Command Polymers coming with an IPO to raise upto Rs 7.09 crore

Command Polymers

• Command Polymers is coming out with an initial public offering (IPO) of 25,32,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 28 per equity share.
  
• The issue will open for subscription on March 17, 2023 and will close on March 21, 2023.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 2.8 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Aryaman Financial Services.
  
• Compliance Officer for the issue is Sikha Banka.
  

Profile of the company

The company is in the business of Marketing and Manufacturing Polymer based products primarily Polythene LF Tube, Tarpoulin sheets, Polyester Fabrics and other polymers. Its products has a wide variety of applications in several industries such as Industrial packaging industries, Food industry etc.

The company’s manufacturing facility is located at Mouza Malancha, J.L.No.87, P.O. Narayanpur, P.S Bhangar, District 24 Parganas (South), West Bengal and is well equipped with the required facilities including machinery, other handling equipment’s to facilitate smooth manufacturing process and easy logistics. It endeavor to maintain safety in its premises by adhering to key safety norms, established through its internal health and safety manual, accompanied by regular safety meetings.

Proceed is being used for:

• Funding Working capital requirements.
  
• Repayment of Loans.
  
• General Corporate Purpose.
  

Industry overview

Indian plastic industry market is one of the leading sectors in the country’s economy. The history of the plastic industry in India dates to 1957 with the production of polystyrene. Since then, the industry has made substantial progress and has grown rapidly. The industry is present across the country and has more than 2,000 exporters. It employs more than 4 million people in the country and constitutes 30,000 processing units; among these, 85-90% belong to small and medium enterprises. India manufactures various products such as plastics and linoleum, houseware products, cordage, fishnets, floorcoverings, medical items, packaging items, plastic films, pipes, raw material, etc. The government intends to take the plastic industry from a current level of Rs. 3 lakh crores ($ 37.8 billion) of economic activity to Rs. 10 lakh crores (US$ 126 billion) in 4-5 years.

Indian plastics industry also delivers plastic materials to many other industry such as automotive, consumer packaging, & electronics. Over the past few decades, the demand for Plastic has developed by 8 percent yearly. A similar development rate is anticipated to continue during the forecast period. The progress rate of the plastics industry in India is among the top in the world, with plastics consumption rising at 16 percent per year. Considering a rising middle class with low per capita consumption of plastics. This high progress rate is expected to continue, as the per capita consumption of plastics will certainly increase. Although India’s plastics industry has been hit by the nation’s general economic emergency over the past 2 years, with the weakening rupee, underlying economic movement rests strong as the use of plastic is increasing in more & more segments, opening new markets & substituting traditional materials.

Pros and strengths

Existing relationship with suppliers: The company focuses on building sustained and long term relationship with its suppliers. For manufacturing its products, it purchase raw materials such as Low Density Polyethylene, Low Density Polyethylene, High density Polyethylene from leading suppliers like ONGC Petro Additions, Vishambara Polymers etc in bulk quantities. Its strong relationships with suppliers will enable it to continue to grow its business. Due to its relationships with its suppliers, it gets quality and timely supplies of its raw materials. This enables it to manage its inventories and supply quality products on timely basis to its customers. This in turn has enabled it to generate repeat business.

Quality Assurance: The company is committed towards quality of its products. Its determination towards quality is demonstrated by well defined quality and safety procedures at various stages of its manufacturing process from procurement of raw material to distribution of its products. Owing to the expertise of its experienced and trained team forming part of its Quality Division all its products are manufactured strictly as per the regulatory standards. All its manufacturing facilities have a fully equipped Quality Division with experienced and qualified staff to carry out quality checks and inspections at all the stages of its manufacturing process. It has necessary infrastructure to test its raw materials and finished products to match the quality standards as specified by the relevant customers.

Smooth flow of operations: The company has maintained good relationship with its major customers. It is successful in building a strong client base for its business. Its existing relationships help it to get repeat business from its customers. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy. Its existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business.

Risks and concerns

Extensive government regulation: The company is engaged in the business of Manufacturing Polymer based products primarily Polythene LF Tube, Tarpoulin sheets etc. The raw material utilized to manufacture these products predominantly consists of plastic. The increasing reliance of the world on plastics and plastic products and their impact on the environment, could lead to promulgation of stricter government regulations and adoption of rigorous waste management rules which in turn may require it to make additional capital expenditures, incur additional expenses or take other actions in order to remain compliant and maintain its current operations. Increased awareness of plastic pollution and its staggering impact on its environment might lead to imposition of complete or partial ban on the industrial usage of plastics or supply of plastics, which could have a severe impact on the operation of its manufacturing unit and its continued business operations.

No long-term agreements with suppliers: The company has not entered into long term contracts with its suppliers and prices for raw materials are normally based on the quotes it receives from various suppliers. Any discontinuation of production by these suppliers or a failure of these suppliers to adhere to the delivery schedule or the required quality and quantity could hamper its manufacturing schedule. There can be no assurance that strong demand, capacity limitations or other problems experienced by its suppliers will not result in occasional shortages or delays in their supply of raw materials to it. Further, it cannot assure that its suppliers will continue to be associated with it on reasonable terms, or at all. Since its suppliers are not contractually bound to deal with it exclusively, it may face the risk of its competitors offering better terms to such suppliers, which may cause them to cater to its competitors alongside.

High working capital requirements: The company’s business requires significant working capital, such as to finance the purchase of raw materials, consumables, stores & spares and payments for operating expenses before it receive payment from its customers. In addition, the actual amount of its future capital requirements may differ from estimates as a result of, among other factors, cost overruns, unanticipated expenses, regulatory changes, economic conditions additional market developments. In the event, it is unable to source the required amount of working capital for addressing such increased demand of its products, it might not be able to efficiently satisfy the demand of its customers.

Outlook

Command Polymers is in the business of Marketing and Manufacturing Polymer-based products. These products include Polythene LF tubes, Tarpaulin sheets, Polyester Fabrics, and other polymers. The products of Command Polymers have a wide variety of applications in industries like Industrial packaging industries, Food industry, etc. With its versatility and scale, the company is able to serve multiple types of industries and its scope is continuously growing. The company primarily engages in manufacturing and trading. Its revenue is generated in the proportion of 67% and 33% from these activities, respectively. The company has a qualified and professional management team with significant experience in all operational aspects of its business. On the concern side, the company does not have an in-house transportation facility and it rely on third party transportation and other logistic facilities at every stage of its business activity including for procurement of products from its suppliers and for transportation from its distribution centres to various stores.

The company is coming out with a IPO of 25,32,000 equity shares of Rs 10 each at a fixed price of Rs 28 per share to mobilize Rs 7.09 crore. On performance front, the company’s Revenue from Operations increased by Rs 312.72 lakh or 19.13%, from Rs 1,634.76 lakh in fiscal 2021 to Rs 1,947.48 lakh in fiscal 2022. The company’s Profit after Tax increased by Rs 10.37 lakh or 52.82%, from Rs 19.64 lakh in fiscal 2021 to Rs 30.01 lakh in fiscal 2022. Meanwhile, the company intends to diversify its product portfolio which could cater to customers across segments, sectors, and geographies. In accordance with this, while it seeks to continue to strengthen its existing product portfolio, it intends to further diversify into products with prospects for increased growth and profitability. It plans to continue to increase offerings in its current business segments as well as diversify into new products by tapping into segments which in the view of its management have attractive growth prospects.