Sabar Flex India
Sabar Flex India is coming out with an initial public offering (IPO) of 40,70,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 11 per equity share.
The issue will open for subscription on September 8, 2022 and will close on September 13, 2022.
The shares will be listed on NSE Emerge Platform.
The share is priced 1.10 times higher to its face value of Rs 10.
Book running lead manager to the issue is GYR Capital Advisors.
Compliance Officer for the issue is Kushang Surendrakumar Thakkar.
Profile of the company
The company is in the business of packaging products made from plastics which caters to the packaging requirements of various industries. Most of the company's existing products are industrial in nature. Overall, the company supplies total 3 different products, that is, Multilayer films, Printed laminates, and flexible packaging products (pouches and bags). Printed laminates and flexible packaging products are part of Multilayer film only which are later on cut as per requirement of customer. Since, flexible packaging material predominantly consists of plastic as a major raw material, it aims to manufacture its products sustainably by aiming towards ‘Reuse, Recycle and Upcycle’.
The company’s product portfolio largely consists of multi-color pouches, stand-up pouches, zip-lock pouches, vacuum pouch, paper bag, e-commerce bag, etc. Over the years, it has offered cost effective and customized flexible packaging solutions in accordance with the standardized sizes, designs of the customer requirements, coherent with the latest technological advances within the industry. It manufactures packaging material suitable for packaging products manufactured in food and beverage industry, e-commerce industry, pharmaceutical industry, hygiene and personal care industry, household industry and agricultural industry. The company’s key customers are well known brands in the food, beverage and household industry for manufacturing inter alia dairy products; biscuits, cakes and rusks; namkeens; frozen snacks and essential products such as tea, spices, rice etc.
Proceed is being used for:
Industry overview
In India’s case, packaging is the fifth largest sector in its economy and is one of the highest growth sectors in the country. According to the Packaging Industry Association of India (PIAI), the sector is growing at CAGR 22% to 25%. Over the last few years, packaging industry has been an important sector driving technology and innovation growth in the country and adding value to the various manufacturing sectors including agriculture and FMCG segments. According to the Indian Institute of Packaging (IIP), the packaging consumption in India has increased 200% in the past decade, rising from 4.3 kg per person per annum (pppa) to 8.6 kg pppa as on FY20. Even with this steep rise in the last decade, there is significant headroom for growth in this sector when compared to other developed regions across the globe. This rise in consumption is driven by key aspects of the rising Indian economy namely, strong favourable demographics, increasing disposable income levels, rising consumer awareness and demand for processed food. The growth of individual end user segments of food, beverages, FMCG and pharmaceuticals will trickle down into rising demand of packaging solutions.
The India Packaging Market was valued at $50.5 billion in 2019, and it is expected to reach $204.81 billion by 2025, registering a CAGR of 26.7% during the period of 2020-2025. Packaging is among the high growth industries in India and developing at 22-25% per annum and becoming a preferred hub for packaging industry. Currently the 5th largest sector of India's economy, the industry has reported steady growth over past several years and shows high potential for much expansion, particularly in the export market. Costs of processing and packaging food can be up to 40% lower than parts of Europe which, combined with India's resources of skilled labour, make it an attractive venue for investment. A high degree of potential exists for almost all user segments which are expanding appreciably - processed foods, hard and soft drinks, fruit and marine products.
Pros and strengths
Research and development capability: As part of the company’s ongoing quality assurance activities, it has established standard specifications for its raw materials and finished products and continually looks at ways to develop anti-tampering packages for its products. It has dedicated team that is focused on new products development. Its research and development activities include new product development to meet and exceed ever-changing client expectations and to achieve larger market share. Consumer preferences are incorporated into its products by its quality function deployment process. Its manufacturing units have adequate facilities and personnel to ensure compliance with the quality specifications and process parameters it has established. It provides the requisite training periodically to its quality and process control personnel. In addition, it periodically undertake a comprehensive review of various regulatory issues concerning its industry.
Quality assurance: Each of the company’s products passes through stringent quality checks. The quality assurance measures taken by the company include thorough checking of all raw materials, other inputs and finished goods to ensure quality, statistical methods to identify and analyze areas of improvement, experienced manpower for quality assurance activities, creation of data base for future reference and analysis etc. Each of the divisions is well equipped with modern quality checking and testing equipment in place for quality assurance and functions on its philosophy of providing quality products to customer.
Strong management team and motivated and efficient work force: The company’s qualified and experienced management has substantially contributed to the growth of its business operations. Its Promoter Directors have more than a decade of experience in packaging industry. Emphasis on systems and individuals has enabled it to build up capabilities to operate at different locations. Empowerment of management by delegation of authority has been its strength in meeting management expectations and has helped the company in building a large team of qualified and experienced professionals. The experience of its senior management team has translated into improved product quality, increased profitability and improved margins which give it competitive edge.
Risks and concerns
Dependent on third-party transportation providers: The company’s success depends on the supply and transport of the various raw materials required for its manufacturing facilities and of its finished products from its manufacturing facilities to its customers and distributors, which are subject to various uncertainties and risks. It uses third-party for the delivery of its products and transportation restrictions, if any, could have an adverse effect on supplies and deliveries to and from its customers and suppliers. In addition, raw materials and finished products may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be a delay in delivery of raw materials and products which may also affect its business and results of operations negatively.
Requires significant amount of working capital: The company’s business requires significant amount of working capital for carrying-out its activities. Consequently, there could be situations where the total funds available may not be sufficient to fulfil its commitments, and hence it may need to incur additional indebtedness in the future, or utilize internal accruals to satisfy its working capital needs. Its future success depends on its ability to continue to secure and successfully manage sufficient amounts of working capital. Further, its ability to arrange financing and the costs of capital of such financing are dependent on numerous factors, including general economic and capital market conditions, credit availability from banks, investor confidence, the continued success of its operations and other laws that are conducive to its raising capital in this manner.
Dependent on adequate and uninterrupted supply of electrical power and water: Adequate and cost-effective supply of electrical power and water is critical to the company’s operations, which entails significant consumption of electrical power and water. Its manufacturing process requires uninterrupted supply of electrical power and water in order to ensure that it is able to manufacture its products. The shortage or nonavailability of electrical power and water may adversely affect its manufacturing process and have an adverse impact on its results of operations and financial condition. Currently, it sources its power requirements from the state electricity board. There can be no assurance that electricity supplied will be sufficient to meet its requirements or that it will be able to procure adequate and interrupted power supply in the future at a reasonable cost. If the supply of electricity is not available for any reason, it will need to rely on alternative sources.
Outlook
Sabar Flex India is a manufacturer and supplier of all kinds of Flexible packaging materials commonly used for packing Food, Dairy, cosmetics, pharmaceuticals, Chemical & agriculture products etc. The company was incorporated in 2007 as a Partnership Firm. The company's operations include manufacturing, processing, designing, buying, selling, exporting, and importing packing cases, cartons, drums, crates, cans, and containers, as well as wooden boxes, plastic containers, polythene containers, bottles, hollow wares, cases, drums, cages, tins, bins, jars, tubes, crates, packing cases, cans, bottles, vials, etc. Its Manufacturing unit is in Dhandha, Himatnagar City of Gujarat which is closed to Rajasthan. As of now Flexible Packaging Industry is not developed in Rajasthan due to which company is getting good orders from salt industry of Rajasthan State and due to location advantage. Its diversified customer base has helped it in introducing products in South part of India in the states like Tamilnadu, Kerala, Pondicherry. On the concern side, the company may face product liability claims and legal proceedings if the quality of its products does not meet its customers’ expectations. Its products might have certain quality issues or undetected errors, due to defects in manufacture of products or raw materials which are used in the products. Besides, it is subject to laws and government regulations, including in relation to safety, health, environmental protection and labour wherein it is required to obtain and maintain various regulatory approvals and registrations for its operations.
The company is coming out with a maiden IPO of 40,70,000 equity shares of Rs 10 each at a fixed price of Rs 11 per share to mobilize around Rs 4.48 crore. On performance front, the total income of its company for fiscal year 2021 was Rs 7,397.88 lakh against Rs 6,364.32 lakh total income for Fiscal year 2020. An increase of 16.24% in total income. Profit after tax for the Fiscal 2021 was at Rs 139.84 lakh against profit after tax of Rs 89.80 lakh in fiscal 2020, a 55.72% increase. Meanwhile, the company’s intend to continue to encourage its employees to be enterprising and expect them to learn on the Job and contribute constructively to its business, either through ideas, personal networks or effective knowledge management. It also intends to continuously re-engineer its management and organizational structure to allow it to respond effectively to the changes faced in the business environment and enhance its overall profitability.
