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Rajshree Polypack NSE SME IPO review (May apply)

Review By Dilip Davda on Sep 1, 2018

• RPPL engaged in rigid plastic/thermoformed packaging products
• Has good clientele base and track record of growth
• Recent plastic ban movement by many state is the major risk
• Valuation appears reasonable.
• LM has poor track record.

ABOUT COMPANY:
Rajshree Polypack Ltd. (RPPL) that entered in plastic packaging products a decade back is now one of the leaders in manufacturing of rigid plastic sheets and thermoformed packaging products (As per CARE Advisory Report – July 2018). The company manufactures customized plastic thermoformed packaging products which are tailored to the client's requirements for products like yoghurt & ice cream containers, food packing, QSRs, coffee cups, bakery products and confectioneries, beverage cups & containers, generic bowls, punnets & trays for fruits and vegetable packing, lids etc. It has a wide range of sizes and designs to meet the customers' need. With an annual capacity of over 10,000 MT and more than 100 products, company is fundamentally committed to the ongoing technical advancement, whilst aiming to stay updated on the technology used in its business. RPPL has a diversified range of products that cater to the dairy, beverages, FMCG, QSR, retail, pharmaceuticals and the electronics sector.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans to set up Factory Unit IV at Daman and general corpus fund needs, RPPL is coming out with a maiden IPO of 2960000 equity shares of Rs. 10 each via book building route. It has fixed price band of Rs. 119-Rs.121 per share. RPPL mulls mobilization of Rs. 35.22 cr. to Rs. 35.82 cr. (based on lower and upper price bands). Issue opens for subscription on 10.09.18 and will close on 12.09.18. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue constitutes 26.35% of post issue paid up capital of the company. Issue is solely lead managed by PL Capital Markets Pvt. Ltd. (Prabhudas Lilladher Group) and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue provides reservation of 49.96% for QIBs (1405000 shares), 15% for HNIs (422000 shares) and 35% for retail (985000 shares). Having issued initial equity at par, it raised further equity in the price range of Rs. 25 to Rs. 167.55 per share between January 2012 and August 2018. (It did pre-IPO placement at Rs. 120 per share in August 2018 for 297939 shares). It has also issued bonus shares in the ratio of 2 for 1 in November 2016. Cost of acquisition of shares by the promoters is Rs. 12.53, Rs. 12.57 and Rs. 27.68 per share. Post issue, RPPL's current paid up equity capital of Rs. 8.27 cr. will stand enhanced to Rs. 11.23 cr.

FINANCIAL TRACK RECORD:
On performance front, for last four fiscals, RPPL has posted turnover/net profits of Rs. 65.06 cr. / Rs. 0.72 cr. (FY15), Rs. 95.66 cr. / Rs. 7.83 cr. (FY16), Rs. 96.43 cr. / Rs. 8.87 cr. (FY17) and Rs. 112.50 cr. / Rs. 9.31 cr. (FY18). For last three fiscals it has posted an average EPS of Rs. 11.21 and an average RoNW of 21.60%. Issue is priced at a P/BV of 2.05 on the basis of its NAV of Rs. 58.91 as on 31.03.18. If we consider FY18 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 14.6 and appears reasonably priced. Company's client base includes Amul, Hind Unilever, Nestle, Britannia, Danone, Mother Dairy, Tata Tea, Kinder Joy, Vadilal etc. However, recent movement by many states for Plastic/Thermo product ban raises concern. (Email sent for clarification to the company and LM on this and other queries remained unanswered till writing this.)

COMPARISION OF LISTED PEERS:
As per offer documents, it has considered Mold-Tek Packaging (though it is not comparable strictly) as its listed peers that is currently trading at a P/E of around 30. (As on 31.08.18).

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, it has not handled any IPO in last three years and hence no track records for recent listings. However, its past record is very poor with many companies have eroded investors wealth drastically before being suspended from trade. (Some of them are Raj Oil, Astral Coke, Resurgere Mines, Rishabhdev Tech that are currently suspended from trading).

Rajshree


Conclusion / Investment Strategy

Company's financial performance is lucrative, but concern is about ongoing controversy on usage of plastic ban movement. More states are joining the bandwagon. Thus it is a major risk for this company going forward. Future of such companies hinges on outcome of Government's final ruling. Although pricing looks lucrative, cash surplus investors may consider investment for long term.

Review By Dilip Davda on Sep 1, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Rajshree Polypack IPO FAQs

  1. 1. Why Rajshree Polypack IPO?

    The initial public offer (IPO) of Rajshree Polypack Limited offers an early investment opportunity in Rajshree Polypack Limited. A stock market investor can buy Rajshree Polypack IPO shares by applying in IPO before Rajshree Polypack Limited shares get listed at the stock exchanges. An investor could invest in Rajshree Polypack IPO for short term listing gain or a long term.

  2. 2. How is Rajshree Polypack IPO?

    Read the Rajshree Polypack IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Rajshree Polypack IPO what should investors do?

    Rajshree Polypack IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Rajshree Polypack IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Rajshree Polypack IPO good?

    Our recommendation for Rajshree Polypack IPO is to subscribe for long term.

  5. 5. Is Rajshree Polypack IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Rajshree Polypack IPO.

  6. 6. When will Rajshree Polypack IPO allotment status?

    The Rajshree Polypack IPO allotment status will be available on or around Sep 18, 2018. The allotted shares will be credited in demat account by Sep 19, 2018. Visit Rajshree Polypack IPO allotment status to check.

  7. 7. When will Rajshree Polypack IPO list?

    The Rajshree Polypack IPO will list on Monday, September 24, 2018, at NSE SME.
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