Sonaselection India Ltd

Sonaselection India Limited

Incorporated in 2022 and promoted by the Nuwal family of Bhilwara, Sonaselection India dyes and finishes cotton and cotton blend woven fabric at a single plant at Hamirgarh, Bhilwara, with capacity of 82.44 million metres a year. It did only job work until July 2024 and now buys yarn and cloth and sells finished fabric, which made up 81.50% of FY26 revenue of ₹517 cr. Its customers are domestic fabric traders, wholesalers and garment makers.

Auditor :  Pokharna Somani & Associates, Chartered Accountants BRLM :  Choice Capital Advisors Private Limited

Executive summary: Skip

Sonaselection dyes and finishes cotton fabric, a largely commoditised business with limited pricing power and a contracting end market. With growth funded by debt rather than cash from operations, the quality of the business does not give us enough comfort: -

• Revenue grew from ₹121 cr in FY24 to ₹517 cr in FY26 while production rose only 41%, largely due to the shift from job work to manufacturing, where the company now books the full value of the fabric as revenue instead of just a processing fee.

• The business has not generated cash, as working capital and capex needs have risen with growth. Over the last 3 years it made ₹144 cr of post-tax EBITDA but negative ₹7.6 cr of operating cash, and debt rose from ₹45.2 cr to ₹258 cr.

• Three promoters are named in an 2015 FIR alleging cheating and offences under the Prize Chits Act, linked to a group company. It was settled with the complainants in 2023 but is yet to be formally closed.

• The largest shareholder was disqualified as a director between 2017 and 2019, and the low audit fee (₹4.30 lakh) and CFO pay (₹6.30 lakh) raise questions on financial oversight.

At an IPO ask of 16.5x P/E, we don't find enough margin of safety given these concerns, and would skip the issue. One can expect flat or even negative listing gains as per current GMP ~0% (21 Sep 2026), provided the GMP sustains.

• Revenue rose from ₹121 cr in FY24 to ₹517 cr in FY26, while production rose only 41%, from 48.3 million metres to 68.2 million metres. From 2022 until July 2024 the company did only job work, dyeing and finishing fabric owned by customers and charging a processing fee. Since its own plant started, it buys the yarn and cloth itself and sells the finished fabric, so it now records the full sale value of the fabric as revenue instead of just the fee. Job work revenue fell from ₹107 cr to ₹89.4 cr over the period, while manufacturing revenue went from ₹13.7 cr to ₹421 cr. The headline growth therefore reflects a change in business model and in how revenue is recorded, with underlying volume growth of 41%.

• The Nuwal family has been in fabric processing in Bhilwara since 1993 through Sona Processors (India) Ltd, and also runs businesses in textiles, real estate, share broking and hospitality. The family set up Sonaselection in February 2022, led by Harshil Nuwal, now Managing Director, and in June 2022 the company bought Sona Processors' running unit at Hamirgarh for ₹16.2 cr. Half of the ₹15.5 cr the promoters put in during 2022 came from Harshil's brother-in-law, Deepank Bhandari, who has been the largest shareholder since. Deepank is an IIT Delhi graduate who worked at BNP Paribas, 1mg and Blinkit before co-founding the fintech firm Dexif in 2022. He owns 41.48% of the company but has no board seat or operating role, and has been paid ₹1.20 cr a year in professional fees in each of the last three years. His parents are among the family members who have given personal guarantees and collateral for the company's bank loans.

• The company has been a manufacturer for less than two years, and its customer base jumped from 191 in FY24 to 909 in FY26. Its customers are domestic fabric traders, wholesalers and garment makers. However, its end market is shrinking. India's cotton woven fabric production fell to 368 cr metres in FY26, down from 384 cr metres in FY24 and 9.4% below FY20, according to CMIE data cited in the company's industry report. The report attributes this to high domestic cotton prices, weak export demand, and garment makers shifting to cheaper man-made fibres, which also receive more policy support through schemes such as PLI. Exporters were further hit by the 50% US tariff imposed in August 2025. Sonaselection's volumes grew 22.0% in FY25 and 15.7% in FY26, but with a short operating history, a largely new customer base and an industry facing these headwinds, it is hard to say whether this growth can be sustained.

• The company's cash conversion has been weak, with a cumulative operating cash flow of negative ₹7.6 cr from FY24 to FY26 against a cumulative post-tax EBITDA of ₹144 cr. Operating cash flow was negative ₹14.2 cr in FY25 and negative ₹11.0 cr in FY26. Most of the cash went into working capital, since the company now owns the cloth it processes. Inventory rose from ₹19.1 cr to ₹154 cr in two years, and receivables from ₹14.0 cr to ₹104 cr.

• Debt to equity was 2.48x at March 2026. Total debt rose from ₹45.2 cr in FY23 to ₹258 cr in FY26, and reached ₹284 cr by July 2026. Over FY24 to FY26 the company spent ₹178 cr on capex, generated negative ₹186 cr of free cash flow, and borrowed to fill the gap. ₹80.0 cr of the IPO money will go towards repaying bank debt, which on the March 2026 balance sheet would bring debt to equity to 0.73x before issue expenses. The plant ran at 82.71% utilisation in FY26 and the ₹50.6 cr of machinery funded by the IPO adds no capacity. Growth beyond the current plant will need fresh capex and more working capital, and at current cash conversion both will likely be funded with debt.

• A 2015 FIR in Bhopal names Subhash Chandra Nuwal, Uma Nuwal, Harshil Nuwal and the company's plant general manager for alleged cheating, forgery and offences under the Prize Chits and Money Circulation Schemes (Banning) Act, relating to the business of promoter group company Starnet Breeding and Research Farms. Starnet Breeding settled with the three complainants in 2023 for ₹10.8 lakh, but the case is yet to be formally closed, and a petition to quash the FIR, filed in 2018, is pending before the Madhya Pradesh High Court.

• The statutory auditor is Pokharna Somani & Associates, a Bhilwara firm that has audited the company since its first financial year. The FY26 statutory audit fee was ₹4.30 lakh and the tax audit fee ₹1.00 lakh, for a company with ₹517 cr of revenue and ₹258 cr of borrowings. The company has also admitted to repeated delays and errors in its regulatory filings. Its November 2024 share placement was filed with the RoC as 74,829 shares at ₹735 instead of 374,145 shares at ₹147, and its compulsorily convertible debentures were filed as optionally convertible. The company has filed corrected forms and applied to the RoC to settle both defaults, which are yet to be decided.

• Deepank Bhandari was disqualified as a director in November 2017 because a company on whose board he sat had not filed its financial statements or annual returns for three consecutive years. The Delhi High Court stayed the disqualification in 2019. That company, along with two LLPs where he was a designated partner, has since been voluntarily struck off as inoperative.

• The CFO, Ramesh Chandra Vyas, a Chartered Accountant who moved up from accounts manager in February 2025, was paid ₹6.30 lakh in FY26. 

Business

• Sonaselection India processes fabric. It buys yarn or unfinished woven cloth (greige fabric), dyes and finishes it at a single plant in Bhilwara, Rajasthan, and sells finished fabric to textile traders and garment makers. It bought this plant in June 2022 from Sona Processors (India) Ltd, a promoter-owned company, for ₹16.2 cr on a slump sale basis.

• Until July 2024 the company did only job work, where the customer owned the material and the company charged a processing fee. Since commissioning its own cotton processing line it buys the material and sells finished fabric. Manufacturing was 81.50% of FY26 revenue against 11.28% in FY24, job work 17.30% against 88.72%, and a new garment vertical added 1.20%.

• Cotton blends are 74.73% of FY26 goods revenue, cotton lycra stretch fabric 17.83%, polyester blends 3.12% and 100% cotton 2.87%. The mix moves sharply each year, with cotton blends at 22.90% and polyester blends at 26.75% in FY25. Orders are taken on individual purchase orders with no long-term contracts.

• Customers are domestic textile traders, fabric wholesalers and garment makers. The top 10 customers accounted for 29.44% of FY26 revenue against 48.15% in FY24. Rajasthan is 37.31% of sales, Delhi 28.03%, Maharashtra 16.24% and Karnataka 9.37%. Exports began in FY26 and are 0.16% of revenue.

• The company does not spin yarn or weave cloth. Yarn or greige fabric comes in, is singed, cleaned, bleached, mercerised, dyed, stretched to width, pre-shrunk, inspected and packed, and goes out as finished fabric. In FY26 it began buying yarn and having third-party weavers convert it into greige fabric on job work, with outside weaving and sizing charges rising to ₹39.1 cr from ₹6.63 cr.

• Raw materials consumed in FY26 were yarn at ₹133 cr, greige fabric at ₹103 cr, dyes and chemicals at ₹40.1 cr and coal and fuel at ₹30.1 cr. Rajasthan supplies 96.01% of purchases and imports are negligible. Sona Styles Ltd, a promoter group company, supplied greige fabric and processing worth ₹121 cr in FY25 and ₹24.9 cr in FY26.

• The plant at Hamirgarh has installed capacity of 82.44 million metres a year, raised from 54.00 million metres in July 2024, and ran at 82.71% utilisation in FY26. It has a zero liquid discharge effluent plant, 1.20 MW of rooftop solar and an in-house lab, and holds OEKO-TEX, GOTS, GRS, OCS, RCS and Regenagri certifications. It employed 979 people and 102 contract workers as of July 2026.

Promoters and Leadership

• Harshil Nuwal, 37, is Managing Director and a commerce graduate from the University of Mumbai. He has been a director of the family's Sona Processors (India) Ltd since 2011. His father Subhash Chandra Nuwal is non-executive Chairman and his mother Uma Nuwal is Whole-time Director, both with over 25 years in the family's textile businesses.

• Harshil Nuwal was paid ₹1.43 cr in FY26 and Uma Nuwal ₹60.0 lakh, while the Chairman draws no remuneration. 

Financials

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