concerns over negative operating cash flows, high working capital requirements, leverage and concentration of revenue and raw material procurement in a single place.

As of 2:29 PM on Day 1, the IPO was subscribed 0.35 times overall. Retail investors led demand with 0.57 times subscription, while the NII category stood at 0.14 times and QIB (Ex-Anchor) reached 0.11 times.

Brokerage view

SBI Securities

The brokerage noted that Sonaselection India is an integrated fabric manufacturing and processing company that reported strong growth during FY24-26, with Revenue, Ebitda and PAT CAGR of 107 per cent, 73 per cent, and 61 per cent, respectively, driven by its transition to a manufacturing-led business model.

 

At the upper price band of ₹99, the issue is valued at 16.5 times FY26 post-issue P/E, which appears reasonable. However, concerns regarding high geographic concentration in Rajasthan, with FY26 revenue and purchases contribution at 37.3 per cent and 96 per cent respectively, the brokerage added.

“Further, SIL reported negative operating cash flow of ₹14.2 crore in FY25 and ₹110 cr in FY26, respectively, alongside elevated leverage and high working capital intensity (inventory days: 109; receivables days: 73).

Considering these factors, we assign a ‘Neutral’ rating to the IPO and would prefer to track cash flow generation, balance sheet deleveraging, and execution consistency post listing,” SBI Securities said.

Swastika

The brokerage firm has assigned a ‘Neutral’ rating to Sonaselection India, noting that the company’s Revenue and raw material procurement are heavily concentrated in the state of Rajasthan.

Swastika added that the company experienced negative net operating cash flows in recent fiscal years. It has heavy reliance on a limited set of key customers without long-term supply contracts.

However, it also noted that the company has an integrated manufacturing facility equipped with an in-house quality control laboratory and warehousing capability. Sonaselection also has a diversified product portfolio spanning cotton, lycra, polyester blends, and ready-made garments. The brokerage also highlighted that the company has established recurring business relationships with a broad domestic customer base.

IPO Details

Sonaselection India IPO is a book-built issue worth ₹141.57 crore. The issue comprises an entirely fresh issue of 1.43 crore equity shares.

The bidding for the Sonaselection India IPO opened on September 17, 2026, and will close on September 21, 2026. The allotment is expected to be finalised on September 22, 2026.

The IPO has a price band of ₹94 to ₹99 per share. The lot size is 150 shares, meaning retail investors need to invest a minimum of ₹14,850 for one lot, based on the upper end of the price band.

The Company is an integrated fabric manufacturing and processing company engaged in the production of valueadded textile products. It manufactures 100% cotton fabric, cotton lycra (stretch) fabric, cotton blends and polyester blends, and also undertakes processing of 100% cotton, cotton blends, polyester-viscose (P/V) and polyester fabrics. The Company's manufacturing facility is located in Bhilwara, Rajasthan.

 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.