AMD Metplast Ltd.

Background:

• AMD Metplast Ltd. (AMD) was originally incorporated as Ashoka Metal Décor Private Ltd in December 1983; the company was changed to AMD Metplast Pvt Ltd. in August 2004. The Company subsequently became a public limited company on 2nd June 2006. It operates in the beverage packaging industry.
• AMD’s products are used in packaging for carbonated soft drinks (CSD), mineral waters, beer and other alcoholic beverages, juices, sauces, ready-to-drink milk products etc. Other sectors where specific products of AMD can be used are pharmaceuticals, personal care products and non-alcoholic items like edible oils etc.
• AMD has four plants with an installed capacity of 2661.12 Million per annum (mnpa) (184800 cases) of crown caps, 4620 MTPA of resin processing to make PET perform and 288 mnpa of CSD closures.
• Company is having a strong technical base with advanced Plant & Machinery. The crown caps manufacturing machines are imported from Sacmi, Italy, and, imported the key plant from Krauss Maffei, Germany to manufacture PET PREFORMS.
• Upon completion of the issue, promoter’s holding will get reduced to approximately 52.53% of the post issue equity share capital from current 99.9%.

Objects of Issue:

• To set up a new PET Preform Line at its existing plant at Neemrana, Rajasthan
• To part finance long term working capital requirements of the company
• To prepay/repay the Debt
• To meet the issue expenses & general corporate purposes

Strengths:

• It is an approved supplier by PepsiCo and The Coca Cola Company for Crown Caps. It also caters to brands like catering to brands like Gold Spot, Limca, Bisleri-Soda, Thumps-Up, Double-7, etc.
• Company has been consistent profit making company for the last 20 years. The Company was incorporated since 1983 and since then, it has not posted any losses.
• AMD enjoys number of tax benefits like sales tax benefit for Unit 1 in UP where company pays only 1.875% instead of 2.5% tax & 1% exemption in CST. Also, The Company is allowed CST exemption on the central sales outside Rajasthan subject to investment of Rs 30 Crores in Fixed assets. Quantum of benefit on this account is around Rs10 mnpa for 10 years.
• Debtors to sales ratio have shown a declining trend in last 5 years from 45% in FY02 to 23% in FY06.
• For past three years company has been generating positive cash flows from operations.
• OPM of the company has increased from 14.1% in FY02 to 19.3% in FY06. NPM in FY06 was 6.3% compared to 1.9% in FY05.
• AMD will be using Rs.120mn to repay its high interest cost debt. This will help company to rationalize its interest cost approx. by Rs.12.9mn.

Weakness:

• The Company is largely dependent on a single customer i.e. M/s Hindustan Coca Cola Beverages Pvt. Ltd. (HCCBL) which constitutes more than 80% of the total revenues in case of crown caps and more than 72% in case of pet preforms & closures.
• The main consumers of AMD’s products are soft drink manufacturers and beer industry, whose business is largely seasonal in nature. Any adverse change in the demand in the season may affect the operations of the Company.
• AMD is in a business, which has low entry barrier because of which the competition is intense.

Peer Group Comparison for financial year 2006:

Financial information of the company relates to beverage packaging operations and as there are no other listed companies in the Indian beverage packaging industry.

Valuation:

• AMD’s sales, EBIDTA & NPM have grown at a CAGR of 9.3%, 11.8% & 6.5% respectively for last 5 years. AMD’s sales as on 31 st March 2006 stood at Rs.658mn.
• The company’s net worth as on 31 st March 2006 is Rs.324.6mn and book value per share at Rs.36.1 per share (pre equity issue).
• AMD’s RONW & ROCE stood at 13.1% & 12% & Debt to Equity ratio at 1.6 times respectively for FY06.
• Post issue annualized EPS based on 31 st October 2006 earnings is Rs.1.8 per share. The shares are being offered in the price band of Rs. 65-75 at P/E range of 36-41.