The Three M Paper Boards IPO is set to make its debut in the stock market, offering investors an opportunity to participate in the growth of a key player in the recycle paper-base duplex board industry. Scheduled to open for subscription on July 12, 2024, and close on July 16, 2024, this initial public offering (IPO) presents a significant moment for both the company and potential investors. Here’s a detailed look at what the IPO entails, including its pricing, allotment process, and the company’s prospects.
IPO Details and Pricing
The Three M Paper Boards IPO is a book-built issue with a total size of ₹39.83 crore. The company plans to issue a fresh batch of 57.72 lakh shares at a price band of ₹67 to ₹69 per share. This IPO will be list on the BSE SME platform, with the tentative listing date set for July 22, 2024.
For retail investors, the minimum application size is 2000 shares, translating to an investment of ₹138,000. High Net-Worth Individuals (HNIs) need to apply for at least 4000 shares, which amounts to ₹276,000. This structure aims to attract a wide range of investors, from retail to institutional.
Allocation and Subscription
The Three M Paper Boards IPO is structure to accommodate various investor categories. The allocation is divide as follows:
- Qualified Institutional Buyers (QIBs): 18.99% of the shares (1,096,000 shares)
- Non-Institutional Investors (NIIs): 14.28% of the shares (824,000 shares)
- Retail Individual Investors (RIIs): 33.26% of the shares (1,920,000 shares)
- Anchor Investors: 28.45% of the shares (1,642,000 shares)
The IPO has seen significant interest, with the subscription details indicating a robust response from different investor segments. As of the first day of bidding, the retail category was oversubscribe, demonstrating strong investor confidence.
Company Background
Founded in 1989, Three M Paper Boards Limited specializes in producing high-quality recycled paper-based duplex board products. These products are widely used in packaging applications across diverse industries such as food and beverage, pharmaceuticals, cosmetics, and consumer goods. The company’s manufacturing facility is located in Chiplun, Ratnagiri, Maharashtra, and has a production capacity of 72,000 tonnes per annum (TPA) as of FY 2022-23.
The company has established a strong distribution network with around 25 dealers across India and exports its products to over 15 countries, including regions in Asia-Pacific, the Middle East, the Mediterranean, and Africa. This global presence underscores the company’s ability to meet international quality standards and adapt to various market demands.
Financial Performance
Three M Paper Boards Limited has shown a mixed financial performance over the years. For the fiscal year ending March 31, 2024, the company reported a significant increase in profit after tax (PAT) by 71.53%, despite a 16.3% decline in revenue compared to the previous fiscal year. This discrepancy raises questions about the sustainability of these profits.
Here’s a snapshot of the company’s financial performance over the past few years:
- FY 2024: Revenue of ₹27,601.56 lakh, PAT of ₹1,134.72 lakh
- FY 2023: Revenue of ₹32,974.92 lakh, PAT of ₹661.53 lakh
- FY 2022: Revenue of ₹31,600.49 lakh, PAT of ₹327.56 lakh
- FY 2021: Revenue of ₹16,552.14 lakh, PAT of ₹172.63 lakh
The company’s financials indicate a strong PAT growth but a fluctuating revenue trend, which could impact investor sentiment.
Use of Proceeds
The proceeds from the Three M Paper Boards IPO will be utilize for several key purposes:
- Capital Expenditure: Installing new machinery and modernizing existing processes within the manufacturing facility, including the installation of a plastic-fired low-pressure boiler.
- Working Capital: Funding long-term working capital requirements to support business operations.
- Repayment of Borrowings: Prepayment or repayment of outstanding borrowings to reduce debt levels.
- General Corporate Purposes: Covering various other corporate needs.
These allocations are aimed at enhancing the company’s operational efficiency and financial health, which could positively impact future growth prospects.
Market Position and Competition
Three M Paper Boards operates in a highly competitive and fragmented market. Despite this, the company has managed to carve out a niche for itself through its focus on recycled paper products. The market for paper and packaging is growing, driven by increasing consumption across industries and the rise of e-commerce.
Three M Paper Boards’ listed peers include companies like N R Agarwal Industries, Kuantum Papers, and Shree Ajit Pulp and Paper. These competitors have varying P/E ratios, reflecting different market positions and operational efficiencies. The IPO’s pricing at a P/BV of 1.52 and a P/E of 11.70 based on FY24 earnings suggests that the shares are priced in line with industry norms but may face competitive pressures.
IPO Review and Outlook
The Three M Paper Boards IPO has garnered attention due to its unique positioning in the recycled paper sector. While the company has shown impressive profitability, the sustainability of its recent earnings is a point of concern. The significant decline in revenue alongside a rise in PAT raises questions about future performance.
Investors are advised to consider these factors when evaluating the IPO. The strong market interest and the company’s growth trajectory might make it an appealing option for those looking to invest in the paper and packaging sector. However, potential investors should weigh the risks associated with fluctuating financial performance and competitive pressures before making investment decisions.
Conclusion
The Three M Paper Boards IPO represents a noteworthy opportunity for investors interested in the paper industry. With a solid track record of producing high-quality recycle paper products and a strategic plan for utilizing IPO proceeds, the company is position for growth. However, the mix financial performance and competitive landscape should be carefully consider. As the IPO date approaches, investors should stay inform and assess their investment strategies accordingly.
