Kshitij Polyline IPO Review (Neutral)

Review By Finception on September 17, 2018

Ksithij Polyline is in the business of manufacturing and distributing of I.D. Card Products, Binding & Lamination equipment, related materials & accessories, and Stationery Products. They began operation in 1998 and are currently operating out of a manufacturing facility at Dadra and Nagar Haveli. They are also involved in the export of products to countries like Uganda, Lebanon, Sri Lanka, South Africa, Bhutan, Nepal, Dubai etc.

Products

1. Office Stationery and Utility products
2. Laminated Sheet & PP Sheet
3. Wiro and Spiral
4. Customised Products

How are they doing as a business?

The top line was largely growing at a slow pace until FY17 and then the company’s revenue jumped from 17 Cr. to 27 Crores in FY18. Profits too were hovering at around 20 lakhs during FY17 and then made a five-fold jump the subsequent year taking the sum total to 1 Cr in FY 18.

Particulars(in Cr)	FY18	FY17	FY16	FY15	FY14	FY13
Revenue	27	16	15	12	12	13
PAT	1	0.2	0.2	0.16	0.11	0.08
PAT Margin (%)	3.8	1.6	1.2	1.3	0.88	0.61

We don’t know what led to this sudden increase as the company has limited its financial disclosure up to the Q3FY18 in the DRHP. The revenue and profit figures for the entire year have been taken from the company’s investor presentation.

Why the thin margins?

It’s quite evident that the company operates with thin margins. One of the principal reason for this anomaly is that the segment is highly competitive in the unorganized sector.

The industry, in which we are operating, is highly and increasingly competitive due to presence of many small time players in the unorganized sector- DRHP

The company concedes that the competition is, in fact, a concern. The financial implication of being a marginal player in the unorganized sector is that you can’t set your own prices, instead, the market sets the price for you. This is partly the reason why Kshithij Polyline has been working with thin margins. The only real way to make any significant impact on your bottom line is by increasing scale i.e. selling more stationery products. Until the company can establish itself as a brand, our opinion is that the company’s margins will continue to remain in this range.

High Trade Receivables?

The company had trade receivables of about 30 % from the past few years which increased to 45 % as on December FY18. One way of looking at this is to say that the company has been selling products on credit to boost its revenues. In any case, its important for investors to keep a tab on this column.