CM RATING

35/100

Plastene India, promoted by Champalal G. Parekh, Prakash Parekh and Madhu P. Parekh, is engaged in the integrated business of manufacturing Jumbo bags, woven sacks (comprising of laminated woven sacks and BoPP laminated woven sacks), flexible packaging (comprising of printed laminates, preformed pouches, surface printed three-layer films and liners), woven fabric, tarpaulins and other products mostly used in self consumption which comprises of UV master batch, anti-fab master batch, multifilament yarn and webbings. In FY 2009, it started manufacturing master batches, multifilament yarn and fillers as part of its backward integration strategy. It also sells granules, its main raw material, which is imported from countries like Saudi Arabia, Thailand, and the UAE. The packaging products manufactured by the company are used in different industrial segments such as food grains, pharmaceuticals, edible oil, cement, fertilizers, chemicals, salt, sugar etc.

It is also distributors for Indian Oil Corporation in the Kutch and Saurashtra regions of Gujarat for supply of PP / HDPE / LLDPE granules. The company is entitled to Rs 0.35 per kg commission on sale of these products.

Currently, it has two manufacturing units, both of which are situated in Gujarat: in the Nani Chirai Village of the Kutch district and in Rajpur Village of Mehsana district. The companys wholly owned subsidiary, Oswal Extrusion, has four manufacturing facilities, three at Kutch district and the other one at the Mehsana district of Gujarat.

The companys current capacity stands at 56,200 tonnes per annum (tpa). It is in the process of enhancing its manufacturing capacity to 69,000 tpa to capitalize upon the growing demands of Jumbo bags, BoPP laminated woven sacks/ bags and flexible packaging. The company is going to venture into block bottom valve bags and will set up capacity of 5,000 tpa by March 2013 at its existing Nani Chirai village of Kutch district at an approximate cost of Rs 25 crore. Block bottom valve bags are used in packaging of cement, food grain, cereals etc.

The company derives approximately 49% of its revenues from the exports to more than 30 countries.

The company intends to enter capital market to raise money in the range of Rs 74.9 crore to Rs 77.7 crore by issuing around 92.55 lakh equity share of face value of Rs 10 each at the price range of Rs 81 to Rs 84 per share. The proceeds from issue of shares will be used by the company for expansion of manufacturing facilities and purchase of plant and machinery for manufacturing of new product, block bottom valve bags at Nani Chirai, amounting to Rs 49.34 crore; expansion of manufacturing facilities at Rajpur, amounting to Rs 28.07 crore; and for general corporate purpose.

Strengths

• The companys manufacturing unit in Nani Chirai, in the Kutch district of Gujarat is in close proximity to the Kandla and Mundra ports. This helps the company in efficient logistics thereby reducing its transportation and raw material cost as compared to its competitors.

• The companys product portfolio is diverse enough to cater to a variety of packaging solution requirements of customers across various industry segments and can manufacture packaging products for products ranging from 5 gram to 3,000 kg

• In-house production of key inputs such as master batches, fillers and multi filament yarn confers give cost advantage to the companys operations

• For the companys units and its subsidiaries units, the Technology Upgradation Finance Scheme benefits are available from the Ministry of Textiles. They are entitled for concessional rate of interest and are reimbursed 5% of the interest rate that are charged on finance of new machinery. This helped the company in lowering its overall cost of funds.

Weaknesses

• The packaging industry is highly fragmented and unorganized and to a certain extent localized.

• For the 10 months ended January 31, 2012, contingent liabilities not provided for appearing in its financial statements aggregated to Rs 61.9 crore on a consolidated basis and Rs 44.21 crore on a standalone basis. If any of these contingent liabilities were to materialize, it may have an adverse impact on the companys financial condition

• Oswal Extrusion, a wholly owned subsidiary, is one of its top customers. It forms 21% of total consolidated revenue for the 10 months ended January 2012, 17% for FY 2011, 17% for FY 2010 and 27% for FY 2009.

• The promoters have interest in certain companies, which engage in similar businesses, which may create a conflict of interest. Further, it does not enjoy contractual protection by way of a non - compete or other agreement or arrangement with its group companies

Valuation

The companys total consolidated net sales for FY 2011 have increased by 55% to Rs 484.43 crore. Of this, consolidated net sales of traded products increased by 65.37% to Rs 174.56 crore. The growth in domestic sales was 73% in FY 2011, while the growth in export sales was 34%. Out of total net sales, revenue from jumbo bags is Rs 129.81 crore (27% of sales), woven sack, fabric & tarpaulin is Rs 149.7 crore (31% of sales), multi-layer films & bags is Rs 57.91 crore (12% of sales), fillers, master batches, webbings, multi filament yarn is Rs 17.53 crore (4% of sales) and trading of granules is Rs 122.6 crore (26% of sales). The operating profit margin has gone down by 180 basis points to 10.1%. The net profit was up by 62% to Rs 21 crore.

The companys consolidated net sales for ten months ended January 2012 stood at Rs 382.51 crore. Out of total net sales, revenue from jumbo bag is Rs 135.98 crore (36% of sales), woven sack, fabric & tarpaulin is Rs 107.44 crore (28% of sales), multi layer films & bags is Rs 52.3 crore (14% of sales), Fillers, master batches, webbings, multi filament yarn is Rs 10.3 crore (3% of sales) and trading of granules is Rs 75.6 crore (20% of sales). The operating profit margin stood at 10.6%. The net profit stood at Rs 10.95 crore.

At a price band of Rs 81 to Rs 84 per equity share of Rs 10 face value, the P/E at the lower band works out to 13.27 times and at upper band it works out to be 13.76 times the EPS of Rs 6.1 for FY 2011 (on post-IPO equity). In packaging sector, the companies such as Jumbo Bag, Neo Corp International, Emmbi Polyarns, Flexituff International, Uflex and Karur KCP Packagings are trading at a PE of 16.7x, 7.1x, 7.8x, 21.8x, 1.1x and 3.5x times their respective FY 2011 earnings. Plastene Indias 10-months annualized EPS works out to only Rs 3.7 (on post-IPO equity), which is discounted 22 to 23 times by the offer price band.

Plastene India : IPO Highlights
Sector	Packaging
No. of shares on offer (lakhs)	92.55
Price band (Rs)	81-84
Post-issue equity (Rs crore)	35.75
Face Value in Rs	10
Post-issue promoter stake (%)	64.74
Issue open date	9th May 2012
Issue close date	15th May 2012
Listing	BSE and NSE
Rating:	35/100

 

Plastene India: Consolidated Financials
Particulars	1201(10)	1103(12)	1003(12)	0903(12)	0803(12)
Net Sales	382.51	484.43	313.30	213.26	174.97
OPM (%)	10.6	10.1	11.9	9.2	9.1
OP	40.39	49.00	37.33	19.65	15.86
Other Income	2.90	6.82	5.45	7.63	12.53
PBDIT	43.29	55.83	42.78	27.27	28.38
Interest	21.18	18.97	17.08	9.97	10.31
PBDT	22.12	36.86	25.69	17.31	18.08
Depreciation	6.11	6.64	5.37	3.47	2.44
PBT before forex gain/loss	16.01	30.21	20.32	13.84	15.64
Forex gain/loss	0.00	0.00	0.00	0.00	0.00
PBT after forex gain/loss	16.01	30.21	20.32	13.84	15.64
EO	0.00	0.00	0.00	0.00	0.00
PBT after EO	16.01	30.21	20.32	13.84	15.64
Tax	5.05	8.39	6.75	4.01	4.13
Net Profit before PPA	10.95	21.83	13.57	9.83	11.51
PPA	0.00	0.83	0.59	-0.10	0.46
PAT	10.95	21.00	12.98	9.93	11.05
EPS (Rs)	3.7	6.1	3.8	2.7	3.2
Annualised on post-issue equity of Rs 35.75 crore; Face value Rs 10 (Curr: Rs in crore)

 

Plastene India: Standalone Financials
Particulars	1201(10)	1103(12)	1003(12)	0903(12)	0803(12)
Net Sales	299.86	361.16	266.63	201.53	159.62
OPM (%)	9.6	9.4	10.9	5.0	6.6
OP	28.78	34.09	29.07	10.13	10.48
Other Income	2.29	5.47	3.95	7.32	10.28
PBDIT	31.08	39.56	33.01	17.44	20.76
Interest	16.71	13.76	14.62	7.78	6.97
PBDT	14.37	25.79	18.40	9.66	13.80
Depreciation	4.79	5.46	4.87	3.21	2.25
PBT before forex gain/loss	9.58	20.34	13.53	6.45	11.54
forex gain/loss	0.00	0.00	0.00	0.00	0.00
PBT after forex gain/loss	9.58	20.34	13.53	6.45	11.54
EO	0.00	0.00	0.00	0.00	0.00
PBT after EO	9.58	20.34	13.53	6.45	11.54
Tax	3.11	6.96	5.50	3.39	3.93
Net Profit before PPA	6.47	13.38	8.03	3.06	7.61
PPA	0.00	0.77	0.83	-0.10	0.46
PAT	6.47	12.60	7.19	3.16	7.16
EPS (Rs)	2.2	3.7	2.2	0.9	2.1
Annualised on post-issue equity of Rs 35.75 crore; Face value Rs 10 (Curr: Rs in crore)

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