Pyramid Technoplast IPO opens tomorrow and it has set the expectations high among investors as a promising upcoming public offer. Priced in the range of INR 151 – 166 per share, the IPO is not offering any discount to retail investors but this is not going to be a deal breaker as we will see later in this analysis. In total, the IPO of the industrial packing company will raise anywhere from INR 139.22 crore to INR 153.05 crores. Has the company’s business model potential to generate strong profits for the years to come and reward investors? We try to figure out the answers through Pyramid Technoplast IPO Review.
Pyramid Technoplast IPO Details
|Pyramid Technoplast IPO Dates||18 – 22 August 2023|
|Pyramid Technoplast IPO Price||INR 151 – 166 per share|
|Fresh issue||55,00,000 shares (INR 83.05 – 91.30 crores)|
|Offer For Sale||37,20,000 shares (INR 56.17 – 61.75 crores)|
|Total IPO size||92,20,000 shares (INR 139.22 – 153.05 crores)|
|Minimum bid (lot size)||90 shares (INR 14,940)|
|Face Value||INR 10 per share|
|Listing On||BSE, NSE|
Pyramid Technoplast IPO Analysis: Fresh + OFS
As mentioned in the table above, the public offer is a mix of fresh shares being issued and a sale As much as INR 91.30 crores will be raised by issuing new shares. As the same time, 37,20,000 shares will be sold by existing shareholders.
A look at the list of largest shareholders in the company reveals that there are no external investors in the company. As such, full 100% equity is owned by promoters and promoter group. It is difficult to find a company of this size without external investment but Pyramid Technoplast has managed to achieve this feat, that too without sacrificing growth.
Pyramid Technoplast IPO Review: Objects of the Offer
- Repayment and/or pre-payment of certain outstanding borrowings – INR 40 crore
- Funding working capital requirements – INR 40.21 crore
- General corporate purposes
Pyramid Technoplast IPO Analysis: Packaging for an Array of Industries
Pyramid Technoplast is engaged in the business of manufacturing polymer-based molded products (Polymer Drums) mainly used by chemical, agrochemical, specialty chemical, and pharmaceutical companies for their packaging requirements. It is one of the leading manufacturers of rigid Intermediate Bulk Containers (IBC) in India. It also manufactures MS Drums made of mild steel (MS) used in the packaging and transport of chemicals, agrochemicals, and specialty chemicals.
The total installed capacity of the Polymer Drum manufacturing units is 18,837 Metric Tonnes Per Annum (MTPA). The total installed capacity of the IBC manufacturing unit is 3,240 MTPA and the total installed capacity of the MS Drums unit is 3,600 MTPA.
Pyramid Technoplast IPO: Strengths
Robust and Expanding Manufacturing Base: Pyramid Technoplast started commercial production in the year 1998 with its first unit but has expanded consistently in the following years. Presently, it has six strategically situated manufacturing units out of which four are in Bharuch, GIDC, and two are situated at Silvassa. The seventh manufacturing unit is under construction at the Bharuch, GIDC adjacent to the existing units. The civil construction work for the new unit has been completed and installation of machinery is expected to be completed by Q2 of FY 2024.
The company also has a fleet of 51 trucks which enables on-time delivery of the products to its customers. These trucks are also used for the internal transfer of raw materials and products used for captive consumption between the units thereby streamlining production schedules.
Diverse Customer Base: The company caters to bulk packaging requirements of clients from diverse industries like chemicals, agrochemicals, pharmaceuticals, lubricants, and edible oil by supplying them with Polymer Drums, IBC, and MS drums. The clients have stringent quality and qualification requirements which it is required to adhere to for continued supply of the products. The company enjoys long-term relationships with most of its clients and the repeat business from them allows to have strong visibility on future revenues and a stable client base. Pyramid Technoplast has served more than 376 customers on a regular basis during the past three financial years.
Comprehensive Product Portfolio: Pyramid Technoplast offers complete bulk industrial packaging solutions to clients since it manufactures both polymers-based bulk packaging drums and IBC, as well as MS Drums for packaging. The product offering in polymer-based packaging by way of drums ranges from 20 liters to 250 liters and IBC which is 1,000 liters.
It also offers the alternative packaging option of MS Drums. In addition to these products, it uses injection molding technology to manufacture caps, closures, bungs, lids, handles, and lugs for in-house use for the products manufactured.
Pyramid Technoplast IPO Review: Financial performance
As the table below mentions, the company has made a steady progress in expanding its business and this is reflected in revenues. Sales revenues have followed an upward trend and this growth in revenues has also driven profits in the last three years from a mere INR 17 crore to INR 31.8 crore. The quality of increasing profits is seen in improving margins. In the latest year ended 31 March 2023, the company posted a net profit margin of 6.62%, its best in the last three years.
|FY 2021||FY 2022||FY 2023|
Pyramid Technoplast has demonstrated a good control on costs and has been working on reducing debt. This has brought down the debt equity ratio from 1.05 in FY 2021 to 0.52 in FY2023.
Pyramid Technoplast IPO Review: Should you invest?
So far, so good but here comes the most important question – is Pyramid Technoplast IPO worth subscribing? In Pyramid Technoplast IPO analysis so far, we couldn’t really find anything negative with the company’s business and strategies. There are a number of things the company is doing well and are worth highlighting. As we mentioned earlier, the company has done rather well even in the absence of private equity investors. This is quite an achievement in itself that the company managed to expand its business to become the leading player in its field without taking external capital.
Another area where the company shines is its ability to plough back the profits in the business, expand manufacturing operations, reduce debt and expand profit margins. As we noticed earlier, the debt equity ratio is now quite comfortable at 0.52 although there is scope for further reduction.
At the same time, Pyramid Technoplast has not got a high dependence on a few customers. In fact, its current portfolio of 376 domestic customers is well diversified. The 10 biggest clients accounted for 27.63% of FY 2023 revenues and this is down from 32.03% in FY 2021. Similar has been the trend for its top 5 customers. Full marks in the client concentration department.
Considering all these positives, valuations appear attractive. The company is asking for a PE ratio of 16.21 based on FY 2023 earnings. Its listed peers Mold-Tek Packaging and TPL Plastech trade at higher PE ratio levels of 40.6 and 19.8 while Time Technoplast is available at a multiple of 13.3. On the Price to Sales parameter also, the company is valued fairly at 1.27. While its profit margins are in line with the rest of the industry, it is noteworthy that its return ratios are way above the industry average.
The listed peers have been considered the basis of the business, relevant products, distribution network, and target segment (ticket sizes) of the company.
|Company||Total Income (Cr.)||PAT Margin (%)||EBITDA (%)||RONW (%)||ROCE (%)|
|Pyramid Technoplast Limited||482.03||6.62||10.75||29.61||21.37|
|Time Technoplast Limited||4,293.19||5.21||13.53||9.61||6.91|
|TPL Plastech Limited||2,718.43||5.90||11.38||13.89||9.93|
|Mold-Tek Packaging Limited||7,313.01||11.0||18.71||14.40||12.89|
Overall, Pyramid Technoplast IPO Review reveals that the well-managed company is in a sweet spot and stands to benefit from the industry tailwinds. Since its products are commoditized, execution capabilities bear the brunt and the company excels here. All in all, valuations are reasonable and the company is leaving something on the table for IPO investors.