IPO Update : Glory Polyfilms

Glory Demystified, Expensive Issue

Glory Polyfilms is entering the capital markets with a public issue of 82.2 lac shares at a fixed price of Rs. 48 ( face value of Rs. 10 each). Investment Guru is of the view that the IPO offers very limited bandwidth to the investors as it is priced aggresively given the size and brand of the company and the valuation of its peers. High risk profile investor only should consider this issue.


Highlights of the Company's IPO

Glory Polyfilms Limited (GPL) is a medium sized manufacturing company established in 1998 by promoters Mr. Yogesh P Kela and Mr.Umesh P Kela. It is a profit making company. The manufacturing facility of the Company is situated at Daman - Union Territory of India.

The Company is engaged in the manufacture of Co extruded multi layer barrier film and printed/ unprinted flexible laminates. Its products have diverse applications as a packaging material for food,liquids like milk, edible oil and nonfood items.

The Company supplies its products to large scale industries, co-operative unions, federations, boards and various small scale industries, multinational and domestic customers in dairy, personal products industry, detergent and fabric wash industry, biscuits, tea, candies and chocolates, agro industries etc.

The Company’s clients include Mother Dairy, Ruchi Soya Industries Ltd. and Hatsun Agro Product Ltd.

The Company’s top ten customers have purchased 79.69% of the total gross sales of the Company as on 31.12.2006. This over dependence on few customers may affect the Company’s operations in the long term. Further, the Company’s gross sales include Rs. 1128.25 lacs to a venture promoted by the promoters, which constitutes 36.14% of the gross sales.

The objects of the issue are to part finance the expansion of Multilayer film producing capacity by 11652 MTPA, printing capacity by 4956 MTPA and lamination capacity by 3500 MTPA, to meet the working capital margin requirements of the Company on account of the proposed expansion and to meet the expenses of the public Issue.

The company has reported an Income of Rs.29.68 crores for nine months ended 31st December,2006 against 39 crores in the Financial year ending 31st March,2006. Net profit stood at Rs. 2.66 crores for nine months ended 31st Dec compared to 2.66 crores generated in Year 2006

There is negative Cash Flow of Rs. 30.02 lacs in the Year 2002-03 & Rs. 4.66 lacs in the
year 2005-06. The Company has reported a net cash flow from operating activities of Rs. 176.97 lacs in the Year 2002-03 & Rs. 143.99 lacs in the year 2005-06. The negative cash flow during the year 2002-03 is on account of repayment of term loan.

Out of the total debtors of the Company of Rs.1,314.05 lacs as on 31.12.2006, an amount of Rs. 604.34 lacs representing 46% of the total debtors is due from Immense Packaging, a venture promoted by the Promoters.

The Company has raised a bridge loan of Rs. 2.00 crores from Indian Overseas Bank at an interest rate of 13.5% against the proceeds of this issue. The Company has taken a disbursement of Rs. 110 lacs against this bridge loan

The promoters have three proprietorship ventures, which are in the similar lines of business as of the Company !

The Company will not be eligible for any Income tax exemption under section 80IB of theIT Act, 1961, which it enjoyed till the last financial year i.e., 2006-07. This may increasethe income tax liabilities and reduce profit margins of the Company in the future.

The Company’s products are not branded. The Company’s logo is not registered. The Company has already applied for registration of its logo and is taking steps to brand its various grades.

The weighted average EPS for last three years stood at 3.1 At pre-issue levels, the IPO comes at a Price multiple of 15.48. Weighted average return on networth comes to 15.48%. Noted Industry peers like Radha madhav are qouting at a P/E of 14.3

Net asset value post issue comes to Rs. 29.71

Issue opens : 09-May-2007
Issue Closes: 15-May-2007
Registrar: Bigshare Services Pvt. Ltd.