Akash Jha
Pyramid Technoplast, situated in the Indian state of Gujarat, will soon open its doors on Dalal Street. The IPO, or initial public offering, began accepting bids on August 18 and will run through August 22.
The company, which makes plastic injection moulds, expects to raise Rs 153.05 crore with the IPO. An initial public offering (IPO) will contribute Rs 91.30 crore, while an OFS will bring in an additional Rs 61.75 crore. The offer price range is between Rs 151 and Rs 166 per share, and it will end on August 22.
Four anchor investors, including Carnelian Structural Shift Fund and Alchemie Ventures Fund-Scheme I, contributed Rs 27.55 crore to the industrial packaging company on August 17. This funding came in preparation for the IPO.
Debt service and meeting working capital needs will make up the bulk of the fresh issue of money. The remaining funds will be used for operational expenses.
Qualified institutional bidders will receive 50% of the offer, while individual investors would receive 20%. Retail investors will receive the remaining 30%.
Company profile
Pyramid Technoplast was founded in 1997 and is responsible for producing polymer-based bulk packaging drums and intermediate bulk containers (IBC) for usage primarily in the chemical, agrochemical, speciality chemical, and pharmaceutical industries. The company also produces mild steel (MS) barrels for shipping and storage.
The company currently operates six production facilities in key locations across India: four in Bharuch, GIDC, Gujarat, and two in Silvassa, in the union territory of Dadra and Nagar Haveli. In addition to the current four factories in Bharuch, a seventh is now being built.
The combined production capacity of the company’s Polymer Drum machines, IBC factory, and MS drum units is 20,612 MTPA, 12,820 MTPA, and 6,200 MTPA, respectively.
How has Pyramid Technoplast performed financially?
For the fiscal year ending on March 31, 2023, the company generated an after-tax profit of Rs 31.76 crore on revenue of Rs 482.03 crore. The previous fiscal year saw a profit of Rs 26.15 crore on revenue of Rs 402.64 crore for the business. Notably, it has shown sustained increase in its revenue from operations, increasing by more than 20 percent in each of the last two fiscal years. Net income increased by 22% in FY23 and by 53% in FY22.
What is the industry outlook for Pyramid Technoplast?
The Indian chemicals market was worth Rs 12.53 trillion in 2019, and experts predict it would increase to Rs 0.304 trillion by 2025, a CAGR of 9.3 percent. There will be a yearly growth in chemical demand of 9 percent by 2025. It is predicted that the chemical industry will add Rs 24.39 trillion to India’s GDP by 2025.
Who are the company’s peers?
Pyramid Technoplast’s competitors include both established and up-and-coming names, such as Time Technoplast, TPL Plastech, and Mold-Tek Packaging.
What are some of the key risks faced by the company?
Polymer products have a negative effect on the environment, according to the corporation, and automation could hurt the business. Furthermore, its activities can be impacted by economic, social, and political uncertainties.
Underutilization of our production capacity is a real risk if demand for our products drops. The company warned in its Red Herring Prospectus (RHS) that “we may also face surplus production of a particular product due to various reasons, including inaccurate forecasting of customer requirements,” which might have a negative impact on the company’s operations, financial position, and cash flows.
The success and expansion of Pyramid Technoplast are contingent on its ability to attract new customers and keep its current ones. However, “there can be no assurance that we will be able to procure new customers or retain our existing customers successfully,” the document cautioned. The company’s operations and success could be jeopardised if this is not achieved.
Should you bid?
Some brokerages have recommended that aggressive bidders “subscribe” to the issue due to its favourable terms, solid finances, large clientele, and history of satisfied clients. However, there are many who believe the IPO should be delayed or even abandoned altogether due to factors such as erratic debt, intense rivalry, and a razor-thin profit margin. What a few brokerage houses have to say about it:
Mehta Equities: Subscribe
Despite significant inflationary pressures over the previous two years, Pyramid has demonstrated solid financial success. According to Prashanth Tapse of Mehta Equities, the company’s long-term success can be attributed to its varied product range, which serves different sectors, and its strategically positioned manufacturing sites.
Conservative investors might be concerned that the current market condition is a bit muted. The analyst warned that investors should exercise caution before subscribing to the issue in light of the current market climate and fully discounted valuations. Those who are willing to face the risk should do so only with a long-term horizon..
Swastika Investmart Rating: Subscribe (for high-risk investors)
Pyramid Technoplast has been operating successfully in the plastic packaging market for many years. The company has built a solid reputation for its products among consumers and is now branching out to serve more people. According to Swastika Investmart, the company also benefits from advantageous locations for its factories.
However, the corporation does face some risks, including new entrant competition, raw material price volatility, and shifts in government policy. The corporation also has a history of negative cash flow. Despite the high P/E of 16.24 times, it says that high-risk investors are welcome to apply for the IPO.
Anand Rathi: Subscribe – long term
The company’s market value after the issuance of equity shares is Rs 6,110,000,000, and its return on net worth is 29.56% if its valuation is set at the top end of the price range. Anand Rathi, the head of rating agency S&P, said, “We believe that issue is fairly priced and recommend’subscribe — long term’ rating to the IPO.”
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StoxBox Rating: Avoid
The business has many vendors for specific components rather than relying on a single source to de-risk itself from supply chain concerns, and it maintains long-term relationships with distributors on both the local and international levels. According to StoxBox, this helps the company maintain a steady supply of raw materials and negotiate the lowest feasible pricing for its wares.
The company has a history of consistent revenue, EBITDA, and PAT growth, with these metrics increasing at CAGRs of 23.7%, 29.3%, and 36.9% from FY21–23. We are cautious on the issue due to the strong competitive intensity, narrow margins, and volatility resulting from the commoditized character of the industry, as well as the persistent levels of debt,” it continued, giving the issue a “avoid” rating.
The opinions and recommendations offered by Moneypoise’s investing gurus are their own and do not reflect the thoughts or opinions of the website or its management. Moneypoise recommends that customers seek the advice of qualified professionals before to making any financial commitments.
