Gujarat-based Pyramid Technoplast is poised to make its debut on Dalal Street. Bidding for the company’s initial public offering (IPO) opened on August 18, and is set to conclude on August 22.
The company, a manufacturer of polymer-based moulded products, aims to raise Rs 153.05 crore through this offering. Of the amount raised, Rs 91.30 crore will be generated from a fresh issue, while Rs 61.75 crore will come from an Offer for Sale (OFS). The price band for the offer, which closes on August 22, has been set at Rs 151-166 per share.
Ahead of the IPO, The industrial packaging company garnered Rs 27.55 crore from four anchor investors on August 17, including Carnelian Structural Shift Fund, and Alchemie Ventures Fund-Scheme I.
The fresh issue of funds will be spent mainly on repaying debt and to meet working capital requirements. The rest will be used for general corporate purposes.
The company has reserved 50 percent of the offer for qualified institutional bidders, while non-institutional investors will get 20 percent. The remaining 30 percent will be allocated to retail investors.
Company profile
Incorporated in 1997, Pyramid Technoplast manufactures polymer-based bulk packaging drums and intermediate bulk containers (IBC), which are mainly used for packaging by the chemical, agrochemical, speciality chemical and pharmaceutical sectors. It also manufactures drums made of mild steel (MS), which are used for packaging and transport.
Currently, the company has six strategically located manufacturing units, of which four are in Bharuch, GIDC, Gujarat, and two are at Silvassa, in the union territory of Dadra and Nagar Haveli. A seventh manufacturing unit is under development at Bharuch, next to the other four units.
These facilities provide the company with a total capacity of 20,612 million tonnes per annum (MTPA) for Polymer Drum manufacturing machines, 12,820 MTPA for the IBC manufacturing facility, and 6,200 MTPA for MS drum units.
How has Pyramid Technoplast performed financially?
The company reported a profit after tax of Rs 31.76 crore, accompanied by total revenue of Rs 482.03 crore, for the fiscal year that ended on March 31, 2023. In the preceding fiscal year, the company achieved a bottomline of Rs 26.15 crore and a revenue of Rs 402.64 crore. Notably, its revenue from operations has exhibited consistent growth, exceeding 20 percent over the last two fiscal years. Furthermore, net profit grew 22 percent in FY23 and 53 percent in FY22.
What is the industry outlook for Pyramid Technoplast?
The Indian chemicals market was valued at Rs 12.53 trillion in 2019 and is anticipated to grow by a CAGR of 9.3 percent to reach Rs 0.304 trillion by 2025. By 2025, it is anticipated that demand for chemicals will increase by 9 percent annually. By 2025, the chemical sector is anticipated to contribute Rs 24.39 trillion to India's GDP.
Who are the company’s peers?
Some of Pyramid Technoplast’s listed industry peers are Time Technoplast, TPL Plastech and Mold-Tek Packaging.
What are some of the key risks faced by the company?
The company said that the environmental impact of polymer products is damaging, and that automation may affect its competitiveness. In addition, economic, social and political uncertainty can affect its operations.
“Any reduction in the demand for our products could lead to underutilization of our manufacturing capacity. We may also face surplus production of a particular product due to various reasons including inaccurate forecasting of customer requirements, which could adversely affect our business, results of operations, financial condition and cash flows,” the company said in its Red Herring Prospectus (RHS).
Pyramid Technoplast’s growth prospects and financial performance depend on its ability to obtain new customers and retain existing clients. However, it stated that “there can be no assurance that we will be able to procure new customers or retain our existing customers successfully”. If it is unable to do so, the company’s business and operations might be affected.
Should you bid?
Brokerage firms have a mixed view on the issue and a few have suggested aggressive bidders ‘subscribe’ to the issue, citing its fair pricing, healthy financials, strong customer base and long-term relationships with customers. On the other hand, a few analysts have recommended skipping the IPO, citing inconsistent debt, a high level of competition and a thin margin. Here's what select brokerage firms said:
Mehta Equities: Subscribe
Despite high inflationary pressures in the last two years, Pyramid has shown a strong financial performance over the past few years. Hence, the company's diversified product portfolio, serving multiple sectors and strategically located manufacturing units, gives the business a unique advantage to perform well in the long run, said Prashanth Tapse of Mehta Equities.
“Even the current market scenario is a bit subdued, which is a matter of concern for conservative investors. Hence looking at market mood and fully priced-in valuations, we recommend investors to cautiously look before subscribing to this issue and if investors wish to take the risk one should subscribe with a long-term perspective only,” the analyst noted.
Swastika Investmart Rating: Subscribe (for high-risk investors)
Pyramid Technoplast is a well-established player in the plastic packaging industry with a proven track record of financial performance. The company has a strong brand presence and a wide customer base, and it is also expanding its operations. Moreover, it has strategic locations for its manufacturing units, said Swastika Investmart.
“However, the company faces some risks, such as competition from new entrants, fluctuations in the price of raw materials, and changes in government policies. Additionally, the company has experienced negative cash flow in the past. Nevertheless, the IPO is priced at a P/E of around 16.24 times, high-risk investors may apply for this IPO,” it added.
Anand Rathi: Subscribe – long term
“At the upper price band, the company is valuing at P/E (price-earnings) of 16.21 times FY23 earnings with a market cap of Rs 6,110 million post issue of equity shares and return on net worth of 29.61 percent. We believe that issue is fairly priced and recommend ‘subscribe — long term’ rating to the IPO,” said Anand Rathi.
StoxBox Rating: Avoid
The company has long-term relationships with distributors both domestic and international, and has multiple vendors for particular components rather than relying on single sources to de-risk itself from supply chain problems. This allows it to ensure the continued availability of raw materials and enables the company to secure the best possible prices for its products, said StoxBox.
“The company has a track record of sustained revenue, EBITDA and PAT growth which rose at a CAGR of 23.7 percent, 29.3 percent and 36.9 percent, respectively, during the FY21-23. The high competitive intensity, thin margins and volatility due to commoditized nature of the business and consistent levels of debt makes us cautious on the issue,” it added, giving the issue an ‘avoid’ rating.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
