Pyramid Technoplast Limited

Pyramid Technoplast Limited has filed its DRHP with market regulator SEBI on April 3, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue and Offer for Sale both. The size of IPO is Up to 55,00,000 Equity Shares aggregating up to ₹ [●] crore and Offer for sale of Up to 37,20,000Equity Shares aggregating up to ₹ [●] crore by Credence Financial Consultancy LLP.

Business Model of the Company

The Company is an industrial packaging company engaged in the business of manufacturing polymer based molded products (Polymer Drums) mainly used by chemical, agrochemical, speciality chemical and pharmaceutical companies for their packaging requirements. The Company is one of the leading manufacturers of rigid Intermediate Bulk Containers (IBC) in India manufacturing 1,000 litre capacity IBC.

IBCs are industrial-grade containers engineered for the mass handling, transport, and storage of liquids, semi-solids, pastes, or solids. rigid IBCs are manufactured across a volume range which is in between that of standard shipping drums and intermodal tank containers, hence the title intermediate bulk container. The Company also manufactures MS Drums made of mild steel (MS) used in the packaging and transport of chemicals, agrochemicals and speciality chemicals.

The Company uses blow molding technology to manufacture Polymer Drums and IBCs. Injection molding technology is used for manufacturing caps, closures, bungs, lids, handles, lugs, etc. for in-house use. The products are marketed and sold under the brand name “Pyramid”.

Management of the Company

(i) Bijaykumar Agarwal, the Managing Director & Chairman of the Company. He has been associated with the Company since 2002. He was appointed to the Board with effect from February 2023. He has over three (3) decades of experience in the packaging industry. He looks after various functions in the Company such as finance, raw material procurement, customer servicing and business development.

(ii) Jaiprakash Agarwal, the Whole-time Director & Chief Financial Officer of the Company. He holds a bachelor’s degree in commerce from the Mumbai University. He also holds a master’s degree in business administration from the ICFAI University, Dehradun. He has been associated with the Company since June 2003. He has over nineteen (19) years of experience in the packaging industry. He looks after various functions in the Company such as manufacturing, finance, accounts, sales & marketing and business development.

Object of the Issue

Offer for Sale

The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder and the proceeds received from the Offer for Sale will not form part of the Net Proceeds. The Promoter Selling Shareholder will be entitled to the proceeds of the Offer for Sale after deducting his proportion of Issue expenses and relevant taxes thereon.

Fresh Issue

The net proceeds are proposed to be utilized in the following manner:

1. Repayment and/or pre-payment, in full or part, of certain outstanding borrowings availed by the Company;

2. Funding working capital requirements of the Company; and

3. General corporate purposes..

Further, the Company expects to receive the benefits of listing the Equity Shares on the Stock Exchanges, which will result in enhancement of visibility and brand image among its existing and potential customers.

Risks in the IPO

Substantial portion of the revenues come from the manufacturing of polymer based molded industrial packaging

The Company is a packaging solutions provider engaged in the business of manufacturing polymer based molded products like IBC, Polymer Drums, carboys, jerry cans, plastic accessories and Metal Drums. The revenue from the sale of IBC for six months period ended September 30, 2022 and for the Financial Years 2022, 2021 and 2020 contributed ₹ 7,409.12 lakhs, ₹ 12,207.90 lakhs, ₹ 8,283.81 lakhs and ₹ 6,881.00 lakhs, respectively, representing 31.36%, 30.49%, 26.42%, and 8.54%, respectively, of the revenues from operations. Substantial portion of the revenues come from the manufacturing of polymer based molded industrial packaging products like IBC and Polymer Drums.

Any change in government policies or quality norms

The Company is required to adhere to government policies, international standards or customer quality norms for manufacturing industrial packaging products. These standards are subject to certain changes as may be required by the chemical, pharmaceutical and other industries from time to time. Any change in government policies or quality norms by the customers for molded industrial packaging, which the Company may not be able to adhere to, may affect the business growth, operations and financials.

Not having long term contracts with customers

The Company has not entered into any long-term agreements with its customers for purchasing its products. The Company is subject to uncertainties in demand and there is no assurance that the customers will continue to purchase its products. This could impact the business and financial performance of the Company.

Increase in the price of Crude Oil

Polymer including polypropylene and polyethylene is the primary raw material consumed by the Company for polymer based molded products including IBC & Polymer Drums and constitutes a significant percentage of the Company’s total expenses. Polymer is a derivative of crude oil and any substantial increase in price of crude oil or decrease in the supply of polymer could materially adversely affect the Company’s business.

Requires substantial working Capital

The Company has substantial working capital requirements. Its inability to obtain and / or maintain sufficient cash flow, credit facilities and other sources of funding in a timely manner to meet its requirements of working capital or payment of the debts, could adversely affect the operations.

Financial Performance

As per the financial statements of the Company:

1. Revenue Growth: The company experienced a significant increase in total revenue in FY22, with a growth rate of 27%. The revenue rose to Rs. 402 crore compared to Rs. 316 crore in FY21.

2. Expense Increase: Total expenses also witnessed a substantial increase in FY22, rising by 25% to reach Rs. 367 crore, in comparison to Rs. 293 crore in FY21.

3. Profit Before Tax: The company’s profit before tax showed remarkable growth in FY22, with a surge of 53%. It reached Rs. 35 crore, surpassing the Rs. 22 crore recorded in FY21.

4. Profit After Tax: Similar to the increase in profit before tax, the company’s profit after tax also grew by 53% in FY22. The figure reached Rs. 26 crore, compared to Rs. 16 crore in FY21.

5. Total Assets: The company’s total assets in FY22 amounted to Rs. 183 crore, reflecting an increase from Rs. 153 crore in FY21.

6. Total Equity and Liabilities: In line with the total assets, the total equity and liabilities of the company in FY22 stood at Rs. 183 crore, showing growth from Rs. 153 crore in FY21.

7. Operating Cash Flow: The company utilized Rs. 6 crore in operating activities in FY22, representing a shift from the previous fiscal year when it generated Rs. 8 crore in cash.

8. Investing Cash Flow: The net cash used in investing activities in FY22 decreased to Rs. 4 crore, compared to Rs. 6 crore in FY21.

9. Financing Cash Flow: The company saw a substantial increase in net cash generated from financial activities in FY22, reaching Rs. 9 crore, while it had generated Rs. 50 lakhs in FY21.

10. Net Cash and Cash Equivalents: At the end of FY22, the company had Rs. 3 crore in net cash and cash equivalents, slightly lower than the Rs. 4 crore recorded in FY21.