CRISIL assigns 3/5 grade to IPO of Mandhana Inds

CRISIL has assigned a CRISIL IPO Grade "3/5" (pronounced "three on five") to the proposed initial public offer of Mandhana Industries Ltd. (MIL). This grade indicates that the fundamentals of the issue are average relative to other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The offer price for the issue may be higher or lower than the level justified by its fundamentals.

The grade is not a recommendation to buy / sell or hold the graded instrument, the graded instrument's future market price or its suitability for a particular investor.

The grading reflects the company's design oriented operations in niche segments of both fabrics and garments business. The company's Europe based design-focused client profile has helped it to sustain volumes and margins in a period of turmoil for Indian garment exporters. MIL's ability to create a shelf of fabric and garment designs gives it an edge while dealing with its design-focused client profile in the casual wear segment.

However, the company is likely to face challenges in scaling up its design-focused garment business model to four times its current capacity, as planned, without compromising on the margins.

Moreover, the ongoing uncertainty in the global currency markets has the potential to impact MIL's business especially in the backdrop of competition from the Chinese players. The grading also reflects the potential conflict of interest on account of MIL's promoters having another entity in the same line of business, catering to bottom wear (MIL caters to tops).

Sourced From: CRISIL Limited