Spinaroo Commercial coming with IPO to raise Rs 10.17 crore

Spinaroo Commercial 

• Spinaroo Commercial is coming out with an initial public offering (IPO) of 19,94,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share.
• The issue opens on March 28, 2025 and will close on April 3, 2025.
• The shares will be listed on BSE SME Platform.
• The share is priced at 5.1 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Finshore Management Services.
• Compliance Officer for the issue is Ankita Periwal.

Profile of the company

The company is engaged in manufacturing of Aluminium Foil Container, Aluminium Home Foil, Paper Cups, Paper Plates, Paper Bowls, Semi Processed Material for Paper Cups viz. paper coating, printing, blanking etc. It also deals in wide range of Paper Cup related Machinery like High-Speed Paper Cup Making Machine, Flexo Printing Machine, Automatic Roll Die Cutting Machine etc. with full end to end support.

The company offers a wide range of products made from superior-quality raw materials sourced from its highly reliable vendors. Under the guidance of experienced professionals, these products are manufactured to ensure exceptional performance and premium quality. In addition to delivering quality products, it provides these products at competitive prices and ensure timely delivery, tailored to meet its clients' precise specifications. Its paper cup making machines are procured from reputable and trusted vendors within the industry, who ensure the highest quality standards. These certified vendors utilize state-of-the-art machines and tools to manufacture products that meet specific client requirements. They are well-versed in understanding and fulfilling the unique demands of its customers.

The company has established two manufacturing facilities, both located within the Jalan Industrial Complex. The first facility is situated at Gate-1, Right Lane-6, P.O. Jangalpur, Begri Gram Panchayat, Kolkata, Howrah, and also serves as its registered office. The second facility is located at Gate-1, Right Lane-3, within the same industrial complex. Having both manufacturing units in close proximity within the same complex is highly advantageous, providing it with significant cost-efficiencies both logistically and commercially. This setup allows for streamlined operations and effective resource management. Its manufacturing facilities are equipped with the necessary tools, machineries, other equipment’s and amenities, to support a seamless manufacturing process, hassle-free production, Quality testing, storage and packaging. All its machineries are periodically upgraded and lubricated with experienced personnel so as to retain production rate.

Proceed is being used for: 

• Meeting the Working Capital Requirements
• General Corporate Purposes

Industry Overview

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 government's progressive policies, including permitting 100% FDI through the automatic route, have stimulated foreign investments in the packaging sector. FDI inflows in the Paper and Pulp industry totalled $ 1.71 billion from April 2000 to March 2024, highlighting investor confidence in India's packaging landscape. Innovative ventures, such as SIG's establishment of the first aseptic carton packs in Ahmedabad, underscore the industry's commitment to technological advancements and sustainability. With plans to invest Rs. 880 crores ($ 106.02 million) between 2023 and 2025, SIG exemplifies the industry's drive towards pioneering solutions.

The India paper cups market size reached 22.7 billion Units in 2023. The market is projected to reach 28.7 billion Units by 2032, exhibiting a growth rate (CAGR) of 2.64% during 2023-2032. The rising application in social and public gatherings, increasing demand for cost-effective and sustainable solutions, and the growing environmental concerns represent some of the key factors driving the market. Paper cups, also known as disposable cups, are made from bleached virgin paper pulp and coated with plastic and wax to prevent liquid from soaking through the paper and leaking. They are also coated with polyethylene, which aids in enhancing their durability and performance by controlling the condensed moisture from absorbing in and retaining the original flavor of the product. At present, the rising consumption of beverages among consumers represents one of the key factors supporting the growth of the market in India. Besides this, the growing demand for disposable packaging in quick service restaurants (QSRs) and fast-food chains to reduce leakage and spillage of beverages is offering a positive market outlook in the country. Additionally, there is a rise in the need for sustainable and environment friendly solutions among the masses. This, coupled with the increasing demand for paper cups as they easily decompose in the environment and do not add to landfill wastes or pollute water bodies, is propelling the growth of the market. 

Pros and strengths

Strategic advantage of dual manufacturing units within same industrial complex: The company operates two manufacturing units within the same industrial complex, providing significant strategic advantages in terms of production capacity and logistics. This proximity allows it to efficiently scale up production during peak demand periods, ensuring that it meet increased customer requirements without compromising on delivery timelines. Additionally, the ample space provided by these two facilities gives it sufficient room for both production and storage. It can manage inventories and finished goods effectively, allowing it to capitalize on market opportunities during high business seasons. The close proximity of the units further enhances its logistics, reducing transportation time and costs between facilities, ensuring smooth coordination of operations, and optimizing resource allocation. This setup positions it to be highly responsive to market fluctuations while maintaining operational efficiency. 

Innovation and efficiency through a dedicated R&D team: The company's success is driven in part by the efforts of its Research and Development (R&D) team, whose innovative approach has enabled it to expand its product line and optimize production processes. With their expertise, it has successfully introduced the manufacturing of paper plates alongside its existing machinery, despite the requirement for specialized equipment. Their forward-thinking solutions have also allowed it to offer a wide range of new designs for both paper cups and plates, keeping pace with the evolving tastes and preferences of its customers. In addition to product innovation, its R&D team has played a critical role in enhancing its operational efficiency. 

Establishing long-term client relationships and driving repeat business: The company has built a strong reputation in the industry, securing repeat orders from many prominent clients, even amid rising competition. This success stems from its unwavering commitment to understanding and addressing the unique needs of each client. By consistently delivering on expectations, it has cultivated long-lasting relationships that not only enhance client satisfaction but also strengthen its client retention strategy. These established relationships serve as a key competitive advantage, enabling it to attract new clients and grow its business. The experience it gains from executing current orders continually enhances its understanding of client requirements. This insight allows it to evaluate the scope of future businesses and assess associated risks more effectively. It deeply values the trust its clients place in it and remain dedicated to not only meeting but exceeding their expectations. This focus on quality service and relationship-building helps solidify its position as a trusted partner in the industry, contributing to its long-term success. 

Risks and concerns

Maintains high level of inventory for uninterrupted production activities: The company’s requirement of maintaining inventory is high when compared to other companies in the same industry. Maintaining such high level of inventory requires extensive investments in working capital and strains its financial resources. Further, stocking high inventory may also lead to risks of scrapping of raw material, decay due to time, wear and tear. It continues to assess and maintain inventory level strategically giving importance to both operational and financial performance. The results of operations of its business are also dependent on its ability to effectively manage its inventory and stocks. To effectively manage its inventory, it must be able to accurately estimate customer demand and supply requirements and manufacture new inventory accordingly. If its management has miscalculated expected customer demand it could adversely impact the results by causing either a shortage of products or an accumulation of excess inventory. 

Geographical concentration: The company carries its manufacturing operations from its manufacturing facility located at West Bengal. Due to the geographical concentration of its manufacturing operations in these locations, its operations are susceptible to local, regional and environmental factors, such as social and civil unrest, regional conflicts, civil disturbances, economic and weather conditions, natural disasters, demographic and population changes, and other unforeseen events and circumstances. Such disruptions could result in the damage or destruction of a significant portion of its manufacturing abilities, significant delays in the transport of its products and raw materials, loss of key managerial personnel, and/or otherwise adversely affect its business, financial condition and results of operations. Its Productions were disrupted due to natural calamity such as Amphan cyclone and Covid in the past. 

Do not have long-term contracts with clients: The company does not have any long-term contracts with its clients and any change in the business pattern of its existing clients could adversely affect the business of the company. As a result, its customers can terminate their relationships with it due to a change in preference or any other reason on immediate basis, which could materially and adversely impact its business. Consequently, its revenue may be subject to variability because of fluctuations in demand for its products and services. The company's customers have no obligation to work with it and may either cancel, reduce, or delay the business. The business by the company's customers is dependent on factors such as the customer satisfaction with the level of service that the company provides, fluctuation in demand for the company's products, customer’s inventory management, amongst others. Although it has satisfactory business relations with its clients and has received continued business from them in the past, there is no certainty that the same will continue in the years to come and may affect its profitability. 

Outlook

Spinaroo Commercial is engaged in manufacturing of aluminium home foils, aluminium containers, paper cups, paper plates and paper bowls. Its raw materials for paper cups, plates, and bowls are of the highest quality, ensuring superior end products. It sources sustainable, food-grade paperboard that offers excellent strength and rigidity. These materials are carefully selected for their smooth surface, which allows for high-quality printing and coating adhesion. Its raw materials meet strict safety standards, making them ideal for food contact applications. They are also engineered to optimize production efficiency, reducing waste and improving cost-effectiveness for manufacturers. It also sells raw materials (semi-finished) for Papers cups, plates and bowls after certain processing and modification. On the concern side, the company operates in the highly competitive industry. There are no entry barriers in its industry which puts it to the threat of competition from new entrants. Besides, as a labour-intensive business, it depends heavily on its workforce to ensure smooth production and manufacturing processes. Any disruptions, such as strikes, lockouts, or industrial action, could have a considerable negative impact on its financial health, operational efficiency, and reputation.

The company is coming out with an IPO of 1994000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share to mobilize Rs 10.17 crore. On performance front, the total revenue consist of revenue from operation and other income has decreased to Rs 4121.31 lakh in FY 2023-24 from Rs 5319.30 lakh in FY 2022-23 i.e. total revenue decreased by Rs 1197.99 lakh (22.52% for the said period) primarily due to decrease in revenue from manufacturing activities of the company. The restated Profit after Tax for FY 2023-24 has been increased to Rs 140.05 lakh (3.40% of total income) as against Rs 93.06 lakh (1.75% of total income) in the FY 2022-23. 

Meanwhile, to bolster the production of the company’s aluminium products, specifically Aluminium Home Foils and Aluminium containers, it is imperative to strategically source raw materials which is primarily Aluminium reels. The company plans to utilize a portion of the proceeds from this IPO to procure aluminium reels from countries i.e. Thailand and also from other countries wherever it finds a competitive pricing. It intends to explore new opportunities within its existing Aluminium foil and paper cup/plate/bowl business by developing innovative products and designs that align with evolving consumer preferences. By broadening its product offerings, it will further enhance the diversification of its business, allowing it to cater to the varied needs of different customer segments.