Boss Packaging Solutions coming with IPO to raise Rs 8.41 crore

Boss Packaging Solutions

• Boss Packaging Solutions is coming out with an initial public offering (IPO) of 12,74,000 equity of face value of Rs 10 each for cash at a fixed price of Rs 66 per equity share.
• The issue will open on August 30, 2024 and will close on September 3, 2024.
• The shares will be listed on SME Platform of NSE.
• The share is priced 6.60 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Fedex Securities.
• Compliance Officer for the issue is Sweta Sandip Prajapati.

Profile of the company

Started business in 2012 as manufacturer of filling and sticker labeling machines, the company has come a long way today to become a manufacturer, supplier and exporter of diversified packaging, capping, filling machines, self-adhesive sticker labeling machine, conveyors, turn tables, web sealers, sleeve applicator etc. It has sales and distribution network in Pan India. The company has well-equipped machine manufacturing facilities along with registered office in Ahmedabad, Gujarat. From a single type equipment manufactured to facilitate filling and sticker labeling machine in 2012, it has expanded its equipment portfolio to wide range of packaging machines which includes a comprehensive range of packaging machinery such as, industrial packaging machines with Semi-Automatic or automatic Liquid Filling Machines, Semi-Automatic or Automatic Screw or ROPP Capping machine, Pick and Place Screw Capping Machines. 

Wide range of Self-Adhesive Sticker Labelling Machines, Hologram Applicator Machines, Shrink Sleeve Applicator Machine, Conveyors and Turn Tables, Air Jet Cleaning Machine, Semi-Automatic or automatic shrink-wrapping machines (Web Sealer), Electric Tunnels and Winder Re winder and customized atomization to cater to diverse customer requirements. The company sells these machines under its brand “Boss” and also under the brand of its customers i.e. as a white label. The company’s products find application in various end-use industries including edible oil, lubricants, chemicals, cosmetics, homecare, pharmaceuticals, viscous liquid, juices and dairy, agriculture and pesticides, food and ancillaries, cosmetic and toiletries, and distilleries and breweries.

The company has developed own sales team and network for sourcing customers from pan India basis and for exports through merchant exporters. This network is also backed by an after-sales services team who provides its customer with access to maintenance services and spare parts and respond to a majority of its customer grievances. It also promotes the sales of spare parts for its equipment, and also address post-sales requirements of its customers. The company’s sales and support team are backed by team of engineers and quality experts that ensures all its products meet. It has developed in-house capabilities to deliver evolving technologies and continue to develop the design and drawing, understand the customer requirement, technical specification and their production & packaging process.

Proceed is being used for:

• Purchase of machineries
• Funding working capital requirements
• General corporate purpose

Industry Overview

Fast-moving consumer goods (FMCG) sector is India’s fourth-largest sector and has been expanding at a healthy rate over the years because of rising disposable income, a rising youth population, and rising brand awareness among consumers. The FMCG sector in India expanded due to consumer-driven growth and higher product prices, especially for essential goods. FMCG sector provides employment to around 3 million people accounting for approximately 5% of the total factory employment in India. FMCG sales in the country grew 7-9% by revenues in 2022-23. The key growth drivers for the sector include favourable Government initiatives & policies, a growing rural market and youth population, new branded products, and growth of e-commerce platforms. Resilience needs to be the key factor in the manufacturing process, daily operations, retail and logistic channels, consumer insights and communication that will help FMCG companies to withstand the test of time and create more value for consumers in the long run. India’s fast-moving consumer goods (FMCG) sector grew 7.5% by volumes in the April-June 2023 quarter, the highest in the last eight quarters, led by a revival in rural India and higher growth in modern trade.

The FMCG sector in India expanded due to consumer driven growth and higher product prices, especially for essential goods. FMCG market reached $121.8 billion as of 2023. Total revenue of FMCG market is expected to grow at a CAGR of 27.9% through 2021 to 2027, reaching nearly $615.87 billion. In 2022, urban segment contributed 65% whereas rural India contributed more than 35% to the overall annual FMCG sales. In Q4, FY23, the FMCG sector clocked a value growth of 6.0% Y-o-Y. Good harvest, government spending expected to aid rural demand recovery in FY24. The sector had grown 8.5% in revenues and 2.5% in volumes last fiscal year. Resilience needs to be the key factor in the manufacturing process, daily operations, retail and logistic channels, consumer insights and communication that will help FMCG companies to withstand the test of time and create more value for consumers in the long run.

Meanwhile, packaging currently stands as the fifth largest sector in the Indian economy, reflecting its pivotal role in driving industrial growth and innovation. With an annual growth rate of 22-25%, the industry has become a preferred hub for packaging solutions, bolstered by advancements in technology and infrastructure. Notably, the industry boasts a robust structural framework, comprising over 900 paper units with an installed capacity of nearly 4,990 thousand tons. Furthermore, India is home to 861 paper mills, with 526 operational units, showcasing the nation's significant capacity for paper and paperboard production. The outlook for the paper and packaging industry in India is optimistic, driven by several factors including the country's growing population, increasing urbanization, and rising disposable incomes. The rapid expansion of e-commerce is fueling demand for packaging materials, while a growing focus on sustainability is prompting the industry to innovate greener solutions.

Pros and strengths

Strong marketing and distribution network: The company’s success depends upon its strong marketing and distribution network in the domestic and export market. The company has in-house sales team and marketing team. Further, it has a strong after sales service team of engineers which takes care of the installation, training and post installation complaints of its customers.

Diversified product portfolio: The company has a varied product base to cater to the requirements of its customers. The company’s product portfolio includes diversified variety of labelling, packing, filling, sealing machines, accessories and full packaging line that finds its application across various industries. The company’s range of products allows its existing customers to source most of their packaging machine requirements from a single vendor and also enables it to expand its business from existing customers, as well as address a larger base of potential new customers.

Diversified customer base and long-standing relationship with its customers: It has a well-diversified customer base across varied end-use industries such as edible oil, lubricants, chemicals, cosmetics, homecare, pharmaceuticals, viscous liquid, juices and dairy, agriculture and pesticides, food and ancillaries, cosmetic and toiletries, and distilleries and breweries from all over India. The company has sold its machines in over 18 states of India, 3 Union territories and also in 4 countries. This reduces the intensity of any significant single customer’s contribution in its revenues. The company’s top ten customers contributed 60.00%, 53.59% and 56.27% (inclusive of taxes) of its revenue from the Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively. As of March 31, 2023, the company has relationships spanning around 3 years with majority of its top ten customers by contribution to revenue from operations.

Risks and concerns  

Maximum revenue comes from few customer: Although, the company caters to a large number of customers, it has been reliant on selected customers for a significant amount of its revenues. The company’s top ten customers contributed 60.00%, 53.59% and 56.27% (inclusive of taxes) of its revenue from operations for the Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively. The loss of one or more of these significant customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. The actual sales by the company may differ from the estimates of its management due to the absence of any supply agreements. It cannot assure that it will be able to maintain historic levels of business and/or negotiate favourable terms that are commercially viable with its significant customers or that it will be able to significantly reduce customer concentration in the future.

Geographical constrain: The company’s Manufacturing Units is located at Ahmedabad in Gujarat. The concentration of all of its operations in only location in Gujarat, heightens its exposure to adverse developments related to any significant social or economic disruption, or natural calamities or civil disruptions in or around this region, or changes in the policies of the local, state or central governments, could require it to incur significant capital expenditure, change its business structure or strategy, which could have an adverse effect on its business, results of operations and financial condition. Further, its manufacturing operations require significant labour and it is also reliant on government policies in terms of taxes, duties and incentives made applicable by the Gujarat state governments. As a result, any unfavourable policies in Gujarat could adversely affect its business, financial condition and results of operations. Furthermore, any political or economic instability in Gujarat may have a possible adverse effect on its business, financial condition and results of operations. There can be no assurance that such situations will not recur or be more intense than in the past.

High working capital requirement: The company’s business operations are subject to high working capital requirements. Currently, the company meets its working capital requirements through a mix of internal accruals and unsecured loan from related parties and scheduled commercial banks. While its internal accruals and working capital facilities availed from its lenders will be sufficient to address its working capital requirements, it cannot assure that it will continue to generate sufficient internal accruals and / or be able to raise adequate working capital from lenders to address its future needs. The company’s inability to meet its present working capital requirements or its enhanced working capital requirements will have an adverse impact on its results of operation, business and financial condition. 

Outlook

Boss Packaging Solutions manufactures, supplies, and exports a variety of packaging, capping, and filling machines. They also offer self-adhesive sticker labelling machines, conveyors, turntables, web sealers, and sleeve applicators. The company's product portfolio includes a variety of labeling, packing, filling, and sealing machines, as well as accessories and full packaging lines, which are used in various industries. The company supplies its products to industries such as edible oil, lubricants, chemicals, cosmetics, homecare, pharmaceuticals, viscous liquid, juices and dairy, agriculture and pesticides, food and ancillaries, cosmetic and toiletries, and distilleries and breweries. On the concern side, the company is heavily reliant on a few customers and it derives a significant part of its revenue from select customers. The loss of any significant customer may have a material adverse effect on its business and results of operations. Moreover, the company’s manufacturing units is located at Ahmedabad in Gujarat and any adverse developments affecting this region could have an adverse effect on its business, results of operations and financial condition.

The company is coming out with a maiden IPO of 12,74,000 equity shares of Rs 10 each at a fixed price of Rs 66 per share to mobilize Rs 8.41 crore. On performance front, total revenue increased by 17.67% to Rs 1,217.54 lakh for the Financial Year 2024 from Rs 1034.71 lakh for the Financial Year 2023 primarily due to increase in revenue from operations. Moreover, the company recorded an increase of 0.53% in its profit for the year from Rs 100.51 lakh in Fiscal 2023 to Rs 101.04 lakh in Fiscal 2024. The company intends to leverage its technological expertise, design capability and integrated operations to offer quality products in a cost-efficient manner. Its technological expertise coupled with low production cost will give it a significant competitive advantage while competing with other machine manufacturers. It intends to expand its current product portfolio of more than 20 products. Additionally, the company is in to the process of developing aseptic brick pack machine / BOPP labeling machine / unscramble machine and also developing the future RFC machine, carbonated filling machine and high-speed filling machines. Towards this strategy, the company has taken initial steps such as in-house designing of aseptic brick pack machine with the test trial by application of such machines.