Pramara Promotions coming with an IPO to raise Rs 15.27 crore

Pramara Promotions 

• Pramara Promotions is coming out with an initial public offering (IPO) of 24,24,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 63 per equity share. 
• The issue will open for subscription on September 1, 2023 and will close on September 5, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 6.30 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Fedex Securities.
• Compliance Officer for the issue is Vanita Pednekar.

Profile of the company

The company is engaged in the business of ideation, conceptualization, designing and manufacturing and marketing of promotional products and gift items for its clients across sectors, such as FMCG, QSR, pharma, beverage companies non-alcoholic and alcoholic, cosmetic, telecom, media and others. It helps its clients in promoting their products and services to their customers and it plays a vital role in their brand promotion and sales. It is one of the few players in the promotional marketing merchandise sector, offering a wide range of innovative promotional products and merchandise to help businesses promote their brand and increase sales. The company understands its client’s need as an agency and work closely with them to understand their branding, target audience, budget, and specific goals for the promotional campaign. Based on these inputs it conceptualize and develop merchandise or products that helps these brands to connect with their consumers. 

The company’s service and product offerings include manufacturing of plastic promotional products and toys, designing and manufacturing of non-plastic items from its approved vendors across categories. It offers the largest portfolio of corporate gifting items and promotional products across categories like plastic, steel ware, silicon rubber, paper printed, glassware, toys of all kinds, tin products, apparel and accessories, etc. Since inception, it has designed and manufactured around 5000 products. Services are an integral part of its manufacturing process and are in the nature of ideation, conceptualization and designing which are critical for its sales since it deal with designed based products. The selling price of the product is inclusive of the following charges, namely, designing charges, development charges and expenses with respect to the ideation of toys and products. Therefore, a separate invoice is not required to be generated for providing the designing & developing services. Based on such invoicing practices, the revenue generated is derived from the manufacturing activities only and the same is not bifurcated between the manufacturing activities and services offered by the Company.

Proceed is being used for:

• Funding working capital requirements.
• General corporate purposes.

Industry overview

India’s toy manufacturing industry is quite fragmented, consisting of over 4,000 toy manufacturing units located in states such as Uttar Pradesh, Maharashtra, Karnataka, and Tamil Nadu. MSMEs manufacturing toys are spread all over the country; around 88% of the total manufacturing units are based in the northern and western regions. Toy categories such as dolls; soft toys for pre-schoolers, babies and infants; and board games are growing, driven by the Government of India’s push for indigenisation. The toy manufacturing industry is labour-intensive; thus, expanding the manufacturing base by setting up new toy clusters would drive job creation. The Indian toy industry manufactures a wide variety of toys which can be broadly classified into two categories based on their application and purpose - educational and recreational. Educational toys include toys and games made from plastics and cardboard. On the other hand, recreational toys mainly include electronic (remotely control-based, video games), battery-operated, plastic, soft and mechanical pull-back toys. Of these, batteryoperated and electronic toys, and video games are only imported and not manufactured locally. All other types of toys are manufactured in India as well as imported.

India exports sports goods and toys to about 129 countries across the globe. India’s major toy export destinations include the USA, the UK, Germany, Mexico, and the Netherlands. In India, among states, Maharashtra leads the Indian toy and game exports; the exports grew to $ 76.3 million in 2019–20 from $ 32.9 million in 2017–18. Uttar Pradesh and Karnataka are other key states, with toy and games exports valued at $ 49.4 million and $ 36.4 million, respectively. In 2021–22, the US was the largest importer of Indian toys, valued at $ 69.3 million, accounting for 39% of the total exports from the country. The other key toy export destinations include the UK and Germany, with a share of 10% and 6%, respectively. The share of the top 10 countries importing Indian toys and games increased to 74% at a CAGR of 13% between 2020 and 2016. It implies the importance of traditional markets in the growth in exports and continued demand momentum for Indian products. Among the various emerging markets, the UAE holds strong growth potential for Indian toy exports, as the country leads in terms of demand for children’s toys in the Middle East region. India can capture the lion’s share in the UAE market by taking advantage of the large Indian population residing in the country.

Pros and strengths

Strong product designing and development capabilities backed by technical expertise: The company places a strong emphasis on having in-house product designing and development capabilities in order to provide its customers with a broad range of products and value-added services such as product customization and value engineering. Its ability to value engineer products for meeting its customer expectations is the key driver for retaining its customers and for business.

Cost-efficient operating structure: With the company’s integrated manufacturing facilities, in-house research, product design development and laboratory testing facilities, it is able to manage the entire value chain from the sourcing of raw materials to the manufacturing, assembling, packing and delivery of the finished products to its customers. This enables it to operate effectively and manage its costs more efficiently which gives it an edge over its competitors. 

Established strong relationships with customers: The company places a strong emphasis on establishing close and direct interface with its customers in order to have a better understanding of their product requirements. It has have been able to earn and sustain the trust and confidence of its customers mainly due to its reliability in providing quality products and services at competitive prices and on a timely basis. As a testament to its close working relationships with its customers, several of these customers provide it with long term supply contracts from time to time. 

Risks and concerns

Highly dependent on suppliers for uninterrupted supply of raw-materials: The company procures its supply of raw materials from various vendors in the market. It has not entered into any long-term supply agreement for supply of major raw materials. Currently, it has been able to secure timely supply of required raw material for its existing activity. Raw material is easily available in the domestic market and no difficulty is envisaged in sourcing of the raw material. In case of any disruption in supply of raw materials from these suppliers/vendors or its procurement of raw materials on terms that are not favorable to it; will adversely affect its operations and financial cost.

Depend on limited number of customers: The company’s reliance on a limited number of customers for its business exposes it to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its significant customers, a failure to negotiate favourable terms with its key customers or the loss of these customers, all of which would have a material adverse effect on the business, financial condition, results of operations, cash flows and future prospects of the company. Any decline in its quality standards, growing competition and any change in the demand for its products by these customers may adversely affect ability to retain them.

Subject to strict quality requirements: The company is manufacture and supply promotional toys and gifts, plastic household products and plastic packaging containers, etc. based on order given by the customers. Given the nature of its products and the sector in which it operate, its customers have high and precise standards for product quality as well as delivery schedules. Adherence to quality standards is a critical factor in its manufacturing process as any defects in the products manufactured by its Company or failure to comply with the technical specifications of customers regarding the size and length may lead to cancellation of the orders placed by the customers. Further, any failure to make timely deliveries of products in the desired quantity as per customers’ requirements could also result in the cancellation of orders placed by its customers and may adversely affect reputation and goodwill. In addition, its customers may demand, among others, price reductions, set-off any payment obligations, require indemnification for themselves or their affiliates, change their outsourcing strategy by moving more work in-house or replace their existing products with alternative products, any of which may have an adverse effect on business, cash flows, results of operations and financial condition.

Outlook

Pramara Promotions is engaged in the business of ideation, conceptualization, designing and manufacturing and marketing of promotional products and gift items for its clients across sectors, such as FMCG, QSR, pharma, beverage companies non-alcoholic and alcoholic, cosmetic, telecom, media and others. Its service and product offerings include manufacturing of plastic promotional products and toys, designing and manufacturing of non-plastic items from its approved vendors across categories. Its offer the largest portfolio of corporate gifting items and promotional products across categories like plastic, steel ware, silicon rubber, paper printed, glassware, toys of all kinds, tin products, apparel and accessories, etc. Since inception, it has designed and manufactured around 5000 products. It also manufactures the products under an OEM arrangement, where it manufactures products such as water bottles, pens, etc which are branded with company's logo or design and used as their promotional merchandise. Its product range can be broadly classified in to promotional, corporate gifting, loyalty & rewards, toy retail and OEM. On the concern side, in some instances, it depends on third-party transportation for its business needs. This makes it dependent on such third-party transportation providers. Weather-related problems, strikes, or other events which affects thirdparty transportation could impair its ability to receive the raw materials and/or deliver the requisite quantities of products in time to itd customers, which could adversely affect the performance of business, results of operations and cash flows.

The company is coming out with an IPO of 24,24,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 63 per equity share to mobilize Rs 15.27 crore.  On performance front, the company’s total revenue increased by 3.57% from Rs 4,942.69 lakh for the Financial Year ended March 31, 2022 to Rs 5,119.11 lakh for the Financial Year ended March 31, 2023. This increase was primarily due to an increase in revenue from operations. The company has recorded a profit after tax of Rs 209.98 lakh for the Financial Year ended March 31, 2023 from a profit of Rs 134.56 lakh for the Financial Year ended March 31, 2022. Meanwhile, as a part of its growth strategy, it intends to increase sales volume through diversification of services offered and spread in geographical outreach. It plans to use its expertise to get larger orders and deploy resources more efficiently and improve margins. It also plans to upgrade facilities by increasing the number of clean rooms for assembling and packaging of its products and by installing additional manufacturing equipment to upgrade its production facility to meet all international standards.