Sah Polymers IPO

Introduction

Sah Polymers was founded by Sat Industries on April 20, 1992. PP/HDPE FIBC bags are its primary product and source of revenue. Their customers work in industries like cement and agro.

How the company plans to use the IPO proceeds?

• The company will utilize the money raised from the new issuance to pay off debt, build a factory, and meet its working capital requirements.
• After the IPO, the company's market value will be close to Rs 160 crore.

Specifics of IPO

10,200,000 shares will be made available in total. The company is available for application at price range of 61 to 65 with a lot size of 230 shares per lot. The company is issuing 66.30 Crores as fresh capital in the market. The IPO will be listed on January 12, 2023. Currently the shares are available at ?6 premium in grey market.

Financial analysis of the company

• Despite the company's stable gross margin, COVID adversely affected EBITDA in the 2020 and 2021 fiscal years.
• A high debt-to-equity ratio and negative cash flow both point to excessive borrowing by the company. As a result, it needs to improve its balance sheet.
• However, the return on equity exceeds industry peers.

Shareholding pattern of the company?

While public shareholdings increase to 39.54%, promoter ownership will drop from 91.79% to 55.50%.

Strength

• The sector in which the business operates is rapidly growing.
• Most customers have strong financial standing, and the company is nearly doubling its capacity, which will aid in achieving scale.
• Additionally, they are developing new methods for creating products for specialized markets that are 100 percent recyclable and reusable.
• The company's promoter holds most of the debt. Exports account for 50% of the company's revenue.

Weakness

Incapacity to meet working capital needs, recent negative cash flow outcomes, and heavy reliance on a small number of customers for sales are significant low points for investors investing in IPO.

Conclusion

• The share is available at a fair price based on the NAV.
• The % of shareholding available to retail investors is increased significantly due to which the volatility of share is expected to be high.
• I will not be investing on this IPO as this company is unable to manage its finances well, and the products that are being offered can be easily replicated by its competitors.