Industrial packaging company Pyramid Technoplast is set to float its initial public offering for subscription on August 18. This would be the fourth public issue this month, after SBFC Finance, Concord Biotech, and TVS Supply Chain Solutions.
Here are 10 key things to know before you bid for the issue:
1) IPO Date
The bidding will start on August 18 and the last day for subscription would be August 22. The anchor book, a part of qualified institutional buyers (QIB), will open for a day on August 17.
2) Price Band
The price band for the offer has been fixed at Rs 151-166 per share.
3) Issue Size
The manufacturer of polymer-based molded products such as polymer drums plans to mop up Rs 139.22 crore at the lower price band and Rs 153.05 crore at the upper end.
Also Read | Pyramid Technoplast IPO opens tomorrow: 10 things to know before buying the issue
The maiden public issue of 92.2 lakh equity shares comprises a fresh issue of 55 lakh shares (Rs 91.30 crore at Rs 166 per share), and an offer-for-sale (OFS) of 37.2 lakh shares (Rs 61.75 crore) by promoter Credence Financial Consultancy LLP.
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4) Objectives of the Issue
The fresh issue proceeds, excluding the IPO expenses, will be utilised for repaying certain borrowings (Rs 40 crore) and working capital requirements (Rs 40.21 crore). The remaining funds will be kept for general corporate purposes.
The total borrowings on its books stood at Rs 55.34 crore at the end of March FY23, down from Rs 64.8 crore in the previous year. This means that with the fresh issue, the debt-to-equity ratio of the company is expected to improve from 0.52 at the end of March to 0.86 in August.
The funds raised from the OFS will go to selling shareholder Credence Financial.
5) Lot Size
Investors can bid for a minimum of 90 equity shares and in multiples of 90 shares thereafter. Hence, retail investors can make a minimum investment of Rs 14,940 per lot (90 shares) and the maximum investment would be Rs 1,94,220 for 13 lots (1,170 shares).
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High networth individuals with an investment limit of Rs 2-10 lakh in the IPO, can make an application for minimum Rs 2,09,160 for 14 lots (1,260 shares) and the maximum investment would be Rs 9,86,040 for 66 lots (5,940 shares).
This is a book-building offer by the company which has reserved 30 percent of the issue size for the QIB, 20 percent for high net-worth individuals and the remaining 50 percent for retail investors. Further, the company may allocate up to 60 percent of the QIB book for anchor investors portion.
6) Company Profile
Pyramid Technoplast, with blow moulding technology, manufactures polymer based molded products, i.e. polymer drums, which are mainly used by chemical, agrochemical, speciality chemical and pharmaceutical companies for their packaging.
It also manufactures MS Drums made of mild steel (MS) used in the packaging and transport of chemicals, agrochemicals and speciality chemicals.
Injection moulding technology is used for manufacturing caps, closures, bungs, lids, handles, lugs, etc. for in-house use.
With six strategically situated manufacturing units, the Gujarat-based company markets and sells its products under the brand name Pyramid. Its seventh manufacturing unit is under construction at the Bharuch, adjacent to the existing six units. The total installed capacity of its polymer drum manufacturing units is 20,612 MTPA (metric tonnes per annum).
7) Financial Performance
Pyramid has recorded healthy earnings growth in the financial year gone by, though there was a margin pressure due to increasing input cost. Profit for the year ended March FY23 stood at Rs 31.76 crore, increasing by 21.5 percent over a year-ago period, with net profit margin expansion of 9 bps on-year at 6.62 percent during the same period.
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Revenue from operations for the year FY23 at Rs 480 crore increased by nearly 20 percent from the previous year. On the operating front, EBITDA (earnings before interest tax, depreciation and amortisation) grew by 18.06 percent on-year to Rs 49.8 crore, but margin dropped 10 bps to 10.4 percent in FY23.
The return on equity fell significantly to 29.61 percent in FY23, down from 34.77 percent in previous year, while return on capital employed remained stable during the same period at 21.37 percent against 21.38 percent.
The company with a P/E of 16.21x on FY23 basis compares itself with listed entities such as Time Technoplast (P/E at 14.16x), TPL Plastech (20.50x), and Mold-Tek Packaging (41.10x).
8) Promoters and Management
Promoters of the company are Bijaykumar Agarwal, Jaiprakash Agarwal, Yash Synthetics, Credence Financial Consultancy LLP, Pushpa Devi Agarwal and Madhu Devi Agarwal. Currently, Pyramid is 100 percent owned by the Agarwal family.
Bijaykumar Agarwal is the Chairman and Managing Director of the company. His son Jaiprakash Agarwal is the Whole-time Director and Chief Financial Officer, and Jaiprakash's wife Madhu Agarwal is the Whole-time Director on the board.
Chandrakant Joge is the Company Secretary and Compliance Officer of the company.
9) Risk Factors
Here are key risk factors highlighted in the prospectus:
a) Manufacturing operations, which are located in Western India (Bharuch, Gujarat and Silvassa, Dadra and Nagar Haveli), may be affected by various factors associated with the region including any political disruptions, natural calamities or civil disruptions, opposition and protests.
b) Substantial portion of its revenues come from the manufacturing of polymer based molded industrial packaging products like polymer drums and intermediate bulk containers (IBC).
c) Polymer is a derivative of crude oil and any substantial increase in price of crude oil or decrease in the supply of polymer could materially adversely affect its business. Mild steel is manufactured by using iron ore and sponge iron and hence, substantial increase in price of iron ore and sponge iron or decrease in the supply of iron ore and sponge iron could materially adversely affect the manufacturer of MS drums.
d) Company has not entered into any long-term agreements with customers for purchasing its products.
e) Company reported negative cash flows in the past and may continue to do so in the future.
f) Any ban on polymer based packaging by the Government of India may affect its business
10) Allotment and Listing Dates
The company will finalise the basis of allotment of IPO shares, in consultation with the NSE, by August 25, and the equity shares will be credited to demat accounts of eligible investors by August 29. The refunds will be transferred to unsuccessful investors by August 28.
Finally, Pyramid will debut on the BSE and NSE on August 30.
Its IPO shares were available at more than 10 percent premium over upper price band, in the grey market, analysts said on anonymity. The grey market is an unofficial market wherein the IPO shares can be bought and sold till the listing.
PNB Investment Services, and First Overseas Capital are the merchant bankers to the issue, while Bigshare Services is the registrar to the offer.
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