Standard Glass Lining
IPO Size: Rs. 410 cr
- Fresh Issue of Rs. 210 cr to (i) repay Rs. 130 cr of Rs. 198 cr gross debt (ii) capex Rs. 40 cr (iii) inorganic growth Rs. 20 cr (5 acquisitions done in the last 4 years)
- Offer for sale (OFS) of Rs. 200 cr by mainly promoter (72.5% to drop to 60% post IPO)
Price band: Rs. 133-140 per share
M cap: Rs. 2,793 cr, implying 15% dilution
IPO Date: Mon 6th Jan to Wed 8th Jan 2025, Listing Mon 13th Jan 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Engineering Equipment Manufacturer
Standard Glass Lining Technology is a Hyderabad based manufacturer of specialized equipments, such as reaction systems, storage, separation and drying systems and provides plant engineering and utility services. Company’s equipments are glass-lined, stainless steel and nickel alloy based, and supplied to pharma, chemicals, food and beverage sectors, with pharma comprising 80% of revenue.
Global Tie-Ups
Company has supply arrangement with HHV Pumps (subsidiary of Sweden’s Atlas Copco) for vacuum pumps and with Japan’s Asahi Glassplant and GL Hakko for glass lining. Asahi Glassplant and GL Hakko are also strategic investors, having acquired ~11% stake in Nov 2023 for Rs. 168 cr (at Rs.80 per share).
Funding Growth
After undertaken Rs. 81 cr capex between FY23 to H1FY25, company plans further Rs. 73 cr capex for brownfield expansion. Of this, Rs. 40 cr will be funded via fresh issue proceeds and balance through internal accruals. Manufacturing capacity will rise by 13% with higher valued added products and diversification to new sectors, such as oil and gas, heavy engineering, edible oil, keeping long term outlook positive.
Double Digit Net Margin
Based on FY22 proforma revenue of Rs. 400 cr (reported revenue of Rs. 240 cr), company has witnessed revenue growth CAGR of 17% between FY22-FY24.
On FY24 revenue of Rs.543 cr, net profit for equity shareholders stood at Rs. 58 cr, leading to a net margin of 11%. For H1FY25, revenue and PAT stood at Rs. 307 cr and Rs.34 cr respectively, with net margin being maintained in double digit. EPS was at Rs. 3.5 and Rs. 1.9 for FY24 and H1FY25 respectively.
Poor Working Capital Management
Receivables outstanding have doubled in past 18 months, from Rs. 91 cr as of 31.3.23, to Rs. 191 cr, as of 30.9.24, when revenue growth was 11% p.a., from FY23 to H1FY25. Even inventory increased by 80% in 18 months, with company holding ~5 months of inventory. Thus, outstanding receivables + inventory is over 8 months of revenue, which is seen quite high.
20%+ RoE
Despite poor working capital management, specialised nature of products translate into high margins and a high RoE (21%) and RoCE (25%). As 1/3rd of Rs. 444 cr net worth comprises cash and equivalents (only Rs. 40 cr of Japanese investment invested till date), adjusted RoCE is higher at 29%, and so be the RoE.
Attractive Valuation
On FY25E revenue close to Rs. 650 cr and EPS of ~Rs. 4.4, current year PE multiple is 32x. Factoring in lower interest costs on debt reduction, one year forward PE is 27x, which is seen attractive for capital goods player, double digit net margin, high RoE, capex underway, and addresses the long working capital cycle.
On 16th Dec 2024, company raised Rs. 40 cr pre-IPO at the same price of Rs. 140 per share.
6th Jan 2025 at 05:44 am
5th Jan 2025 at 09:17 pm