Purv Flexi NSE SME IPO review (Apply)
• PFL is a flagship company of Purv Group that has Cool Cap listed at NSE SME emerge.
• The company posted consistent growth in its top and bottom lines for the reported periods.
• The company’s product portfolio has wide demand in domestic and global markets.
• Based on FY24 annualized earnings, the issue is reasonably priced.
• Investors may lap it up for the medium to long term rewards.
ABOUT COMPANY:
Purv Flexipack Ltd. (PFL) is the flagship company of “Purv Group” which started its operations in the year 1994, the company now extends packaging solutions across various industries.
It is primarily engaging in the distribution of various plastic-based products such as Biaxially Oriented Polypropylene (BOPP) film, Polyester Films, DOPW) of Indian Oil Corporation Limited for their polymer division.
PFL is dealer of various companies for distribution of plastic based products. In addition to distribution business in the plastic-based products, the company has one (1) subsidiary company namely Cool Caps Industries Limited, an NSE SME Listed company and four (4) Step down wholly owned subsidiary companies namely Purv Technoplast Private Limited, Purv Packaging Private Limited, Purv Ecoplast Private Limited and Re.act Waste Tech Private Limited. PFL has invested in Purv Technoplast Private Limited through its subsidiary Cool Caps Industries Limited and made it its step-down subsidiary company on March 27, 2021. As of December 31, 2023, it had 28 employees on its payroll.
Its major subsidiary Cool Cap that came with an IPO of Rs. 11.63 cr. at a price of Rs. 38 per share currently trades at Rs. 453 (marked all time high of Rs. 639.90 on NSE SME Emerge) and its market cap that was around Rs. 44 cr. at the time of IPO has seen it rising to Rs. 526 cr. at present. PFL is holding 61.65% equity stake in Cool Caps which is valued at around Rs. 279 cr.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 5664000 equity shares of Rs. 10 each. to mobilize Rs. 40.21 cr. at the upper cap. It has announced a price band of Rs. 70 – Rs. 71 per share. The issue opens for subscription on February 27, 2024, and will close on February 29, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.99% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 19.87 cr. for repayment of existing borrowings, Rs. 20.00 cr. for working capital, and the rest for general corporate purposes.
The issue is solely lead managed by Holani Consultants Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar of the issue. Holani Consultants Pvt. Ltd. is also the market maker for the company.
The company has done pre-IPO placement of 1200000 equity shares at a price of Rs. 71 per share and garnered Rs. 8.52 cr. and resultantly, it has reduced the IPO size to that extent.
Having issued initial equity capital at par, the company has issued further equity shares in the price range of Rs. 20 – Rs. 71 per share (on the basis of Rs. 10 FV) between March 2007 and December 2023. The average cost of acquisition of shares by the promoters is Rs. NA, Rs. 1.18, and Rs. 5.20 per share.
Post-IPO, company’s current paid-up equity capital of Rs. 15.32 cr. will stand enhanced to Rs. 20.98 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 148.98 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 137.80 cr. / Rs. 6.15 cr. (FY21), Rs. 229.44 cr. / Rs. 7.66 cr. (FY22), and Rs. 341.08 cr. / Rs. 11.34 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earns a net profit of Rs. 5.76 cr. on a total income of Rs. 139.36 cr. Thus its top and bottom lines posted growth for the reported periods.
For the last three fiscals, it has reported an average EPS of Rs. 5.08, and an average RONW of 10.10%. The issue is priced at a P/BV of 1.23 based on its NAV of Rs. 57.74 as of September 30, 2023, and at a P/BV of 1.19 based on its post-IPO NAV of Rs. 59.54 per share (at the upper cap).
If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 12.93. The issue is reasonably priced considering its holding worth Rs. 279 cr.in Cool Caps and its pre and post IPO NAV.
For the reported periods, the company has posted PAT margins of 4.27% (FY21), 2.82% (FY22), 2.48% (FY23), 3.20% (H1-FY24), and RoCE margins of 15.61%, 14.49%, 18.50%, 10.14% respectively for the referred periods.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Sah Polymers as their listed peers. It is trading at a P/E of 245 (as of February 20, 2024). However, they are not comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 8th mandate from Fedex Securities in the last four fiscals, out of the last 7 listings, 1 opened at discount and the rest with premiums ranging from 4.94% to 242.11% on the date of listing.
Conclusion / Investment Strategy
The company is a flagship company of Purv group that has one listed company i.e. Cool Caps and PFL is holding around 62% equity in this subsidiary. The company has posted growth in its top and bottom lines for the reported periods. Based on FY24 annualized earnings, the issue appears reasonably priced. Investors may lap it up for the medium to long term rewards.
Review Author
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
Email: dilip_davda@rediffmail.com
Courtesy: https://www.chittorgarh.com/
