IPO Aims to Cut Debt
TC Terrytex has filed its Draft Red Herring Prospectus with SEBI, initiating its public market journey. The main goal of this upcoming IPO is to strengthen its finances, with a significant portion of the proceeds planned for debt reduction. The company aims to raise ₹170 crore through a fresh issue of shares. Investor Ashis Living will also sell 67.5 lakh shares via an offer for sale. A substantial ₹120 crore from the fresh issue is earmarked to clear outstanding borrowings, which stood at ₹170.9 crore as of December 2025. This strategy aims to reduce the company's debt. While debt protection metrics have been moderate, with interest coverage ratios hovering around 2.2-2.5 times in recent fiscal years, ratings agencies note improvements and expect gearing to be below 1.1 times for FY2025.
Company Operations and Market Focus
Operating mainly as a business-to-business (B2B) supplier, TC Terrytex focuses on cotton-based home textiles. It manufactures terry towel products primarily for international markets like the US and Australia, which together generate 50-60% of its revenue. The company also sells and processes dyed yarn within the domestic market. Its manufacturing facility is located in Dera Bassi, Punjab, with a stated capacity for 9,349.90 MTPA of terry towels and 5,845 MTPA of dyed yarn. This specialized, export-oriented B2B model differs from larger, more diversified Indian textile players which often have wider product ranges and stronger brands in both home and international markets. The Indian home textile market is valued at over USD 11 billion and is projected for significant growth due to rising incomes and urbanization. However, TC Terrytex's niche B2B export focus means it’s exposed to specific market trends.
Financial Performance
For the six months ending September 2025, TC Terrytex reported revenue of ₹324.5 crore and ₹7.8 crore in profit. In the fiscal year ended March 2025 (FY25), the company achieved revenue of ₹673.5 crore, a slight increase of 2.9% from ₹654.4 crore in FY24. Profit grew more substantially, up 26.5% to ₹17 crore in FY25 from ₹13.4 crore the previous year. Provisional financials for FY25 indicate revenue around ₹670-680 crore and an improved operating margin of about 8.4%-8.5%. While revenue growth has been steady but moderate, profitability benefited from stable margins due to its ability to pass on costs and steady yarn prices. The EBITDA margin was 8.1% and PAT margin was 2.13% in FY24.
Market Challenges for the IPO
The IPO also features an Offer for Sale (OFS) by Ashis Living and a possible pre-IPO round of up to ₹15 crore, providing flexibility in how capital is raised. However, TC Terrytex's debut on the public markets comes amid significant IPO market volatility. The current financial year has seen a sharp downturn, with about 66% of companies listed so far trading below their issue prices, signaling investor caution and making valuations challenging. This marks a shift from previous years when IPOs were highly sought after. Investors are now more cautious with new listings, especially given market volatility and economic uncertainty. Recent IPOs in the textile sector also indicate a cautious investor appetite for manufacturing firms, despite the sector's overall potential.
Key Risks for Investors
Debt and Servicing
Although the IPO aims to cut debt, the outstanding borrowings of ₹170.9 crore are significant compared to the company's FY25 profit of ₹17 crore. Interest coverage ratios remain moderate, hovering around 2.2-2.5 times. Scheduled annual debt repayments of ₹18-21 crore will continue to strain cash flows.
Export Reliance and Competition
Its reliance on international markets, especially the US and Australia, for most terry towel revenue exposes it to geopolitical risks, currency swings, and potential trade policy shifts, including import tariffs. The global textile market is highly competitive, facing pressure from lower-cost manufacturing countries. Unlike more diversified companies, TC Terrytex’s niche B2B export focus presents a concentrated risk.
Margin Pressures and Material Costs
The textile industry is highly sensitive to raw material price swings, particularly cotton. These price swings, along with fierce competition, can significantly squeeze margins. Additionally, increasing global sustainability compliance costs, like the EU's Carbon Border Adjustment Mechanism, could raise operating expenses.
Market Reception and Valuation
The current IPO market sentiment is strongly risk-averse. With about two-thirds of IPOs this fiscal year trading below their issue price, TC Terrytex faces a tough environment to achieve a favorable valuation. Investors may seek a significant discount, given the company's B2B model, moderate profits, and the market's preference for businesses with stronger brands or less cyclical models.
Industry Outlook
The Indian home textile market is projected to grow robustly, with estimates between 7% and nearly 10% annually, driven by higher domestic consumption and exports. However, this growth faces significant challenges, including raw material price swings, intense competition, and growing demand for sustainable practices. TC Terrytex’s strategy to cut debt and potentially expand capacity is positive but must be seen against this competitive and dynamic industry backdrop. The company’s success hinges on navigating volatile export markets, managing raw material costs, and gaining investor confidence in an IPO market currently cautious about manufacturing-focused companies.