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Review By MLR Securities Private Ltd on April 21, 2011
Issue Date: 20-25th April
Price Range: INR 32-35
Issue Size: INR 419/458 mn
Mcap: INR 854/935 mn
Market Lot: 150 Shares
IPO Grading: ICRA IPO Grade 2
Public Holding: 49.04% (Post Issue)
BRLM: Onelife Capital Advisors
Paramount Printpackaging Ltd provides various types of packaging solutions consisting mainly of cartons to various clients in sectors like Pharma, Auto Ancillary, FMCG, Electricals and Food etc.
The company is promoted by members of the Sukhadia family. Sukhadia family started its stationary print- ing press in 1941 at Fort in Mumbai and gradually shifted from stationery printing to packaging in 1982.
The present production facility is located at Navi Mumbai and has a production capacity of 20 lakh cartons a day. The objective of the issue is to set up a new production facility at Gujarat for manufacturing of high end duplex board cartons, shippers and printed corrugated box with a production capacity of 15 lakh car- tons a day. The new project is likely to be completed by the end of FY12.
1. The EBITDA margin of the company is healthy at around 22% for 9mthFY11, however the PAT margin was only 3.9% due to high interest expense.
2. The stock is valued at an EV of 6 x annualized 9mthFY11 EBITDA considering the average of the IPO Price Range of INR 32-35.
3. Larger and established players in the packaging industry are trading at an average EV/EBITDA of around 5.5.
| Financials (INR mn) | FY08 | FY09 | FY10 | 9mthFY11 |
| Net Sales | 275.5 | 338.7 | 465 | 438.2 |
| EBITDA | 26.4 | 65.2 | 95.3 | 96.3 |
| EBITDA Margin (%) | 9.6 | 19.2 | 20.5 | 22 |
| Interest | 7.6 | 36.3 | 38.5 | 43.7 |
| Depreciation | 12.1 | 28.2 | 29.3 | 23.6 |
| Tax | 2.1 | 0.8 | 10.9 | 11.9 |
| PAT | 4.6 | -0.1 | 16.6 | 17.2 |
| PAT Margin (%) | 1.7 | 0 | 3.6 | 3.9 |
| Net Worth | 65.5 | 125.4 | 160.6 | 227.6 |
| Total Liabilities | 277.3 | 247.7 | 259.4 | 326.1 |
| Debt Equity Ratio | 4.2 | 2 | 1.6 | 1.4 |
| RoE (%) | 7.1 | -0.1 | 10.3 | 7.5 |
Taking into consideration the size of the company's current operations and the threat to earnings dilution as the investment from the issue is on a new project which is in a very initial phase, the IPO Price looks expensive and we recommend avoiding the issue. We believe that the justified EV/EBITDA for the stock is 5 and the IPO Price Range should have been around INR 24.
Review By MLR Securities Private Ltd on April 21, 2011
The initial public offer (IPO) of Paramount Printpackaging Ltd. offers an early investment opportunity in Paramount Printpackaging Ltd.. A stock market investor can buy Paramount Printpackaging IPO shares by applying in IPO before Paramount Printpackaging Ltd. shares get listed at the stock exchanges. An investor could invest in Paramount Printpackaging IPO for short term listing gain or a long term.
Read the Paramount Printpackaging IPO recommendations by the leading analyst and leading stock brokers.
Paramount Printpackaging IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Paramount Printpackaging IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Paramount Printpackaging IPO?"
Our recommendation for Paramount Printpackaging IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Paramount Printpackaging IPO.
The Paramount Printpackaging IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Paramount Printpackaging IPO allotment status to check.
RHP