Shree Tirupati Balajee Agro Trading Company

FIBC Manufacturer

Net proceeds will be used for debt repayment

Incorporated in 2001 by Binod Agarwal, Tirupati Balajee Agro Trading Company Pvt Ltd (STBATCPL) manufactures and sells flexible intermediate bulk containers (FIBCs), i.e., large flexible bags, and other industrial packaging products such as woven sacks, woven fabric and narrow fabric and tapes in the domestic and overseas markets. The company offers customised products. It caters to the bulk packaging solutions of its clients from diverse industries like chemicals, agrochemicals, food mining, waste disposal, agriculture, lubricants and edible oils by supplying them FIBC products for packaging and transportation. The loading and unloading processes of vessels, containers, or trucks are streamlined, reducing labor requirements.

FIBC is engineered to accommodate loads ranging from 500 kg to 2,500 kg. Woven polypropylene bags or simply woven PP bags are widely used to packing materials for grains, milling and sugar industries. Also, these bags have a wide application in the fodder industry, chemicals and fertilizers industry besides the cement industry and to pack sand and metal parts. Container liners are made to the specification. They provide protection of the material from rainwater and contamination from foreign parties inside the container. Mulch film is used to cover the soil around the plant with plastic film to conserve the soil moisture to prevents weed growth and regulate soil temperature.

FIBC, i.e., technical bags, container liners, food grade bags, platen bags and builder bags are exported, with the company accorded the status of three-star export house, in accordance with the provisions of the Foreign Trade Policy, 2023 by the Department of Commerce, Ministry of Commerce and Industry, Government of India.

With a track record of more than 20 years, the operations are conducted from five manufacturing units strategically located at Indore, Madhya Pradesh. The facilities are over an area of 21,613 square meters, with an installed extrudious capacity of 2,300 tonnesper month. The utilized capacity is 2,200 tonnesa month. The business is managed through subsidiaries Honourable Packaging Private Limited (HPPL), Shree Tirupati Balajee FIBC Limited (STBFL) and Jagannath Plastics Private Limited (JPPL) for ease of operations and better management and control. Unit I and Unit II are operated by the flagship, while Unit III is operated by subsidiaryShree Tirupati Balajee FIBC Limited. Unit IV is operated by subsidiary Honourable Packaging Private Limited. Unit V is operated by subsidiaryJagannath Plastics Private Limited.

FIBC formed 51.47% of total revenue in FY2024 (67.89% in FY2023). Woven sacks formed 4.51% (6.42%), woven fabrics and narrow fabrics 21.32% (1.91%), tape 4.21% (7.91%), and others 18.49% (15.87%). Liner, container liner, thread, multifilament yarn, filler cord, and treated polymers contributed to the remaining revenue.

Export sales accounted for 49.04%, 64.13% and 84.44% of total revenue in FYs 2024, 2023 and 2022, respectively.

Most of the key raw materials are sourced from domestic vendors and subsidiary under shorter-term contracts.

The Offer and the Objects

The offer comprisesfresh issue of up to 14750000 equity shares at the upper price band of Rs 83,aggregating Rs 122 crore,and at the lower price band of Rs 78, aggregating Rs 115 crore. TheOFSis of up to 5690000 equity shares, aggregating Rs 47 crore at the upper price band of Rs 83 and Rs 44 crore at the lower price band of Rs 78.Promoter shareholder Binod Kumar Agarwal stake will decrease to 65.42% post-issue from 88.38% pre-issue shareholding.

The net proceeds from the fresh issue will be used towards repayment and/or prepayment, in part or full, of certain outstanding borrowings amounting Rs 31.45 crore; investing in subsidiaries HPPL, STBFL and JPPL for repayment and/or prepayment, in part or full, of certain of outstanding borrowings amounting Rs 20.82 crore; funding the incremental working capital requirements amounting Rs 13.5 crore; investment in subsidiaries HPPL, STBFL and JPPL for funding working capital requirements amounting to Rs 10.74 crore; and the balance towards general corporate purposes.

Consolidated outstanding borrowings including fund based and non-fund-based borrowings were Rs 245.33 crore as on May 31, 2024.The consolidated sanctioned limit of working capital facilities stood at Rs 193 crore and included fund-based and non-fund-based limits. So far, Rs 188.88 crore has been used.

Strengths

The products adhere to international standards. The manufacturing units I and II hold ISO 9001:2015 and ISO 22000:2018 certifications. Certifications have been awarded for quality management system and food safety management system for production of FIBC, woven sacks, and fabrics of PP (polypropylene) and HDPE (high-density polyethylene). Unit III is certified with ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, ISO 22000:2018, and SEDEX SMETA four-pillar.

Not dependent on a single market. Has presence in overseas as well as domestic markets. The customer base is spread across the globe. The products are exported to 38 countries. Products are supplied pan India.

Expanded its product reach to various industries like chemicals, salt, fertilizer, food, pharma, agri-commodities, cement, and construction. Moreover, the revenue is well diversified, with a healthy revenue mix of export and domestic sales. Further, healthy relationships have been established with reputed players, thereby ensuring repeated orders.

According to the Indian Flexible Intermediate Bulk Container Association (IFIBCA), India has a 75% share in European FIBC imports and a 72% share in the US import market. India’s dominance in the export market is due to focus on quality, engineering capabilities, backward integration, and ethical business practices. Further, the growth is supported by increasing demand from sectors like food and agriculture, chemical and petrochemicals, and construction materials.

One of the primary drivers of growth is the rapid pace of industrialization worldwide. FIBCs are increasingly being adopted by manufacturers in the chemical and agriculture sectors for transportation of various commodities, including grains, rice, potatoes, cereals, and liquid chemicals. Additionally, these bags are used to store and transport construction supplies such as carbon black, steel, alloys, minerals, cement, and sand. The export numbers are expected to project a CAGR of 5% during 2024-2028 and will reach around 99.9 million units by the end of the forecast period.

The FIBC market is expanding due to growing environmental concerns and rising demand for lightweight, biodegradable bulk packaging materials, particularly in the pharmaceutical sector. Pharmaceutical-grade FIBCs play a crucial role in the storage and prevention of contamination for a wide range of medical products. Innovations in product development, such as the introduction of FIBC variations designed for hygienic packaging solutions, are further contributing to the industry‘s growth

FIBCs are a more sustainable packaging solution than traditional packaging materials, such as drums and sacks. FIBC bags are reusable, recyclable, lightweight, and efficient. Further, FIBC bags are made from polypropylene, a recyclable material. The increasing awareness about sustainability is thus expected to drive the demand for FIBC.

The global FIBC consumption market was valued at US$ 4,856 million in 2023 and is expected to grow to US$ 5,117 million in 2024. The market growth is attributed to the rising need to reduce the weight of bulk packaging, the thriving food and pharmaceutical industries, and the expanding manufacturing and construction sectors in developing regions. The consumption of the Indian FIBC Industry improved by around 7.3% in 2023. It is expected to reach around 69.1 million units by the end of 2024.

The market size of the domestic plastic packaging industry is expected to grow from US$ 21.77 billion in 2024 to US$ 25.35 billion by 2029, reflecting a CAGR of 3.09%

Weaknesses

Polymers, the primary raw material, comprises a major part of its product costs. Polymers experience volatility in pricing. The business is susceptible to the adverse impact of fluctuations in crude oil prices, affecting costs. There are risks associated with foreign exchange movements during polymer imports.

Due to its lengthy decomposition period and harmful effects on the environment and living organisms,plastic is increasingly being phased out by many countries worldwide.

There was negative cash flow from operation in FY2024 and FY2022.

Many approvals, licenses, registrations and permits are required in an ordinary course of the business. Additionally, renewal is required of expiring approvals.

The business requires significant amount of working capital for purchasing key raw materials. These are procured from domestic and international suppliers.

A material portion of revenue isderived from the top 10 clients by revenue. Top 10 customers formed 46.2% of total revenue in FY2024.

Productsare exported to countries where anti-dumping duties may be imposed.

The introduction of alternative packaging materials caused by changes in technology or consumer preferences may affect demand.

The market is characterized by competition from both large, organized firms and smaller regional competitors.

The Indian FIBC industry is fragmented due to a large number of small-scale players with insufficient R&D and technical capabilities. This leads to product homogeneity and fierce market competition, leading to low profit margins.

Valuation

Consolidated sales were up by 14% to Rs 539.66 crore in FY 2024. The OPM rose 140 bps to 11.5%, leading to 29% increase in OP to Rs 61.91 crore. OI grew to Rs 13.16 crore from Rs 2.7crore. Interest cost increased 16% to Rs 20.72 crore. Depreciation was up19% to Rs 6.91 crore. PBT jumped75% to Rs 47.44 crore. Tax expenses were 78% higher at Rs 11.37 crore. Net profit spurted74% to Rs 36.07 crore.

The FY2024 EPS on post-issue equity works out to Rs 4.4. At the upper price band of Rs 83, P/E works out to 18.8

Listed peers such as Commercial Syn Bags traded at TTM P/E of 46.6, Emmbi Industries at TTM P/E of 22.8,and Rishi Techtexat TTM P/E of 34.2 as on 03 September 2024. Kanpur Plastipack reported loss in Q1 of FY2024.

STBATCPL’s Ebitda margin and ROE stood at 13.6% and 20.8%, respectively,in FY 2024 as compared with9.1% and 5.7% for Commercial Syn Bags;9.9% and 5.9% for Emmbi Industries;and 6.8% and 4.2% for Rishi Techtex.