Phytochem Remedies BSE SME IPO review (Not Rated)

•    The company is engaged in the manufacturing and marketing of corrugated boxes, and other packaging related solutions.
•    It posted growth in its top and bottom lines for the reported periods, but sudden boost in bottom lines from FY25 onwards raises eyebrows and concern over its sustainability as it is operating in a highly competitive and fragmented segment.
•    The company has nothing to do with pharma segment, but supplied its products to some of pharma companies.
•    Based on its recent financial data, the issue appears aggressively priced.
•    There is no harm in skipping this pricey and dicey issue.

ABOUT COMPANY:
Phytochem Remedies (India) Ltd. (PRIL) is one of the leading manufacturers of high-quality corrugated boxes including printed, rolls, pads, sheets etc., offering customized packaging solutions to meet the specific requirements of its clients. The company specialises in manufacturing corrugated boxes and supplies to various sectors (Source: D&B Report). Incorporated in 2002, the company initially focused on development and planning, with manufacturing operations commencing in 2014. Since then, the company has grown significantly and leveraging its state-of-the-art manufacturing facilities.

The company operates from its strategically located manufacturing units in Bari Brahmana, Jammu, which provide significant logistical advantages. Over the year, Company has expanded its reach and built a strong regional presence in Jammu, India while also establishing a marketing and distribution network across multiple states (Source: D&B Report).

With a strong focus on innovation and customer satisfaction, it has built a reputation for delivering durable and cost-effective packaging solutions. The company operates in two units at Bari Brahmana, Jammu, with Unit 1 having a total allocated area of 43,360 Sq. Ft. and Unit 2 having an allocated area of 1,73,440 Sq. Ft. Currently, Unit 1 is utilizing approximately 12,000 Sq. Ft. and Unit 2 is utilizing approximately 55,000 Sq. Ft. of total area of respective units. Out of the total land area, approximately 15,000 Sq. Ft. in Unit 1 and around 75,000 Sq. Ft. in Unit 2 remain unutilized and shall be used for the construction and installation of new manufacturing machineries to accommodate both present and future expansion.

Its manufacturing journey started with a Semi-Automatic Manufacturing Line in 2014. Even with Market standards of 2014, this line had all latest machines and other facilities to give quick service to the customers, which continues to contribute to revenue and profitability. To further strengthen its production capabilities, the company established a fully automatic corrugated board plant in 2022 in an extensive area of 75,000 sq. ft. equipped with the latest technology. This facility enables the company to cater to a broader range of packaging needs of customer with improved efficiency and precision.

With ongoing expansion plans and a strong foothold in multiple industries, it is well-positioned for future growth and increased market share in the corrugated packaging sector. As of September 30, 2025, it had 51 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 3900000 equity shares of Rs. 10 each at a fixed price of Rs. 98 per share to mobilize Rs. 38.22 cr. The IPO opens for subscription on December 18, 2025, and will close on December 22, 2025. The minimum application to be made is for 2400 shares and in multiple of 1200 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 33.12% of post-IPO paid-up equity capital of the company. The company is spending Rs. 3.72 cr. for this IPO process, and from the net proceeds of the issue, the company will utilize Rs. 13.60 cr. for capex on purchase of equipment/machineries, Rs. 5.88 cr. for capex on civil construction, Rs. 9.37 cr. for repayment/prepayment of certain borrowings, and Rs. 5.65 cr. for general corporate purpose.

The IPO is solely lead managed by Mefcom Capital Markets Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Aftertrade Broking Pvt. Ltd. Is the market maker. The issue is underwritten to the tune of 15% by Mefcom Capital and 85% by Aftertrade Broking. 

After issuing entire initial equity shares at par value, it has issued bonus equity shares in the ratio of 3 for 2 in April 2025. The average cost of acquisition of shares by the promoters is Rs. 1.64, and Rs. 4.00 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 7.88 cr. will stand enhanced to Rs. 11.78 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 115.40 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit, of Rs. 20.83 cr. / Rs. 0.82 cr. (FY23), Rs. 32.90 cr. / Rs. 2.31 cr. (FY24), Rs.  36.81 cr. / Rs. 4.48 cr. (FY25). For H1- FY26 ended on September 30, 2025, it earned a net profit of Rs. 3.75 cr. on a total revenue of Rs. 25.01 cr. However, the sudden boost in its bottom lines in a pre-IPO period i.e., from FY25 onwards raises eyebrows and concern over its sustainability in a highly competitive and fragmented segment. Its outperforming the industry standards with super margins appears to be a window dressing to fetch fancy valuation for IPO.

For the last three fiscals, the company has reported an average EPS of Rs. 10.29, and an average RoNW of 27.98%. The issue is priced at a P/BV of 4.57 based on its NAV of Rs. 21.45 as of September 30, 2025, but its post-IPO NAV data (for a fixed price issue) is missing from the offer document.

If we attribute its FY26 super annualized earnings on post-IPO expanded equity base, then the asking price is at a P/E of 15.38, and based on its FY25 earnings, the P/E stands at 25.79. Thus, the issue appears aggressively priced, and needs caution as the margins reported are not sustainable in long term.

The company has posted PAT margins of 3.93% (FY23), 7.04% (FY24), 12.25% (FY25), 15.12% (H1-FY26), but its RoCE Margins data is missing from offer documents. The company has posted 

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

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Perfectpac, Worth Peripherals, GKP Printing, as its listed peers. They are currently trading at a P/E of 15.9, 13.3, and 19.4 (as of December 15, 2025, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 2nd mandate (1 mainboard and this SME one is 2nd), from Mefcom Capital in the ongoing fiscal. The only listing (mainboard) that took place so far opened with a premium of 28.31% on the listing date.