Kshitij Polyline IPO Review

Review By Finception on Sep 17, 2018

Ksithij Polyline is in the business of manufacturing and distributing of I.D. Card Products, Binding & Lamination equipment, related materials & accessories, and Stationery Products. They began operation in 1998 and are currently operating out of a manufacturing facility at Dadra and Nagar Haveli. They are also involved in the export of products to countries like Uganda, Lebanon, Sri Lanka, South Africa, Bhutan, Nepal, Dubai etc.

Products

  1. Office Stationery and Utility products
  2. Laminated Sheet & PP Sheet
  3. Wiro and Spiral
  4. Customised Products

How are they doing as a business?

The top line was largely growing at a slow pace until FY17 and then the company’s revenue jumped from 17 Cr. to 27 Crores in FY18. Profits too were hovering at around 20 lakhs during FY17 and then made a five-fold jump the subsequent year taking the sum total to 1 Cr in FY 18.

Particulars(in Cr)

FY18

FY17

FY16

FY15

FY14

FY13

Revenue

27

16

15

12

12

13

PAT

1

0.2

0.2

0.16

0.11

0.08

PAT Margin (%)

3.8

1.6

1.2

1.3

0.88

0.61

We don’t know what led to this sudden increase as the company has limited its financial disclosure up to the Q3FY18 in the DRHP. The revenue and profit figures for the entire year have been taken from the company’s investor presentation.

Why the thin margins?

It’s quite evident that the company operates with thin margins. One of the principal reason for this anomaly is that the segment is highly competitive in the unorganized sector.

The industry, in which we are operating, is highly and increasingly competitive due to presence of many small time players in the unorganized sector- DRHP

The company concedes that the competition is, in fact, a concern. The financial implication of being a marginal player in the unorganized sector is that you can’t set your own prices, instead, the market sets the price for you. This is partly the reason why Kshithij Polyline has been working with thin margins. The only real way to make any significant impact on your bottom line is by increasing scale i.e. selling more stationery products. Until the company can establish itself as a brand, our opinion is that the company’s margins will continue to remain in this range.

High Trade Receivables?

The company had trade receivables of about 30 % from the past few years which increased to 45 % as on December FY18. One way of looking at this is to say that the company has been selling products on credit to boost its revenues. In any case, its important for investors to keep a tab on this column.

Particulars ( in Cr)

Dec 17

FY17

FY16

FY15

FY14

FY13

Trade Receivables

7.7

5.2

4.6

4.2

3.3

2.5

%  of Revenue

45

31

30

35

27

19

Why IPO?

The company wants to fulfill three objectives by applying for an IPO

  1. Purchase of Machinery and Equipment to manufacture the Laminated sheet, Wiro and PP Sheet suitable for stationery and office products;
  2. Working Capital Requirement;
  3. General Corporate Purpose

Particulars

Amount Raised through IPO (Cr)

Purchasing Machinery

4.28

Working Capital

3.25

General Corporate Purpose

0.76

Total

8.3

 

Other points of Interest

  1. It must also be noted that the company’s current facility isn’t operating at peak capacity according to the DRHP
  2. The company also has loans amounting to about 8 Crores as on December 2018
  3. The company issued 8,00,000 shares on March 2018 at a price of 15, much lower than its current issue price

Peer Comparison

Here is a peer comparison of Kshithij Polyline against similar companies within the industry.

S.No

Particulars

EPS

P/E

RONW

1

Ecoplast Limited

6.5

20

80

2

Duropack Limited

1.1

8

15

3

Cosmo Films Limited

57.38

19

31

4

Ksithij India Limited

1.18

21

13



Should you buy?

Based on annualized earnings the asking price of Rs 35 translates to a PE of about 21 post issue. Considering the low margins in the business and the presence of large unorganized players in the market, Ksithij Polyline has an uphill task to justify the asking price.

We here at Finception, wish the company all the best in its future endeavor.


Conclusion / Investment Strategy

Based on annualized earnings the asking price of Rs 35 translates to a PE of about 21 post issue. Considering the low margins in the business and the presence of large unorganized players in the market, Ksithij Polyline has an tough task to justify the asking price.

Review By Finception on Sep 17, 2018

Review Author

Dilip Davda, a freelance journalist

Finception

Finception is a startup dedicated to simplifying stocks through compelling storytelling. Finception aggregates, analyses and filters information from multiple sources and creates compelling narratives about publicly listed companies in an easy to understand language without financial jargons. The startup is the brainchild of 3 IIM Ahmedabad alumnus and they are currently based out of Ahmedabad.

Email: support@finception.in

Web: https://finception.in/

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