Avoid Tijaria Polypipes IPO: MLR Securities

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Avoid Tijaria Polypipes IPO: MLR Securities

Tijaria Polypipes (TPIL) is engaged in the manufacturing of pre-lubricated HDPE pipes, PVC & SWR pipes, sprinkler pipes and systems, flat tubes, fittings and PET straps with a total production capacity of 35,256 MTPA.

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Tijaria Polypip BSE | NSE 23/05/12 Are Mutual Funds betting on Tijaria Polypip?

Tijaria Polypipes (TPIL) is engaged in the manufacturing of pre-lubricated HDPE pipes, PVC & SWR pipes, sprinkler pipes and systems, flat tubes, fittings and PET straps with a total production capacity of 35,256 MTPA.

TPL is in the process of implementing an expansion cum diversification project for the manufacture of partially oriented yarn, zipper and mink blankets with a total capex of Rs 108.5 Cr to be funded though term loan of Rs 40 crore, promoter contribution of Rs 8.5 crore and IPO proceeds of Rs 60 crore. MLR Securities has recommended investors to Avoid this issue.

MLR Securities research report:

Financials & Valuations: The company's topline witnessed a CAGR of 32% during the period FY06-11 to Rs 119 Cr while bottomline grew by 58% during the same period to Rs 6.9 Cr. Operating margins consistently improved till FY11 on the back of better product mix and higher realizations. In FY11, it marginally declined to 11.75% from 12.4% a year ago as the company added new capacities during the fiscal. For the last two fiscals company is able to deliver net margin of close to 6%.

Concerns: Vulnerability to fluctuations in crude oil prices as the major raw materials are petroleum derivatives. Weak bargaining power of the company with suppliers as well as customers as the major raw materials are HDPE and PVC which are sourced from companies such as RIL, GAIL and Haldia petrochemicals. TPL is a relatively small company and is therefore exposed to intense competition from major industry participants

Company is asking for a valuation of 20 times FY11 EPS which is quite steep compared to its peer Finolex Industries which is trading at 11 times FY11 EPS, despite the latter having a larger scale of operations. MLR Securities has recommended investors to Avoid this issue.

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To read the full report click on the attachment