1. At a Glance
Karnika Industries Ltd is a small-cap SME garment manufacturer that’s sprinted from ₹47 Cr sales in FY21 to ₹173 Cr in FY25. While its core business is in kids’ wear, its market valuation is anything but child’s play—trading at a lofty 11.5x book value.
2. Introduction with Hook
Imagine a babywear company making grown-man-level profits—and then asking customers to pay months later. That’s Karnika Industries for you. With a 3-year profit CAGR of 58% and stock price up 103% in the last year, this toddler-themed firm is punching above its weight. But is the runway just glitter, or does this little fashionista have long-term flair?
- Market Cap: ₹818 Cr
- 1-Year Price Surge: +103%
- Debt Days: 158 (Don’t lend them cash. Ever.)
3. Business Model (WTF Do They Even Do?)
Karnika Industries designs, sources, inspects, irons, and packs ready-made garments for kids and teens. They don’t own the manufacturing—they outsource it via job work and focus instead on:
- Designing & sampling
- Quality control
- Branding & retail distribution
- Garments: Tops, dresses, skirts, ponchos, leggings, denim
Despite its humble 2017 start, the company boasts ISO 14001:2015 certification and an expanding pan-India footprint.
4. Financials Overview
| Year | Revenue (₹ Cr) | Net Profit (₹ Cr) | OPM (%) | EPS (₹) |
|---|---|---|---|---|
| FY21 | 47 | 1 | 4% | NA |
| FY22 | 98 | 5 | 10% | NA |
| FY23 | 124 | 8 | 12% | 8.99 |
| FY24 | 126 | 10 | 14% | 8.15 |
| FY25 | 173 | 18 | 15% | 14.54 |
Key Trend: Revenues up 3.6x in 4 years, profit up 18x. Sounds magical—until you see cash flows.
5. Valuation
With a P/E of 45.4 and CMP/BV of 11.5x, this SME darling is priced like a boutique version of Page Industries. Here’s a valuation range:
- P/E-based Fair Value (20–30x): ₹320 – ₹480
- Price/Book (2–4x on ₹57.3 BV): ₹115 – ₹230
- Blended FV Range: ₹280 – ₹390
You’re not crazy to see this stock above ₹600. But sustaining it? That’ll take a lot of birthday parties.
6. What’s Cooking – News, Triggers, Drama
- Bonus Bonanza? Board meeting on 15 July 2025 to discuss bonus issue
- IPO Funds Used Right: Rs. 25.07 Cr IPO proceeds fully utilized as of FY25
- Consistent Earnings Beat: PAT up 79% YoY, revenue up 36%
- Trading Window Closed: For all those insider babywear leaks? We don’t judge.
7. Balance Sheet
| FY | Equity (₹ Cr) | Reserves (₹ Cr) | Borrowings (₹ Cr) | Assets (₹ Cr) |
|---|---|---|---|---|
| 2021 | 0 | 4 | 16 | 31 |
| 2023 | 9 | 9 | 52 | 98 |
| 2025 | 12 | 59 | 60 | 155 |
Key Points:
- Total liabilities grew 5x in 4 years
- Debt up, but so are reserves—this isn’t a burning balance sheet
- Borrowings well-leveraged with improving ROCE (24.2%)
8. Cash Flow – Sab Number Game Hai
| FY | CFO (₹ Cr) | CFI (₹ Cr) | CFF (₹ Cr) | Net Cash (₹ Cr) |
|---|---|---|---|---|
| 2021 | -6 | -0 | 7 | 1 |
| 2023 | -11 | -1 | 14 | 2 |
| 2025 | 4 | -18 | 4 | -10 |
Red Flag: Negative cumulative FCF over 5 years
Positive: FY25 saw slight CFO recovery (+₹4 Cr), but it’s still cash-thirsty
9. Ratios – Sexy or Stressy?
| Metric | FY25 |
|---|---|
| ROE | 29% |
| ROCE | 24% |
| Debtor Days | 158 |
| Inventory Days | 191 |
| CCC | 269 |
Summary:
- ROE is stylish
- Debtor Days? Fashionably late
- CCC of 269 days? This isn’t a working capital cycle—it’s a gap year.
10. P&L Breakdown – Show Me the Money
| FY | Sales (₹ Cr) | OPM (%) | PAT (₹ Cr) | EPS (₹) |
|---|---|---|---|---|
| 2023 | 124 | 12% | 8 | 8.99 |
| 2024 | 126 | 14% | 10 | 8.15 |
| 2025 | 173 | 15% | 18 | 14.54 |
Margins rising with scale. Solid topline growth + disciplined cost structure = attractive P&L story… for now.
11. Peer Comparison
| Company | CMP (₹) | ROE (%) | P/E | Market Cap (Cr) |
|---|---|---|---|---|
| Page Industries | 48,765 | 48.5 | 74.6 | 54,427 |
| Pearl Global | 1,546 | 22.5 | 32.3 | 7,113 |
| Kitex Garments | 279 | 14.0 | 41.1 | 5,576 |
| Karnika Industries | 660 | 29.0 | 45.4 | 818 |
Karnika’s valuations are closer to Page, but its size and liquidity are more Kitex than Calvin Klein.
12. Miscellaneous – Shareholding, Promoters
- Promoters: 73.39% (No dilution, no drama)
- Public: 26.60%
- FII/DIIs: Practically zero
- Bonus Issue Incoming? Yep, board meeting scheduled for 15 July 2025
- IPO Proceeds: Fully utilized by March 2025
13. EduInvesting Verdict™
Karnika is no longer crawling—it’s sprinting. Profit growth, margin expansion, and IPO discipline signal strong management. But with 158 debtor days and a CCC longer than most MBA programs, working capital is the risk wearing glitter lipstick.
If it cracks the collections code, this babywear brand could strut a serious runway. Until then, it’s a well-dressed sprinter—not a marathon runner yet.
Metadata
– Written by EduInvesting Team | 14 July 2025
– Tags: SME IPOs, Textile Stocks, Babywear Sector, Garment Manufacturing, Karnika Industries
