Ecoline Exim NSE SME IPO review (Not Rated)

•    The company is engaged in the manufacturing of wide range of sustainable packaging and promotional bags made of cotton and jute.
•    While it posted declining top lines, inconsistent bottom lines for the reported periods.
•    The company is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears reasonably priced.
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
Ecoline Exim Ltd. (EEL) is primarily engaged in manufacturing of wide range of sustainable packaging and promotional bags made out of cotton and jute. It is engaged in the export of these bags globally. During the Fiscal 2025, the company exported products to more than 27 countries. Its major export market is European Union, USA, Japan, and South East Asia and Mexico, etc. With the awakening of global market where more and more measures are being taken to reduce the use of plastics, EEL addresses to the alternate solution to use products which are sustainable, reusable and biodegradable, like bags made out of cotton or jute which are eco-friendly.

It is OEM’s catering to packaging solutions of various customers like: Super Markets and Retail chains, Wholesalers and Promotional companies. The company customizes products as per the customer requirements with screen printing, embroidery, labelling, sizing etc. Its customer base is divided into two major segments i.e. (i) Functional – where major customers are Retailers/Wholesalers and Supermarkets and (ii) Promotional – where major Customers are Promotional companies and Corporate Gifting agencies. During the Fiscal 2025 it sold products to 55 number of customers addressing to functional requirements and 32 number of customers addressing to promotional requirements. As on June 30, 2025, it has an outstanding order book for supply for cotton and jute bags worth Rs 88.10 cr. from around 63 number of customers. As of March 31, 2025, it had 201 employees on its payroll, and additional 339 contract workers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 5420000 equity shares worth Rs. 76.42 cr. at the upper cap. The company has announced a price band of Rs. 134 – Rs. 141 per share of Rs. 10 each. The issue comprises of 4340000 fresh equity shares (worth Rs. 61.19 cr. at the upper cap), an Offer for Sale (OFS) of 1080000 equity shares (worth Rs. 15.23 cr. at the upper cap). The IPO opens for subscription on September 23, 2025, and will close on September 25, 2025. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.42% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 50.00 cr. for capex on new premises for manufacturing unit at Ahmedabad, and the rest for general corporate purposes.

The IPO is solely lead managed by Hem Securities Ltd., while MUFG Intime India Pvt. Ltd., is the registrar to the issue. Hem Group’s Hem Finlease Pvt. Ltd., is the market maker, as well as a syndicate member.

After issuing initial equity shares at par value, the company issued further equity shares in the price range of Rs. 14 – Rs. 200 per share between February 2011, and December 2018.  It has also issued bonus shares in the ratio of 13 for 1 in August 2024. The average cost of acquisition of shares by the promoters is Rs. 0.43, Rs. 0.71, Rs, 1.44, Rs. 1.90, and Rs. 2.60 per share.

Post-IPO, company’s current paid-up equity capital of Rs. 16.18 cr. will stand enhanced to Rs. 20.52 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 289.27 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total Income/Net Profit of Rs. 310.67 cr. / Rs. 18.86 cr. (FY23), Rs. 280.59 cr. / Rs. 22.59 cr. (FY24), and Rs. 273.07 cr. / Rs. 18.82 cr. (FY25). While its top lines posted erosion, its bottom line marked inconsistency.

For the last three fiscals, the company has reported an average EPS of Rs. 12.42, and an average RoNW of 27.54%. The issue is priced at a P/BV of 2.58 based on its NAV of Rs. 54.68 as of March 31, 2025, but its post-IPO NAV data is missing from the offer documents.

If we attribute its FY25 earnings on post-IPO expanded equity base, then the asking price is at a P/E of 15.36, and based on its FY24 earnings, the P/E stands at 12.81. Thus, based on its recent financial data, the issue appears reasonably priced.

The company has posted PAT margins of 6.21% (FY23), 8.30% (FY24), 6.99% (FY25), and RoCE Margins of 29.97%, 26.45%, 21.14%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already adopted a dividend policy, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per offer document, the company has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORDS:
This is the 56th mandate from Hem Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at par, and the rest with premium ranging from 3.43% to 61.92% on the date of listing.