By Shares of Solve Plastic Products Limited had a promising start on the NSE SME exchange today, August 21, with the stock listing at ₹102 per share, marking a 12% premium over its issue price of ₹91. This performance comes after the company’s ₹11.85 crore IPO garnered significant attention from investors during its subscription period from August 13-16, 2024.
The IPO of Solve Plastic Products consisted entirely of a fresh issue of 13.02 lakh shares, with each share priced at ₹91. Retail investors could participate with a minimum lot size of 1,200 shares, translating to an investment of ₹1,09,200, while high-net-worth individuals (HNI) needed to invest in at least two lots, or 2,400 shares, amounting to ₹2,18,400.
The offering saw remarkable demand, with the overall subscription rate reaching 34.23 times. Investors placed bids for a total of 4.23 crore shares against the 12.36 lakh shares on offer. Retail investors led the charge, with their category being subscribed 46.76 times, while the “Others” category saw a subscription rate of 19.47 times. This overwhelming response reflected strong investor confidence in the company’s growth prospects.
Founded in 1994, Solve Plastic Products Limited is known for its manufacturing of uPVC pipes and rigid PVC electrical conduits under the brand name “BALCOPIPES.” With three manufacturing units in Kerala and one in Tamil Nadu, the company has established itself as a key player in the South Indian market.
Its products have received approvals from the Bureau of Indian Standards (BIS) and several prominent organizations, including the Central Public Works Department (CPWD) of Chennai and Kochi, Military Engineer Services (MES), Integral Coach Factory, Public Works Department (PWD) of Kerala and Tamil Nadu, and Tamil Nadu Housing Board. These endorsements highlight the company’s adherence to quality and reliability in its product offerings.
The proceeds from the IPO are earmarked for a range of strategic initiatives, including capital expenditures for purchasing additional plant and machinery, meeting working capital requirements, covering issue expenses, and general corporate purposes.
Finshore Management Services Limited served as the book-running lead manager for the IPO, with Integrated Registry Management Services Private Limited acting as the registrar. Black Fox Financial was appointed as the market maker for the issue.
Despite, market expert Dilip Davda from Chittorgarh.com advised caution despite the successful listing and strong investor demandointed out that Solve Plastic Products operates in a highly competitive and fragmented industry, which has seen inconsistent top-line performance in recent years.
Between the financial years ending March 31, 2023, and March 31, 2024, the company experienced a revenue decline of 24%, even as its profit after tax rose by 18% during the same period. This divergence in financial performance raises concerns about the company’s ability to maintain consistent growth in a challenging market environment.
Davda also expressed reservations about the pricing of the IPO, describing it as aggressively priced given the company’s FY24 earnings. He noted that with a small equity base post-IPO, the investment could entail a longer gestation period, classifying it as a “High Risk/Low Return” bet. Potential investors, according to Davda, may want to consider skipping this IPO, given the uncertainties surrounding the company’s future performance.
Despite these concerns, Solve Plastic Products has attracted significant investor interest, underscoring the market’s belief in its potential to successfully navigate the competitive landscape.
The company’s focus on expanding its manufacturing capabilities and strengthening its financial position through the IPO proceeds could provide the necessary momentum to drive future growth. However, as with any investment, potential risks remain, and investors should carefully weigh these factors before making decisions.
