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Review By Dilip Davda on April 19, 2019
• The primary business of the company is the manufacturing of corrugated boxes.
• It is also engaged in trading of Kraft per, duplex paper etc.
• 9MFY19 results are based on the business succession process.
• Based on 9MFY19 performance, issue pricing appears reasonable.
ABOUT COMPANY:
GKP Printing & Packaging Ltd. (GKP) is an ISO 9001:2015 certified Company engaged in the manufacturing of corrugated boxes. The company deals in various types of corrugated boxes such as master cartons, mono cartons, Honey comb partition boxes, Die cut self-locking boxes, storage bins, adjustable depth book flap, Ring flap boxes and unit cartons. It is also engaged in the trading of Kraft paper, Duplex paper and Low – Density Plastic Rolls (LD Rolls). Kraft paper and Duplex papers are the primary raw material in corrugated boxes manufacturing and their trading provides the benefits of backward integration to the company by enabling it to procure raw material at very competitive prices as compared to other manufacturers of the corrugated boxes. The company is registered with the Ministry of MSME as a manufacturer of corrugated paper containers.
Through a Business Succession Agreement dated April 14th, 2018 whereby the company acquired the substantial assets and liabilities of the respective proprietorship concerns.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital (Rs. 4.41 cr.) and general corporate fund (Rs. 1.47 cr.) needs, GKP is coming out with a maiden IPO of 2056000 equity shares of Rs. 10 each with a fixed price of Rs. 32 per share to mobilize Rs. 6.58 cr. The issue opens for subscription on 23.04.19 and will close on 26.04.19. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 28.04% of the post issue paid-up capital of GKP. For raising Rs. 6.58 Cr. Company is spending Rs. 0.70 cr.
The issue is solely lead managed by Holani Consultants Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Maverick Share Brokers Pvt. Ltd. is the market maker for the issue.
Having raised initial equity at par, the company has converted/issued further equity at a price of Rs. 32 per share in January 2019. The average cost of acquisition of shares by the promoters is Rs. 10.35 and Rs. 12.93 per share. Post issue, GKP's current paid up equity capital of Rs. 5.28 cr. will stand enhanced to Rs. 7.33 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for last three fiscals, GKP has (prior to succession process) posted turnover/net profits of Rs. 5.13 cr./ Rs.0.25 Cr. (FY16), Rs. 5.75 cr./Rs. 0.25 cr. (FY17) and Rs. 14.09 cr. / Rs. 0.55 cr. (FY18). For the first nine months ended on 31.12.18, it has earned a net profit of Rs. 2.76 cr. on a turnover of Rs. 19.23 cr. No doubt GKP has posted growth in top line and bottom line for FY17 and FY18, but the sudden boost in the top and bottom line for 9MFY19 is the result of the business succession process, as explained by the management.
The issue is priced at a P/BV of 1.83 on the basis of its NAV of Rs. 17.46 as on 31.12.18 and at a P/BV of 1.41 on the basis of post issue NAV of Rs. 22.62.
For the last three fiscals, average EPS and RoNW data are ignored by the company due to proprietary business, for 9MFY19 it has shown an EPS of Rs. 8.21 (not annualized) and RoNW of 42.48%.
If we annualize latest earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 6.37 which appears reasonable. Sustainability of such performance raises concern.
COMPARISION WITH LISTED PEERS:
As per offer documents, it has shown Worth Peripherals as its listed peer that is currently trading around 15 P/E (as on 18.04.19). However, it is not strictly comparable.
MERCHANT BANKER'S TRACK RECORD:
This is the third mandate from its stable. Out of last two listings, one opened at par and the 1 with a premium of 49.12% on the day of listing.
Although GKP has posted growth in top and bottom lines for the past three years plus financial performance, the sudden jump in the top and bottom line raises concern. It is issuing shares at the same price based on pre-IPO placements. Printing and packaging industry is poised for better prospects ahead. Considering these aspects, risk savvy cash surplus investors may consider investment for long term at their own risk.
Review By Dilip Davda on April 19, 2019
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of G. K. P. Printing & Packaging Limited offers an early investment opportunity in G. K. P. Printing & Packaging Limited. A stock market investor can buy GKP Printing IPO shares by applying in IPO before G. K. P. Printing & Packaging Limited shares get listed at the stock exchanges. An investor could invest in GKP Printing IPO for short term listing gain or a long term.
Read the GKP Printing IPO recommendations by the leading analyst and leading stock brokers.
GKP Printing IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the GKP Printing IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for GKP Printing IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the GKP Printing IPO.
The GKP Printing IPO allotment status will be available on or around May 3, 2019. The allotted shares will be credited in demat account by May 7, 2019. Visit GKP Printing IPO allotment status to check.
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