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  Details of thedeal:  Astron Paper and Board Mill IPO details Subscription Dates 15 – 20 December 2017 Finalization of Basis of Allotment 26-Dec-17 Initiation of refunds 27-Dec-17 Transfer of shares to demat accounts 28-Dec-17 Listing Date 29-Dec-17 Price Band INR 45 – 50 per share Fresh issue 14,000,000 shares (INR 63 – 70 crore) Offer For Sale Nil Total IPO size 14,000,000 shares (INR 63 – 70 crore) Minimum bid (lot size) 280 shares Face Value  INR10 per share Retail Allocation 35% Listing On NSE, BSE Listing Price on NSE INR115 per share (up 130% from IPO price) Closing Price on NSE INR120.75 per share (up 141.5% from IPO price)  Book running lead manager:   PantomathCapital Advisors Private LimitedPromoters of Astron Paper andBoard Mill:·       Mr.

Kirit G Patel·       Mr. Ramakant Patel·       Mr. Karshanbhai Patel·       Asian Granito India Limited   Valuation of Astron Paper and Board: Earnings Per Share (EPS) INR 3.06 Price/Earnings (P/E) ratio 14.70 – 16.33 Return on Net Worth (RONW) 21.

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98% Net Asset Value (NAV) INR 13.94/share                     ABOUT THE COMPANYAstron paper, setup in 2010, manufactured Kraft paper. Theymainly cater to the packaging industry and have been able to develop a loyalclientele network consisting of various packaging companies and MNCs Currently theyare operating in domestic markets with the products being supplied on PAN Indiabasis.

They are also in the process of exploring export markets. They believethat they are one of the major Kraft paper manufacturers in Gujarat with themanufacturing facility having an installed capacity of 96,000 mt p.a. as on thedate of this RHP. The manufacturing facility is situated at Halvad, Gujarat andis well equipped with requisite plant and machineries and other facilities.

Theyalso have in house testing laboratory for quality control checks and testing ofthe products. They endeavor to maintain safety in the premises by adhering tokey safety norms. With increasing environmental awareness, the Company hassince its inception adopted the use of waste paper as raw material instead oftraditional usage of wood. The process of manufacturing Kraft paper involvesrecycling of waste paper and with many organizations, now supporting the GoGreen Campaign, it increases the demand of FSC certified Kraft paper as thesame is eco-friendly.

They have been environmentally conscious and the productshave been certified as meeting relevant FSC Standards since 2014 by SGS SouthAfrica (Pty) Ltd. The product Kraft paper is used by packaging industry formanufacturing corrugated boxes and liners, corrugated sacks and compositecontainers. They offer varied products like High RCT, Kraft Liner, and Liner toCorrugated Medium Paper, ranging mainly from 140 GSM to 350 GSM and 22-35 BF. Theyendeavor to serve the customers, each having different requirements of RingCrust test (RCT), Gram square meter (GSM) and weight pressure. The Companymainly imports raw material for ensuring better quality of output. They havealso been accredited with Authorized Economic Operator- T1 Certificate(Importer and ExporterThe Individual Promoters manage and control the major affairsof the business operations.

With their dedication and commitment, the Companyhas shown an increasing trend in the business operations which is evidenced bythe growth in the total income from Rs. 267.27 million in FY 2012-13 to Rs.1,845.89 million in FY 2016-17.

They believe that the market position has beenachieved by adherence to the vision of the Promoters and senior management andtheir experience. Geographical Customer Presence for FY 2016-17.The registeredoffice is situated at Ahmedabad. They have a dedicated marketing team whocontinuously interacts with customers to understand their requirements andanalyse the market dynamics.

They have also been actively participating andassociated with the Federation of Corrugated Box Manufacturers of India andIndian Corrugated Case Manufacturers Association. They aim to establish thebrand as a distinguished name in industry. From FY 2013-14 to FY 2016-17, asper the Restated Financial Statements, i) the total revenue has shown growthfrom Rs. 1,061.98 million to Rs.

1,845.89 million, representing a CAGR of14.82% ii) the EBITDA has shown growth from Rs. 113.32 million to Rs.

230.06million, representing a CAGR of 17.95% iii) the profit after tax has showngrowth from Rs. a loss of Rs. (30.21) million to a profit of Rs.

99.59 millionand iv) the Return on net worth has shown a growth from (12.78)% to 21.98%. Therestated total revenue, EBITDA and profit after tax for the six months endedSeptember 2017 was ` 1,109.61 million, 146.20 million and ` 94.

55 millionrespectively, with an EBITDA margin of 13.18% and PAT margin of 8.52%                          OBJECTIVE OF THE ISSUEThey intend to utilize the Net Proceeds towards the followingobjects:1.     Forsetting an additional facility of Kraft Paper with low GSM range and low B.F rangingfrom 80 to 180 GSM and ranging from 12 B.F to 20 B.F respectively2.     Repaymentof unsecured loan taken by company.

3.     Tomeet the working capital requirement of the company4.     Forgeneral purpose related to corporate5.     Believethe listing will help the company to enhance its corporate image, brand nameand create public market.

The following figures show a briefoverview of utilization of funds. IS IT THE RIGHT TIME FOR IPO  Market Trend in favour of IPOs·       The risk appetite hasincreased and the year 2016-2017 is term the year of IPO ·       IPOS have risen from IPOs,which were only 15.8% to 46.9% share (2016-17) of all equity issues in 2013-14.In terms of net worth, the size of the IPO market has expanded (96%) to Rs21,904 crore.

·       The companies coming out withIPOs where from diverse and unconventional section unlike in olden times where conventionalsectors were dominant like l banking, finance and IT in the IPO market since2000.This clearly indicates the gradual rise of capital market as a mode offinance among large and small corporate, ·       Three fold growths in MutualFunds is another reason for upsurge.·       Therebythe Mid-cap and small-cap companies are seeing better opportunities for a goodvaluation, given current market conditions. Market is flooded IPOs and themarket is totally ready to pay a premium. The Sips are putting money in the mutual fundsmarket if Rs5000 crore month on month thereby providing incentives for thecompany to go public Growing Indian EconomyIndia is the fastest growing economy in the world as Real GDPgrowth of the Indian economy is expected to be in range of 6.75% to 7.

5% for FY2017-18. Even under this forecast, India would remain the fastest growing majoreconomy in the world.Growing Demand PaperIndustryThe paper industry in India accounts for about 3% of theworld’s paper production. The estimated turnoverof the industry is INR 50,000 crore (USD 8 billion) approximately and itscontribution to the exchequer is around INR 4,500 crore. The industry isproviding job to as many as 0.

5 million people formally and 1.5 million peopleinformally. The paper mill is inexist from a long time hence present use technology of have a wide loop rangingfrom oldest to the most modern. The mills use wood, bamboo, recycled fibre,bagasse, wheat straw etc for its raw material.The global per capita paper consumption is 57 kg whereas inIndia is a little bet over 13 kg.Thus in this scenario India is the fastest growing market andpaper consumption is expected to grow in future with the current economicgrowth scenario.The view is that the growth in the paper consumption will bein multiples of GDP and hence an increase in consumption by one kg per capitawould lead to an increase in demand of 1 million tonnes.                               PAST TRENDS IN PAPERINDUSTRY Operating profit margin is improving since second half of2016.

the major source of cost is raw materials approx. 50 percent of the netsales and fuel and power costs which is 16% net salesBecause of lower costs and better price realized which is alsosupported by good demand the operating margin were in the range of 15 % duringfiscal year 9 to 11 but increase in raw material cost, fuel and power themargin reduced significantly in FY13 to 11%.The fall in margin was arrested in FY15 and H2FY16 witnessedimprovement in margins due to declining RM costs and power & fuel cost.Consumption & Production: Indian Paper Industry in 2015 – 16: Thoughdigitization has taken the Indian Paper industry for a ride, India’s demand forpaper is expected to rise 53 per cent as the educational demand for paper isconstantly on the rise. Although India’s per capita consumption of paper isquite low compared to global countries, the demand is set to rise from thecurrent 13 million tonne (MT) to an estimated 20 MT by 2020. As per industry scene,India’s per capita paper consumption at nine kg, against 22 kg in Indonesia, 25kg in Malaysia and 42 kg in China. The global average stands at 58 kg.

India’spaper demand is set to rise 53% by 2020.During 2011-15, consumption grew by 6.3%, higher than theglobal average. The index of industrial production (IIP) recorded a decline of0.1% in FY14.

Paper and paper products industry saw growth of only 0.1% y/y. However,the industry saw a revival in FY15 with a growth of 3% y/y. In 8MFY16, itrecorded a growth of 3.

2% y/y. In the last five years, the Indian paper sectorhas invested about Rs.20000 crore on capacity enhancement, technology upgradeand acquisitions. The raw material prices for the paper industry soared inFY15-16.

This together with slug of cheap imports from China and otherSoutheast Asian nations negatively impacted the profit margins of most paperproducers. In 2015, global wood pulp prices have risen beyond the previous peaksince 2011, which was the highest point in more than 30 years. Unfortunatelyfor manufacturers who rely on the material as input, especially paper packagingmanufacturers, higher prices for wood pulp have increased their productioncosts. According to IBIS World, the price of wood pulp is forecast to increasefurther at an annualized rate of 5.1% in the three years to 2019. The increasein the price of wood pulp will also be reflected in the domestic price ofpaper, will grow at an annualized rate of 3.2% over the next three years. The raw material consumption pattern has drastically changedin the recent years with the pulp & paper industry witnessing a rise in theuse of waste paper.

This shift has been mainly brought about for purpose ofenvironmental compliance. Presently, the consumption of wood, agro and wastepaper is 20 %, 10% and 70 % respectively. Till about a few years ago, theconsumption of wood, agro and waste paper was 31%, 22% and 47% respectively.Figure below illustrates the changing raw material consumption pattern of theIndian Paper Industry                        PERFORMANCE OF THE IPO Shares of Astron Paper and Board Mills saw abumper listing on Friday as the stock debut with a premium of 141 percent.The stock traded at a high point of Rs 120.75 on the NSE.The initial public offer (IPO) was oversubscribed 243.

20times so far on the last day of bidding.The IPO to raise Rs 70 crore received bids for3,40,48,47,040 shares against the total issue size of 1,40,00,000 shares (dataavailable with the NSE showed).Qualified institutional buyers (QIBs) – oversubscribed103.36 timesNon institutional investors- 396.99 timesRetail investors- 76.26 times    FINANCIAL ANANLYSIS  As they can see through the working capital requirement thecompany needed 239 million rupees for the fiscal year 2018 which is to beutilized for funding the working capital.The financials of thecompany which is the income statement of the company clearly shows the increasein profits of the company .

Company enjoys strong Financialperformance and stable cash flows     Relative Valuation    The P/E ratio of the listed amount was in comparison with theindustry peers but the return on net worth is the highest, hence it is a well-placedcompany in terms of relative valuation.    OPINION:If we take the upperprice band (Rs 50), and the EPS of 2.9 in FY17, we see that P/E ratio comes outto be ~17 times. And if we take EPS of last 3 years (2.3), the P/E ratio comesout to be ~21 times. Thus we can say that thestock was undervalued, thus the investors could see future gains, and thus theIPO got oversubscribed.

The industry averageprice to earning is 22.8 times, and if we compare it with its competitors,South India Paper (P/E 15 times), Genius Paper (P/E 36 times), we can say itwas decently priced.Further looking at thecompany’s financials, in the last 5 years it’s revenues multiplied 7 times, andthe profits look good in the future as well, at least in the short term.However, on a conservativeoutlook, we see that the company’s profits have been dependant on a fewcustomers, the loss of one or more could impact profits, in turn affectingrevenues, future cashflows and operations.

Also, it is importdependant for its raw material. Thus, any global impact could impact thecompany as well.All past cashflows werenegative, be it operating, financing or investing activities. If this trendcontinues, it could be problematic for the company, impacting growth.  On the positive outlook,the company is expanding facility to increase its product range.

It is alsoplanning to explore export markets, as well as increasing domestic reach withmore marketing strategies. On an operational level, it wants to increase efficiency,using advanced technology. Overall, the IPO wasrightfully oversubscribed as there was a positive outlook towards its future growthprospects.

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