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Ideal Technoplast Industries

• Ideal Technoplast Industries is coming out with an initial public offering (IPO) of 13,25,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 121 per equity share. 
• The issue will open for subscription on August 21, 2024 and will close on August 23, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 12.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Swastika Investmart. 
• Compliance Officer for the issue is Neha Shaw.

 

Profile of the company

The company is a manufacturer and supplier of rigid plastic packaging, with a presence in both domestic and international markets (indirectly through export houses and third parties). It provides industrial packaging solutions for sectors such as paints, agro, chemicals, cosmetics, adhesives, lubricants, food, and edible oil. Its Surat facility spans multiple stories, covering an area of 20,000 sq. ft., and features advanced technology, including a fully automated plant. It employs In-Mould Labelling (IML) via robotic automation that enhances its output capacity. Additionally, it has specialized units for production, R&D, quality control, and automated screen printing. Its quality testing procedures cover everything from raw material sourcing to the final product, including weight checks, drop tests, finishing evaluations, and leak tests.

The company offers a range of rigid plastic packaging solutions with advanced manufacturing technologies, including In-House Design & Printing Technology. It specializes in manufacturing square packaging containers known for their ruggedness, durability, and ease of handling heavy items. The technology used for manufacturing these containers includes fully automatic machines with robotic arms, reducing human intervention throughout the manufacturing process. These machines feature in-mould labelling technology and Heat Transfer Mould Labeling Technology, allowing direct printing on the containers instead of applying labels. This ensures standardized finished products and maintains desired quality while increasing production efficiency. Its specialization in square container manufacturing is supported by custom-designed moulds tailored to meet customer requirements.

Proceed is being used for:

 

• Meeting capital expenditure
• General corporate purpose

 

Industry overview

India's packaging industry has experienced constant growth throughout the years, becoming one of the nation's primary economic sectors. The industry is expected to grow by 22% to 25% a year, according to the Packaging Industry Association of India (PIAI). Some of the other important sectors that have long been in charge of the nation's packaging industry's growth are pharmaceuticals, the food processing sector, and fast-moving consumer goods (FMCG). In recent years, there has been a boom in the Indian packaging industry due to the emergence of e-commerce as a new consumer. Numerous parcels are delivered across the country every day as a result of the increasing usage of e-commerce platforms. This has increased demand even more.

India Rigid Plastic Packaging Market Size was valued at $8 Billion in 2022. The rigid plastic packaging industry is projected to grow from $8.8 billion in 2023 to $19.01 billion by 2032, exhibiting a compound annual growth rate (CAGR) of 10.10% during the forecast period (2024 - 2032). Some of the key market drivers driving the market are the growing customer desire for product safety and extended shelf life, the growing need for sustainable packaging solutions, and various breakthroughs in manufacturing technology.

The growing need for rigid plastic packaging in the food & beverage industry is driving growth in the India Rigid Plastic Packaging Market. Food contamination during storage poses a significant risk. Two examples of factors that affect the nutrients in food are temperature and moisture content. By using the right packaging materials, it can be partially avoided. It also lengthens the shelf life of the food product. Companies in the food & beverage sector have access to a range of suppliers for rigid plastic packaging. Customers can easily open and reseal these containers due to the included film lidding option. Additionally, they include side ventilation for easier moisture management and cooling. Thus, driving the rigid plastic packaging market revenue.

Pros and strengths

Diverse product range: Ideal Technoplast Industries offers a wide range of rigid plastic packaging solutions, including industrial containers for various products such as adhesives, lubricants, and oils. This diversification can contribute to a stable revenue stream.

Advanced manufacturing technologies and In-House Design & Printing Technology: The company is equipped with the latest manufacturing technologies. This technological edge can enhance production efficiency, reduce costs, and maintain high-quality standards, giving them a competitive advantage. The in-house design and printing technology provides the company with greater control over product customization and branding. This can be a significant advantage in meeting specific customer requirements and building a strong brand identity.

Experienced promoter and management team: Its promoter Vipulbhai Dulabhai Mendapara and Prafulkumar Karsanbhai Vaghasiya have been associated with the company since its inception and Gauravbhai Chhaganbhai Gopani a valued addition to the team moving forward play a pivotal role in driving the company's growth trajectory, overseeing critical functions such as finance, research and development, and strategic decision-making. His unwavering commitment to excellence and relentless pursuit of innovation serve as the driving force behind Ideal Technoplast Industries' stupendous growth and success.

Risks and concerns

Dependent on key customers: Its operations are dependent on the requirements of its customers, from its Top 10 Customers it generates Rs 1172.39 lakh, Rs 513.98 lakh, Rs 311.36 lakh and Rs 393.31 lakh of Total Revenue, which is almost 48.36%, 42.86%, 54.83% and 69.07% of the Total Revenue generated as on February 29, 2024, March 31, 2023, 2022 and 2021 respectively. It is an innovation driven enterprise and to produce new products which attracts higher cost. Thus, the cost of the new product is comparatively higher than the usual product. This thus raises the price of the product and thus involves the risk of acceptance by the customer. As a result, number of potential consumers of its products may reduce which will ultimately affect its potential revenue in future to that extent.

Increase in the prices of raw material: Its Key Raw Materials include plastic granules, handle, oil and grease, Packing material and printing material. It sales its product in different sizes ranging from 125 ml to 40 Ltr. of Round Container, 800 ml to 40 Ltr. of Square Container etc. The increase in the cost of raw material of its products will affect its ability to maintain the quantity of product in the package. This may lead to have an adverse effect on its business, results of operations and financial condition.

The company is majorly dependent on two states: Its purchase of raw materials is majorly dependent on 2 States i.e. Haryana and Gujarat. It cannot assures that it will be able to get the same quantum and quality of supplies of raw material from the said states or any supplies at all and the loss of supplies from one or more of them may adversely affect its purchases of stock and ultimately its revenue and results of operations. However, the composition and amount of purchase from these States might change as it continue seek supplies from new states for its product for better quality and price in the normal course of business. In case of uncertainties and adverse developments in these states can affect the business of the company’s ability to procure raw materials and to carry on the business.

Outlook

Ideal Technoplast Industries is a manufacturer and supplier of rigid plastic packaging, with a presence in both domestic and international markets (indirectly through export houses and third parties). It provides industrial packaging solutions for sectors such as paints, agro, chemicals, cosmetics, adhesives, lubricants, food, and edible oil. The company offers a range of rigid plastic packaging solutions with advanced manufacturing technologies, including In-House Design & Printing Technology.  On the concern side, it operates in highly competitive market segments that are highly fragmented among several market participants. In the Rigid Plastic Container Industry, it competes with numerous multinational and Indian companies with sizeable market shares as well as the broader industry comprising numerous small competitors. Moreover, barriers to entry for the market segments in which it operates are generally low. It anticipates these low barriers to entry, combined with forecast growth potential in the industry, will lead to increased competition both from established players as well as from new entrants in the industry. This could include attrition of its staff to its competitors or its staff establishing competitive enterprises.

The company is coming out with an IPO of 13,25,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 121 per equity share to mobilize Rs 16.03 crore. On performance front, during FY 2022-23, the company's revenue from operations and other income increased to Rs 1,199.79 lakh, from the amount of Rs 568.13 lakh recorded in FY 2021-22. The restated Profit after Tax for FY 2022-23 has been significantly increased to Rs 50.62 lakh as against Rs 10.53 lakh in the FY 2021-22. This was mainly due to increase in the sales volume during the fiscal year. Meanwhile, in recent years, creative and unique packaging has become a trend. It's not just about functionality, packaging now serves as a promotional tool. High-quality labels convey professionalism and reliability. The company has set-up facility of printing the outer branding labels directly on the manufactured products instead of pasting paper-based labels on the products, this efficient printing technique has minimized material waste, benefiting both the environment and cost management, it also has enabled faster label production means quicker time-to-market for new products.