# İsvea IPO Review

In this review, we will take a detailed look at İsvea’s upcoming IPO through an investor’s lens, analyzing its offering structure, the balance of shareholder sales, use of proceeds, debt levels, and operational strength. Instead of rehashing the generic, superficial IPO summaries found everywhere, I will focus on analyzing and interpreting the critical points that stand out within the company’s financial statements and operational framework.

## IPO Structure and Shareholder Sales

An analysis of the company’s pre-IPO ownership structure shows that Ece Holding holds **90%**, Erdem Çenesiz **5.30%**, Neslihan Onur **1.40%**, Münevver Çenesiz **1.40%**, Ahmet Çenesiz **1.40%**, and Nuri Bülent Onur **0.50%**. Of the shares to be offered, **60 million lots** will come from a capital increase, while **7 million lots** will come from shareholder sales. The internal breakdown of the shareholder sales is as follows: Erdem Çenesiz 53%, Münevver Çenesiz 14%, Neslihan Onur 14%, Ahmet Çenesiz 14%, and Nuri Bülent Onur 5%.

This distribution, coupled with a post-IPO free float rate capped at **23.93%**, leaves a positive initial impression. Furthermore, the plan to allocate 20% of the gross IPO proceeds to price stabilization operations for 30 days serves as a significant supporting factor. The fact that Ece Holding, the largest institutional shareholder, is not selling any shares suggests that the owners are focused on directly securing the capital the company needs rather than exiting their positions. Consequently, a net cash inflow of approximately **1.2 billion TL** is expected to enter the company’s coffers.

## Use of Proceeds and Cash Requirements

The reports outline the planned allocation of the IPO proceeds within the following percentage ranges:

* **Renewable Energy Investments:** 20% - 30%

* **Machinery and Equipment Investments:** 15% - 25%

* **Acquisition of Leased Machinery and Equipment:** 10% - 20%

* **Financial Debt Reduction:** 15% - 25%

* **Working Capital:** 15% - 25%

Given that the company manufactures across 5 separate factories, utilizing their roof space for renewable energy investments is a highly rational move. With energy expenses hovering around 9-10% of total costs, this investment points to a high long-term return. Similarly, machinery and equipment investments are optimization- and quality-driven, which will boost productivity. In fact, the company’s capacity utilization rate averaging **30% - 45%** clearly indicates a strategic focus on operational efficiency rather than expanding raw capacity. The item for acquiring leased machinery and equipment—which includes taking over lease-to-own agreements—is also a positive step toward cost reduction and margin expansion.

However, presenting the allocations for financial debt reduction and working capital as ranges rather than exact figures gives the impression that the precise requirements haven’t been fully nailed down. When working capital and debt reduction are evaluated together, it’s worth noting that nearly 50% of the fund will go toward paying down debt and meeting urgent cash needs. While I view the allocation of the remaining funds toward cost-saving and efficiency-driven investments as a positive, I remain **neutral** on the overall use of proceeds for now, given this heavy tilt toward debt.

## Operational Structure and Growth

The company operates across a wide spectrum, including vitreous china sanitaryware (toilets, sinks, reservoirs, etc.), high technical resistance kitchen sinks, shower trays, bathroom furniture, concealed cistern systems, toilet seats, faucets, ceramic and metal accessories, and roofing tiles.

Looking at the industry landscape, the ceramic and bathroom products segment has faced severe revenue pressure in recent years due to demand contraction brought on by high inflation and tight monetary policies. Within the current dynamics of the construction industry, even when home sales increase, housing prices are underperforming inflation, and material quality is declining. This macroeconomic climate has created a challenging period for the company. Although the perceived value-add of the products isn’t particularly high, it is more practical to focus on whether the IPO financials hide an opportunity.

The company’s 2025 income statement reveals that revenue has declined over the years, a drop primarily driven by domestic sales. Coupled with a slight dip in export sales, the revenue balance stands at **55% domestic and 45% international**. Despite industry-wide cost increases, the company seems to have successfully kept its costs under tight control, likely through steps like labor optimization. This allowed it to keep gross profit flat at around **830 million TL**. Thanks to disciplined management of operating expenses, such as general administrative and marketing expenses, operating profit edged up slightly to **676 million TL**.

## Debt, Receivables, and Cash Cycles

Looking at the company’s current balance sheet, cash on hand stands at **133 million TL** and has been flat for a long time. Trade receivables, while growing below inflation, maintain an upward trend, reaching **1.18 billion TL**. In contrast, trade payables remain remarkably low at **175 million TL**.

The most critical detail here is that 481 million TL of trade receivables, and 226 million TL of the 232 million TL under other receivables, are due from related parties. Breaking down these related-party receivables reveals a total balance of **710 million TL**: 412.2 million TL is due from Esviya Sıhhi Tesisat Malzemeleri (with a 3-month maturity) and 225.9 million TL from Ece Holding A.Ş. (with a 3-to-12-month maturity). Meanwhile, inventories continue to climb, reaching **936 million TL**. Even though current assets have gathered momentum to reach around 3.2 billion TL, the sheer volume of receivables relative to the lack of cash on hand makes rigorous risk management an absolute necessity.

While the company’s days payable outstanding (DPO) is 37 days, its days sales outstanding (DSO) has stretched to **150 days**, posing a serious cash flow risk. Although low trade payables relative to receivables keep this structure sustainable for now, the short-term debt line item is flashing red. The company faces **2.2 billion TL** in total debt and working capital obligations due within a single year—434 million TL mature within 3 months, and 1.8 billion TL mature within 3 to 12 months.

Without the IPO option, the company might have been forced to rely on high-cost loans once again. The continuous buildup of short-term debt is a clear red flag regarding financial management performance. Finance expenses skyrocketing to **627 million TL** demonstrates that the company has essentially been operating just to service its financial obligations. In an environment where the timeline for turning sales into cash remains uncertain, this IPO serves as a vital lifeline.

When the expected IPO inflows, current cash, and expected collections are combined (132 million TL in cash, roughly 1.4 billion TL in net IPO proceeds, and 600 million TL in receivable collections, reaching **2.1 billion TL** under an optimistic scenario), this liquidity risk could be mitigated. Management is likely using this financial projection to position the IPO as a financial relief strategy.

## Capacity, Investments, and the Outlook

As previously mentioned, the company’s capacity utilization rate is below 50%. Despite this, generating an operating profit of approximately 676 million TL against non-current assets of **802 million TL** is a positive sign for operational efficiency. The primary reason this strong operational profitability does not flow down to net income is the heavy burden of finance expenses.

Assuming that about 80% of this debt burden is cleared within a year using the IPO proceeds, and that receivables are collected as committed, we can anticipate that the company will avoid entering another heavy borrowing cycle. Under this scenario, even if the company doesn’t grow its revenue, net income could reach around **500 million TL** by the second half of 2027. This potential must be taken into account when evaluating the company’s forward-looking valuation.

## Overall Evaluation

While the company’s IPO structure and the distribution of shareholder sales leave a positive initial impression, the heavy indebtedness on the financial statements, prolonged collection periods, and tight cash flow are major risks that warrant close monitoring. Although no distinct niche value-add stands out in the product lineup, the easing of finance expense pressures once the IPO proceeds kick in opens up a significant window of opportunity. The potential for clearing debts and seeing operational profitability finally convert into net profit makes this offering well worth watching closely.

## Key Areas to Watch

* Regularly tracking receivable collection processes and cash inflows from related parties via financial reports.

* Monitoring investor relations to see if the company shows any tendency to re-leverage.

* Keeping an eye on the capacity utilization rate, domestic construction costs, and the pace of housing production in the sector.

* Clarifying with management the strategy of shifting international sales toward the Middle East and Turkic states.

* Conducting a deeper analysis of the business lines and product details if a long-term investment horizon is being planned.

LEGAL DISCLAIMER: This content does not constitute investment advisory services. Investment advisory is a personalized service tailored to an individual’s risk-return profile, financial situation, and investment goals. The information, comments, and evaluations contained herein are prepared solely for general informational purposes and do not in any way constitute guidance for investment decisions. This content may not be suitable for the reader’s financial structure and risk-return preferences; therefore, investing based solely on this information may not yield the expected results.