Pyramid Technoplast Ltd. IPO
Published by Sharekhan Education | August 18, 2023
Pyramid Technoplast Ltd. is coming out with an IPO of issue size of ₹153 Crores. It has a price band of ₹151-166. The issue opens on Friday, 18th August 2023 and closes on Tuesday, 22nd August 2023
The company operates as an industrial packaging company, providing clients with comprehensive bulk industrial packaging solutions. In their product lineup, they offer polymer-based bulk packaging drums, Intermediate Bulk Containers (IBC), and Mild Steel (MS) drums.
Furthermore, the company extends its services to clients across diverse industries, encompassing chemicals, agrochemicals, pharmaceuticals, lubricants, and edible oil. Additionally, they actively market and sell their products under the brand name “Pyramid.”
Objects of the IPO: Pyramid Technoplast Ltd.
Repaying or prepaying specific outstanding borrowings, meeting the company’s working capital needs, and addressing general corporate requirements.
Manufacturing:
The company operates four manufacturing units in Bharuch and two in Silvassa. These manufacturing units hold ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 certifications for quality, environmental management, and health and safety systems.
Competitive Strengths:
The company stands out by offering comprehensive bulk industrial packaging solutions. Its manufacturing facilities are strategically located in Gujarat’s manufacturing hubs, ensuring easy access and cost-effective delivery to customer industries.
Pyramid Technoplast Ltd. has secured UN certification for its IBC and MS Drums, ensuring compliance with safety standards set by the United Nations for transporting dangerous goods. Moreover, the company is led by qualified and experienced promoters, alongside a senior management team with the expertise and vision to manage and expand the business.
Business Strategy:
The company plans to boost its IBC capacity by setting up a new manufacturing unit, Unit VII, at Bharuch GIDC, Gujarat. Once operational, Unit VII will have four production lines with a total capacity of approximately 30,000 IBC units per month. Additionally, the company aims for strategic acquisitions to expand capacity and tap into new markets, capitalizing on the Indian government’s support for local manufacturing and the potential opportunities in the market.
Key Concerns:
Operating within a labor-intensive industry poses the company to potential disruptions and outages, significantly impacting operations. Furthermore, the necessity of renewing regulatory permits, licenses, and approvals is critical for sustaining business operations. Additionally, the company is exposed to the risks associated with fluctuations in foreign currency exchange rates. Furthermore, while polymer-based products present environmental challenges, the emergence of biopolymers offers a promising alternative.
Financials:
Over FY21-23, the company has achieved a 23.7% CAGR in operating revenue growth. Additionally, EBITDA has grown at 25.9% during the same period, and Net Profit has exhibited a 36.7% CAGR. Polymer drums contributed 51.6% of total revenues in FY23, while IBCs accounted for 31.9%. FY23’s Return on Equity stood at 29.6%.
Valuation:
At the upper end of the price band (₹151-166), the company reasonably prices the issue with a P/E multiple of 19.2x based on FY23 post-issue fully diluted EPS. Source: IPO Red Herring Prospectus.
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