IPO Corner: Sah Polymers Limited

Sah Polymers Limited’s Initial Public Offering to open on Friday, 30^th December, 2022. Sah Polymers Limited, primarily engaged in manufacturing and selling of Polypropylene (PP)/ High Density Polyethylene (HDPE) Flexible Intermediate Bulk Containers (FIBC) Bags, Woven Sacks, HDPE/PP woven fabrics, woven polymer based products has fixed the price band at ₹61 to ₹65 per Equity Share for its maiden public offer. The initial public offering of the Company will open on Friday, 30^th December, 2022, for subscription and closes on Wednesday, 4^th January, 2023. Investors can bid for a minimum of 230 Equity Shares and in multiples of 230 Equity Shares thereafter. The public issue with a face value of Rs 10 per equity share consists of a fresh issue of equity shares of upto 102,00,000 equity shares, with no offer for sale component.

• Issue Opens on: Friday, December 30, 2022
• Issue Closes on: Tuesday, January 4, 2023
• Price Band: ₹61 to ₹65 per Equity Share
• Face Value: Rs 10 per equity share
• Minimum Bid: 230 Equity Shares and in multiples

The Issue shall constitute 39% of the post-Issue paid-up Equity share capital of the Company. Notably, the issue involves all fresh issue without any offer for sale component. Out of the issue proceeds, Rs. 8.18 crores shall be utilized for capex for setting up of new manufacturing unit; Rs 19.66 shall be towards repayment of debt, Rs. 14.95 crores for working capital and balance for general corporate purposes.  The debt repayment is towards the bridge loan from the holding company which was deployed in the capex. The total equity issued before IPO is 15.59 crores and along with reserves the net-worth is Rs 27.74 crores as at the end of the 30th June 2022. Post IPO, the Company’s net-worth shall stand at Rs 92.95 crores. The Book value post IPO would be 36 plus the profit surplus for the period. The Issue is being made in terms of Rule 19(2)(b) of the SCRR through the Book Building Process.

The Company

Sah Polymers is led by Asad Daud and professionally backed by Hakim Sadiq Ali Tidiwala and Murtaza Ali Moti with a combined expertise of approximately 20 years in the FIBC packaging sector. The Company provides tailored bulk packaging solutions to business-to-business producers in a variety of industries, including agro pesticides, basic drugs, cement, chemicals, fertilisers, food products, textiles, ceramics, and steel. The Company exports its products to 14 countries including USA, UK, Australia, UAE, Africa, France and Poland. Majority of the sales of the Company comes from exports. For the 3 months ended June 30, 2022 and for Fiscals 2022, the Company’s revenue from exports contributed 57.61% and 55.14%, respectively, of total revenues from operations.

Financials

Return on net-worth is 16.42% and PAT margin for the year ended 2022 stood at 5.39%. The Company’s sales have grown from Rs. 49.90 crores in FY 2020 to Rs. 81.23 crores in FY 22. The sales for the quarter ended June 2022 stood at Rs.27.59 crores. Thus the sales CAGR for last three completed years is 27.6%. Similarly, the post-tax profits, i.e., PAT of the Company has increased with CAGR of 284% over last three years.

The Company operates at 85% to 92% of the installed capacity and therefore going for further capex. Total capex is Rs. 33.81 crores, out of which the Company has taken bridge loan of Rs. 15.71 crores from the holding company and deployed while the IPO approvals came so that the overall timeframe of the installation is not delayed. The new Project is estimated to commence commercial operations within this year 2022-23 itself. Out of the current manufacturing facility (located at Mewar Industrial Area, Madri, Udaipur, Rajasthan) the Company manufactures a diverse range of HDPE/PP Woven Sacks and FIBC products with filling capacity of upto 500 KGs per bag/sack. The Company intends to manufacture new variant of FIBC products with filling capacities of upto 2,500 KGs out of the new Unit. The installed capacity of the new Unit is of 3,960 MT per annum, which is equivalent to current capacity therefore the company’s capacity will double upon commissioning of new plant.

Kanpur Plastipack Ltd., Rishi Techtex Ltd., Gopala Polyplast Ltd., Jumbo Bag Ltd., SMVD Polypack Ltd., EMMBI Industries Ltd., and Commercial Syn. Bags Ltd. are competitors; however, the peers are not directly comparable due to the type, range of products/services, turnover, and size of the firm.

Acquisitions

The Group has made several acquisitions from time to time. The Company carefully evaluate and pursue accretive acquisitions. Given the breadth of its product offering, and the scale of manufacturing and customer network, the Company is positioned to grow inorganically within its industry. The Company has gained competitive advantage due to its recent acquisition of Fibcorp Polyweave Private Limited on January 5, 2022, which will leverage to generate incremental synergies. The equity shares are proposed to be listed on the Main Board of NSE and BSE.