Avon Moldplast IPO Closes July 18, Should you Invest?

Avon Moldplast Ltd has planned NSE SME IPO to raise Rs. 4.51 crore. This issue constitutes 27.17% of the post issue paid up capital of the company. The Avon Moldplast IPO lead manager is Turnaround Corporate Advisors Pvt. Ltd. and Mas Services Ltd. is the registrar to the issue.

The company had issued 80000 shares at a price of Rs. 100 per share (on the basis of Rs. 10 FV) in March 2008 and has also issued bonus shares in the ratio of 2 for 1 in January 2018. Post issue, the company’s current paid up capital of Rs. 2.37 cr. will increase to Rs. 3.25 cr.

Avon Moldplast Ltd. (AML) manufactures quality plastic molded furniture under the brand name of “AVON” since 2002. The company’s manufacturing unit is located in Ghaziabad, Uttar Pradesh. This company has distribution network in PAN India with about 100 distributors and over 10000 selling agents.

Investment Rationale

• The company plans to scale up the production and enhance the design portfolio of the existing products
• To increase the market share of the company in the domestic market
• Further strengthen its competitive position
• To make optimum use of their resources
• To further enhance the distributorship’s network

Avon Moldplast IPO Detail

• Issue Open: July 12, 2018 – July 18, 2018
• Issue Type: Book Built Issue IPO
• Issue Size: 884,000 Equity Shares of Rs 10 aggregating up to Rs 4.51 Cr
• Issue Price: Rs 51 Per Equity Share
• Market Lot: 2000 Shares
• Minimum Order Quantity: 2000 Shares
• Listing At: NSE SME
• Commencement of trading of the Equity Shares on the Stock Exchanges: On or about July 22, 2018

Purpose of the issue

The objects of the Avon Moldplast IPO are:

1. For the acquisition of additional molds of chair, cupboard, table etc., at the existing manufacturing facilities of the company of INR 2.06 crore
2. To meet the incremental working capital requirements of INR 1.50 crore
3. General Corporate Purpose of INR 0.60 crore
4. To achieve the benefits of listing their Equity Shares on the Stock Exchanges. The listing of Equity Shares is expected to enhance the company’s brand name and provide liquidity to the existing shareholders.
5. Offer related expenses of INR 0.35 crore

Valuation – Should you Invest?

During FY 16 and FY 17, AML has posted net profit of Rs. 5.55 lakhs and Rs. 9.97 lakhs respectively. The company had posted topline of Rs. 1000 lakhs in FY 16 and Rs.1385 lakhs in FY 17. The company has delivered net profit of Rs.0.69 cr. and a turnover of Rs. 18.92 cr for the first 10 months of FY18, which means a sudden rise from the previous years.

Additionally, the listed peers Nilkamal, Supreme Ind., Prima Plastics and Wim Plast, are currently trading at a P/Es of around 20, 33, 33 and 23. (as on 06.07.18). These companies have strong presence in the segment AML is dealing with and AML is looking for the same P/E for this issue, which means AML is slightly expensive. The investors should therefore avoid the Avon Moldplast IPO.