Sylvan Plyboard (India)
- Sylvan Plyboard (India) is coming out with an initial public offering (IPO) of 51,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 55 per equity share.
- The issue will open for subscription on June 24, 2024 and will close on June 26, 2024.
- The shares will be listed on NSE Emerge Platform.
- The share is priced at 5.50 times higher to its face value of Rs 10.
- Book running lead manager to the issue is Finshore Management Services.
- Compliance Officer for the issue is Rajneesh Mishra.
Profile of the company
The company is engaged into manufacturing of various wood products such as plywood, block board, flush door, veneer and sawn timber across various grades and thickness. In the year 1951, Jai Prakash Singh (Whole Time Director of the company and father of its promoter) through his proprietorship concern, Singh Brothers & Co., started the business as a trading concern of indigenous timber logs and subsequent selling the same in Indian market. Leveraging the knowledge of timber products and domestic market, in the year 2004, the Company acquired ongoing business of Singh Brothers & Co. (Proprietorship Firm). Over the period, after establishing its selves in trading of timber products, it diversified its activities to manufacturing activities by setting up an integrated manufacturing facility in Baidyabati, West Bengal
It is dedicated to constantly expanding and updating its product range in order to stay ahead in the market. Its range of products under its manufacturing capabilities is summarized as under: Plywood, Block Boards & Flush Doors, Veneer, and Sawn Timber. The company markets its products under the brand name of ‘Sylvan’, through its network of Authorized Dealers and Authorized Sub Dealers.
It has more than 12 numbers of plywood products in its basket, thickness ranging from 4 mm to 40 mm. Plywood segment (including Block Board and Flush Door) contributes around 81.74% of its revenue from operations. The Company has large range of product offering to wide range of customers, ‘Sylvan Z+ Premium Plus’ is the most premium plywood product of the Company amongst other offerings in premium segment. It has ‘Robusta Premium’ & ‘Primo Plus’ for middle segment and ‘Sylvan Blu’ which is aimed at lower class segment with a view of addressing the growing demand of cheaper plywood and their alternatives. It also offers Boiling Water Proof (BWP) and Boiling Water Resistant (BWR) plywood. Its range of plywood products caters to various customers across various segments.
Proceed is being used for:
- Funding capital expenditure towards purchase of additional plant and machinery
- Meeting the working capital requirements
- Meeting the Issue Expenses
- General corporate purposes
Industry overview
India was ITTO’s second largest tropical log producer, with production totalling 48.0 million m3 in 2021 and 2022. About 2 million m3 is produced from state-owned forests where the harvesting is severely restricted, with the remaining volume sourced from trees outside forests. The main ITTO plywood producers in 2020-2022 are shown in Figure 2.15. Production of tropical plywood in ITTO member countries increased year-on-year between 2016 and 2021, and amounted to 49.2 million m3 in 2021, declining in 2022 to 48.4 million m3.
India’s tropical plywood production is based largely on imported tropical logs and has also expanded significantly over the last decade, growing year-on-year between 2016 and 2019 and amounting to 10 million m3 in 2019. Production has moderated at 10.0 million m3 annually between 2019 and 2022. India’s tropical plywood production typically uses species such as: keruing (gurjan) from Myanmar for face veneer; balau, merbau and keruing from Malaysia; teak from Myanmar and other suppliers; and domestic plantation species for core veneer. With log export restrictions implemented in most Southeast Asian supplying countries, Indian plywood manufacturers continue to face difficulties in securing raw material along with reduced availability and rising costs of log imports from other supplying countries, intensified by a weakening currency in 2022 and early 2023, and rising costs of labour.
India’s tropical plywood consumption has remained relatively stable over the last five years and totalled 10.0 million m3 in 2021 and 2022. As a proportion of India’s total panel consumption, plywood consumption is relatively high (about 78 percent) although MDF and particleboard are reportedly increasing their market share. The Indian plywood market is primarily driven by construction activity and the home furnishing sector. Growth in consumer disposable income levels along with rising expenditure on home décor has supported demand for wood-based panels, including plywood57, boosted by a government policy shift to demand-side stimulus and more public investment. Although air pollution had slowed construction activity in late 2022, weakening the demand for plywood, later improvements in air quality had allowed construction work to resume and had lifted demand for plywood.
Pros and strengths
Brand recognition: For success and growth in consumer facing industries, recognition of brand name in the mind of customers is vital. Accordingly, it has continuously focused on creating and improving on the brand image of ‘Sylvan’. Its products are sold under the brand name of ‘Sylvan’. To capitalise on the established brand name, it continues to introduce newer products under the same brand name. Its industry experience and strong presence in Eastern India have positioned its brand with quality products.
Large & Integrated manufacturing facility: The company has its manufacturing facility at Baidyabati, Kolkata which is spread over an area of around 11.61 acre (5,05,732 sq. ft.) The entire land area is used for the facility which has vacant space for further expansion. The company currently has 2,43,644 sq. ft. around under plywood manufacturing capacity which can be further expanded within the same facility. Manufacturing unit is an integrated facility where each process in the manufacturing activity is carried out by the Company in-house without any outsourcing. The company has in house resin plants and makes the glue with its research formulations making the products superior at lower manufacturing cost.
Wide dealers’ network: For deeper market penetration, establishment of strong dealers’ network is an integral part of its business operations. It has been working effortlessly on expanding its dealers’ network. At present, the company has an extensive network of 223 Authorised dealers present across 13 states across India with around 83 dealers in West Bengal, 45 dealers in Uttar Pradesh, 33 dealers in Odisha, 16 dealers in Andhra Pradesh and 12 dealers in Maharashtra. Its dealer network is spread in other states like Bihar, Telangana, Jharkhand, Uttarakhand, Karnataka, Kerala, Rajasthan and Tamil Nadu. Further, these dealers also have around 753 sub-dealers under them which look after the operation at retail level. As it continues to introduce newer product in its product range, it needs to maintain strong distribution network enabling it to achieve market penetration of those products in shorter turnaround time.
Risks and concerns
Do not have any long-term contracts with clients: It does not have any long-term contracts with its clients and any change in the business pattern of its existing clients could adversely affect the business of the Company. As a result, its customers can terminate their relationships with it due to a change in preference or any other reason on immediate basis, which could materially and adversely impact its business. Consequently, its revenue may be subject to variability because of fluctuations in demand for its products and services. The company's customers have no obligation to work with us and may either cancel, reduce, or delay the business.
Dependent on authorized dealers: The company has 223 Authorized Dealers present across 13 states and is completely dependent on the dealers. Its business from customers is dependent on its continuing relationship with such customers, the quality of its products and its ability to deliver on their orders, and there can be no assurance that such customers will continue to do business with us in the future on commercially acceptable terms or at all. However, in case of any change in the buying pattern of its end users or disassociation of major customers can adversely affect its business or if its customers do not continue to purchase products from it, or reduce the volume of products purchased from it, its business prospects, results of operations and financial condition may be adversely affected. Further, loss of or interruption of work by, a significant customer or a number of significant customers or the inability to procure new orders on a regular basis or at all may have an adverse effect on its revenues, cash flows and operations.
Delays or defaults in client payments: It may be subject to working capital risks due to delays or defaults in payment by clients, which may restrict its ability to procure raw materials and make payments when due. In addition, any delay or failure on its part to supply the required quantity or quality of products, within the time, to its customers may in turn cause delay in payment or refusal of payment by the customer. Such defaults/delays by its customers in meeting their payment obligations to it may have a material effect on its business, financial condition and results of operations.
Outlook
Sylvan Plyboard (India) is engaged in the business of manufacturing plywood, block board, flush door, veneers and allied products at its factory located at Baidyabati, West Bengal. In addition, it engages in import and trading of timber logs and sawn timber. The company markets its products under the brand name of ‘Sylvan’, through its network of Authorized Dealers and Authorized Sub Dealers. On the concern side, the market in which the company is doing business is highly competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive.
The company is coming out with an IPO of 51,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 55 per equity share to mobilize Rs 28.05 crore. On performance front, the total revenue for FY 2022-23 was increased to Rs 19915.32 lakh as against Rs 17292.63 Lakh in the FY 2021-22 primarily due to increase in revenue from operations of the Company. The restated Profit after Tax for FY 2022-23 has been increased to Rs 352.85 lakh as against Rs 305.31 lakh in the FY 2021-22. This increase was mainly due to increase in volume of operation. Meanwhile, it plans to increase its production and launch of newer products in various segments, it understands the need of setting up a strong distribution network which will enable it to efficiently market the product to the right set of customers at the right time. It will continue its present focus of catering to Tier-1 cities while at the same time increasing its presence in Tier-2 and Tier-3 cities from where demand for most of the lower-middle segment products are received.
