Astron Paper and Board Mills IPO – Should you Invest?
Astron Paper and Board Mills IPO would open for subscription on 15th December, 2017. Astron Paper and Board Mills Ltd is one of the leading manufacturer of Kraft Paper in India. Its revenues multiplied by 6.9 times (169% CAGR) in last 5 years. It profits are 5.4% for FY17. What are the positive factors in Astron Paper and Board Mills IPO? Are there any hidden factors in Astron Paper and Board Mills Ltd IPO? Is Astron Paper and Board Mills IPO Price is reasonably priced? In this article, I would provide some interesting insights and do Astron Paper and Board Mills Limited IPO Review.
About Astron Paper and Board Mills Ltd
Incorporated in 2010, Astron Paper and Board Mill Limited is engaged in manufacturing of kraft paper. Within a short span of time, Company has developed a name for itself in kraft paper industry and they have been able to establish a brand associated with qualitative and comprehensive range of kraft papers. They mainly cater to packaging industry and have been able to develop a loyal clientele network consisting of various packaging companies and MNCs Currently we are operating in domestic markets with its products being supplied on PAN India basis. They are also in the process of exploring export markets.
They believe that they are one of the major kraft paper manufacturers in Gujarat with its manufacturing facility having an installed capacity of 96,000 mt p.a. as on the date of this RHP. Company manufacturing facility is situated at Halvad, Gujarat and is well equipped with requisite plant and machineries and other facilities. They also have in house testing laboratory for quality control checks and testing of its products. They endeavour to maintain safety in its premises by adhering to key safety norms. Its manufacturing and dispatch process has been assessed and certified as meeting the requirements of ISO 9001: 2015, ISO 14001: 2015 by an international organisation viz. SGS United Kingdom Ltd. With increasing environmental awareness, Company has since its inception adopted the use of waste paper as raw material instead of traditional usage of wood. The process of manufacturing Kraft paper involves recycling of waste paper and with many organisations, now supporting the Go Green Campaign, it increases the demand of FSC certified Kraft paper as the same is eco friendly. They have been environmentally conscious and its products have been certified as meeting relevant FSC Standards since 2014 by SGS South Africa (Pty) Ltd.
Astron Paper and Board Mills IPO Issue details
- IPO open date: 15-Dec-2017
- IPO close date: 20-Dec-2017
- Face Value: Rs 10 per share
- Issue price band: Rs 45 to Rs 50 per share
- Issue size: Rs 70 Crores on higher price band
- Astron Paper and Board Mills IPO Lot size: 280 shares
- Minimum investment: Rs 14,000
- Leading Managers: Pantomath Capital Advisors
- Listing: BSE / NSE
- Download Astron Paper and Board Mills IPO RHP Prospectus at this link.
Objects of the Astron Paper and Board Mills Ltd IPO issue
They intend to utilize the Net Proceeds towards the following objects:
1) Setting up of additional facility for manufacturing of Kraft Paper with lower GSM ranging from 80 to 180 GSM and lower B.F ranging from 12 B.F to 20 B.F.
2) Part repayment of unsecured loan availed by the Company.
3) Funding the working capital requirements of the Company
4) General corporate purposes.
Who are the promoters of Astron Paper IPO?
The promoters of the company are Mr Kirti G Patel, Mr Ramakant Patel and Mr Karshanbhai Patel. Asian Granito India Ltd is the corporate promoter of the company.
Company Financials (reinstated)
1) The company generated revenue of Rs 26.7 Crores for the year ended Mar-13 and Rs 184.5 Crores for the year ended Mar-17.
2) The company posted a loss of Rs 4.1 Crores for the year ended Mar-13 and profit of Rs 9.9 Crores for the year ended Mar-17.
3) Its restated basic EPS for FY ending Mar-17 is Rs 2.9 and last 3 years weighted EPS was Rs 2.3.
What are Astron Paper and Board Mills Key Strenghts?
Here are Astron Paper and Board Mills strengths.
1) Its experienced management and dedicated employee base.
2) Scalable Business Model.
3) Quality certifications.
4) Repeat orders.
5) Location Advantages.
What are Astron Paper and Board Mills Ltd Key Strategies?
Company is focusing on few key strategies.
1) Setting up of additional manufacturing facility which will increase the product range.
2) Expand company domestic geographical reach through marketing network.
3) Continue to improve operating efficiencies through technology enhancements.
4) Forward integration.
Reasons to invest in Astron Paper and Board Mills IPO
1) Its posted strong revenue growth in the last 5 years. Its revenues multiplied by 6.9 times (169% CAGR) in the last 5 years.
2) Its profits are on increasing mode. Its profits increased from 2.7% in FY15 to 5.4% in FY17. However one should note that it incurred losses for FY13 and FY14.
Risk Factors / Reasons not to invest in a Astron Paper and Board Mills Ltd IPO
1) Its Statutory auditors have included certain observations and emphasis of matters on certain matters which include delay in payment of statutory dues, delay in repayment of loans non maintenance of fixed assets register, etc. in their auditors reports.
2) Company, company Group Companies and company Promoters are parties to certain legal proceedings. Any adverse decision in such proceedings may have a material adverse effect on company business, results of operations and financial condition.
3) A portion of the proceeds of the Issue will be utilized for repayment / pre-payment of certain loans availed by company from company Group Company, Shreerangam Packaging Private Limited.
4) Company historical revenues have been significantly dependent on few customers. The loss of one or more of company significant customers or significant reduction in production and sales of, or demand for company product from company significant customers may adversely affect company business, financial condition, result of operations and cash flows.
5) Its is mainly dependent on imports for supply of company major raw material; i.e. waste paper.
6) Company has certain contingent liabilities that have not been provided for in its financials which if materialised, could adversely affect company financial condition.
7) Company has negative cash flows from its operating activities, investing activities as well as financing activities in the past years. Sustained negative cash flow could impact company growth and business.
8) Other risk factors (Internal and external) can be viewed in the draft prospectus.
Recommendation / Investment strategy – Astron Paper and Board Mills IPO
1) On the upper price band of Rs 50 and on FY17 EPS of Rs 2.9, P/E ratio works out to 17x. Even based on last 3 years EPS of Rs 2.3, P/E ratio works out to 21x. Means, company is asking higher price band of Rs 50 in the P/E ratio of 17x to 21x. Its listed peers like Genius Paper is trading at P/E ratio of 36x (Highest) and South India Paper at P/E Ratio of 15x (Lowest) and Industry average P/E is 22.8x. Hence the issue price of Rs 50 at P/E of 17x to 21x is reasonably priced.
2) Company revenues multiplied by 6.9 times (169% CAGR) in last 5 years. Its profits are in increasing mode. Its issue price is also reasonably priced. Considering all these positive factors, investors can invest in this IPO for 2-3 years tenure. One may or may not get listing gains. Since this is a small cap stock, one may or may not get allotment too, however we can try our luck.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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Astron Paper and Board Mills IPO – Should you Invest