Incorporated in April 1992 as
Peacock Continental Limited, Sah Polymer is primarily engaged in manufacturing
and selling of polypropylene (PP), high density polyethylene (HDPE) FIBC
(flexible intermediate bulk containers) bags, woven sacks, HDPE and PP(poly
propylene) woven fabrics, based products of different weight, sizes and
colours. The company was promoted by Sat Industries Ltd.
The company offer customised bulk
packaging solutions to business-to-business (B2B) manufacturers catering to
different industries such as agro pesticides industry, basic drug industry,
cement industry, chemical industry, fertilizer industry, food products
industry, textile industry, ceramic industry and steel industry. Besides, the
company is a del credere associate cum consignment stockist (DCA/ CS) of Indian
Oil Corporation and also operates as dealer operated polymer warehouse (DOPW)
of Indian Oil Corporation for their polymer division. The company enter into
arrangements as third-party manufacturers to manufacture tape and fabric based
on customers requirements.
The company has has presence in 5
states and 1 union territory for its domestic market while internationally it
export products to 14 countries such as Algeria, Togo, Ghana, Poland, Portugal,
France, Italy, Dominican Republic, USA, Australia,UAE, Palestine, UK and
Ireland. For the three months ended June 30. 2022 and for fiscals 2022, 2021
and 2020, revenue from exports was Rs. 15.58 crore, Rs. 44.39 crore, Rs. 27.52
crore and Rs. 24.92 crore contributing 57.61%, 55.14%, 49.98% and 50.75%
respectively of revenue from operations.
The company currently has one ISO
9001:2015 accredited manufacturing facility with installed production capacity
of 3960 tonne per annum (tpa) and one processing unit in Udaipur, Rajasthan
located over 8000 sq. mtr. and 1500 sq mtr. of land respectively.
The primary raw material used by
the company are low density polyethylene, high density polyethylene, PP resin,
anti fab/calcium carbonate, UV stabilizers, colour master batch and pigments.
The purchase price of raw materials generally follows market prices. It usually
do not enter into long-term supply contracts with any of its raw material
suppliers. The raw material is purchased in the spot market on the basis of the
rates offered by various suppliers. It also procure fabric from regional
suppliers near its factory. PP granules are majorly used in manufacturing of
fabric whereas LDPE is used to manufacture liners. Liners are manufactured by
processing LDPE in liner blown film plant, output of which is then sized as per
customer’s requirement in the form fit & sealing machine and then glued
with the help of liner gluing machine. These liners can either be directly sold
to the client or can be used an intermediate product and used in finishing of
FIBC, based on customer requirements. Liners are especially used in FIBC
required to handle semi liquid products.
The Offer and the Objects
The offer comprises fresh issue
of 10200000 equity shares at upper price band of Rs 65 aggregating up to Rs 66
crore by the company and Rs 62 crore at lower price band of Rs 61
The company proposes to utilize
the net proceeds of the fresh issue towards setting up of a new manufacturing
facility to manufacture new variant of flexible intermediate bulk containers
(FIBC) amounting Rs 8.17 crore, repayment of certain secured and unsecured
borrowings in full availed by the company amounting Rs 19.66 crore, funding the
working capital requirements of the company amounting Rs 14.96 crore and
balance towards general corporate purposes.
The company current manufacturing
facility manufacture a diverse range of HDPE and PP woven sacks and FIBC
products with filling capacity of upto 500 KGs (kilo gram)per bag. It intends
to manufacture new variant of FIBC products by setting up a new manufacturing
facility to manufacture bags with filling capacities of upto 2,500 KGs, with an
installed capacity of 3,960 tpa. The proposed project is estimated to commence
commercial operations in the financial year 2022-23. The total estimated
capital cost of the project is Rs. 33.81 crore out of which Rs 15.71 crore
would be met through unsecured loans from holding company and third party, Rs
9.93 crore would be met through term loan and Rs 8.17 crore would be met
through net proceeds.
The company had availed channel
financing facility of upto Rs. 3 crore from Tata Capital Financial Services
Limited via their Sanction Letter dated November 25, 2021. It plans to repay
the aforementioned loan out of the net proceeds. As on November 18, 2022, the
company had outstanding loan of Rs. 1.97 crore towards the said facility, which
is proposed to be repaid out of the net proceeds. Additionally, it had also
availed unsecured loans from holding company i.e. Sat Industries and DA
Tradetech Private on time to time which are repayable on demand, to meet the
capital expenditure for the project and for financing the acquisition of
Fibcorp Polyweave Private Limited. As on November 18, 2022, the company had
outstanding indebtedness from the aforementioned entities aggregating to Rs.
19.85 crore. The company proposes to repay Rs. 17.69 crore out of the net
proceeds towards the outstanding loans of both the companies.
Strengths
The company has a customer base
across industries and geographies both at domestic and overseas market. It
follows B2B customer segment catering the packaging requirements of agro
pesticides industry, basic drug industry, cement industry, chemical industry,
fertilizer industry, food products industry, textile industry, ceramic industry
and steel industry. Further domestically it export products to 14 countries
such as Algeria, Togo, Ghana, Poland, Portugal, France, Italy,Dominican
Republic, USA, Australia,UAE, Palestine, UK and Ireland. In addition to direct
sales, domestically it also sell products through commission agents and
globally through overseas representatives and merchant exporter. Its customer
base across various industries and at varied geographies reduces its dependence
on any one industry or location and provides a natural hedge against market
instability in a particular industry or location.
The company product mix has
evolved over the past several years as it has entered into new product categories.
Product portfolio includes FIBC container bag, PP woven fabric & HDPE woven
fabric, woven sacks, PP fabric, box bags, fabric rolls, bags for flexible
packaging. It engage in manufacturing of products based on the orders of
customers to meet their requirements.
The polymers market size is
expected to reach US$790 billion by 2027, after growing at a CAGR of 5.5%
during 2022-2027.
The India packaging market was
valued at USD 50.5 billion in 2019, and it is expected to reach USD 204.81
billion by 2025, registering a CAGR of 26.7% during the period of 2020-2025.Packaging is among the high growth
industries in India and growing at around 22-25% per annum and becoming a
preferred hub for packaging industry.
Weaknesses
The company had reported negative
cash flows from operations in fiscal 2022 and for three months ended June 2022.
One of its promoter group
company, Aeroflex Industries Limited., is appearing in the RBI wilful
defaluters list issued by CIBIL in relation to default in payment with respect
to various facilities availed by the company in the past.
The company is dependent on a
limited number of customers for a significant portion of its revenues. Revenues
generated from sales to its top 10 customers was Rs. 17.58 crore, Rs. 53.92 crore,
Rs. 3.44 crore and Rs. 36.80 crore which represented 61.72%, 65.83%, 66.57%,
and 79.06% of its revenue from operations during the three months period ended
June 30,2022, fiscal 2022, fiscal 2021 and fiscal 2020 respectively.
The industry segments in which it
operate is fragmented and the company face competition from other large and
small players, which may affect its business operations and financial
conditions.
The company requires significant
amounts of working capital and significant portion of its working capital is
consumed in trade receivables and inventories.
The company require a number of
approvals, NOCs, licences, registrations and permits for setting up new
manufacturing unit as well as in the ordinary course for existing business and any
failure to obtain the same will adversely affect operations, business and
profitability.
Group Company, Italica Furniture
Private limited and Fibcorp Polyweave Private Limited, its subsidiary is
carrying on business activities similar to company business. This may be a
potential source of conflict of interest and which may have an adverse effect
on business, financial condition and results of operations.
The company business operations
are subject to hazards such as risk of equipment failure, work accidents, fire
or explosion and require individuals to work under potentially dangerous
circumstances.
Introduction of alternative
packaging materials caused by changes in technology or consumer preferences may
affect demand for its existing products which may adversely affect financial
results and business prospects.
There
is an increased awareness towards controlling pollution and many economies
including India who have joined in the efforts to ban plastic product. In case
any plastic packaging products manufactured by the company are banned in India
or in any of the markets where it export its products, it could have a material
and adverse effect on business and results of operations.
Valuation
For FY 2022, consolidated
sales were up by 46% to Rs 80.51 crore. The OPM rose 320 bps to 8.7%, which led
to 132% increase in operating profit to Rs 7.01 crore. Other income increased 164%
to Rs 0.72 crore while interest cost rose 42% to Rs 1.24 crore and depreciation
increased 25% to Rs 1.01 crore. PBT increased 239% to Rs 5.49 crore. Tax
expenses were 219% higher at Rs 1.12 crore. Net profit increased 244% to Rs 4.38
crore.
For three months of April- June
2022, consolidated sales were Rs 27.22 crore. The OPM was 7.3% which led to
operating profit of Rs 1.99 crore. Other income was Rs 37 lakh, while interest
cost was Rs 36 lakh and depreciation Rs 28 lakh. PBT stood at Rs 1.72 crore.
Tax expenses were Rs 47 lakh. Net profit stood at Rs 1.25 crore.
The EPS on post-issue
equity works out to Rs 1.7. At the upper price band of Rs 65, PE works out to 38.3.
As of 28 December 2022, its
listed peers such as Rishi Techtex trades at PE of 14.5 times of their
consolidated FY2022 EPS, Jumbo Bag at 17.8 times, SMVD Poly Pack at 15.4 times,
EMMBI Industries at 8.9 times, and Commercial Syn Bags at 19 times.
For FY2022, Sah Polymers
PBIDT and ROE stood at 9.6% and 16.4% respectively, compared to 6.3% and
17.8% for Rishi Techtex, 7.5% and 3.4% for Jumbo Bag, 8.1% and 4.7% for SMVD Poly Pack, 11.3% and 12.4% for EMMBI
Industries and 10.9% and 0.2% for Commercial
Syn Bags, respectively.
Sah
Polymers: Issue Highlights
|
Fresh
issue (in number of shares)
|
10200000
|
Offer for
sale (in number of shares)
|
0
|
Fresh
issue (in Rs crore)
|
|
- in Upper price band
|
66
|
- in Lower price band
|
62
|
Offer for
sale (in Rs crore)
|
|
- in Upper price band
|
0
|
- in Lower price band
|
0
|
Price Band
(Rs)
|
61-65
|
Pre issued
capital (Rs crore)
|
15.60
|
Post issue
capital (Rs crore)
|
25.80
|
Pre issue
promoter and Promoter Group shareholding (%)
|
100.00
|
Post issue
Promoter and Promoter Group shareholding
|
60.46
|
Bid Size
(in No. of shares)
|
230
|
Issue open
date
|
30-12-2022
|
Issue
closed date
|
04-12-2023
|
Listing
|
BSE, NSE
|
Rating
|
30/100
|
Sah
Polymers: Financials
|
Particulars
|
2003 (12)*
|
2103 (12)*
|
2203
(12)&
|
2007
(03)&
|
Total
Income
|
49.10
|
55.07
|
80.51
|
27.22
|
OPM
|
3.7
|
5.5
|
8.7
|
7.3
|
Operating
Profits
|
1.80
|
3.02
|
7.01
|
1.99
|
Other
Income
|
0.81
|
0.27
|
0.72
|
0.37
|
PBIDT
|
2.61
|
3.30
|
7.73
|
2.36
|
Interest
|
1.33
|
0.87
|
1.24
|
0.36
|
PBDT
|
1.28
|
2.43
|
6.50
|
2.00
|
Depreciation
|
0.77
|
0.81
|
1.01
|
0.28
|
PBT
|
0.51
|
1.62
|
5.49
|
1.72
|
Provision
for Tax
|
0.22
|
0.35
|
1.12
|
0.47
|
Profit
after Tax
|
0.30
|
1.27
|
4.38
|
1.25
|
EPS (Rs)*
|
0.1
|
0.5
|
1.7
|
#
|
*EPS
annualized on post issue equity capital of Rs 25.8 crore of face value of Rs
10 each
|
Figures in
Rs crore
|
*Standalone
financials; & Consolidated Financials
|
Source:
Capitaline Corporate Database
|
|