What you must know about Pyramid Technoplast IPO

Pyramid Technoplast Ltd was incorporated in the year 1997 to manufacture polymer-based molded products. Better known as Polymer Drums, they are principally used for packaging in industries like chemicals, agrochemicals, specialty chemicals, and pharmaceutical sectors. Some of its key products include polymer-based bulk packaging drums and Intermediate Bulk Containers (IBC). It also specializes in the manufacture of MS Drums for packaging and transporting of volatile chemicals, agrochemicals, and specialty chemicals. It currently has 6 manufacturing units, of which 4 are located in GIDC, Bharuch while the other 2 are located in Silvassa, Dadra & Nagar Haveli. Pyramid Technoplast Ltd has total polymer drum manufacturing capacity of 20,612 MTPA, IBC manufacturing capacity of 12,820 MTPA and MS Drums manufacturing capacity of 6,200 MTPA. It is currently foraying into building its seventh plant, also in GIDC, Bharuch.

The company is certified by the UN based on the United Nations Recommendation for IBC and MS Drums to meet safety levels. Its business is broadly divided into the IBC Containers vertical, MS Barrels vertical and the Plastic Barrels vertical. Some of the premium clients of Pyramid Technoplast for its polymer based packaging solutions include Gujarat Alkalis & Chemicals Ltd (GACL), Deepak Nitrite, United Phosphorus (UPL), Patanjali Group, Adani Wilmar Ltd, Apar group, Alkyl Amines, Asian Paints and the JSW Group, owned by the Jindal family. The issue will be lead managed by PNB Investment Services Ltd and First Overseas Capital Ltd. Bigshare Services Private Ltd will be the registrar to the issue.

Highlights of the Pyramid Technoplast IPO issue

Here are some of the key highlights to the public issue of Pyramid Technoplast IPO.

• Pyramid Technoplast IPO has a face value of ₹10 per share while the price band for the book building IPO has been set in the band of ₹151 to ₹166. The final price will be discovered within this band, but the upper band is used for all our analysis.
   
• The IPO of Pyramid Technoplast Ltd will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 55,00,000 shares (55 lakh shares), which at the upper price band of ₹166 per share will translate into fresh issue size of ₹91.30 crore.
   
• The offer for sale (OFS) portion of the IPO comprises the issue of 37,20,000 shares (37.20 lakh shares), which at the upper price band of ₹166 per share will translate into an offer for sale (OFS) size of ₹61.75 crore. The entire 37.20 lakh shares in the OFS are being sold by Credence Financial Consultancy LLP, one of the major promoters.
   
• Therefore, the overall IPO portion will comprise of the issue of 92,20,000 shares (92.20 lakh shares), which at the upper price band of ₹166 per share will translate into a total IPO issue size of ₹153.05 crore.

While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. The entire 37.20 lakh shares in the OFS are being offered by Credence Financial Consultancy LLP, one of the major promoters of Pyramid Technoplast Ltd. The proceeds of the fresh issue portion will be used to repay / prepay outstanding loans availed by Pyramid Technoplast Ltd and also for the working capital needs of the company.

Promoter holdings and investor quota allocation quota

The company was promoted by Yash Synthetics, Credence Financial and others. Here is a list of key promoters and promoter group and their participation in the OFS.

Currently the promoters hold 100.00% of the company, which will get diluted post the IPO to 74.94%. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while only 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of Pyramid Technoplast Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

Lot sizes for investing in the Pyramid Technoplast IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Pyramid Technoplast Ltd, the minimum lot size is 90 shares with upper band indicative value of ₹14,940. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Pyramid Technoplast Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Pyramid Technoplast IPO and how to apply?

The issue opens for subscription on 18th August 2023 and closes for subscription on 22nd August 2023 (both days inclusive). The basis of allotment will be finalized on 25th August 2023 and the refunds will be initiated on 28th August 2023. In addition, the demat credits are expected to happen on 29th August 2023 and the stock will list on 30th August 2023 on the NSE and the BSE. Pyramid Technoplast Ltd offers a very unique combination. It has an established and tested business model; it is into an industry that is considered the future of the O2C industry and it comes from the group that has delivered consistently over the last few years. Let us now turn to the more practical issue of how to apply for the IPO of Pyramid Technoplast Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Pyramid Technoplast Ltd

The table below captures the key financials of Pyramid Technoplast Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (All ₹ figures are in crores)

There are few key takeaways from the financials of Pyramid Technoplast Ltd which can be enumerated as under

1. In the last 2 years, the revenues growth has been robust averaging over 20%, indicating the growing demand for specialized polymer products. Purely on the strength of the prospects of the sector and the performance of the group, the pricing does look like it has left something on the table for investors. Even the P/E ratio looks reasonable at these levels.
    
2. The last 3 years profit margins and the return on assets as well as the return on equity are extremely competitive in the industry group. While the net margins have hovered around the 6% mark, the ROA has hovered close to 14% while the ROE is extremely attractive at nearly 30% in all the years.
    
3. The company has maintained an impressive rate of sweating assets as is evident from the asset turnover ratio. It has consistently averaged over 2.0X, which is a very good sign for a capital intensive business like polymer products.

While pricing of the IPO does matter here, what is more critical is the eventual PAT margins and the eventual ROE that will sustain. A lot will depend on how the company is able to scale up and yet maintain its profitability margins. Purely from the perspective of the model, the product positioning, and the track record, it is an issue worth investing from a long term perspective. However, it is better suited to investors with a higher risk appetite.