Divyadhan Recycling Industries is set to open its IPO for bidding from September 26 to September 30, 2024. With an issue size of ₹24.17 crore, this IPO offers investors exposure to the growing sector of recycled polyester staple fibre (R-PSF) and recycled pellets.
About Divyadhan Recycling Industries
Founded in 2010, Divyadhan Recycling Industries is involved in the manufacturing of recycled polyester staple fibre (R-PSF) and recycled pellets, made from post-consumer PET bottles. The recycled polyester fibre is used in a variety of applications, including:
- Home furnishings: Premium pillows, cushions, and quilts
- Industrial segments: Packaging, textiles, automotive components, and non-woven fabrics
- Recycled pellets: Used in both food-grade and non-food-grade bottles
Strengths and Competitive Advantages
- ISO Certification: The company is ISO 9001:2015 certified for quality management systems and ISO 14001:2015 certified for environmental management.
- Manufacturing Capacity: Its manufacturing facility in Baddi, Himachal Pradesh, has an annual production capacity of 8,030 metric tonnes of fibre and 4,320 metric tonnes of pellets, allowing the company to serve both domestic and international markets.
- Profit Growth: Divyadhan has shown significant growth in profitability, with Profit After Tax (PAT) rising from ₹0.53 crore in FY22 to ₹2.38 crore in FY24.
Risks and Challenges
While Divyadhan Recycling Industries has promising prospects, there are notable risks to consider:
- Geographical Concentration: Himachal Pradesh contributes the majority of the company’s revenue (88.55% in FY24). Any adverse developments in this region could negatively affect operations.
- Customer Concentration: A significant portion of the company’s revenue depends on a single customer, PV Fibres LLP, which accounted for 88.05% of revenue in FY24. The loss of this customer could have a significant impact on the company’s financial stability.
- Dependency on Recycled PET Fibre: The company’s main source of revenue comes from the sale of recycled polyester staple fibre, which contributed 94.68% of revenue in FY24. Any decline in the demand for this product could adversely affect the company’s operations.
- Legal Proceedings: The company and its group companies are involved in legal proceedings. Adverse judgments in these cases could harm the company’s business prospects.
- Outstanding Loans: As of March 31, 2024, Divyadhan has unsecured loans amounting to ₹5.87 crore. The inability to service these loans could negatively impact the company’s financial position.
Financial Overview
Despite facing challenges, Divyadhan Recycling Industries has maintained steady revenue growth and improved profitability.
| Financial Metric | FY22 | FY23 | FY24 |
|---|---|---|---|
| Revenue (₹ Cr) | 57.78 | 57.34 | 56.13 |
| Total Assets (₹ Cr) | 17.68 | 19.39 | 24.12 |
| Profit After Tax (₹ Cr) | 0.53 | 2.16 | 2.38 |
Key Performance Indicators (KPI)
| Metric | Value |
|---|---|
| Return on Equity (ROE) | 18.42% |
| Return on Capital Employed (ROCE) | 20.76% |
| Debt/Equity Ratio | 0.47 |
| Profit After Tax Margin | 4.24% |
| P/BV Ratio | 4.9 |
IPO Application Details
Investors can apply for the IPO in the following price band:
| Application Type | Price Band | Apply Upto |
|---|---|---|
| Regular | ₹60 – ₹64 | ₹2 Lakh |
| High Networth Individual (HNI) | ₹60 – ₹64 | ₹2 – 5 Lakh |
IPO Specifications
| IPO Date | September 26, 2024 – September 30, 2024 |
|---|---|
| Face Value | ₹10 per share |
| Price Band | ₹60 to ₹64 per share |
| Lot Size | 2,000 Shares |
| Total Issue Size | 3,776,000 shares |
| Issue Size | ₹24.17 crore |
| Listing At | NSE SME |
Promoter Holdings
The promoters, Mr. Pratik Gupta and Mr. Varun Gupta, will see their holding decrease from 94.06% pre-issue to 69.24% post-issue.
IPO Reservation
| Investor Category | Shares Offered |
|---|---|
| Anchor Investors | 10,70,000 (28.34%) |
| Market Maker | 2,00,000 (5.3%) |
| QIB | 7,16,000 (18.96%) |
| NII (HNI) | 5,38,000 (14.25%) |
| Retail Investors | 12,52,000 (33.16%) |
Lot Size and Investment Limits
| Application Type | Lots | Shares | Amount |
|---|---|---|---|
| Retail (Min) | 1 | 2,000 | ₹128,000 |
| HNI (Min) | 2 | 4,000 | ₹256,000 |
IPO Objectives
The funds raised through this IPO will be used for:
- Capital expenditure
- General corporate purposes
- Issue-related expenses
Analyst Review
According to Dilip Davda, Divyadhan Recycling Industries has maintained almost static revenue growth over the last few years, but the company’s profitability has improved due to cost control measures and value-added products. The company operates in a highly competitive and fragmented segment, but with its strategic focus on recycling and eco-friendly products, the long-term prospects appear bright. While the issue is fully priced, it may offer good returns in the long term.
Conclusion
Divyadhan Recycling Industries IPO presents an opportunity to invest in the recycling and sustainable materials sector, which is gaining prominence globally. Despite the risks associated with customer concentration and regional dependency, the company’s focus on recycled materials and its steady profitability growth make it an appealing option for long-term investors.
For more details, contact the IPO registrar:
Skyline Financial Services Private Ltd
Phone: 02228511022
Website: Skyline Financial Services
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