Purv Flexipack
- Purv Flexipack is coming out with initial public offering (IPO) of 56,64,000 shares of Rs 10 each in a price band Rs 70-71 per equity share.
- The issue will open for subscription on February 27, 2024 and will close on February 29, 2024.
- The shares will be listed on NSE SME Platform.
- The face value of the share is Rs 10 and is priced 7.00 times of its face value on the lower side and 7.10 times on the higher side.
- Book running lead manager to the issue is Holani Consultants.
- Compliance Officer for the issue is Shivani Marda.
Profile of the company
Purv Flexipack is primarily engaged in the distribution of various plastic-based products such as Biaxially Oriented Polypropylene (BOPP) film, Polyester Films, Cast Polypropylene (CPP) films, Plastic granules, Inks, Adhesives, Masterbatches, Ethyl Acedate, and Titanium Dioxide. In addition, the company is a Del Credere Associate (DCA) Dealer Operated Polymer Warehouse (DOPW) of Indian Oil Corporation Limited for their polymer division. It is dealer of various companies for distribution of plastic based products. In addition to distribution business in the plastic-based products, it has one subsidiary company namely Cool Caps Industries Limited, an NSE SME Listed company and four Step down wholly owned subsidiary companies namely Purv Technoplast Private Limited, Purv Packaging Private Limited, Purv Ecoplast Private Limited and Re.act Waste Tech Private Limited.
The company is the flagship company of “Purv Group” which started its operations in the year 1994 under the proprietorship firm named SR Enterprises. Having decades of experience in the flexible packaging industry, the company extends packaging solutions across various industries. The company is managed by its promoter and director, Rajeev Goenka. He holds a Bachelor of Commerce (Honors) degree from St. Xavier's College, Kolkata (W.B.) and has completed the Cost Accountancy course from the Institute of Cost and Works Accountants of India. With his extensive knowledge and experience, he excels in troubleshooting various mechanical issues and staying updated with technological insights. Rajeev Goenka has played a pivotal role in the growth of its business. He laid the foundation of the company and has been actively involved in the plastic products industry for the past 30 years.
The company offers various packaging solutions to a diverse customer base. It has its own warehouse for storage and inventory management. The warehouse is equipped with modern facilities and equipment to ensure the safe and secure storage of its products. It is maintained under optimal conditions to preserve the quality and integrity of its products, and it has implemented strict inventory management systems to ensure accurate tracking of its inventory.
Proceed is being used for:
- Repayment of certain existing fund-based borrowings in full or in part availed by the company from scheduled commercial banks.
- Funding working capital requirements of the company.
- General corporate purposes.
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 country majorly exports plastic raw materials, films, sheets, woven sacks, fabrics, and tarpaulin. The Government of India intends to take the plastic industry from a current level of Rs. 3 lakh crore ($37.8 billion) of economic activity to Rs. 10 lakh crore ($126 billion) in four-five years.
Packaging provides a protective and informative covering while protecting the product during material handling, storage, and movement and providing information about the package's content. The market study tracks the demand for packaging through the revenue derived from selling plastic packaging, both rigid and flexible. The study also follows the effects of regulations and market drivers on growth and factors hindering market growth. The India Plastic Packaging Market is segmented by packaging type (rigid plastic and flexible plastic), end-user (food, beverage, healthcare, personal care, household, and other end-user types), and products (bottles, cans, jars, pouches, trays, containers, bags, films, wraps, and other product types). The market sizes and forecasts are provided in value (USD million) for all the above segments.
India Master batch market was valued at $1.07 billion in 2020 and is expected to reach $2.22 billion by 2027 at a CAGR of 11% during the forecast period. The market is segmented by product, by polymer and by end use. In terms of product, India Master batch Market is divided into white, black and additive. Based on polymer, India Master batch Market segmentation include polyethylene, polypropylene and others. While packaging, building & construction, automobile and other are end user of India Master batch Market. Increasing demand from industries such as packaging, healthcare, aerospace, electronics, automotive, consumer goods, etc., are the factor driving growth of India master batch market. Expanding manufacturing sector is expected to augment demand for master batch in India by 2027. Growing demand from packaging and automotive industries in the country act as an opportunity for master batch market. Use of biocompatible master batch for healthcare applications, nanoparticle-based master batches is trending in the India master batches market. Launch of innovative high-performance products and novel foam enhancement technology are the key development took place in the India master batches market. Government schemes such as ‘Smart City Plan' and ‘Make in India' campaigns are impelling growth to the India master batch market.
Pros and strengths
All solution under one roof: The company offers a one-stop solution for packaging material, simplifying sourcing process with a wide range of products under one roof. Its portfolio includes plastic granules, master-batch/colorants, films, ink, and adhesives. It provides single roof solution for colors, sizes, thicknesses, and packaging. Also, it has developed the ‘Window Metalized’, addressing the growing demand for transparency in packaging. In east except it no other company is providing all the facilities under one roof. Its expert team works closely with the client, ensuring top-quality products from its reliable network of suppliers. With its comprehensive range, tailored solutions, and dependable delivery, it is the ideal partner for trading needs in the packaging material manufacturing industry.
Customization of different size of roll: The company’s state-of-the-art slitting machine allows it to customize products to meet specific client requirements, a capability unmatched by its competitors. In east it is the only trader who is having 6 slitting machine which can slit the jumbo rolls from 2000mm to 50mm rolls with the help of its sister concern company.
Infrastructure: The company's infrastructure stands as a testament to its commitment to uninterrupted operations. Equipped with industrial lifts, it optimizes material handling efficiency, ensuring products move seamlessly through its facilities. The incorporation of backup electricity systems guarantees operational reliability, allowing it to navigate power outages or unforeseen emergencies without compromising productivity. Moreover, its dedication to employee well-being is reflected in the provision of worker quarters, ensuring a rested and readily available workforce, even in prolonged operations or challenging conditions. This comprehensive infrastructure underscores its resilience, enabling it to thrive in adverse environments.
Risks and concerns
Portion of its revenue from certain customers: The company is dependent on a limited number of customers for a significant portion of its revenues. Revenues generated from sales to its top 10 customers was Rs 2,058.28 lakh, Rs 5881.51 lakh, Rs 6281.10 lakh and Rs 3806.64 lakh which represented 37.45%, 37.45%, 36.73% and 37.23% of its revenue from operations for the period ended on September 30, 2023, and during the Fiscal 2023, Fiscal 2022 and Fiscal 2021 respectively. However, the composition and revenue generated from these clients might change as it continues to add new customers in normal course of business. While it has developed valued relationships with certain of its customers in the normal course of business, there can be no assurance that its customers in the past or its newly acquired customers will continue to place similar orders with it in the future. The loss of one or more of these significant customers or a significant decrease in business from any such key customer, whether due to circumstances specific to such customer or adverse market conditions affecting the industry in which its customer operates or the economic environment, may materially and adversely affect its business, results of operations and financial condition.
Depend on limited number of suppliers: The company sources its products requirement indigenously or through imports. Purchases made from its largest supplier, top 5 suppliers and top 10 suppliers for the period ended on September 30, 2023, and for the Fiscals Years 2023, 2022, 2021 are 63.53% and 81.51%, 76.32% and 86.36%, 77.18% and 89.44%, 74.79% and 86.28%, respectively. While it may find additional suppliers to supply these products, any failure of its suppliers to deliver these products in the necessary quantities or to adhere to delivery schedules, credit terms or specified quality standards and technical specifications may adversely affect its business and its ability to deliver orders on time and at the desired level of quality. As a result, it may lose customers which could have a material adverse effect on its business, financial condition, and results of operations.
Working capital requirement: The company’s business requires significant working capital, such as financing the purchase of its products, and payments for operating expenses before it receives payment from its customers. In addition, the actual amount of its future capital requirements may differ from estimates as a result, among other factors, cost overruns, unanticipated expenses, regulatory changes, economic conditions, additional market developments and new opportunities in the industry. A significant portion of its working capital is consumed in trade receivables and inventories. The company requires significant amounts of working capital and 82.11%, 82.05%, 90.51% and 90.42% of its current assets comprises of trade receivables and inventories for the period ended on September 30, 2023, and for the Fiscal Year ended on March 31, 2023, 2022 and 2021. Its inability to meet its working capital requirements including failure to realize receivables and inventories may have an adverse effect on its results of operations and overall business.
Outlook
Purv Flexipack distributes plastic products, including BOPP film, Polyester Films, CPP films, Plastic granules, Inks, Adhesives, Masterbatches, Ethyl Acedate, and Titanium Dioxide. The company provides various packaging solutions for a diverse customer base. They have four warehouses for storing and managing inventory. The warehouse is equipped with modern facilities and equipment to ensure safe and secure storage of products. It is maintained under optimal conditions to preserve the quality and integrity of the stored items. Also, the company has implemented strict inventory management systems to ensure accurate inventory tracking. On the concern side, the company derives a portion of its revenue from certain customers, and the loss of one or more such customers, the deterioration of their financial condition or prospects, or a reduction in their demand for its products could adversely affect its business, results of operations, financial condition and cash flows. Moreover, the company is highly dependent upon a limited number of suppliers. 76.32%, 80.74% and 74.79% of its Total Purchases are derived from its top 5 suppliers for the period ended on September 30, 2023, and for the Fiscal Years ended on March 31, 2023, 2022 and 2021. If it fails to successfully leverage its existing and new relationships with suppliers, its business and financial performance could be adversely affected.
The company is coming out with an IPO of 56,64,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 70-71 per equity share. The aggregate size of the offer is around Rs 39.65 crore to Rs 40.21 crore based on lower and upper price band respectively. On performance front, its total revenue has increased by 48.66% to Rs 34,107.83 lakh for financial year 2022-23 from Rs 22,943.81 lakh for financial year 2021-22, bifurcated into revenue from operations and other income. Moreover, the company reported a jump of 31.82% in its net profit at Rs 826.13 lakh in FY23 as compared to Rs 626.73 lakh in FY22.
The company shall continue to offer a one-stop solution for the packaging needs of its customers with a comprehensive range of packaging products and services in a single location. This includes a diverse selection of packaging materials like plastic bags, films, tubes, containers, and paper-based products. By providing a complete range of packaging solutions, customers can conveniently find everything they need in one place. The company shall continue to endeavor possibilities for exploring new market segments and product portfolios to reach a broader customer base. Its commitment to innovation drives its future endeavors. One such initiative is the import of non-IOCL polymer grades, which is poised to significantly boost its turnover. It also plans to expand its product range further and explore new avenues of growth. Going forward, the company has already been importing these other grades of granules in previous years and has decided to increase these imports on a large scale to fulfill the rising demand. This approach allows for increased market reach, and the ability to cater to a wider range of customer needs, ultimately driving business expansion.
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