Shree Ram Twistex IPO: A Small Fish Demanding a Whale’s Price?

Shree Ram Twistex, a Rajkot-based manufacturer of 100% cotton yarn, is hitting the primary markets with a clear objective: to transition from a standard spinner to a renewable-energy-powered, specialized yarn manufacturer.

The company is raising INR 110.24 crores entirely via a fresh issue. The proceeds are strategically allocated to fund a 4.2 MW Wind Power Project and augment working capital. By producing its own power, the company aims to structurally reduce its operating costs and boost margins—a move that markets typically reward.

Shree Ram Twistex IPO Snapshot:

• Open Dates: 23 – 25 February 2026
• Price Band: INR 95 – 104 per share
• Lot Size: 144 Shares

Shree Ram Twistex: Financial Analysis

A surface-level look at the financials shows a stable company. However, a deep look reveals a significant strategic turnaround in the last 6 months.

The Margin Jump:

Historically (FY23-FY25), the company operated with thin margins typical of a commodity spinner (PAT Margin ~1-3%). However, in H1 FY26, the Net Profit Margin doubled to 5.30%.

• FY25 Revenue: INR 255.04 Cr
• H1 FY26 Revenue: INR 132.08 Cr
• EBITDA Margin Growth: jumped from 8.57% (FY25) to 12.90% (H1 FY26).

The expansion is induced by a change in product mix.

1. Organic Yarn: In FY25, Organic Yarn was negligible (0.87% of revenue). In H1 FY26, this high-margin segment surged to contribute 21.5% of total sales.
2. Specialized Yarn: The company has reduced dependence on standard Carded Yarn and increased focus on Eli-Twist and Combed Yarns.

The company is presenting itself not only as a “Commodity Player” but as a “Specialized Spinner.” If this mix is sustainable, the higher margins justify a better valuation. If it reverts to commodity yarn, the premium vanishes.

Shree Ram Twistex IPO Peer Comparison Analysis

This is where the investment case faces its toughest test. We have benchmarked Shree Ram Twistex against the industry’s titans: Vardhman Textiles, Ambika Cotton, and Nitin Spinners.

The Valuation Disconnect (Price vs. Value)

The table below highlights a stark anomaly. Shree Ram Twistex is demanding a valuation significantly higher than established peers.

• The P/E Premium: Investors are being asked to pay ~29x earnings for a small-cap company. In contrast, Nitin Spinners (which has similar growth and margins) is available at ~11x P/E.
• The Book Value Shock (4.34x vs 0.84x): This is the most critical data point.
  • Ambika Cotton is debt-free, highly profitable, and trades below its book value (0.84x).
  • Shree Ram Twistex is asking for 4.34x its book value.
  • Verdict: The secondary market offers far better asset value than this primary offer.

Operational Efficiency (Return Ratios)

While the Shree Ram Twistex IPO valuation is expensive, the company’s operational metrics in H1 FY26 are robust and competitive.

• Capital Efficiency: Shree Ram’s RoCE of 13.37% is superior to the industry leader Vardhman (10.8%). This indicates that management is efficient at generating returns on the capital deployed.
• Margin Catch-up: The jump to 12.90% EBITDA margin brings it neck-and-neck with high-performer Nitin Spinners (13.2%), though it still trails the “Margin King” Ambika Cotton (14.72%).

Balance Sheet Health

• Leverage: With a Debt/Equity ratio of 0.84, the company is moderately leveraged. It is not in the “danger zone” like Damodar Industries (1.22), but it lacks the fortress balance sheet of Ambika (Zero Debt).
• Liquidity: The Current Ratio of 1.44 indicates a tight working capital position. The peers maintain much higher liquidity buffers (Current Ratio > 5x for Ambika and Vardhman).

The “Green Energy” Arbitrage: A Strategic Lever

A key component of the Bull Case for this IPO is the Power Cost Arbitrage.

• Current State: Power and Fuel costs account for approximately 6-8% of the company’s total expenses.
• The Plan: The company is investing IPO proceeds into a 4.2 MW Wind Power Project and has already commissioned a 6.1 MW Solar Project.
• The Impact: By shifting to captive renewable power, the company can potentially reduce its power cost significantly. In a low-margin spinning industry, saving 1-2% on power directly translates to a 15-20% jump in net profits.
• Valuation Angle: If executed correctly, this justifies some premium, as the company’s future cost structure will be leaner than peers who rely solely on grid power.

Shree Ram Twistex IPO: Risks Factors

• High Customer Concentration: The company derives 79.74% of its revenue from the top 10 customers. The loss of any single key client could significantly impact overall financial stability.
• Geographic Concentration Risk: Approximately 87.72% of total revenue comes from a single state, Gujarat. Any regional policy change, natural calamity, or political unrest here would disproportionately affect operations.
• Project Execution Risk: The proposed 4.2 MW Wind Power Project (funded by IPO proceeds) has no definitive agreement signed with the vendor (Suzlon) yet, posing a risk of implementation delays.
• Negative Cash Flow History: The company reported Negative Cash Flow from Operations (INR -4.91 crore) in FY24. Recurring negative cash flows could strain working capital and hinder growth plans.

Final Verdict

The data presents a conflicting picture:

• The Good: Strong pivot to high-margin Organic Yarn, respectable RoCE (13.37%), and a clear roadmap to cut costs via renewable energy.
• The Bad: A valuation asking price that defies industry logic.

The market is currently offering established, debt-free, and market-leading companies at valuations 50% cheaper than this IPO.

• To justify a 29x P/E, Shree Ram Twistex would need to grow at 25-30% CAGR for the next 3 years—a difficult feat in the cyclical textile industry.
• At 4.34x Book Value, the IPO leaves zero margin of safety for investors.

While Shree Ram Twistex is a fundamentally improving company with a sound strategy, the Offer Price appears disconnected from reality. It prices in all the future operational efficiencies (Wind/Solar) and product mix improvements today, leaving little room for listing gains for new shareholders.