Promoted by the Gada family, Sejal Architectural Glass was incorporated in 1998 and started commercial operations in 2000-01 by setting up a processing facility for insulating glass. It started another process for toughened glass in 2001. An automated lamination line was installed in January 2007. Processing value-added glass for exterior and interior applications including decorative glass was also undertaken.
The installed capacity for insulating glass is 49,500 square meters (sq mt), tempering glass 2,40,000 sq mt and laminated glass 4,500 sq mt. The plant is located in the Union Territory of Dadra and Nagar Haveli in the Silvassa district of Gujarat.
Sejal Encasa, the trading division located in Mumbai, trades in various in-house brands as well as other manufacturers’ products including tiles, sanitary ware, mirrors and glass home and commercial interiors.
A new manufacturing facility for float glass, with a capacity of 2,00,750 tonnes per annum, is proposed to be set up at Jhagadia in Gujarat. Commercial production is expected to start from March 2009. The strategic location of this project will help in controlling costs and enhance the quality of glass used for value-added products. Land of 6,08,540 sq mt has been acquired for this backward integration project. Contracts have been awarded for executing the construction and civil works.
The cost of setting up this new manufacturing facility for float glass is Rs 434.86 crore. A term loan of Rs 318 crore has been raised from a consortium led by State Bank of Patiala, Rs 39.83 crore through issue of equity shares including the pre-IPO placement of 5,09,425 shares, and Rs 15 crore by means of an unsecured loan. Around Rs 96.53 crore to Rs 105.73 crore are to be raised by issuing 91,94,155 equity shares at the price band of Rs 105 to Rs 115 per share through IPO to part finance the funds required for capacity expansion and general corporate purposes.
Strengths
The proposed plant would be eligible for 100% income tax deduction for the first five years after the commencement of the commercial production and thereafter at 30% for the next five years.
The growth in real estate sector, especially in commercial offices, residential housing and retail industry will give boost to the glass and glass products industry.
Weaknesses
Operating in a highly competitive industry.
Had a negative cash flow (from operating activities) of Rs 46.34 crore in the nine months ended December 2007 and Rs 10.02 crore in the year ended March 2007 (FY 2007).
Depends on few customers for its business. Top three customers accounted for 54% and top 10 74% of the total turnover in the nine-month period. The loss of any one or more customers would adversely affect business.
Float glass plant is to be set up by taking huge debt. The float glass industry, apart from being capital-intensive, is dominated by a few large global players and is categorised by profit cyclicality. Ability to stabilise and upgrade a float-glass plant and also sell about six times current volume of glass remains to be seen.
Valuation
Sejal Architectural Glass has set a price band of Rs 105 to Rs 115 per equity share of face value Rs 10. At the lower band, the P/E would be 47.7 times the annualised EPS in the for nine months ended December 2007 and 105 times the annualised EPS in FY 2007 on post-issue equity of Rs 28 crore.
At the upper price band, the P/E would be 52.3 times the annualised EPS in the nine months ended December 2007 and 115 times the annualised EPS in FY 2007 on post-issue equity of Rs 28 crore. Considering the sector TTM P/E of around 18 and the risks involved, the issue price is very high