Neelam Linens Pre-Opens at 33.33% Premium Above Issue Price on NSE SME

Neelam Linens and Garments (India) Limited, established in 2010 and specializing in high-end soft home fashion manufacturing and exports, prepares for its market debut on Monday, 18th November 2024, with its shares showing strong momentum in the pre-open session on the NSE SME platform. The company, which operates two manufacturing units in Mumbai and serves major international clients like Tuesday Morning, TJX, and Big Lots, enters the market after a successful IPO.

Listing Details

• Listing Price: In pre-open session at 09:33:06 AM IST, Neelam Linens shares showed an indicative equilibrium price of ₹32 per share on NSE SME.
• Comparison to Issue Price: The indicative price represents a substantial premium over the IPO issue price. Neelam Linens had set its IPO price band from ₹20 to ₹24 per share, with the final issue price being fixed at the upper end of ₹24.
• Percentage Change: The indicative equilibrium price of ₹32 suggests a premium of 33.33% over the issue price of ₹24.

First-Day Trading Performance

• Opening Signals: Strong buying interest with buy orders for 25,32,000 shares versus sell orders for 14,46,000 shares in pre-open session.
• Market Capitalisation: Expected to open with market cap of ₹48.52 crore.
• Trading Volume: Pre-open session showed indicative equilibrium quantity of 11,46,000 shares as of 09:33:06 AM IST.

Market Sentiment and Analysis

• Grey Market Premium: The shares were trading with a GMP of ₹14 ahead of listing
• Subscription Rate: Neelam Linens and Garments IPO was heavily oversubscribed by 91.97 times (as of November 12, 2024, 6:19:59 PM), with NIIs leading at 273.47 times subscription, followed by retail investors at 57.82 times, and QIBs at 15.40 times.
• Market Expectations: Given the pre-open session indications and grey market premium, analysts expect the stock to potentially list with gains of up to 54% over the issue price.
• Growth Drivers and Challenges

Expected drivers of future performance:

• Well-established international client base
• Value-added services in textile processing
• Expansion into apparel segment since 2023
• Additional revenue from import license trading
• Strategic sourcing of quality fabrics

Potential challenges:

• High debt-to-equity ratio of 3.12
• Static and inconsistent financials
• Highly competitive sector
• Working capital intensive business
• Regulatory risks in import-export business

Utilisation of IPO Proceeds

Neelam Linens plans to use the funds for:

• Purchase of Embroidery Machines for expansion
• Repayment of borrowings
• General corporate purposes

Financial Performance

The company has shown mixed results:

• Revenue decreased marginally by 0.63% to ₹104.74 crore in FY2024 from ₹105.41 crore in FY2023
• Profit After Tax increased by 3.43% to ₹2.46 crore in FY2024 from ₹2.38 crore in FY2023
• Q1 FY2025 showed revenue of ₹21.95 crore with PAT of ₹0.80 crore

As Neelam Linens prepares to begin its journey as a listed entity, market participants will closely monitor its ability to manage its high debt levels and maintain growth momentum. The strong pre-open session activity suggests significant investor interest despite concerns about the company's financial metrics.