Flexituff International IPO Review by Magnum Broking (Apply)

Review By Magnum Equity Broking Ltd on September 23, 2011

Isssue Open: Sept 29, 2011 - Oct 05, 2011
Issue Type: 100% Book Building
Issue Size: 98-104 cr
Market Lot: 40 Shares
Rating Agency: CARE

The company currently manufactures FIBC, Geo-Textile Fabric and Ground Cover, Reverse Printed BOPP Woven Bags, Special PP Bags including Leno Bags. These products are manufactured at our three manufacturing units located in Pithampur (M.P.) and Kashipur (Uttrakhand).
The company has a recycling and reprocessing plant at Kandla which is used for recovering polypropylene and making various compounds of plastics. Our step down subsidiary, Lakshmi Incorporated, U.S.A manufactures reclosable extruded zipper profile which is used as a secondary closure for 5-50 kg bags.
They also have a Research and Development centre at Kashipur which is engaged in the research and development of various compounds for plastic products including engineering plastic, bio-degradable plastic and other new product developments.
They are a major exporter of FIBC and woven products from India and have been receiving the Top Exporter Award from the PLEXCONCIL, Ministry of Commerce from 2005-06 to 2008-09 every year.
The company exports to around 30 countries across the globe & are present in 4 continents with major thrust of exports being to U.S.A and Europe.

OBJECTS OF THE ISSUE

Expansion of manufacturing facilities at SEZ and DTA units at Pithampur;
Setting up of Dripper Project at Kashipur;
Working capital requirements;
General Corporate Purposes;
To meet Issue expenses.

Concern

Reduction or termination of tax incentives and benefits to units in Special Economic Zone (SEZ)
Major revenue from exports to US and Europe
Absence of long term contracts with Customers
Competition from other producers and unorganized sector

Conclusion / Investment Strategy

Outlook

The company product portfolio and application of its product in its various industries, established track records in the exports market with high capacity utilization and integrated manufacturing units have a significant outlook to the company growth prospect.
The company customised products as per the requirement of the clients and accordingly has edge over other company in timely execution and asking premium for the product.
FIL is asking for a market cap of Rs 330 Cr (approx) on a price band of Rs 145-155. The company's enjoys a healthy market share in the domestic market as well as international market & massive capacity expansions which will lead to volume growth make the issue attractive.
FIL is a market leader in the FIBC segment in India and second largest in international market commanding a healthy RoCE of 15% on a consolidated basis. Though the valuations of 8.5 times FY11 EPS are at a premium to its listed peer JUMBO BAGS which is trading at a P/E of 24, we believe it justifies its strong fundamentals. We recommend investors SUBSCRIBE to this issue at a price band of Rs 145-155 for a long term time frame.

Reviewer recommends Subscribing to the issue.