G M Polyplast coming with an IPO to raise up to Rs 8 crore

G M Polyplast

• G M Polyplast is coming out with an initial public offering (IPO) of 5,08,800 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 159 per equity share.
• The issue will open on September 30, 2020 and will close on October 06, 2020.
• The shares will be listed on SME Platform of BSE.
• The share is priced 15.90 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Gretex Corporate Services.
• Compliance Officer for the issue is Dimple Amrit Parmar.

Profile of the company

The company started its operations way back in the year 2003 in the name of G. M. Polyplast Private Limited. The company is engaged in the business of manufacturing of H.I.P.S, A.B.S & P.E.T sheets, along with sheets it also manufactures the raw material used to manufacture the sheets called as granules. The company is known in the industry for manufacturing and supplying of high-grade Sheets and Granules in India. In the phrase ‘Innovation as key to future’ and the company has been keeping pace with modernization in all sphere of development, manufacturing, and marketing, emphasis on product quality & client satisfaction. A professional approach and constant interaction ensure client requirement is met with high standard within the agreed guideline of time and cost. Its impressive growth has been largely due to confidence in its own capability and impressive infrastructure it has created over the years.

The company actively works for the benefit of their employees and labours with prime focus being health, hygiene and welfare of the workforce and also undergoes audit conducted by its recognized suppliers to ensure that the safety and management norms are being complied with. Quality is of the paramount importance as it can essentially make or break a brand. A failure to maintain quality standard can prove to be extremely detrimental to the business of the company. The company gives quality the utmost priority at all stages of production to ensure its customers thoroughly satisfied. The company has three levels of quality checks in place to make sure that the requisite quality of the product is being achieved at every stage of manufacture from raw materials to boxed stock. The company constantly endeavours to maintain and exceed customer expectations consistently in all aspects of quality.

Proceed is being used for:

• Meeting working capital requirement.
• General corporate purposes.

Industry overview

The Indian plastics industry made a promising beginning in 1957 with the production of polystyrene. Thereafter, significant progress has been made, and the industry has grown and diversified rapidly. The industry spans the country and hosts more than 2,000 exporters. It employs about 4 million people and comprises more than 30,000 processing units, 85-90 percent of which are small and medium-sized enterprises. Meanwhile, India is ready to have 18 plastic parks and the Government will be investing Rs 40 crore ($6.2 million) to increase the domestic production of plastics. This will achieve environmentally sustainable growth and increase employment.

India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country. The manufacturing sector of India has the potential to reach $1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of $2.5 trillion along with a population of 1.32 billion people, which will be a big draw for investors. With impetus on developing industrial corridors and smart cities, the Government aims to ensure holistic development of the nation. The corridors would further assist in integrating, monitoring and developing a conducive environment for the industrial development and will promote advance practices in manufacturing.

Pros and strengths

Diversified product portfolio: In order to offer new and varied products to its customers, the company focuses on creating innovative designs and optimizing fit and sizing combined with an emphasis on quality. The company’s product range includes Acrylonitrile Butadiene Styrene (ABS) Plastic Sheets, High Impact Polystyrene (HIPS) Sheets, PET (Polyethylene Terephthalate) Sheets / Rolls, Amorphous Polyethylene Terephthalate (A-PET) Sheet, Recycled Polyethylene Terephthalate (R-PET) Sheet, HDPE (High Density Polyethylene) Sheets / Rolls, PP (Polypoplyne) Sheets / Rolls, Electrostatic discharge materials (ESD materials). Its comprehensive product range offers a wide variety of designs and styles and caters to various customer segments across a wide range of price points, by providing products at various price ranges.

Existing distribution and sales networks: The company is having good channel for distribution to many clients be it in India or other countries. The company has employed a sales and marketing team, who are responsible to take orders from customers which is then give to the manufacturing unit and then the company starts to pack the finished goods or manufacture the new products depending upon the availability of the stock. Its distribution channel currently covers states of Maharashtra, Gujrat, Kerala, Tamil Nadu, West Bengal, Dadra & Nagar Haveli, Puducherry, Uttar Pradesh, Delhi, Madhya Pradesh, Haryana, Telangana, Karnataka, Uttar Pradesh, Goa, Karnataka, Chhattisgarh, and also it supplies to other countries such as UAE, Israel, Jordan, Hong Kong.

Product quality: In providing quality and timely service to its customers, the company has a set of standards for itself when it comes to timeliness and quality of service it provides to its customers. The stringent systems ensure that all the products reach its customers on stipulated time and there are minimum errors to ensure reduced product rejection. Its quality service for the last 17 years has earned it a goodwill from its customers, which has resulted in customer retention and order repetition. It has also helped it to add to its existing customer base. The company developed internal procedure of checking the client orders at each stage from customer order to delivery. Its company focuses on maintaining the level of consistently in its service, thereby building customer loyalty for its brand.

Risks and concerns

Dependent upon few suppliers: The company is dependent upon few suppliers for its raw material for its current manufacturing facility. Major portion of raw materials are coming from its top ten suppliers. In Financial Year 2019-20, majority of raw material has been received from top ten suppliers. Identifying a suitable supplier involves a process that requires it to become satisfied with their quality control, consistency, responsiveness and service, financial stability and other ethical practices and specifically they must be reputed suppliers. Typically, the company does not enter into long term contracts with its suppliers and prices for these items are normally based on the quotes it receives from various approved suppliers. Any unexpected price fluctuations after placement of orders, shortage, delay in delivery, quality defects, or any factors beyond its control may result in an interruption in the supply of such items which is critical to its business. Any delay, interruption or increased cost in the supply of any items thereof pertaining to its project arising from a lack of long-term contracts could have an adverse effect on its ability to meet its targets and client satisfaction from its service and its business, financial performance and cash flows may be adversely affected.

No long-term contracts with any customers: The company does not have any long-term contracts with its customers. The company caters its products on an order to order basis. The company’s customers can terminate their relatiosnship with its by giving notice and as such terms and conditions as mutually agreed upon, which could materially and adversely impact its business. Although, the company has satisfactory business relation with its customers and has received business from them in the past and will regularly receive the business in future also but there is no certainty that it will receive business in future from them and may affect its profitability.

Dependent on third party transportation providers: The company is depended on third-party transportation to receive input materials required for its products and to deliver its finished products to its customers. Third-party logistics providers for all of its product distribution and input materials procurement. This makes it dependent on such third-party transportation providers. Weather-related problems, strikes, or other events which affects third-party transportation could impair its ability to receive the raw materials and/or deliver the requisite quantities of products in time to its customers, which may result in cancellation or non-renewal of purchase orders, and could adversely affect the performance of its business, results of operations and cash flows.

Outlook

Incorporated in 2003, GM Polyplast is a Mumbai-based manufacturer of high-grade sheets such as PVC sheets, HIPS sheets, HDPE sheets, A.B.S. sheets, and others. The company not just manufactures various types of sheets but also manufactures raw material used to prepare the sheets called granules. The company’s manufacturing facilities are well equipped with streamlined process to ensure quality of products and timely manufacturing. It endeavors to maintain safety in its premises by adhering to key safety norms. On the concern side, the company is dependent upon few suppliers for its raw material for its current manufacturing facility. In an eventuality where its suppliers are unable to deliver the company the required materials in a time-bound manner it may have a material adverse effect on its business operations and profitability.

The company is coming out with an IPO of 5,08,800 equity shares of Rs 10 each at a fixed price of Rs 159 per equity share to mobilize Rs 8.09 crore. On the performance front, the company’s revenue from operations decreased by 7.30% to Rs 6,314.53 lakh for the financial year 2019-20 from Rs 6,811.87 lakh for the financial year 2018-19. The decrease was entirely due to decrease in sale of manufactured goods and job work charges. The company’s profit before tax increased by 65.44% to Rs 316.87 lakh for the financial year 2019-20 from Rs 191.53 lakh for the financial year 2018-19. The company carries its business operations in India and abroad. Increase in the presence in international market will help the company to mitigate risk for any unforeseen circumstances in the domestic market and expand its business operations. Meanwhile, quality of the product is very important for the company from both customer point of view and growth point of view. The company is focused on dealing in the products which meets with the requisite quality standards as per the applicable regulatory norms. Providing the desired and good quality products help it in enhancing its image and maintaining long term relationships with customers.