Borana Weaves IPO: 10 key risks investors should know before subscribing to the ₹145 crore issue

Borana Weaves IPO has experienced an exceptional response on its first day of bidding, with retail investors driving the issue to be fully subscribed within just a few hours after it opened. The textile manufacturer’s initial public offering consists entirely of a new issue of up to 67.08 lakh equity shares, according to the red herring prospectus. Borana Weaves IPO price band is set between ₹205 and ₹216 per share, aimed at raising ₹145 crore.

The funds raised from the IPO will be used to cover the expenses of establishing a new manufacturing unit to enhance the production of grey fabric in Surat, Gujarat, as well as to meet additional working capital needs and for general corporate purposes.

Reports indicate that Borana Weaves’ Chairman and Managing Director, Mangilal Ambalal Borana, mentioned that they have significantly increased their manufacturing capabilities in the synthetic textile sector over recent years. The funds from the IPO will assist in expanding their production infrastructure and fulfilling their working capital requirements. This move is in line with their long-term strategy to scale operations while prioritizing product quality and operational efficiency.

Beeline Capital Advisors serves as the book running lead manager, while KFin Technologies acts as the registrar for the offering.

Borana Weaves IPO GMP today is +55. This indicates Borana Weaves share price was trading at a premium of ₹55 in the grey market, according to investorgain.com.

Borana Weaves IPO - Key Risks

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

1. Any inability to secure the necessary approvals, licenses, or permits for the operation of Proposed Unit 4 could negatively impact the company's business, financial status, cash flow, and operational results.
2. As of December 31, 2024, over 98% of the company’s revenue comes from customers located in Gujarat, and there are no long-term agreements in place with these customers. Any alterations or cancellations of their purchase orders or their failure to accurately predict demand for the company's products could adversely affect its business, operational results, and financial health.
3. The company has a brief operating history, having started its operations in 2020, and it may struggle to maintain its previous growth rates.
4. The company sources its raw material, POY Yarn, from individuals within the Promoter Group. If this arrangement is terminated or if obligations under this agreement are not fulfilled, it could adversely affect the company’s business, financial health, cash flow, and operational outcomes.
5. The company engages in transactions with related parties as part of its regular business activities and cannot guarantee that these transactions will not negatively impact its operational results and financial condition.
6. There is an ongoing legal issue involving one of their Independent Directors. A negative outcome in this matter could adversely affect their reputation, business operations, cash flow, and overall financial health.
7. If they fail to accurately anticipate customer demands and manage their inventory levels effectively, it could negatively impact their operational results, financial stability, and cash flow.
8. The company's business and the demand for their products depend on the success of their customers' offerings to end consumers; any decrease in demand for these end-products could adversely affect their business, operational results, cash flow, and financial health.
9. The business is capital-intensive, and they may need significant financing to support their growth strategies and expansion efforts. Inability to secure additional funding could negatively impact their business, operational results, financial stability, and cash flow.
10. Any delays or defaults in customer payments may lead to an increase in working capital requirements and/or a decrease in the company's profits, which would affect their operations and financial health.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.