Mold-Tek Packaging Rights Issue review (May apply)

MTPL is engaged in providing rigid plastic packaging solutions.
It has co-ordeal business relations ship with its top 10 customers.
The company has suffered a setback in Q1 of FY21 following pandemic.
It is offering investors friendly subscription options for this issue.

ABLOUT COMPANY

Mold-Tek Packaging Ltd. (MTPL) is a packaging solution company mainly engaged in the manufacturing of rigid plastic packaging containers through injection molding technology for paints, lubes, oils, food, FMCG and other sectors including cosmetics and pharmaceutical. It develops designs and manufactures standard airtight and pilfer - proof pails as well as customized containers to meet customer's packaging requirements.

The company has introduced certain world class packaging products in India for paints, oil, lubricants, food and FMCG industries through continuous innovation. MTPL decorates products using screen printing, heat transfer labeling technique and In- Mold Labeling ('IML'), which is one of the modern and premium container decoration techniques globally.

It has nine manufacturing units, four at Telangana and one each at Maharashtra, Daman, Karnataka Tamil Nadu and Andhra Pradesh. Company's products mainly cater to three business segments viz (i) paint (ii) oil and lubricant, (iii) food and FMCG. Its products are available in different size and shapes such as circular, rectangular, curving and special shapes as per customer requirement.

The company derives approx 74% of its total revenue from multinational companies in paint, lubricant segment.

ISSUE DETAILS

To part finance its repayment/prepayment of working capital borrowings (Rs 52.83 cr.), general corpus fund (Rs 17.61 cr.), MTPL is coming out with a rights issue of 555330 equity shares (of Rs 5 each) linked with detachable warrants to mobilize Rs 71.30 cr. The issue opens for subscription on October 28, 2020 and will close on November 11, 2020.

This issue consists of Issue of 1 partly paid-up equity share of face value of Rs 5/-each ('Rights Equity Shares') for cash at a price of Rs 180 per Rights Equity Share (including a premium of Rs 175 per Rights Equity Share] ('Rights Equity Share Price') along with 6 detachable warrants ('Warrants') for cash at a price of Rs 184 per Warrant ('Warrant Price') for every 50 fully paid-up equity shares held by the Eligible Shareholders. MTPL is likely to spend Rs 0.86 cr. for this rights issue process.

Rights issue payment schedule is as under: (considered as investors friendly gesture)

PAYMENT SCHEDULE FOR THE RIGHTS EQUITY SHARES (Rs )

Amount Payable per Right Equity Share	Fare Value	Premium	Total
On Application	1.25	43.75	45.00
One or more subsequent call(s) as determined by Rights Committer at its sole discretion, from time to time	3.75	131.25	135.00
Total	5.00	175.00	180.00

PAYMENT SCHEDULE FOR THE DETACHABLE WARRANTS (Due Date)(Rs )

Amount Payable per detachable warrant (Due Date)	Fare Value	Total
On Application	46.00	46.00
On Warrant Excercise	138.00	138.00
Total	184.00	184.00

Post allotment, shares and warrants will be listed on BSE and NSE.

For the entitlement purpose, the company has fixed October 22, 2020 as the record date. Scrip turned ex-right on October 21, 2020.

MTPL's current paid up equity capital of Rs 13.88 cr. will stand enhanced to Rs 14.16 cr. (post fully paid up of new shares) and Rs 15.83 cr. after conversion of detachable warrants into equity. The company is looking at market cap of Rs 569.77 cr. after completion of full process of this issue.

The issue is solely lead managed by Emkay Global Financial Services Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue.

FINANCIAL PERFORMANCE

On financial performance front, on a consolidated basis the company has posted turnover/net profits of Rs 406.85 cr. / Rs 31.92 cr. (FY19) and Rs 439.36 cr. / Rs 37.44 cr. (FY20).

For Q1 of FY21 the company has posted net profit of Rs 1.51 cr. on a turnover of Rs 65.44 cr. against Rs 117.52 cr. and Rs 9.37 cr. respectively for the corresponding previous period. For this period, top 10 customers' contribution in top line marked at 67.6%. This indicates setback for the company amidst ongoing pandemic scare.

Issue is priced at a P/BV of 2.59 based on its NAV of Rs 69.44 as on March 31, 2020 and

SHARE PRICE MOVEMENTS

MTPL's share has posted 52 week high/low of Rs 305.45/ Rs 142.74. It was last quoted at Rs 272.75 on cum-right basis on October 20, 2020. It opened at Rs 273.00 and closed at Rs 268.40 on ex-right basis on October 21, 2020 and its last traded price was at Rs 258.95 at the close on October 23, 2020. At this closing price, MTPL's post issue market cap stands at Rs 819.68 cr.

Conclusion / Investment Strategy

Based on its financial track record and the price movement so far, issue is reasonably priced. However, performance of Q1 of FY21 marked setback and raises concern. No doubt, this set back is due to ongoing pandemic scenario and may not last long. Stakeholders having surplus funds may consider investment for long term as the company is offering investor friendly subscription options. (Subscribe for long term).

Review By Dilip Davda on October 25, 2020

Review Author

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. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. 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 Mold-Tek Packaging Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Mold-Tek Packaging Rights Issue worth investing. The Mold-Tek Packaging Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if Mold-Tek Packaging Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Mold-Tek Packaging Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.