About the Company: -

Incorporated in 1992, Sah Polymers Limited is primarily engaged in manufacturing and selling of Polypropylene (PP)/High-Density Polyethylene (HDPE) FIBC Bags, Woven Sacks, HDPE/PP woven fabrics, and woven polymers.

The company has two business divisions (i) domestic sales; and (ii) exports. Internationally, the company exports to 14 countries such as Algeria, Togo, Ghana, Poland, Portugal, France, Italy, Dominican Republic, USA, Australia, UAE, Palestine, UK, and Ireland.

Presently, the company has one manufacturing facility with an installed production capacity of 3960 m.t. p.a. located at Udaipur, Rajasthan. Furthermore, in line with its strategic expansion plans, Company intends to use part of its Net Proceeds to establish a new facility with an additional installed capacity of 3960 m.t p.a. to manufacture different variants of FIBC products.

Services provided by the Company: -

The company's product mix has evolved over the past several years, as the company has entered into new product categories. The company's product portfolio includes FIBC (Flexible Intermediate Bulk Containers), Container bags, PP woven Fabric & HDPE woven fabric, woven sacks, PP fabric, box bags, fabric rolls, and bags for flexible packaging. The company engages in the manufacturing of products based on the orders of the customers to meet their requirements.

The company offers customized bulk packaging solutions to business-to-business ("B2B") manufacturers catering to different industries such as Agro Pesticides Industry, Basic Drug Industry, Cement Industry, Chemical Industry, Fertilizer Industry, Food Products Industry, Textile Industry Ceramic Industry, and Steel Industry.

Besides, the Company is a Del Credere Associate cum Consignment Stockist (DCA/ CS) of Indian Oil Corporation Limited and also operates as a Dealer Operated Polymer Warehouse (DOPW) of Indian Oil Corporation Limited for their polymer division.

Industry Outlook: -

Packaging is one of the important businesses both in India and globally. It is a sector that cannot exist on its own, i.e., the nature of packaging is such that it is intertwined with many other industries, such as food & drink, personal care, pharmaceuticals, e‐commerce, chemicals, etc. apart from this, plastic packaging such as HDPE/PP Woven sacks’ demand is increasing gradually, owing to lower cost, easy availability of the raw materials, transportation and strength.

According to the Packaging Industry Association of India, the Indian Packaging Market was valued at $10.77 Billion in 2021 and is expected to reach $15.69 Billion by 2027, registering a CAGR of 6.63% during the forecast period of 2022-2027. Packaging is one of the high-growth industries in India and is developing at 22‐25% per annum and is becoming a preferred hub for the packaging industry.

The Objects of the Offer: -

1. Setting up a new manufacturing facility to manufacture a new variant of Flexible Intermediate Bulk Containers (FIBC).
2. Repayment of certain secured and unsecured borrowings in full availed by the Company.
3. Funding the working capital requirements of the Company.
4. General corporate purposes.

Key Financials: -

The financials of the company look promising because growth can be seen in every factor. Not only the Sales, but even the Net Profit has grown every year. The profit percentage has also grown, as can be seen from the ratios. However, the cash flows of the company are negative for FY 2022 & three months ended June 2022.

Valuation: -

As per the RHP the company has 5 peers viz., Rishi Techtex Limited, Jumbo Bag Limited, SMVD Poly Pack Limited, EMMBI Industries Limited, Commercial Syn Bags Limited.

1. The company’s PE on the upper price of Rs.65 comes to 20.31 times and the industry average PE is 14.85 times, indicating an overvaluation.
2. The company PB on upper price is Rs.65 is 3.65 times and the industry PB range is from 0.61 times to 3.14 times.

Key Risks: -

1. The name of one of our Promoter Group Company viz; Aero flex Industries Limited., is appearing in the RBI wilful defaulters list issued by CIBIL in relation to default in payment. If instances occur once again in the future, it could adversely affect our reputation.
2. The company is dependent on a limited number of customers for a significant portion of its revenues. Revenues generated from sales to top 10 customers were 65.83%, 66.57%, and 79.06% of the total revenue for FY-22, FY-21, and FY-20 respectively. Loss of one or more such customers, the deterioration of their financial condition, or a reduction in their demand for the company's products could adversely affect the company's business.
3. The company's existing and proposed manufacturing facilities are concentrated in a single region i.e., Rajasthan, thus, the inability to operate and grow the business in this particular region may harm the company's business.
4. There is an increased awareness of controlling pollution and many economies including India have joined in the efforts to ban the plastic product. In case any plastic packaging products manufactured by the company are banned in India or in the company's export markets, it could have a material and adverse effect on the company's business.
5. The company has contingent liabilities amounting to Rs. 5cr which is approximately 18% of its Net-worth.
6. IPO funding requirements and the proposed deployment of Net Proceeds have not been appraised by a public financial institution or a scheduled commercial bank and the company's management will have broad discretion over the utilization of the Net Proceeds.
7. The company has availed unsecured loans from banks, NBFC, holding company/ Corporate promoters, and unrelated third parties, which may be recalled on demand. This loan amounts to 24.21 crores as against its Net-worth of 27.74 crores, as on 31 June 2022.

IPO Details: -

1.  The IPO is open for subscription from 30^th December 2022 to 4^th January 2023.
2. The IPO has a lot size of 230 shares and a retail individual investor can apply for a minimum of 1 lot worth Rs.14,950 and a maximum of 13 lots worth Rs.194,350.
3. The entire issue worth Rs.66.30 crores is fresh.
4. The share is trading at a GMP of 10.77% as of the time of writing this blog.