The IPO of Gujarat based Kraft paper manufacturer, Astron Paper and Board Mill Ltd to raise up to Rs 70 crore opened for subscription today. While investors may be mulling whether to subscribe to the issue, we take a look at five key details.
The IPO of Gujarat based Kraft paper manufacturer, Astron Paper and Board Mill Ltd to raise up to Rs 70 crore, which opened for subscription today, is seeing steady demand from retail investors. The issue got subscribed by nearly 7% at noon today, even as retail investor portion recorded demand to the tune of more than 20%. While investors may be mulling whether to subscribe to the issue, we take a look at four key details, and what brokerages have to say about the issue.
The public offer consists of a fresh issue of 1,40,00,000 equity shares of face value of Rs 10 each to raise up to Rs 70 crore. The issue also comprises of reservation of up to 7,00,000 equity shares for subscription by eligible employees. The company has fixed a price band of Rs 45-50 per equity share for the ongoing public offer. Post issue, the promoter share is seen reducing to 43.8%. The issue will remain open on Monday and Tuesday as well, closing on the 20th of December. The issue size (Rs 70 crore) being lower than Rs 250 crore, the shares will be listed in “T” group, thus there will be some restrictions on the price movements.
Objects of the issue
According to the company’s prospectus, the proceeds will be used for setting up of additional facility for manufacturing of Kraft Paper with lower GSM; part payment of unsecured loan amounting to Rs 8.1 crore; funding the working capital requirement of the company and general corporate purposes.
About the company
Incorporated in 2010, the company is engaged in manufacturing of kraft paper, which serves as the most suitable raw material for manufacturing of corrugated boxes. According to the company’s website, Astron Paper Ltd has the company is now focused on increasing its customer base to the Middle East, Iran, Sri Lanka, Bangladesh, Some of the African Countries and South East Asia. APBML’s manufacturing facility is situated at Halvad, Gujarat with an installed capacity of 96,000 mt/PA.
Strengths and weaknesses
Pointing to the strengths of the company, Choice Broking says that the company has a scalable business model, quality certification to products leading to repeated orders and location advantage. In its report, the brokerage firm also notes volatility in raw materials, sensitivity to exchange rates given high dependence on imports, government’s regulations towards environment pollution and low entry barrier as key concerns.
In its report on the company, Choice Broking has a “Subscribe” rating on the issue, given the long-term fundamentals. “ Revenue grew by a CAGR of 62% to Rs 1,832.7 million during FY13-FY17 with average EBIDTA margin at 11%. Average RoIC over the last three fiscals remained at 31.1% and RoE at 17.8% higher than peers. Considering all these parameters, at P/E at 12.3(x) on FY18E annualized EPS, the issue looks reasonable considering the growing business, expanding margins and strong growth drivers. Thus, we assign ‘Subscribe’ rating to the issue,” said the firm in its report.