Sah Polymers IPO: Detailed Analysis

Sah Polymers IPO Details

Sah Polymers Limited IPO opens for subscription on 30th December. The company is looking to raise up to Rs 66.30 crore through the public issue. Here are the details: 

Sah Polymers Limited IPO Details:

• Sah Polymers Limited IPO Date: 30 December - 4 January 2023
• Sah Polymers Limited IPO Price band: Rs 61 - Rs 65
• Elin Electronics IPO Issue Size: Rs 66.30 crore (Only Fresh Issue)
• Reservation: QIB 75%, Retail 10%, NII 15%
• Minimum Investment: Rs 14,950
• Post Issue Implied Market Cap: Rs 157 crore – Rs 168 crore
• Bid lot: 230 shares, and in multiples of 230 shares

Sah Polymers Limited IPO: Issue objective

Sah Polymers proposes to utilize the Net Proceeds of the fresh issue towards funding the following objects:

• Setting up a new manufacturing facility to manufacture a new variant of Flexible Intermediate Bulk Containers (FIBC).
• Repayment/ Prepayment of certain secured and unsecured borrowings in full or part availed by the Company and the Subsidiary Company.
• Funding the working capital requirements of the company and general corporate purposes.

Sah Polymers Limited IPO: About Sah Polymers

• The company was incorporated in 1992 and is engaged in manufacturing and selling Polypropylene (PP)/High-Density Polyethylene (HDPE) FIBC Bags, Woven Sacks, HDPE/PP woven fabrics based products of different sizes, weights, and colors as per customers' specifications. 
• They offer customized bulk packaging solutions to business-to-business manufacturers catering to different industries.
• The company is a Del Credere Associate cum Consignment Stockist (DCA/ CS) of Indian Oil Corporation Ltd and also operates as a Dealer Operated Polymer Warehouse (DOPW) of Indian Oil Corporation Limited for their polymer division.
• Sah Polymers enters into arrangements as third-party manufacturers to manufacture their tape and fabric based on customers’ requirements.
• They have a presence in 5 states and one union territory for their domestic market. For exports, they export their products to 14 countries.

Sah Polymers Limited IPO: Industry Overview

• The Polymers Market size is expected to reach $790 billion by 2027, after growing at a CAGR of 5.5% during the forecast period 2022-2027.
• The global polystyrene market size is expected to grow from $28.46 billion in 2021 to $30.77 billion in 2022 at a compound annual growth rate (CAGR) of 8.1%.
• India's Polystyrene market demand stood at 0.34 Million Tonnes in FY21 and is forecast to reach 0.52 Million Tonnes by F030, growing at a healthy CAGR of 4.73% until FY30.

Sah Polymers Limited IPO: Listed Peers

Sah Polymers faces competition from small and large players as the industry in which they operate is highly competitive. The listed peers for Sah Polymers are Rishi Techtex Limited, Jumbo Bag Limited, SMVD Poly Pack Limited, Emmbi Industries Limited, and Commercial Syn Bags Limited. The comparison with listed peers is as below (FY22 data):

• In terms of revenue, Sah Polymers is the smallest player among all listed peers. The largest player is EMMBI Industries, with revenue more than five times of Sah.
• For EBITDA margins, the company falls in the center of the table with margins greater than Rishi Techtex and Jumbo Bag.
• Return on Equity (ROE) is marginally lower than Rishi Techtex at 16.42%, well above other listed peers.
• The debt-to-equity ratio is high than most listed peers, but some peers have much higher D/E.

Sah Polymers Limited IPO: Financials

• For FY20, FY21, and FY22, the company has reported revenue of Rs 49.10 crore, Rs 55.07 crore, and Rs 80.51 crore, respectively. The revenue has grown at a CAGR of 27.75%.
• The EBITDA for FY20, FY21, and FY22 was Rs 2.61 crore, Rs 3.30 crore, and Rs 7.73 crore, respectively. The EBITDA margins for the same period were 5.24%, 5.96%, and 9.52%, respectively.
• The profit was Rs 0.30 crore, Rs 1.27 crore, and Rs 4.38 crore, respectively.
• For the last three financial years, the company has reported an average EPS of 1.71 and an average RoNW of 10.58%. 
• It has low ROCE - 0.09, 0.10, and 0.14 for FY20, FY21, and FY22, respectively.
• The Debt/Equity ratio was 0.55, 0.69, and 1.15 for FY20, FY21, and FY22, respectively. It has increased significantly in recent years.

Sah Polymers Limited IPO: Unique Selling Propositions

Diversified product portfolio: They have a product mix that has evolved over the past several years. They engage in the manufacturing of products based on the orders of customers to meet their requirements. They trust that maintaining a variety of products in business provides them with an opportunity to cater to the diverse needs of different customer segments.

Customer base across geographies and industries: Company has a customer base across industries and geographies both at domestic and overseas. They cater to industries such as Agro Pesticides Industry, Basic Drug Industry, Cement Industry, Chemical Industry, Fertilizer Industry, etc. Further, domestically they export products to 14 countries such as Algeria, Togo, Ghana, Poland, Portugal, France, Italy, Dominican Republic, USA, Australia, UAE, Palestine, UK, and Ireland. 

Sah Polymers Limited IPO: Growth Potential

Setting up a new manufacturing facility: To cater to the growing demand from its existing customers and to meet the requirements of new customers, Sah Polymers plans to, and are in the process of expanding its manufacturing capacities for existing products that they are in the process of developing and commercializing.

Increase customer network: They aim to focus on deepening their penetration in existing markets and thereby increase domestic presence by expanding their customer network. They aim to focus on increasing their customer base by exploring domestic and international markets. They plan to expand the customer network in the untapped opportunities in different cities to capitalize on to grow business operations. 

Carefully evaluate and pursue accretive acquisitions: Sah Polymers are positioned to grow inorganically within their industry. They intend to apply a selective and disciplined acquisition strategy that focuses on enhancing scale, product diversity, and geographic reach while bolstering financial performance through synergies and additional cash generation.

Sah Polymers Limited IPO: Risks

Negative cash flows in recent years: The company had experienced negative cash flows from operations in the recent past, and they may have negative cash flows in the future. Any negative cash flows in the future could adversely affect the results of operations and financial conditions.

Limited customer count: They derive a significant portion of revenue from a limited number of the customer. Revenues generated from sales to top 10 customers represented 61.72%, 65.83%, 66.57%, and 79.06% of their revenue from operations during the three months ended June 30, 2022 FY22, FY21, and FY20, respectively. Loss of one or more such customers can impact the financials.

Large working capital required: The company requires significant amounts of working capital, and a significant portion of working capital is consumed in trade receivables and inventories. Its inability to meet working capital requirements, including failure to realize receivables and inventories may hurt the overall business.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.