HCP Plastene RI review (Avoid)

HCP Plastene Bulkpack Limited Logo

•    HPBL is in the business of plastic packaging materials and textiles.
•    It has posted inconsistent financial performance for the last three fiscals. 
•    RI pricing it at a premium to the current market price.
•    There is no harm in skipping this pricy RI. 

HCP Plastene Bulkpack Ltd. (HPBL) erstwhile known as Gopala Polyplast Ltd. is involved in the plastics packaging industry and also the textile industry. It started with one unit with an installed capacity of 489 TPA of Woven Fabrics. In 1994, Gopala Polyplast Limited become Public with its maiden Public Issue. It also added Garment Accessories to its Product portfolio by putting up woven Jacquard Label
manufacturing looms. 

In the year 2001, it started manufacturing woven bags. In 2019, Gopala Polyplast Limited was admitted for CIRP under provisions of IBC, 2016 due to default in payment of banks. It also had an outstanding payment to banks. It also had outstanding payments to its operational Creditors. Subsequently, M/s Plastene India Limited submitted Resolution Plan and the same has been approved by concerned authorities. 

Presently the Company is a part of Plastene Group (PIL), a reputed FIBC manufacturer and exporter from India with a diverse portfolio comprising of FIBCs and small bags. PIL exports the majority of its products to the EU and the US which have stringent quality requirements. 

To part finance its needs for working capital (Rs. 17.24 cr.) and investment in KP Woven Pvt. Ltd. (Rs. 8.85 cr., HPBL is offering 441000 equity shares of Rs. 10 each as a rights issue (RI) in the ratio of 3 for 5 to the shareholders whose names were registered on the record date of March 18, 2022. HPBL mulls raising Rs. 26.46 cr. The company is issuing these shares at a fixed price of Rs. 600 per share.  The issue has already opened for subscription on March 30, 2022, and will close on April 13, 2022. Applicants will have to pay the full amount on the application. Post allotment, shares will be listed on BSE. HPBL is spending Rs. 0.37 cr. for this RI process.

The issue is solely lead managed by the company itself and Bigshare Services Pvt. Ltd. is the registrar to the issue. 

Post RI, HPBL's current paid-up equity capital of Rs. 10.23 cr. will stand enhanced to Rs. 10.67 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 640.49 cr. 

For the last three fiscals, on a standalone basis, HPBL has posted turnover/net profits (loss) of Rs. 190.53 cr. / Rs. - (88.99) cr. (FY19), Rs.  5.71 cr. / Rs. - (20.72) cr. (FY20) and Rs. 16.11 cr. / Rs. 63.67 cr. (FY21). The first half of FY22 ended on September 30, 2021, it has marked a loss of Rs. - (4.43) cr. on a turnover of Rs. 21.83 cr. Thus the company has marked inconsistency in its top and bottom lines. As per submission to BSE, for 3Q FY33 it has marked loss of Rs. - (3.23) cr. on a turnover of Rs. 33.38 cr. 

HPBL has not declared any dividends for the last three fiscal.  It will adopt a prudent dividend policy based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 600.25 on March 15, 2022, and opened on the ex-rights basis at Rs. 628.00 on March 16, 2022. Since then, it has posted a high/low of Rs. 628.00 / Rs. 545.05. It last closed at Rs. 580.00 (on March 31, 2022) and based on this closing, its market cap post-RI stands at Rs. 619.14 cr. It has posted the last 52 weeks high/low of Rs. 1286.95 / Rs. 8.67. To pave the way for this RI, the counter marked vested interest operations. Its promoter's holding has been 92.83% since the last three quarters.

Conclusion / Investment Strategy

The company has posted inconsistent financial performance and has carried forward loss. RI is priced at a premium to the current market price. There is no harm in skipping this offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Mar 31, 2022

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. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

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

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