The ₹153 crore-initial public offering (IPO) of industrial packaging company Pyramid Technoplast opened for subscription today, August 18, and will close on Tuesday, August 22. The company has set a price range of ₹155-161 for the issue. This would be the fourth public issue this month, after SBFC Finance, Concord Biotech, and TVS Supply Chain Solutions.
About the issue: The public issue comprises of a fresh issue of 55 lakh shares worth ₹91.30 crore and an offer-for-sale (OFS) of 37.2 lakh shares worth ₹61.75 crore by promoter Credence Financial Consultancy LLP.
Subscription status: The IPO saw a decent response and was subscribed 45 percent till 11:30 pm on Day 1. Investors bid for 33.69 lakh shares as against 75.60 lakh shares offered. Its retail portion was subscribed 68 percent, while non-institutional investors (NII) quota was subscribed 14 percent, however, qualified institutional buyers' (QIBs) part did not receive any subscription so far.
GMP: The company's shares in the grey market are trading at a healthy premium of ₹25, indicating a decent response to the issue.
However, one must note that grey market premium is only an indicator of how the company's shares are performing in the unlisted market and can change quickly.
Anchor investors: Ahead of its IPO, Pyramid Technoplast has raised ₹27.55 crore by allocation of 16.59 lakh equity shares to 4 anchor investors at ₹166 per share. Carnelian Structural Shift Fund, Alchemie Ventures Fund-Scheme I, Pluris Fund, and Resonance Opportunities Fund were the marquee investors that participated in the anchor book.
Objective: The fresh issue proceeds, excluding the IPO expenses, will be utilised for repaying certain borrowings ( ₹40 crore) and working capital requirements ( ₹40.21 crore). The remaining funds will be kept for general corporate purposes. Meanwhile, the funds raised from the OFS will go to selling shareholder Credence Financial.
Lot size: Investors can bid for a minimum of 90 equity shares and in multiples of 90 shares thereafter. Hence, retail investors will have to make a minimum investment of ₹14,940 per lot.
Reservation: Pyramid Technoplast IPO has reserved not more than 30 percent of the shares in the public issue for QIBs, not less than 20 percent for NIIs, and not less than 50 percent of the offer is reserved for retail investors.
About the firm: Pyramid Technoplast Limited is an industrial packaging company engaged in the business of manufacturing polymer-based molded products (Polymer Drums), which are primarily used for packaging needs by chemical, agrochemical, specialty chemical, and pharmaceutical firms. The company is one of the leading manufacturers of rigid Intermediate Bulk Containers (IBC) in India manufacturing 1,000-litre capacity IBC. Time Technoplast, TPL Plastech, and Mold-Tek Packaging are the listed industry peers of the company.
Financials: For the year ending March 2023, the company's revenue from operations jumped 19.72 percent to ₹480 crore from ₹402 crore in FY22. Meanwhile, its PAT increased by 21.47 percent to ₹31.76 crore for FY23 from ₹26.14 crore in FY22. The company’s ROCE, however, fell to 30.98 percent in FY23 compared with 33.33 percent and 31.50 percent in FY22 and FY21, respectively. ROE was reported at 34.82 percent in FY23 compared with 42.15 percent and 42.07 percent in FY22 and FY21, respectively.
Allotment and listing dates: The company will finalise the allotment of IPO shares by August 25. It will initiate refunds on Monday, August 28, while the shares will be credited to the Demat account of allottees on Tuesday, August 29.
The company will debut on the BSE and NSE on August 30.
Book-running managers: PNB Investment Services Limited and First Overseas Capital Limited are the book-running lead managers (BRLM) for the offer. Bigshare Services Private Limited is the offer's registrar.
What Brokerages Say:
Brokerages were mixed on the issue. While some recommended subscribing for the long term given the company's diversified customer base along with the comprehensive product portfolio, others said that the volatile nature of the business, thin margins and consistent levels of debt kept them cautious on the issue.
Anand Rathi: Subscribe for long term
“The company has a diversified customer base along with a comprehensive product portfolio. At the upper price band, the company is valuing at a P/E of 16.21x FY23 earnings with a market cap of ₹611 crore after issue of equity shares and a return on the net worth of 29.61 percent. We believe that issue is fairly priced and recommend a “Subscribe – Long Term” rating for the IPO,” said Anand Rathi.
“We believe growth for the industrial packaging players in the IBC segment will be robust over the next 5-6 years; Pyramid Technoplast Limited with its strategic presence in industrial belts in India is perfectly placed to benefit from these developments as the company specialises in making IBCs. At the higher price band, Pyramid is commanding a P/E multiple of ~19x on FY23 EPS of ₹8.63, while the peer set trades at 26.39x. We recommend subscribing to the issue, keeping in mind the high growth rates, lower interest costs as debt is repaid, working capital requirement is lower, new capacity goes on-stream and improved utilisation levels of current capacity (currently 75 percent), which should translate into 15-20 percent earnings growth over the next 12-18 months,” said SMIFS.
Axis Capital: Not rated
The company caters to bulk packaging requirements of their clients from diverse industries like chemicals, agrochemicals, pharmaceuticals, lubricants and edible oil by supplying them with Polymer Drums, IBC and MS drums. They have served more than 376 customers on a regular basis during the past 3 financial years. The issue also has a comprehensive and diverse product portfolio, it said.
“The high competitive intensity, thin margins and volatility due to the commoditised nature of the business (dependent on crude and steel prices) and consistent levels of debt make us cautious on the issue. We, therefore, recommend a “Avoid” rating for the issue,” it said.