The response to book resulted in BBP of 9.937 million shares and FPP of 3.71 million shares. Of the BBP portion, 5.592 million shares were offered by existing shareholders other than the management and hence, the company will add Rs 92.63 crore to the networth. This includes an incremental amount of Rs 20.14 crore, the difference between the price mentioned in the draft offer document and the final offer price, which lowered the portion of debt to be raised for the expansion project by an identical amount. More than the fundamentals, this is a clear indicator of the fact that those who have missed Essel Packaging at the early stage are trying to make up for it.

SRM is the second largest lamitubes manufacturer in India and along with Essel Packaging, is the only integrated player. However, the comparison with Essel Packaging ends here. The net worth of SRM, post issue will be Rs 334.05 crore (Net worth as on September 1999 + 8.055 million shares at Rs 120 per share) which will be almost at par with the balance-sheet size of Essel Packaging as on March 2000. The fundamental difference being Essel's capacity-1312 million tubes in India, 100 million tubes in China through wholly-owned subsidiary in China,180 Million tubes in the 50:50 joint venture in Germany and 20 million tubes in a 75 per cent subsidiary in Egypt. Against this, SR's expanded capacity will be 640 million lamitubes up from 316 million tubes, extruded tubes-25.9 million tubes, printed labels 64.8 million square metres and specialty packaging and plastic products.

Tubes accounted for 32 per cent of the topline for the year ended September 1999 and labels and stickers for 29 per cent. Only the capacityof tubes is being expanded and will be completed in a phased manner by September 2001.

The company has managed a higher OPM, as compared to Essel Packaging, because according to the management, the printing machine can be used to print labels also and hence the fixed cost gets apportioned over a larger number of units. Even if the company does manage to post the projected PAT of Rs 41.3 crore in FY 1999-2000, the impact on the return on equity (RoE) due to equity expansion is anybody's guess. The point that needs to be considered is that since the capacity of only tubes is being expanded, the share of this business including multi-layer film in the topline will be 75-80 per cent in 2002, when the expansion is completed.

If the company manages to report the same margins as Essel Packaging does in the tubes business, the OPM should decline from the present level; but instead, it is projected to be around 50 per cent. The other advantage that Essel Packaging has is the hefty revenue stream that the Chinese JV will offer, considering that the Chinese market is three times the size of the domestic market. Considering these factors, Rs 120 should be the listing price, but the book indicates that the price will be in the range of Rs 300-350. Allotees should get out at that price and within three-four days after listing (if at the indicated price), it will be a candidate for a sell.