- November 29, 2022
- Posted by: Santosh Singh
- Category: IPO
Sah Polymer Limited has filed Draft Red Herring Prospectus with market regulator SEBI on 25th Apr, 2022.
The IPO consists of Fresh Issue of 1.02 crore equity shares and Promoters and Shareholders will not affload their stake.
Business Model of Company
Sah Polymer Limited is primarily engaged in manufacturing and selling of Polypropylene/High Density Polyethylene FIBC Bags, Woven Sacks, HDPE/PP woven fabrics, woven polymer based products of different weight, sizes and colors as per customers specifications. The Company offers customized bulk packaging solutions to business-to-business manufacturers catering to different industries such as Agro Pesticides Industry, Basic Drug Industry, Cement Industry, Chemical Industry, Fertilizer Industry, Food ProductsIndustry, Textile Industry Ceramic Industry and Steel Industry. Besides, the Company is a Del Credere Associate cum Consignment Stockist of Indian Oil Corporation Limited and also operates as Dealer Operated Polymer Warehouse of Indian Oil Corporation Limited for their polymer division.
The Company has two business divisions (i) domestic sales and (ii) exports. As of now the Company has presence in 6 states and 1 union territory for the domestic market. Internationally the Company supplies products in 6 regions such as Africa, Middle East, Europe, USA, Australia, Caribbean. For the nine months ended December 31, 2021 and for Fiscals 2021, 2020 and 2019 the revenue from exports was Rs. 1938.39 lakhs, Rs. 2419.86 lakhs, Rs. 2491.88 lakhs and Rs. 2396.46 lakhs contributed 35.89%, 43.94%, 50.75%, and53.04% respectively of the revenue from operations.
Presently, the Company has one manufacturing facility with installed production capacity of 3960 m.t. p.a. located at Udaipur, Rajasthan. Over the years, the Company has made investments, from time to time, in manufacturing infrastructure to support its product portfolio requirements and its reach. Furthermore, in line with its strategic expansion plans, the Company intends to use part of the Net Proceeds to establish a new facility with an additional installed capacity of 3960 m.t p.a. to manufacture different variants of FIBC products. The Company is promoted by SAT Industries Limited which is listed on BSE Ltd.
Who is the Management of the Company?
As on the date of this Draft Red Herring Prospectus, the following is the management of the company:
(i) Asad Daud, aged 31 years, is the Managing director of the Company. He has been associated with the company since April 3, 2009. He holds a Masters of Science degree in field of Accounting & Finance from The London School of Economics and Political Science. He possesses more than 12 years of experience in the polymer packaging Industry. He looks after the management and operations of the company and is involved in bringing about innovation in the operations and products of the Company.
(i) Hakim Sadiq Ali Tidiwala aged 64 years, is the Whole Time Director of Company. He has been associated with the Company since August 1, 1998. He was then appointed as the Managing director and since November 2, 2015 he has been re-appointed as Whole Time Director in the Company. He does not have a formal education degree. He possesses more than 23 years of experience in the polymer packaging Industry.
Why is the company raising funds via IPO?
The Net Proceeds from the Fresh Issue are proposed to be utilized towards the following objects:
- Setting up of a new manufacturing facility to manufacture new variants of Flexible Intermediate Bulk Containers.
- Repayment/ Prepayment of certain secured and unsecured borrowings in full or part availed by the Company and its Subsidiary Company.
- Funding the working capital requirements of the Company.
- General corporate purposes.
In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, including among other things, enhancement of Company’s brand name and creation of a public market for the Equity Shares in India.
Is there any OFS in the IPO?
The IPO of Sah Polymer Limited does not consist of any Offer for Sale (OFS). The IPO includes Fresh Issue of 1.02 crore equity shares.
Financials of the company?
As per the financial statements of the Company, in FY22, the total revenue of the Company increased 47% to Rs. 81 crore as against Rs. 55 crore in the previous financial year ended March 31, 2021. The total expenses of the Company have also increased 41% to Rs. 75 crore as against Rs. 53 crore in the previous financial year ended March 31, 2021. In FY22, the Profit Before Tax of the Company was Rs. 5 crore, 400% up as against Rs 1 crore, in the previous financial year ended March 31, 2021. In FY22, the net profit of the Company increased 300% to Rs. 4 crore as against Rs. 1 crore in the previous financial year ended March 31, 2021.
In FY22, the net assets of the Company increased 70% to Rs. 68 crore as against Rs. 40 crore in the previous financial year ended March 31, 2021. For the financial year ended March 31, 2022, the total equity and liabilities of the Company increased 70% to Rs. 68 crore as against Rs. 40 crore in the previous financial year ended March 31, 2021.
In FY22, the net cash used in operating activities of the Company was Rs. 79 lakhs as against Rs. 1 crore cash generated from the previous financial year ended March 31, 2021. For the financial year ended March 31, 2022, the net cash used in investing activities of the Company was Rs. 10 crore as against Rs. 23 crore in the previous financial year ended March 31, 2021. For the financial year ended March 31, 2022, the net cash generated from financial activities of the Company was Rs. 11 crore as against Rs. 85 lakhs in the previous financial year ended March 31, 2021.
Risk in The IPO
Inadequate or Interrupted Supply and Price Fluctuation
Manufacturing quantity and cost of the products are dependent on the Company’s ability to source raw materials and packaging materials at acceptable prices and maintain a stable and sufficient supply of the raw materials. The principal raw materials used in the manufacturing process are Polypropylene, Low Density Polyethylene, High Density Polyethylene, color masterbatch, PP Resin, Anti fab/Calcium carbonate, UV stabilizers, Colour Master batch and pigments. Inadequate or interrupted supply and price fluctuation of the raw materials and packaging materials could adversely affect the business, results of operations, cash flows, profitability and financial condition.
Company Requires Significant Working Capital
The Company requires significant working capital, such as to finance the purchase of raw materials, consumables, stores & spares and payments for operating expenses before the Company receives payment from the customers. In addition, the actual amount of the future capital requirements may differ from estimates. The inability to meet the working capital requirements including failure to realize receivables and inventories may have an adverse effect on the results of operations and overall business.
There Are Outstanding Legal Proceedings
There are outstanding legal proceedings involving the Company, Group Company, Corporate promoter, Directors and Subsidiary which are pending at different levels of adjudication before various courts, tribunals and other authorities. Such proceedings could divert management time and attention, and consume financial resources in their defense or prosecution. Any unfavorable decision in connection with such proceedings, individually or in the aggregate, could adversely affect the reputation, business, financial condition and results of operations of the Company.
The Company doesn’t Have Long Term Agreements With Its Customers
The Company has not entered into any long term or definitive agreements with its customers and instead rely on purchase orders to govern the volume, pricing and other terms of sales of the products. However, such orders may be amended or canceled prior to finalization, and should such an amendment mentor cancellation take place, the Company may be unable to seek compensation for any surplus unpurchased products that the Company manufactures. If the customers choose not to source their requirements from the Company, the business, financial condition and results of operations may be adversely affected.
Changes In Technology or Consumer Preferences
The products of the Company are used mainly by companies who require packaging materials for construction, agriculture, chemical, infrastructure industry etc. The business of the Company is affected by change in technology, consumer preferences, market perception of brand, attractiveness, convenience, safety and environmental norms. Introduction of alternative packaging materials caused by changes in technology or consumer preferences may affect demand for the existing products which may adversely affect the financial results and business prospects of the Company.