Bulkcorp Intl. NSE SME IPO review (Apply)

•    The company is one of the leading player in FIBC bags with major revenue from exports.
•    The company posted inconsistency for the reported periods in line with the Pandemic and Global disturbances.
•    Based on FY24 earnings, the issue appears fully priced. 
•    The company is planning for captive solar power plant to reduced energy cost.
•    Investors may park funds for the long term.

ABOUT COMPANY:
Bulkcorp International Ltd. (BIL) is engaged in manufacturing and supply of Food Grade Flexible Intermediate Bulk Container ("FIBC") bags. The manufacturing unit of the Company is situated at Changodar, Ahmedabad. Its manufacturing facility meets the requirements set out in BRC Global Standard for Packing and Packaging Materials and has achieved certified Grade A. It offers a wide range of customizable packaging solutions FIBC bags (Jumbo Bags) which come in eight variations and container liners. BIL's manufacturing facility located at Changodar, Ahmedabad is equipped with the required facilities including machinery, and other handling equipment to facilitate smooth manufacturing process. 

It endeavors to maintain safety and high hygiene in premises by adhering to key safety and hygiene norms as specified by BRC. Company's manufacturing facility has an in-house testing laboratory to ensure that the finished products match the quality standards as specified by customers. All its FIBC bags are manufactured in accordance with ISO 21898 and they have undergone quality tests at well reputed labs. It majorly procures raw materials from Gujarat. As its manufacturing unit is strategically connected to the National Highway and is located in the midst of a developed industrial area, this provides with operational advantage as transportation process becomes time efficient.

The company has expanded its installed capacity by installing new machineries at the premises adjacent to its existing manufacturing facility. Due to expansion, installed capacity of the company manufacturing facility has doubled from 2400 MTPA to 4800 MTPA.

It caters to the requirements of crucial industries such as agriculture, chemical, construction, food, pharmaceutical, and mining. Its customer base is spread across the globe with presence in countries like United States of America, Canada, United Kingdom, South Africa, Ivory Coast, South Korea, Spain, Europe, Egypt etc. As of May 31, 2024, it had 195 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 1978800 equity shares of Rs. 10 each to mobilize Rs. 20.78 cr. at the upper cap. It has announced a price band of Rs. 100 - Rs. 105 per share. The issue opens for subscription on July 30, 2024, and will close on August 01, 2024. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.33% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 11.00 cr. for working capital, Rs. 2.18 cr. for capex on captive solar power plant, and the rest for general corporate purposes. 

The issue is solely lead managed by Swastika Investmart Ltd., and KFin Technologies Ltd. is the registrar to the issue. Sunflower Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 285 in February 2024. It has also issued bonus in the ratio of 2 for 1 in March 2024. The average cost of acquisition of shares by the promoters is Rs. 2.04, Rs. 3.75, and Rs. 4.38 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 5.54 cr. will stand enhanced to Rs. 7.51 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 78.90 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last four fiscals, the company has posted a total income/net profit of Rs. 31.76 cr. / Rs. 0.64 cr. (FY21), Rs. 49.20 cr. / Rs. 1.73 cr. (FY22), Rs. 38.96 cr. / Rs. 1.21 cr. (FY23), Rs. 46.51 cr. / Rs. 3.56 cr. (FY24). The company reported inconsistency in its top and bottom lines. 

For the last three fiscals, it has reported an average EPS of Rs. 4.01, and an average RoNW of 35.89%. The issue is priced at a P/BV of 6.22 based on its NAV of Rs. 16.87 as of March 31, 2024, and at a P/BV of 2.62 based on its post-IPO NAV of Rs. 40.08 per share (at the upper cap). 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 22.15. The issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 2.02% (FY21), 3.56% (FY22), 3.15% (FY23), 7.88% (FY24), and RoCE margins of 36.55%, 27.62%, 19.85%, 40.25% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Rishi Techtex, Jumbo Bags as their listed peers. They are trading at a P/E of 33.7 and 11.8 (as of July 26, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 11th mandate from Swastika Investmart in the last four fiscals (including the ongoing one), out of the last 10 listings, 2 opened at discount, 1 at par and the rest listed with premiums ranging from 4.17% to 110.64% on the date of listing.