Avon Moldplast Limited IPO

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Avon Moldplast Limited IPO

(i) Avon Mold Plast Private Limited was established in the year 2002 at Ghaziabad U.P. India, to manufacture quality plastic molded furniture in the brand name of AVON, catering to the wide strata of consumers. The manufacturing facility of the Company is located at Ghaziabad, Uttar Pradesh.

(ii) Avon Mold has strived to utilize modern imported machine and molds from global leaders and are always ahead in offering the latest product with better finish and quality, which is comparable to the best and established manufacturers in India and across the globe in a fully automatic environment.

(iii) The Company’s Product Portfolio can be classified as under:
a) Molded Chairs
b) Molded Stools
c) Molded Tables
d) Molded Baby Chairs and Baby Desks

Objects of the Avon Moldplast Limited IPO:

Objective of Avon Moldplast Limited IPO

are: a) To acquire additional molds of a chair, cupboard, table etc. at the existing manufacturing facilities. The company is planning to utilize around 2.1 cr out of 4.5 cr funds raised from IPO towards buying different molds from China b) To meet the incremental working capital requirements c) General Corporate Purpose

Avon Moldplast Limited IPO Details:

Open Date: Jul 12 2018
Close Date: Jul 18 2018
Total Shares: 884,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Price Issue IPO
Issue Size: 4.5084 Cr.
Lot Size: 2000 Shares
Issue Price: ₹ 51 Per Equity Share
Listing At: NSE Emerge
Listing Date: Jul 26 2018

Promoters And Management:

Promoters of Avon Moldplast Limited Company are: (i) Mr. Sushil Kumar Aggarwal, Founder and Chairman of Avon Moldplast Limited has more than 3 decades of rich experience in plastic and molded furniture industry. He is a Graduate by qualification and a successful entrepreneur in the Plastically molded furniture industry. He is a National President of All India Plastic Molded furniture Association, and is also a chairman of CII MSME, besides being a Rotarian. (ii) Mrs. Anita Aggarwal is the original Promoter of the Company and has been associated with the Company since inception.She is graduate by qualification and is responsible for handling the Administration Department in the Company. (iii) Mr. Sahil Aggarwal is graduate by qualification and Managing Director of the Company. He is an Alumni of the Singapore Institute of Management.

Company Business:

a) The Company purchases Polypropylene Co-polymer (PPCP) , the raw material used for manufacturing of molded furniture from vendors like Reliance Industries Limited, Indian Oil Corporation, Haldia Petrochemicals Limited and from International sources. b) Then with the help of manufacturing plant ,these raw materials are mixed together in a mixer and heated upto 100 Degree Celcius and then it is injected in to molds of different variety of furniture and after simultaneously cooling the final product is taken off. c) Then these products are supplied to different suppliers across India. However, the top 10 suppliers are based in UP only.

Capital Structure:

(i) Authorized Share Capital 5,000,000  shares at FV@10) 5 Cr
(ii) Issued, Subscribed,& Paid-up Share Capital Before Issue (2,370,000 Shares at FV@10) 2.370 Cr
(iii) Present Issue ( 884,000 Equity Shares FV@10) 88.4 Lacs
(iv) Market Maker 46,000 Equity Shares FV@10. 4.6 Lacs
(v) Net Issue to Public 838000 Equity Shares FV@10 83.8 Lacs
(vi) Reservation for QIB & HNI[419000] Shares at FV@10) 50%
(vii) Reservation for Retail  [419000] Shares at FV@10) 50%
(viii) Paid Up Share Capital after the issue 3.254 Cr

Financials of Avon Moldplast Limited IPO as per DRHP:

1. Assets and Liabilities Key Parameters
Year Asset(lacs) Liabilities (lacs) Net Worth(lacs) Book Value D/E [<1.5] RONW Debtor days
FY13 454.09 208.60 245.49 15.54 0.8 0.1% 52
FY14 479.97 229.59 250.38 15.85 0.9 2.0% 70
FY15 677.95 423.97 253.98 16.07 1.7 1.4% 54
FY16 804.30 544.76 259.54 16.43 2.1 2.1% 64
FY17 1,018.85 749.35 269.50 17.06 2.8 3.7% 85
10MFY18 1,203.02 864.19 338.83 14.30 2.6 20.5% 77
Post Issue 788.83 24 1.1 10%
2. Profit n Loss Key Parameters
Year Revenue(lacs) PAT(lacs) EBITDA Margins Profit Margins Outstanding Shares(lacs EPS
FY13 607.47 0.27157 8.20% 0.04% 15.80 0.02
FY14 617.57 4.89218 8.80% 0.79% 15.80 0.31
FY15 803.98 3.65599 11% 0.45% 15.80 0.23
FY16 999.79 5.55158 12.75% 0.56% 15.80 0.35
FY17 1385.06 9.96751 10.71% 0.72% 15.80 0.63
10MFY18 1892.44 69.32735 11.40% 3.66% 23.70 2.93
Post Issue 32.54
3. Cash Flow Statement(all figures in lacs)
Particulars 10MFY18 FY17 FY16 FY15 FY14 FY13
(i) Net Cash Generated from Operation 189.03 194.25 137.27 16.17 50.38 69.82
(ii) Net Cash Generated from Investment -143.50 -131.89 -121.82 -180.12 -42.81 -18.68
(iii) Net Cash Generated from Financing Activity -50.03 -35.48 -22.99 166.26 -3.92 -57.21
(iv) Total[ (i)+(ii)+(iii) ] -4.50 26.88 -7.54 2.31 3.64 -6.07
(v) Cash and Cash Equivalents at the Start of the Year 30.27 3.39 10.93 8.62 4.98 11.05
(vi) Cash and Cash Equivalents at the end of the Year 25.77 30.27 3.39 10.93 8.62 4.98
Key Notes: a) The Revenue is growing at CAGR of 25.53% from FY13 to FY18. b) The PAT is growing at CAGR of 200% from FY13 to FY18.  The PAT in FY18 is jumped from 9 lacs in FY17 to 69 lacs looks quite fishy just before the IPO. c) The Annualized EPS post issue 2.54 on the basis of FY18. d) P/E(post issue)= 20 at Cutoff price of 51. e) P/B(post issue)= 2.125 at cutoff price of 51. f) The company is almost debt free. Total debt(Short Term + long term=3.6 cr) on equity of 7.8 Cr. g) Mcap/Sales(ideally <2)= .19 on FY18 sales( reasonably priced). h) The EBITDA Margins of the company has improved overs the years from 8% to 11% - Big Positive i) The Company is continuously generating positive cash flows from operations in last 5 years- Big Positive.

Comparison With Peers:

As per DRHP the company has shown Nilkamal, Supreme Ind., Prima Plastics and Wim Plast as listed peers those are currently trading at a P/Es of around 20, 33, 33 and 23. The company is asking a P/E of 20 that too on the basis of fishy 10MFY18 numbers where PAT suddenly jumps from 9 Lacs in FY17 to 69 Lacs in FY18 on moderate revenue growth. The Issue looks aggressively priced.

Recommendation on Avon Moldplast Limited IPO:

Avon Moldplast Limited IPO Rating by InvestorZone team => 3/10 1-5: Fair 5-7: Good 7-10: Excellent

Lead Manager of Avon Moldplast Limited IPO:

  1. Turnaround Corporate Advisors Private Limited

Registrar of Avon Moldplast Limited IPO:

  1. MAS Services limted

Company Address:

Moldplast Limited A-7/36-39, South of G. T. Road Industrial Area, Electrosteel Casting Compound, Ghaziabad 201009, Uttar Pradesh Phone No. 91 120 4376091 E-mail: cs@avonmpl.com Website: www.avonmpl.com

Bid Details of Avon Moldplast Limited IPO as on
18-Jul-2018 17:00:00 IST

Category No.of shares offered No. of shares bid
419,000 990,000
419,000 168,000
46,000 46,000
884,000 1,204,000
QIBs Yes
QIBs+HNIs Subscription 2.24X
Retail Subscription 0.40X
Total Subscription 1.31X

Discussion on Avon Moldplast Limited IPO:

    Average EPS of last three years i.e FY 16, 17 and 18 is 1.30. The issue is priced at 51, so on that basis P/E is 40. How can you even think of in your wildest dream to come up with an IPO at such high valuation.

    Ther trademark(AVON) is currently registered in the name of one of their Promoters Mrs. Anita
    Aggarwal . However, M/s Avon Cycles Limited, a Public Limited Company, has filed application against the company for misusing the name of their brand. So in future they may be restricted to use this logo which will impact their brand and obviously the growth of the company.

    The remuneration of Promoters i.e Mr. Sushil Kumar Aggarwal and Mr. Sahil Aggarwal, Managing Director will be enhanced to 2,00,000/m and 1,50,000/m from FY18 onwards, a whopping jump from 96000/m in FY17. The total expense of Salary of two promoters will be 42 Lacs/year from this year onwards and guess what the total profit of the company in 10 FY18 was 69 Lacs.

    Highest P/E. even mainline larger comany are ruling at lower P/E . Nilkamal and supreme are big brands.
    Also first time Lead manager is highly riskly. Avoid.

    New LM , risky market, negative sentiments for whole SME market & recent IPOs have difficult time in sailing through. So be careful before you apply.