Why:
- The one improvement is a copyable, finished catch-up in a commodity trade. The company stopped buying knitted cloth and started knitting it itself, which lifted the margin, and the numbers show it worked. But that is the standard setup for an integrated processor, the whole plant cost ₹26 crore, and any of the roughly 200 rivals in the Ludhiana cluster with a bank loan can do the same. Against the one listed competitor the filing names, Madhur earns a lower margin and a lower return on capital in every year shown.
- The cash never actually arrives, and the growth is fading. Over nearly four years the company reported ₹26 crore of profit but minus ₹1.8 crore of operating cash. The one period it did produce cash came from delaying payments to suppliers, and most of that unpaid bill is owed to a company the promoters themselves own. Sales growth has slowed from 55% early on to about 8% recently, with the last two disclosed months below the prior year.
- The offer mostly pays down existing bills, not growth. About 86% of the money raised retires liabilities the company already owes, and the single largest new-money item repays that promoter-owned supplier (T1).
Valuation at the band
| Floor ₹95 (T1) | Cap ₹100 (T1) | |
|---|---|---|
| Bid window | 24 to 27 August 2026 | |
| Post-issue shares | 19,010,125 | 19,010,125 |
| Market value | ₹181 cr | ₹190 cr |
| Price to earnings | 13.4x | 14.1x |
| Enterprise value to operating profit | 9.0x | 9.3x |
| Promoter holding after | ~72% | ~72% |
The one listed peer the filing names trades at just 4.7x earnings (T1), so the band asks roughly three times what the market pays for a comparable business. The price does not change the verdict either way: the six ratings below judge the business and the offer's shape, not what it costs.
The story
A single knitting plant in Ludhiana that used to buy its cloth and now makes it, which raised the margin once and has stopped raising it since. Almost all sales are in Punjab, there are no customer contracts, and the profit has never turned into cash.
What this business is
Madhur Knit Crafts, running since 2013, processes knitted fabric at one plant in Village Seera, Ludhiana. Knitted cloth is 88% of sales; the rest is small or shrinking. It sells into one state (Punjab is 98% of revenue) and buys nearly all its yarn in the same state. By its own description it is not a technology or research business; it runs on off-the-shelf accounting software and 177 employees, four of them in sales, with staff turnover that ran between 41% and 84% over three years.
The one real change is vertical integration: it started knitting cloth in-house instead of buying it finished, which cut cost and lifted the gross margin by about nine points. That is genuine and the numbers confirm it. But it is a one-time catch-up to how an integrated processor normally runs, it has flattened out, and it protects nothing: there is no patent, brand, or contract, and a third of revenue comes from customers who were not there the year before.
Easy or difficult business? Run-of-the-mill. Knitting and dyeing fabric in the Ludhiana cluster is a fragmented commodity trade with hundreds of players; the plant cost ₹26 crore and can be matched by any funded competitor. Cheaper Chinese fabric and a US tariff on cluster exports are live pressures on the whole cluster.
Key numbers
| ₹ cr | FY2024 | FY2025 | 11m to Feb 2026 |
|---|---|---|---|
| Revenue | 108.4 | 171.6 | 194.7 |
| Revenue growth % | 21.4 | 58.3 | n/a |
| EBITDA | 8.0 | 23.3 | 25.7 |
| EBITDA margin % | 7.4 | 13.6 | 13.2 |
| PAT | 1.7 | 11.0 | 12.4 |
The margin re-based in FY2025 when the in-house knitting came on, and it has broadly held since. But the growth rate has fallen sharply through the window, the margin peaked and edged down in the latest stub, and the cash tells a different story from the profit: the only cash-positive period came from a jump in unpaid supplier bills, most of it owed to a promoter-owned yarn supplier, which the company's own plan says must be repaid next year.
Scorecard
| Block | Rating | Why |
|---|---|---|
| Right to win | MARGINAL | A real, numbers-backed integration gain, but a copyable, finished, one-time catch-up in a fragmented one-state commodity trade with no patent, brand or contract; and the company under-returns the only listed peer the filing names on margin and on return on capital in every year. |
| Industry and TAM | MARGINAL | The knitting cluster is a large market with room to grow, but growth for a fabric processor is ordinary and the sector faces cheaper Chinese fabric and an export tariff; the company also grew capacity into falling utilisation. |
| Financial momentum | MARGINAL | Good reported profit, but nearly four years of profit produced negative operating cash; the one cash-positive period was a supplier-payment stretch, most of it to a promoter-owned firm, and growth is decelerating. |
| Risks, governance, RPTs | MARGINAL | Clean legals, but ₹38 crore of purchases from promoter-related suppliers carry no independent pricing certificate, and the largest use of IPO money returns credit owed to one of them. |
| Promoter and cap table | PASS | A 32-year self-funded operator who put integration in place and turned it into reported profit; no shares sold in the offer, though the cap-table disclosure is untidy. |
| Offer structure | PASS | A clean 100% fresh issue with no selling shareholders, but about 86% of the money retires existing liabilities rather than funding growth, and the biggest new-money item repays a promoter-owned supplier. |
Watch out for
- The profit does not become cash. ₹26 crore of reported profit over four years came with negative operating cash; strip out the delayed payments to a promoter-owned supplier and there is no cash-positive period at all (T1).
- The one peer is priced at a third of this band. The only listed comparator trades at 4.7x earnings against the roughly 13 to 14x the band asks (T1).
- Growth is fading fast, from 55% early in the window to about 8% recently, with the last two disclosed months below the prior year (T1).
- A promoter-owned supplier sits at the centre of the accounts: it is the largest unpaid bill, the biggest use of the fresh money, and part of the reported margin gain, none of it with an arm's-length pricing certificate (T1).
The offer
- Raising about ₹51 crore, entirely new shares issued by the company; no existing holder sells anything (T1).
- For working capital and general purposes, most of which retires existing bank and supplier liabilities.
- Implied valuation is in the table at the top.
- Promoters hold nearly all of the company before the offer and about 72% after, selling nothing.
Assessment from the RHP, with no outside verification beyond the price band and offer dates, which come from the NSE public records, and the outside checking noted on this page. Numbers carry source tiers: (T1) the filing's audited sections, (T3) mainstream and secondary sources, UNVERIFIED where nothing supports them. The last financial column is an 11-month period. Not a recommendation. The valuation section states what the announced band implies and is not a view on whether that price is right.