 |
CMP = 13 |
Shree Rama Multi-Tech Limited (SRMTL) is an ISO 9001:2015, ISO 15378:2017 and DMF-type III certified company, began its journey in 1987 as a simple extrusion coating line and has grown into an international scale organisation offering state-of-the-art packaging solutions to a large customer base. The company provides primary packaging solutions for oral care, pharmaceuticals, cosmetics and fast-moving consumer goods (FMCG) sectors.
Shree Rama Multi-Tech Limited (SRMTL) is acquired by Dr. Karsanbhai Patel of Nirma group in 2014 after long legal battle of 10 years. Dr. Karsanbhai Patel is one of the most successful entrepreneur in India, he started his business journey as one-man operation in 1969. Today Nirma Group is a diversified conglomerate with major business interest in chemicals, detergents, soaps, cement, healthcare, education, packaging , cosmetics, salt, soda ash, real estate development etc.
https://youtu.be/6l7ZX_D_tMQ
Shree Rama Multi-Tech Ltd has invested heavily in the most modern plastic process technologies and have one of the largest integrated facility for laminated and plastic tubes in the world. The manufacturing facility is located in Gandhinagar, Gujarat. The company has installed manufacturing capacity of 950 million multi-layer Lami Tubes per annum and 15,000 metric tons of laminates (tube & flexible) per annum. The company has more than 150 clients in India and abroad.
The company currently manufacture a wide and diverse range of packaging products such as Lami Tubes, tube laminates and flexible laminates. The products are primarily used for oral care, pharmaceuticals, cosmetics and fast-moving consumer goods (FMCG) sectors. Company products are available in different sizes, diameters and circular shape as per the specifications to customers. Company’s major product is laminated tubes and laminates, which is used for packing products in paste or gel form.
Investment Rationale
Takeover by Nirma Group
Shree Rama Multi-Tech Ltd was originally promoted by Vimpsan Investments Private Limited, Sanket Estates & Finance Private Limited , Vikram and Sharad Patel (Former Promoters). The company made an initial public offering (IPO) at price of Rs. 120 per share in the year 2000 and listed on the NSE and BSE.
In the year 2002, the Former Promoters of Shree Rama Multi-Tech Ltd borrowed a sum of Rs. 48.94 crores from the Nirma Industries and Nirma Chemical Works ( Current Promoters) and pledged 24.25% of equity shares of SRMTL as security. Nirma group ( Current Promoters) invoked the pledged shares of Shree Rama Multi Tech in 2005 after the Former Promoters defaulted in payment. As a result of this action Nirma Group stake has gone upto 24.25% in the company and it triggered the mandatory open offer under Regulation of SEBI.
On becoming aware of certain misconducts and financial irregularities during the management of the Former Promoters, the acquirers ( Current Promoters) tried to withdraw from the Open Offer but SEBI denied it. After 10 years of legal battle, Supreme Court has given order to proceeded with the Open Offer. Finally Nirma group ( Current Promoters) has completed the open offer at price of Rs 18.60 per share and became the Promoters of Shree Rama Multi-Tech Ltd in year 2014.
Nirma Group had received the company in very bad shape with huge debt. Nirma group has gradually transformed the sick company into one of the largest integrated facility for laminated and Lami tubes in the world and upgraded it with latest available technology.
Recently, company has came up with right issue for the payment of old debt given by promoters. At present Nirma group holds 42.51% stake in the company, it is expected that promotor shareholding will go-up above 50% after completion of recent right issue because old retail shareholders are already fed-up after long waiting period of 22 years.
Diversification of Products and Customers Spread
The Company is engaged in the manufacturing of packaging products for oral care, pharmaceuticals, cosmetics and FMCG sectors. With over 25 years of operations, The Company have been able to diversify its product offerings across a wide spectrum of applications and customer requirements. The Company have the ability to address the varied and expanding requirements of customers.
The company sell its products to the customers situated in India as well as overseas. The customer base is spread across various markets which include Belarus, Bulgaria, Indonesia, Nepal, Saudi Arabia, Singapore, Switzerland, Sri Lanka, Slovenia, Tanzania, Tunisia, UAE, USA etc. The customers majorly consist of medium and large-scale manufacturers of oral care, pharmaceuticals, cosmetics and FMCG products. Total exports of accounts around 26% of revenue from operations.
Fully Integrated Manufacturing Facility
The Company own and operate a fully integrated manufacturing facility in Moti Bhoyan, Dist. Gandhinagar, Gujarat which enables it to manufacture a wide and diverse range of packaging products such as tube laminates, flexible laminates and Lami Tubes. The integrated facility allow it to benefit from economies of scale, reduce input costs, reduced reliance on third parties for raw material, improve quality of products and improved operating margins. Additionally, it also allows to change our product mix within the same set of machineries for manufacturing similar products with certain differentiation and cater to the requirements of customers from different sectors. The company has already built large capacity based on future demand so no major capex requirement in near future. At present capacity utilisation for Lami tubes ~ 60% and Laminates ~ 30%.
Robust Quality Control System
The company has quality management system across the value chain right from procurement of raw materials till delivery of final products to the customer’s location. The manufacturing unit is a fully integrated facility which ensures maintenance of quality standards for packaging products. The Company have received various quality accreditations including ISO 9001:2015, ISO 15378:2017 and DMF-type III. The company employ an extensive and stringent quality control mechanism at each stage of the manufacturing process to ensure that the finished product conforms to the exact requirement of the customers.
Experienced Management Team
The company is led by a Board of Directors who have expertise in the packaging industry. The Company is managed by a team of experienced personnel having long operational and business development experience. The Nirma group is a well-known name with strong brand equity. The Company believe that the management team’s experience and their understanding of the packaging industry will enable the company to continue to take advantage of both current and future market opportunities, introduce new products to capitalise on the growth opportunities in packaging industry and help it in addressing and mitigating various risks inherent in the business.
Upgradation of Manufacturing Capabilities and Infrastructure
The company believe that addition and upgradation of infrastructure, machines & equipment and technology which allows it to enhance the product offerings, reduce operating costs and drive sustainable productivity. The company believe in making investments for achieving excellence in products and implement dynamic and diverse specifications of the customers. Packaging plays a crucial role to promote any product and hence customers require frequent changes in packaging products. The varieties of customisation in any product keep on demanding technological upgradation as well as changes and additions in infrastructure. In line with this strategy, in fiscal 2019, The company added new tubing lines to cater to the pharmaceutical sector which has opened new markets for Lami Tube business.
Financial Flexibility for Being Part of the Nirma Group
Up till now Nirma Group has not left any stone unturned to revive this company It is continuously poring the money since long period and now subscribing the maximum portion of the right issue. The Nirma group has continuously given unconditional and irrevocable guarantee for external bank loan facility to SRMTL which ensure the smooth operation and timely servicing of debt. The company will use the all fund raised through the recent right issue to pay the old debt after that negligible long term debt will left on the company.
Strengthening and Expanding the Business Relationship
Some of the customers are associated with the Company for more than 10 years. It is the key objective of the company to build long-term sustainable business relationships with customers. The Company plan to continue to expand the range of products to serve the existing customers and add new customers in different industries. In addition, The Company intend to continue to expand its footprint in pharmaceutical segment of Lami Tube market without hampering our existing business of oral care segment. The Company also intend to continue to build relationships with various pharmaceutical companies and multinational companies, which can help it in expanding the business in new segment.
Strengthening the Global Presence
With combination of wider range of products adhering to global standards, marketing initiatives, competitive pricing and more efficient use of resources, The company intend to strengthen the global presence and become a renowned supplier of packaging products in international markets. For last year 26 % of revenue from operation was on account of export sales in international markets like Belarus, Bulgaria, Indonesia, Nepal, Saudi Arabia, Singapore, Switzerland, Sri Lanka, Slovenia, Tanzania, Tunisia, UAE, USA etc. The company intend to further strengthen its presence in international market like U.S.A., U.K., European countries and Asian countries etc. The company believe that export market provides better margin for the products and going forward the company intend to focus more on export markets.
Technology Tie-ups
The Company believe that it has been able to diversify the product range mainly due to its diversified range of plant & machineries and technological capabilities. The company intend to continue to focus on and make investments in plant & machineries and technology to improve our operational efficiency, customer service, reducing manual intervention and the risk of system failures and improving reliability and efficiency of the business and operations. The company has several technical collaboration and agreement with world leading technology firms like AISA Switzerland for tube making technology, Taiyo Kikai, Japan for printing technology, Reifenhauser Germany for laminate web technology and multi-layer film technology.
Shree Rama Multi-Tech works with best machine and equipment from leading technology providers to ensure that the products offer the performance advantages and flexible integration capabilities customers require for success. The company engage with technology partners on joint development work and projects to create seamless "Best of Breed" solutions.
Large Diversified Client Base
The Company has major clients from medium and large scale manufacturers of oral care, pharmaceuticals, cosmetics and FMCG segment. The company has a well diversified customer base with top 10 clients contributing ~60% of total revenues.
The company serves to 150+ clients in India and abroad in the countries like Belarus, Bulgaria, Indonesia, Nepal, Saudi Arabia, Singapore, Switzerland, Sri Lanka, Slovenia, Tanzania, Tunisia, UAE, USA etc. For last year exports is accounted 26% of total revenue. The company strongly believe living up to the expectations of its customers and provide them superior quality and advanced packaging products, comparable with international standards.
Future Growth
India is a one of the largest consumer economy, with rapidly growing middle class population. In such a widespread and diverse marketplace, Nirma group has strategy since beginning for concentrating all its efforts towards creating and building a strong consumer preference towards its ‘value-for-money’ products. The future growth of the company is being propelled through the development of new products and creation of new markets, both domestic and international.
Shree Rama Multi-Tech Ltd is rising Indian Company in the world of packaging industry with diversified portfolio such as Tube Laminates ABL & PBL Variety of Flexible Laminates Multilayer Tubes, Monolayer Seamless Tubes, Self-Adhesive Labels Paper, HIPS Cups, Tarpaulin etc. The company is adopting the latest technology swiftly so that it can be well prepared in advance to accept and overcome the challenges of future. i.e packaging industry is moving towards recyclable and bio-degradable products.
Conclusion
Shree Rama Multi-tech Ltd manufacture wide and diverse range of packaging products which are primarily used for oral care, pharmaceuticals, cosmetics and fast-moving consumer goods (FMCG) sectors, these are ever-green, ever-growing sectors. The company has competitive position in the international market and proven track record of supplying products and services to its customers at market competitive price.
Nirma Group promotors have very successful track record for developing small business into very large scale business, they have already done it in different business like detergent, cement, soda ash and education. Shree Rama Multi-tech Ltd is also grown from small extrusion coating line into an international scale organisation offering variety of primary packaging solutions to a large customer base of different industries. All these positives are indicators of good turnaround for the company.
Shree Rama Multi-tech Ltd stock at cmp Rs 12 is excellent investment opportunity for both short term and long term. It can be bought within 15% from cmp with 10 % allocation.
