Sonaselection plans Rs 80 crore working-capital repayment

Sonaselection plans to apply Rs 80 crore of initial public offering, or IPO, net proceeds to repay or prepay three working-capital cash-credit facilities. The three specified facilities had combined outstanding balances of Rs 103.196 crore on July 31, 2026, so the earmarked amount equals about 77.5% of those balances before accrued interest and any refinancing changes.

How will Sonaselection use Rs 80 crore for working-capital repayment?

Sonaselection intends to use Rs 80 crore to repay or prepay, fully or partly, specified bank borrowings and accrued interest during FY 2027. Net proceeds are the IPO proceeds remaining after issue-related expenses, and the final amount available will be fixed when the issue price is determined. The repayment allocation is one of two quantified uses: Rs 80 crore for borrowings and Rs 50.611 crore for plant and machinery at Sonaselection's existing manufacturing facility in Hamirgarh, Bhilwara, Rajasthan.

The stated Rs 80 crore is a ceiling for this object rather than a commitment to settle every listed facility in full. Sonaselection reported aggregate outstanding bank borrowings of Rs 263.843 crore as of July 31, 2026, including term loans, vehicle loans, cash-credit facilities and working-capital demand loans. The identified facilities represented about 39.1% of total reported bank borrowings, while the proposed repayment amount represented about 30.3% of that total.

Sonaselection said no portion of net proceeds is proposed to be paid to its promoters, directors, key managerial personnel or senior management. It also stated that proceeds used for debt repayment will not be indirectly routed to promoters, promoter group entities, group companies or associates. The balance designated for general corporate purposes has not been finalised and cannot exceed 25% of gross IPO proceeds under the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations.

Which Sonaselection bank facilities are included in the repayment plan?

Sonaselection has limited the Rs 80 crore repayment plan to three cash-credit facilities from SBI Bank, Axis Bank and HDFC Bank. Sonaselection identified these facilities as borrowings used for working-capital requirements. Together, the facilities had sanctioned limits of Rs 124 crore and outstanding amounts of Rs 103.196 crore as of July 31, 2026.

SBI Bank had the lowest outstanding balance of the three, at Rs 32.689 crore against a Rs 47 crore sanctioned cash-credit limit. The facility was originally sanctioned on February 3, 2025, first disbursed on February 10, 2025 and renewed on August 28, 2025. Its current interest rate was 8.25%, stated as EBLR plus a spread, and its repayment term was stated as on demand.

Axis Bank's Rs 34.280 crore outstanding was closest to its Rs 35 crore sanctioned limit, leaving Rs 72 lakh of undrawn headroom at the stated date. The Axis Bank facility was sanctioned on July 3, 2025 and first disbursed on July 23, 2025; modifications to its sanction terms were dated July 7 and July 15, 2025. HDFC Bank's facility, originally sanctioned on June 15, 2022 and first disbursed on July 13, 2022, was renewed on October 10, 2025.

What will affect the final debt reduction from Sonaselection's IPO proceeds?

Sonaselection's final debt reduction will depend on outstanding balances, accrued interest, repayment schedules and any refinancing when it deploys the Rs 80 crore in FY 2027. Sonaselection said balances under the facilities may vary over time because it may repay or refinance existing borrowings under the relevant repayment schedule. It may use IPO proceeds to repay refinanced facilities, including applicable fees or penalties, but the total for this object cannot exceed Rs 80 crore.

Interest rates are variable under the facility documents rather than fixed for the entire period. SBI Bank's 8.25% rate is stated as linked to EBLR, Axis Bank's 7.75% rate is linked with repo, and HDFC Bank's 7.85% rate is linked with three-month repo. Accordingly, the stated rates are current rates, and changes under the relevant sanction letters or loan agreements can change Sonaselection's interest cost before repayment occurs.

Prepayment terms differ by lender. SBI Bank and HDFC Bank have nil prepayment penalties in the disclosed table, while Axis Bank's charge is 2% of its Rs 35 crore sanctioned limit, equal to Rs 70 lakh if applied to that stated limit. Sonaselection said any applicable prepayment charge would be funded from internal accruals, not from the Rs 80 crore net-proceeds allocation, making internal cash availability relevant to the all-in prepayment cost.

Does Sonaselection's IPO plan allocate more to repayment than machinery?

Sonaselection's quantified plan allocates more funds to debt repayment than to machinery, with Rs 80 crore for borrowings versus Rs 50.611 crore for equipment. The difference is Rs 29.389 crore, and repayment accounts for about 61.2% of the Rs 130.611 crore in specifically quantified objects. That comparison excludes general corporate purposes because its amount will be set only after the IPO price and gross proceeds are finalised.

The machinery allocation is not presented as a production-capacity expansion. Sonaselection plans to buy one continuous dyeing range, one sizing machine and two direct warping machines, based on quotations dated July 1 and August 5, 2026. Sonaselection stated that the equipment is intended to improve operational efficiency, product quality, process optimisation and consistency, without increasing overall production capacity or introducing new products or product lines.

The plan remains subject to management estimates and market, commercial and technical factors. Sonaselection said no bank, financial institution or independent agency has appraised the proposed funding requirements. If a shortfall arises, Sonaselection may reallocate proceeds among the disclosed objects in accordance with applicable law, use internal accruals, or seek additional equity or debt arrangements; any unutilised proceeds after FY 2027 may be deployed in later periods.

Conclusion

Sonaselection's Rs 80 crore working-capital repayment plan is directed at three identified cash-credit facilities with Rs 103.196 crore outstanding on July 31, 2026, rather than at its entire Rs 263.843 crore of bank borrowings. The allocation is larger than the Rs 50.611 crore machinery budget, while the repayment may be partial because the disclosed facilities exceed the earmarked proceeds.

The next points to watch are Sonaselection's final net proceeds, FY 2027 deployment, and changes in facility balances or benchmark-linked interest rates. Sonaselection has disclosed that it can refinance facilities, revise funding deployment and use any unspent amount in subsequent periods, subject to applicable law, so the eventual lenders and balances repaid may differ from the July 31, 2026 snapshot.