L K Mehta Polymers Ltd. (LMPL), a player in the plastic products manufacturing and trading sector, is set to launch its maiden IPO on the BSE SME platform. The company specializes in ropes, twines, woven sack bags, and plastic raw materials, operating under the "Super Pack" brand. Despite its niche, LMPL faces stiff competition in a fragmented industry, making its IPO pricing a key consideration for investors.
IPO Details & Utilization of Funds
LMPL is issuing 10.4 lakh equity shares at INR 71 per share, aiming to raise INR 7.38 crore. The issue opens on February 13, 2025, and closes on February 17, 2025. Post-listing, the company’s market capitalization is expected to touch INR 27.26 crore.
The funds will be allocated as follows:
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INR 5.34 crore for working capital
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INR 1.34 crore for general corporate purposes
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INR 0.70 crore for IPO expenses
Financial Performance – Cause for Concern?
While LMPL has shown consistent revenue growth, its profitability trends are unstable:
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FY22: Revenue INR 11.94 crore, Profit INR 0.04 crore
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FY23: Revenue INR 17.14 crore, Loss of INR 0.01 crore
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FY24: Revenue INR 18.87 crore, Profit INR 0.86 crore
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9M-FY25: Revenue INR 11.98 crore, Profit INR 0.42 crore
The sharp rise in profit from FY24 onwards raises concerns about its sustainability, especially in a price-sensitive industry.
Valuation & Investment Considerations
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The IPO is priced at a P/E of 48.97 (based on FY25 annualized earnings) and 31.84 (based on FY24).
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The post-IPO NAV of INR 26.29 per share suggests a high price-to-book ratio (P/BV of 2.70).
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The company has an erratic bottom line, making long-term growth prospects uncertain.
Should Investors Subscribe?
While LMPL has expanded its product line and demonstrated resilience, the IPO appears expensively priced given its recent financial performance and small equity base. The company operates in a highly competitive and fragmented market, requiring a longer gestation period for meaningful returns.
With higher risks than rewards, investors might find better opportunities elsewhere.
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