Trying to open a new window of opportunity
But only after spending considerable time, money and effort
Bluplast Industries (BIL) manufactures plastic articles using injection-moulding method. Its product range includes thermoware, vacuumware, insulatedware, kitchenware and other consumer products. The company has a network of 98 distributors, dealers and sub-dealers to market its products manufactured at its 5,400-tonne capacity plant in Daman. The company, operating in an industry dominated by unorganised sector, holds around 10% market share.
BIL is in the process of expanding its current installed capacity to 9,000 tonnes and foray into manufacturing PVC wood composite articles. The company is to set up a 4,900-tonne manufacturing facility to manufacture high value PVC–wood composite profiles/ sheets in Daman. This will be the first of its kind plant in India. The product, expected to compete with the existing pure wood or pure PVC products, will be marketed through its existing network of dealers. The company plans to concentrate on the doors and windows segment. The expansion of the existing capacity and the setting up of the new facility are to be completed by December 2006.
The capital expenditure for both the projects is estimated at Rs. 36.88 crore, which will be funded through internal accruals apart from the proceeds of the present IPO. BIL intends to raise Rs. 35.2 crore through the issue of 1.1-crore equity shares of Rs. 10 each at Rs 32.
Strengths
- In the existing product range of thermoware, BIL is well set and has been consistently operating at high capacity utilisation though under increasing pressure on margins
Weaknesses
- Both the projects are expected to complete by end of December 2006. This means no significant improvement can be expected in FY 2007.
- It can take considerable time, money and effort to introduce and establish the new range of PVC–wood composite products in a highly unorganized market.
Valuation
Bluplast has set Rs. 32 as the price of its IPO, which translates into a PE of 36 on fully diluted EPS of Rs. 0.89 for FY 2006. There are around eight listed companies (including Milton Plastics, National Flask, and Tokyo Plast) in the thermoware segment. Most of them are trading (or have stopped trading) at or below face value due to their poor financials. Considering the gestation period involved in the new products, chances of the scrip quoting below offer price are very high.