Swashthik Plascon coming with IPO to raise upto Rs 40.76 crore

Swashthik Plascon

• Swashthik Plascon is coming out with an initial public offering (IPO) of 47,39,200 equity shares of face value of Rs 10 each in a price band Rs 80-86 per equity share.
• The issue will open for subscription on November 24, 2023 and will close on November 29, 2023.
• The shares will be listed on SME Platform of BSE.
• The share is priced 8.00 times of its face value on the lower side and 8.60 times on the higher side.
• Book running lead manager to the issue is Shreni Shares.
• Compliance Officer for the issue is Madras Uthandavelu Ravi Kumar.

Profile of the company

The company is mainly engaged in the business of manufacturing of a wide range of PET Bottles and PET Preforms which includes PET Bottles for Pharmaceutical application, Liquor application, FMCG Packaging, House Hold applications, Dish wash liquid packaging, Repellent dispenser etc and PET Preforms for Soft Drinks bottles, Packaged Drinking Water bottle and Juice bottles.

The company manufactures Bottles and Preforms in Continuous Injection Stretch Moulding Machines with advanced Technology using 100% virgin food grade quality material. Production takes place in an enclosed dust proof environment with quality testing at regular intervals. The products are packed in CFC trays with POF shrink film & then carefully packed in corrugated boxes. Overall colour migration test, heavy metal testing and analysis are done to ensure it give best quality finished products to its Valued Customers.

The company has a well-equipped quality control lab with in house testing equipment’s to test the capacity and quality of its products. Its finished products undergo strict quality check to ensure that they are of required quality as per the standards set. Its in-house testing team regulates and monitors the quality, safety and packaging of Bottles and Preforms. There are also in-house developed quality check procedures and the internationally standardized top-level quality check parameters in addition to the required standards. This allows it to guarantee that its customers get products of the highest quality. Its production plants are certified according to the ISO 9001 Quality management system.

Proceed is being used for:

• Funding capital expenditure for developing new manufacturing facilities and installation of Plant and Machinery.
• Funding of capital expenditure requirements of the company towards Set up of Solar Power Plant.
• Purchase of Plant and Machinery at its existing manufacturing facility.
• Funding working capital requirements of the company.
• General corporate purposes.

Industry overview

Manufacturing is emerging as an integral pillar in the country’s economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables. The Indian manufacturing industry generated 16-17% of India’s GDP pre-pandemic and is projected to be one of the fastest growing sectors. The machine tool industry was literally the nuts and bolts of the manufacturing industry in India. With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government hopes to have 25% of the economy’s output come from manufacturing by 2025. India now has the physical and digital infrastructure to raise the share of the manufacturing sector in the economy and make a realistic bid to be an important player in global supply chains.

India’s gross domestic product (GDP) at current prices stood at Rs 51.23 lakh crore in the first quarter of FY22, as per the provisional estimates of GDP for the first quarter of 2021-22. The manufacturing Gross Value Added (GVA) at current prices was estimated at $77.47 billion in the third quarter of FY22 and has contributed around 16.3% to the nominal GVA of during the past ten years. India has potential to become a global manufacturing hub and by 2030, it can add more than $500 billion annually to the global economy. As per the economic survey reports, estimated employment in manufacturing sector in India was 5.7 crore in 2017-18, 6.12 crore in 2018-19 which was further increased to 6.24 crore in 2019-20. India's display panel market is estimated to grow from around $7 billion in 2021 to $15 billion in 2025.

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. The Indian Cellular and Electronics Association (ICEA) predict that India has the potential to scale up its cumulative laptop and tablet manufacturing capacity to $100 billion by 2025 through policy interventions.

Pros and strengths

Focus on Quality and Safety: The Company manufactures products in Continuous Injection Stretch Blow Moulding Machines & it uses only 100% virgin food grade Raw Material to produce good quality FG. Production takes place in an enclosed dust proof environment with testing at regular time periods for conforming to the quality. The final products are kept in trays & shrink wrapped with POF film & then properly packed in corrugated boxes with proper bursting strength inside plastic liners. Its products undergo strict quality check at various levels of production to ensure that any quality defects or product errors are rectified on real time basis.

Existing relationship with the clients: It focuses on building sustained and long-term client relationship with its clients and constantly tries to cater customer needs with products in demand. Since it is mainly engaged in B2B business model, its existing clients provide it mandate for continuous services. It trusts that its existing relationship and goodwill serves as a competitive advantage in gaining new clients and increasing its business with existing clients.

Cordial relationship between management and labour: Over the years its management has successfully maintained harmonious relations with its workforce. Its management has been able to match the goals and objectives of the company with the goals and expectations of the workforce which enabled the company to achieve its production targets and desired quality of products.

Risks and concerns 

Top ten suppliers contribute majority of purchases: Its top ten suppliers contributed approximately 46.50%, 64.69%, 55.19% and 47.68% of its total purchases for the period ended September 30, 2023 and for financial years ended March 31, 2023, March 31, 2022 and March 31, 2021 based on Restated Financial Statements. However, its top suppliers may vary from period to period depending on the demand-supply mechanism and thus the supply process from these suppliers might change as its continue to seek more cost-effective suppliers in normal course of business. Since its business is concentrate among relatively few significant suppliers, it could experience a reduction in its purchases and business operations if it lose one or more of these suppliers, including but not limited on account of any dispute or disqualification.

Dependent on third party transportation providers: it uses third party transportation providers for the delivery of its raw material and Finished products. Transportation strikes could have an adverse effect on its receipt of raw materials and its ability to deliver its products to its customers. In addition, transportation costs in India have been steadily increasing over the past several years. Continuing increases in transportation costs or unavailability of transportation services for its products may have an adverse effect on its business, financial condition, results of operations and prospects.

Face competition: It may have to confront pressures in respect of pricing; product quality etc. from the clients and such pressures may put strain on its profit margins which may consequently affect the financial position of the company. Competition emerges not only from the organized sector but also from the unorganized sector and from both small and big players. Its competitiveness also depends on the existing & new supply of products and its inability to compete with this intense competition; will have material adverse impact on the company's financial position.

Outlook

The company is mainly engaged in the business of manufacturing of a wide range of PET Bottles and PET Preforms which includes PET Bottles for Pharmaceutical application, Liquor application, FMCG Packaging, House Hold applications, Dish wash liquid packaging, Repellent dispenser etc. and PET Preforms for Soft Drinks bottles, Packaged Drinking Water bottle and Juice bottles. On the concern side, ‘Plastic made Products’ is a global industry and consequently it faces intense competition from various domestic and international manufacturers and traders. Being a fragmented industry, the competition emerges from various small and big players in the industry. It competes against its competitors by establishing ourselves as knowledge-based production unit with industry expertise in the segment which enables it to provide its clients with quality products.

The issue has been offered in a price band of Rs 80-86 per equity share. The aggregate size of the offer is Rs 37.91 crore to Rs 40.76 crore based on lower and upper price band respectively. On performance front, the Revenue from operations had decreased by 7.79% from Rs 4947.29 lakh in Fiscal 2022 to Rs 4561.81 lakh in Fiscal 2023. The company reported a net profit of Rs 302.19 lakh in Fiscal 2023 as compared to a net profit of Rs 13.01 lakh in Fiscal 2022. Meanwhile, its focus is on utilizing its core strengths for expanding its operations in existing as well as new markets. The company meticulously engineered with a cutting-edge technology and aptly supported by an efficient team of trained personnel who marketed the product in unexplored markets, had soon positioned itself as one of the popular brands in Indian market and paved the way for acquiring bigger share of this competitive market which hitherto was not captivated & was dominated by unorganized companies.