The initial public offering on Pyramid Technoplast kicks-off for subscription on Friday, August 18 as the company will be selling its shares in the range of Rs 151-166 apiece with a lot size of 90 equity shares. The bidding for the issue will conclude on Tuesday, August 22.
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Incorporated in 1997, Pyramid Technoplast manufactures polymer-based molded products (Polymer Drums) mainly used by chemical, agrochemical, specialty chemical, and pharmaceutical companies for their packaging requirements. Pyramid Technoplast started its commercial production in 1998.
The company is looking to raise Rs 153.05 crore through its initial stake sale, including a fresh equity share sale of Rs 91.30 crore, while its promoter Credence Financial Consultancy LLP will offload 37.20 lakh equity shares amounting to Rs 61.75 crore via offer-for-sale (OFS) route.
Net proceeds from the issue shall be utilized towards repayment and/or pre-payment, in full or part, of certain outstanding borrowings availed by the company, funding working capital requirements of the company, and general corporate purposes.
Ahead of its IPO, Pyramid Technoplast garnered Rs 27.55 crore through four anchor investors including Carnelian Structural Shift Fund, the Alchemie Ventures Fund, the Pluris Fund, and the Resonance Opportunities Fund. The company gave 16,59,600 equity shares to these anchor investors, with each share valued at Rs 166.
Pyramid Technoplast manufactures polymer-based bulk packaging drums and intermediate bulk containers (IBC) and MS drums for packaging used in the packaging and transport of chemicals, agrochemicals, and specialty chemicals. It has over 6 manufacturing units out of which four are situated in Bharuch, GIDC, Gujarat, and two are situated at Silvassa, UT of Dadra and Nagar Haveli.
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For the year ended on March 31, 2023, the company reported a profit after tax at Rs 31.76 crore, with a total revenue of Rs 482.03 crore. The company had clocked a bottomline of Rs 26.15 crore and a revenue of Rs 402.64 crore in the year ended on March 31, 2022.
The company has reserved 50 per cent of the offer for qualified institutional bidders, while non-institutional investors will get 20 per cent of the offer. Remaining 30 per cent of the shares shall be allocated to the retail investors.
PNB Investment Services and First Overseas Capital are the book running lead managers to the issue, while Bigshare Services has been appointed as the registrar to the issue. The company will be listed at both BSE and NSE, with August 30, 2023, Wednesday, as the tentative date of listing.
Brokerage firms have a mixed view on the issue as a few suggest to ‘subscribe’ for aggressive bidders to it, citing its fair pricing, healthy financials, strong customer base and long-term relationships with the customers. On the other hand, a few analysts have suggested to give a skip citing inconsistent debt, high competition and thin margin. Here’s what select brokerage firms said:
Reliance Securities
Rating: Subscribe
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On FY23 financials, the IPO is valued at 19.2 times P/E, 13.2 times EV/EBITDA and 1.4 times EV/Sales. Pyramid Technoplast is one of the leading manufacturers of rigid IBC in India, manufacturing 1,000 liter capacity IBC, said Reliance Securities in its note for the issue.
“The company has long term relationships with distributors or vendors, both domestic and international. In view of diversified polymer-based product portfolio, healthy financials, strong customer base, focus on quality of products, we recommend a ‘subscribe’ to the issue,” it added.
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. 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.
StoxBox
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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 themselves from supply chain problems. This allows them to ensure the continued availability of raw materials and enables them to secure the best possible prices for their products, said StoxBox.
“The company has a track record of sustained revenue, EBITDA and PAT growth which rose at a CAGR of 23.7 per cent, 29.3 per cent and 36.9 per cent, 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 with a ‘avoid’ rating for the issue.
Hensex Securities
Rating: Subscribe for long term
The company has been able to sustain increasing net profits on YoY basis. Pyramid Technoplast is a low debt company. Its debt-to-equity is 0.46 times. The company intends to explore acquisition of businesses, assets and machines in new geographies where considerable business opportunities would be available to grow their business, said Hensex Securities with a ‘subscribe for long-term’ rating.
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The brokerage has flagged unsecured loans, reduction in the demand for the company’s products and the objects of the offer for which funds are being raised have not been appraised by any bank or financial institution as the key risks for the issue.
