Premium Plast IPO Review: Apply or Not?

Premium Plast Ltd. is set to launch its IPO from October 21, 2024, to October 23, 2024. The company is a leading manufacturer of plastic components primarily for the automotive industry. It offers a diverse range of products, including exterior, interior, and under-the-hood plastic components, catering to original equipment manufacturers (OEMs). This post will provide an in-depth review of Premium Plast’s business strengths, financial performance, risks, and whether this IPO is a good investment.

Premium Plast IPO Details

• IPO Dates: October 21, 2024 – October 23, 2024
• Price Band: ₹46 – ₹49 per share
• Lot Size: 3000 shares
• Minimum Investment: ₹1,38,000
• Issue Size: ₹26.20 crore
• Face Value: ₹10 per share
• Listing Date: October 28, 2024
• Listing At: NSE SME
• Shareholding Pre Issue: 95.45%
• Shareholding Post Issue: 68.73%

Also See: IPO GMP

About Premium Plast

Founded in 1995, Premium Plast is a tier-1 supplier of plastic components to automotive OEMs. The company focuses on designing, manufacturing, and supplying plastic parts used in commercial vehicles. Additionally, it offers products for industrial applications, making it a versatile player in the plastic components industry.

The company’s product line includes:

• Automotive parts: Exterior and interior components, under-the-hood parts, steering wheels, and other vehicle-related components.
• Industrial plastic parts: Injection and blow moulded plastic articles for industrial applications.

Premium Plast operates three manufacturing units in India, with two in Pithampur, Madhya Pradesh, and one in Vasai, Maharashtra, boasting a total installed capacity of 1,975 MTPA.

Strengths of Premium Plast

1. Certified Manufacturing Capabilities: Premium Plast holds various certifications, including IATF-16949 for plastic injection and blow moulding components, ISO 9001:2015 for quality management, and ISO 14001:2004 for environmental management.
2. Diverse Product Portfolio: The company manufactures over 600 components for the automotive industry, along with industrial plastic parts and moulded packaging products.
3. Sustainable Manufacturing Practices: The company’s manufacturing facilities follow sustainable practices, achieving ‘zero-discharge’ status by not emitting any waste into the environment.
4. Steady Revenue Growth: The company’s revenue increased from ₹30.99 crore in FY22 to ₹46.71 crore in FY24, while PAT rose from ₹0.78 crore in FY22 to ₹4.77 crore in FY24.

Also See: Subscription

Risks Associated with Premium Plast

1. Revenue Dependence on a Single Client: The company is highly reliant on VE Commercial Vehicles Limited, which contributes over 81% of its revenue. Any reduction in orders from this client could significantly impact its financial health.
2. Concentration in a Single Segment: Most of the company’s revenue comes from the automotive moulding division, making it vulnerable to any downturns in the automotive industry.
3. Geographical Concentration: All of Premium Plast’s manufacturing operations are based in Maharashtra and Madhya Pradesh, putting the company at risk if there are any disruptions in these regions.
4. Competitive Industry: Premium Plast operates in a highly competitive and fragmented market, with numerous players vying for contracts with OEMs.

Financial Performance

• Revenue Growth: Premium Plast’s revenue from operations increased steadily from ₹30.99 crore in FY22 to ₹46.71 crore in FY24.
• Profitability: The company’s PAT surged from ₹0.78 crore in FY22 to ₹4.77 crore in FY24.
• Total Assets: Premium Plast’s total assets grew from ₹25.17 crore in FY22 to ₹38.09 crore in FY24, reflecting its expansion.

IPO Objectives

Premium Plast intends to use the proceeds from the IPO for the following purposes:

1. Expansion of Manufacturing Facility: The company plans to expand its Pithampur facility and invest in new machinery.
2. Rooftop Solar Power Plant: The company will set up a solar power plant at its existing facility to meet sustainability goals.
3. Repayment of Debt: A portion of the proceeds will be used to repay certain outstanding borrowings.
4. General Corporate Purposes: Funds will be allocated to meet general corporate needs and cover offer-related expenses.

Should You Apply for Premium Plast IPO?

Premium Plast shows promising growth in revenue and profitability, but it comes with significant risks. The company’s heavy dependence on one client and concentration in the automotive moulding division pose challenges. Additionally, its profitability surged just before the IPO, raising questions about the sustainability of such growth in the long term.

However, its certifications, strong operational history, and commitment to sustainability make it a potential medium to long-term investment for informed investors. The IPO is fairly priced based on the recent financial performance, but it operates in a highly competitive industry with limited customer diversity. Investors with a high-risk appetite and a long-term investment horizon may consider applying.

Expert Premium Plast IPO Review Review: [Dilip Davda: May Apply] The company’s growth prospects appear promising, but its reliance on one major client and a single business segment is concerning. For those willing to take on moderate risk, this could be a potential long-term investment.

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