Shree Rama Multi-Tech Limited

 

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.

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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.