Impressive financials make the offer price look reasonable though vesting controlling interest with obscure companies and poor corporate governance practices cast shadow.
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PYRAMID TECHNOPLAST OFFER AT A GLANCE |
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| Offer Type | Book Built |
| Platform | Main Frame |
| Offer Size | Rs 153 Cr |
| Fresh Issue | 55,00,000 equity shares (Rs 91.30 Cr) |
| Offer for Sale | 37,20,000 equity shares (Rs 61.75 Cr) |
| Face Value | Rs 10 |
| Price Band | Rs 151 – 166 |
| Min Quantity | 90 Nos. |
| Implied M-Cap | Rs 611 Cr |
| Equity Cap | Rs 36.78 Cr |
| Free Float | 25% |
| Lead Manager | PNB Investment Services and First Overseas Capital |
| Registrar | Bigshare Services |
| Listing | NSE, BSE |
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INDICATIVE ISSUE SCHEDULE |
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| Opening : 18-Aug-2023 | Closing : 22-Aug-2023 |
| Allotment : 25-Aug-2023 | Refunding : 28-Aug-2023 |
| Demat Credit : 29-Aug-2023 | Trading : 30-Aug-2023 |
The Offer
The Mumbai based Pyramid Technoplast Ltd (PTL) is making its capital market debut with Rs 153 Cr issue. The IPO consists of a fresh issue of 55 lakh equity shares (Rs 91.30 Cr) by the company and an Offer for Sale of 37.20 lakh equity shares (Rs 61.75 Cr) by one of the corporate promoters. The offer is being made through the book-building route with a price band of Rs 151-166 for Rs 10 paid-up share.
Applicants should bid for a minimum lot of 90 shares and multiples thereof. The shares are proposed to be listed on the main frame of NSE and BSE on Wednesday, August 30, 2023. PNB Investment Services and First Overseas Capital are acting as managers to the offer while Bigshare Services is playing the role of the registrar. The bidding opens on Friday, August 18 and closes on Tuesday, August 22, 2023.
The company proposes to utilize the net proceeds of the fresh issue towards re-payment of borrowings to the tune of Rs 40 Cr and funding working capital requirements to the extent of Rs 40.21 Cr. The balance amount is proposed to be utilized for general corporate purposes.
Lineage
PTL has a strange history. The company was originally incorporated on December 30, 1997 by Prem Chand Kumar and Abha Prem Kumar who subscribed to just 10 shares of Rs 10 each. For five long years it remained only as a shell company with a capital of just Rs 200! In December 2002 Rajesh Jain and Anita Jain took control of the company by subscribing to Rs 6 lakh worth of shares. However, by October 2005, the controlling interest shifted to Bijaykumar Agarwal’s family.
Currently, while Bijaykumar Agarwal and his son Jaiprakash hold 8.12% and 8.29% respectively, Bijaykumar’s wife and daughter-in-law are holding 13.53% and 10.48% respectively, and his group firms Yash Synthetics Private Ltd and Credence Financial Consultancy LLP are holding 32.42% and 23.06% respectively. Another company of the Agarwals, Anmol Monower Plastic Private Ltd, is holding the balance 4.09%. Strangely, the financials of the two corporate promoters who collectively hold more than 55% of PTL’s equity capital are not disclosed in the offer document.
The 1986-registered Yash Synthetics based in Bharuch is authorised to carry on the business of spinners, weavers, manufactures, ginners, processors and packers of cotton, jute, hemp, silk and man-made synthetics fibres. But, according to PTL’s RHP, Yash Synthetics is not engaged in any business operations. The 1995-registered Credence Financial Consultancy Private Ltd based in Mumbai was converted into a limited liability partnership firm in August 2022.
Credence Financial Consultancy LLP is reportedly engaged in the business to provide consulting and advisory services in the field of finance to entities including corporate, non-corporate, start-ups, government entities, etc. But, its financials are not disclosed in the RHP. Anmol Monower Plastic Private Ltd, member of the promoter group, has entered into rental agreement dated July 12, 2019, with PTL for a property taken on a monthly rent of Rs 110,000. Anmol Monower is authorized to do business activities similar to that of PTL but, it is not engaged in any business activities.
The most disturbing aspect of PTL is that the company has failed miserably on the corporate governance front. It is not able to trace crucial corporate records with regard to the transfer of shares from the previous promoters to the present ones in 2003. Also, it does not have the records for the transfer of shares in 2008 within the promoter group. Further, it has no record for the acquisitions of shares in 2009 by the promoter family members from eight closely held companies.
Another strange aspect is the appointment and resignation of the promoter-chairman. Present promoter Bijaykumar Agarwal, who was appointed as Chairman and Managing Direcor on September 15, 2022, resigned on January 1, 2023. A month and a half later he was re-appointed as CMD!
Key Management
Bijaykumar Agarwal (62), who has over three decades of experience in packaging industry, looks after various functions such as finance, raw material procurement, customer servicing and business development. Son and co-promoter Jaiprakash Agarwal, (40), who has over nineteen years of experience in the packaging industry, is designated as Whole-time Director and Chief Financial Officer. He looks after manufacturing, finance, accounts, sales & marketing and business development. Daughter-in-law Madhu Agarwal (42) has also been appointed as a Whole-time Director. She looks after human resource, administration and compliance related activities.
Stakeholders
The entire present equity capital of Rs 31.28 Cr is held by the promoter group at an average cost less than Rs 3 per share. Post-IPO, the promoter group will hold 74.94% of the enlarged capital of Rs 36.78 Cr at a negative cost which could be detrimental to the stock in the secondary market after the lock-in period of 6 months and 18 months.
Business
PTL is an industrial packaging company engaged in the manufacture of polymer based molded products (drums ranging 20 litres to 250 litres) mainly used by chemical, agrochemical, specialty chemical and pharmaceutical companies for their packaging requirements. The company is claimed to be one of the leading manufacturers of rigid Intermediate Bulk Containers (IBC) in India manufacturing 1,000 litre capacity. IBCs are industrial-grade containers engineered for the mass handling, transport, and storage of liquids, semi-solids, pastes, or solids.
The company also manufactures MS drums made of mild steel (MS) used in the packaging and transport of chemicals, agrochemicals and specialty chemicals. PTL uses blow molding technology to manufacture polymer drums and IBCs. Injection molding technology is used for manufacturing caps, closures, bungs, lids, handles, lugs, etc. for in-house use. PTL’s products are marketed and sold under the brand name “Pyramid”.
The company reportedly has six strategically located manufacturing units out of which four are in Bharuch, GIDC, Gujarat and two are situated at Silvassa, UT of Dadra and Nagar Haveli. The seventh manufacturing unit is under construction at Bharuch, GIDC adjacent to the existing six units. The total installed capacity of PTL’s polymer drum manufacturing units is 20,612 MTPA and that of IBC manufacturing unit is 12,820 MTPA and the installed capacity of its MS drums unit is 6,200 MTPA.
Financial Track
PTL has an impressive financial track record. The company’s top line has steadily grown from Rs 259 Cr in fiscal 2020 to Rs 480 Cr in fiscal 2023. EBIDTA has surged from Rs 19 Cr to Rs 51 Cr during this period. Net profit has bulged from Rs 5.55 Cr to Rs 31.80 against a small equity base of Rs 3.91 Cr. The company’s net cash flow from operations amounted to Rs 39 Cr in fiscal 2023.
The company’s 3-year CAGR of sales and EBIDTA are commendable at 22.8% and 39.5% respectively. Its return on equity and capital employed are also attractive at 29.6% and 28.3% respectively.
Of the present equity of Rs 31.28 Cr, more than Rs 30 Cr account for bonus shares. The company has not raised any share premium till date. Even after the hefty bonus issues, the company’s reserves and surplus stood at Rs 76 Cr. Nevertheless, the company has not paid any dividend.
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Pyramid Technoplast Financials (in Cr) |
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| Year Ended |
Mar-23 |
Mar-22 | Mar-21 |
Mar-20 |
| Revenue |
480.38 |
401.20 | 313.50 |
259.31 |
| Operating Profit |
50.22 |
43.01 | 29.87 |
18.02 |
| OPM% |
10.5 |
10.7 | 9.5 |
6.9 |
| Other Income |
0.78 |
0.97 | 1.34 |
0.78 |
| EBIDTA |
51.00 |
43.98 | 31.21 |
18.80 |
| EBIDTA % |
10.6 |
11.0 | 9.9 |
7.2 |
| Interest |
4.05 |
4.85 | 5.22 |
7.08 |
| Depreciation |
4.93 |
4.42 | 4.39 |
3.68 |
| Except Item |
0.83 |
0.45 | 1.29 |
-0.14 |
| Tax |
10.60 |
8.70 | 5.75 |
1.44 |
| Net Profit |
31.80 |
26.18 | 16.98 |
5.55 |
| Equity (Implied) |
36.78 |
3.91 | 3.91 |
3.91 |
| Reserves (Implied) |
161.77 |
71.29 | 44.94 |
28.03 |
| Borrowing |
55.34 |
64.77 | 51.30 |
46.43 |
| Fixed Assets |
69.20 |
51.80 | 51.40 |
48.80 |
Valuation
PTL has fixed a price band of Rs 151-166 for Rs 10 paid-up share. Though the company’s operation profit margin is a shade lower than its listed peers, the IPO cap price discounts the company’s earnings at less than 20 times which compares well with industry heavy weight Mold-Tek. However, as compared to Time Technoplast, Pyramid is priced on the higher side.
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HOW PYRAMID COMPARES WITH LISTED PEERS |
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Financials |
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| (Amount in Cr) |
Pyramid |
Mold-Tek | Time Tech |
TPL Plast |
| Market Cap |
611 |
3194 | 3081 |
333 |
| Borrowing |
55 |
47 | 810 |
38 |
| Fixed Assets |
69 |
393 | 1450 |
80 |
| Revenue |
480 |
730 | 4289 |
271 |
| Other Income |
1 |
1 | 4 |
1 |
| EBIDTA |
51 |
137 | 581 |
31 |
| Interest |
4 |
4 | 105 |
5 |
| Net Profit |
32 |
77 | 224 |
16 |
| Equity Cap |
37 |
17 | 23 |
16 |
| Reserves |
162 |
542 | 2047 |
100 |
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Stock Features |
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| Current Price (Rs) |
166 |
963 | 136 |
43 |
| Face Value (Rs) |
10 |
5 | 1 |
2 |
| Book Value |
54 |
168 | 92 |
15 |
| Promoter Stake % |
74.9 |
33.3 | 51.5 |
74.9 |
| Debt/Equity |
0.3 |
0.1 | 0.4 |
0.3 |
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Profitability |
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| OPM % |
10.5 |
18.6 | 13.5 |
11.0 |
| Net Margin % |
6.6 |
10.5 | 5.2 |
5.9 |
| Cash EPS |
9.98 |
32.24 | 17.25 |
2.76 |
| Earnings Per Share |
8.64 |
23.13 | 9.69 |
2.06 |
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Growth |
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| CAGR 3Yr Sales % |
22.8 |
18.6 | 6.5 |
8.9 |
| CAGR 3Yr EBIDTA % |
39.5 |
19.0 | 5.0 |
9.0 |
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Return |
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| RONW % |
29.6 |
13.7 | 10.8 |
13.9 |
| ROCE % |
28.3 |
17.6 | 14.2 |
16.6 |
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Discounting |
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| Price/Earnings |
19.2 |
41.6 | 14.1 |
20.8 |
| Price/Cash EPS |
16.6 |
29.9 | 7.9 |
15.5 |
| Price/Book Value |
3.1 |
5.7 | 1.5 |
2.9 |
| Price/EBIDTA |
12.0 |
23.3 | 5.3 |
10.8 |
| Price/Revenue |
1.3 |
4.4 | 0.7 |
1.2 |
| Price/Fixed Assets |
8.8 |
8.1 | 2.1 |
4.2 |
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Distribution |
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| Dividend % |
0 |
120 | 125 |
30 |
| Yield % |
0 |
0.6 | 0.9 |
1.4 |
| Pay-out % |
0 |
25.9 | 12.6 |
29.2 |