Deep Polymers Ltd. (DPL) is engaged in manufacturing colour and additive masterbatches for engineering plastics and compounds that includes wide range of quality products like antifab fillers, transparent fillers, colour fillers, which is used as cost effective replacements for polymers and acts as anti-fibrillating, anti-blocks, anti-slip agents.
Having started with a capacity of 600 mtpa of master batches production in 1992, currently it has a capacity of 12000 mtpa for colour master batches and 25000 mtpa of filler master batches.
It has a whole range of Masterbatches such as Anti-fab Fillers, Transparent Fillers, Color Fillers, White Masterbatches, Special Effect Masterbatches, Additive Masterbatches etc.
Issue
To part finance its working capital and general corpus fund needs, DPL is coming out with a maiden IPO of 3810000 equity shares of Rs. 10 each (comprising 1360000 fresh equity shares and 2450000 shares via offer for sale by existing stakeholders) at a fixed price of Rs. 40 per share to mobilize Rs. 15.24 crore.
Issue opens for subscription on 08.08.18 and will close on 13.08.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter.
Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Gretex Corporate Services Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 32.09% of the post issue paid up capital of the company.
Having issued initial equity at par, it raised further equity in the price range of Rs. 50 to Rs. 125 per share between March 2007 and June 2015. It has also issued bonus shares in the ratio of 10 for 1 in March 2018.
Post issue, DPL’s current paid up equity capital of Rs. 10.51 cr. will stand enhanced to Rs. 11.87 cr. Average cost of acquisition of shares by the promoters is Rs. 1.39 per share.
Performance
On performance front, for last four fiscals, DPL has (on a consolidated basis) posted turnover/net profits of Rs. 41.14 cr. / Rs. 0.67 cr. (FY15), Rs. 36.01 cr. / Rs. – (0.35) cr. (FY16), Rs. 42.74 cr. / Rs. 1.28 cr. (FY17) and Rs. 41.10 cr. / Rs. 2.15 cr. (FY18).
Higher net for last two fiscals is a result of lower finance cost and depreciations. In FY 18 company posted other income of Rs. 1.31 cr. against Rs. 0.27 cr. for FY17.
For last three fiscals it has posted an average EPS of Rs. 1.52 and an average RoNW of 8.34% (on consolidated basis).Issue is priced at a P/BV of 2.04 on the basis of its NAV of Rs. 19.57 (on consolidated basis).
If we take latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 22 against industry composite of
Peer comparison
As per offer documents, it has shown Plastiblends and Clariant Chemicals as its listed peers. Although both are not strictly comparable, they are trading at a P/E of around 23 and 43 as on 03.08.18.
On merchant banker’s front, this is the 13th mandate from its stable in last three years. Out of last 10 listings, 3 opened at discount, 4 at par and 3 with a premium ranging from 1.9% to 8% on the day of listing. Thus it has poor track record.
Investment Strategy
Issue is fully priced. Company’s top line is almost stagnant for last four fiscals. Merchant banker has poor track record. Cash surplus risk savvy investors may consider investment at their own risk.
