Business of MALU Paper Mills Ltd.
MALU paper mills has two manufacturing units of Kraft Paper and Newsprint which
have a capacity of 8250 TPA (tones per annum) and 19800 TPA respectively. The
manufacturing units are located in Nagpur. MALU Paper Mills has been a venture
of first generation entrepreneurs and all the promoters belong to the MALU family
and was incorporated in 1994 as Malu Solvex Ltd.. Some of the major publishing
houses which are customers of MALU paper mills are Lokmat, Jagran, Sakal, Nav
Bharat, Hitvada, Prabhat Khabar
Financials
MALU Paper Mills clocked revenue of Rs.48.98 crores last fiscal and made a
net profit of Rs.2.64 crores on the same. The company had a much lower profit
of Rs. 71.32 lakhs in the prior fiscal on revenue of Rs.46.87 crores. This disproportionate
growth in income is a cause of lower raw material cost which formed close to
42% of the total turnover in the last fiscal.
Since the start of 2001 the profits have grown from a mere Rs.12 lakhs to Rs.2.64
crores but the growth has been quite erratic with the company making losses
in one of the last five fiscals. The EPS
last fiscal has been Rs.3.79 and the company is offering its shares at a price
of Rs. 30 to the public. While this does not look expensive one must keep in
mind that the EPS calculated does not include the additional shares that will
be there in the market once the IPO
is completed.
The IPO is being floated to set up a new unit at Nagpur to produce 150 TPD
of Newsprint/Writing Printing paper and 6 MW captive Co-generation Power Plant.
The total project is estimated to cost Rs.70 crores to be set up and apart from
the IPO which shall raise an amount of Rs.20 crores from the public a term loan
from Banks / Financial Institutions for Rs.45 crores will be taken and the promoters
will bring in Rs.5 crores of their own.
Key Risks
There are cases of Customs and Central Excise litigations against the company.
There are multiple cases and the financial implications or the total amount
involved in such cases exceeds Rs.25.23 lakhs.
There are cases of labour litigation and the total amount the company will
be liable for if all the cases go against it exceeds Rs.23.10 lakhs .
Additionally the case against the promoter or group companies has a liability
of Rs.3.81 crores if the case goes against the company.
The company is a medium paper-manufacturing unit and will have to compete with
big players in the field who have better economies of scale with higher capacity.
Conclusion
Keeping in mind the small size of the company relative to its competitors,
the fluctuating financials and risks of litigation the issue looks one which is moderately risky.
