Pentagon Rubber IPO aims to raise ₹16.17 crore, and comprises entirely of a fresh issue of 23.10 lakh shares. The price band has been fixed in the range of ₹65 to ₹70. The issue opens for subscription on 26th June 2023 and closes for subscription on 30th June 2023 and will list on NSE emerge platform. The Company is engaged in manufacturing of Rubber Conveyor Belt, Transmission Belts, Rubber Sheets and Elevator Belts.
IPO opens
June 23, 2023
IPO Closes
June 30, 2023
IPO Size (Rs.)
₹16.17 Cr
IPO Size (shares)
2,310,000 shares
Breakup
entire fresh issue
Face Value:
₹ 10
IPO Price in Rs :
₹65 to ₹70 per share
Minimum Lot
2000 Shares
Listing At
NSE SME
QIB Quota + anchor
~ 50%
NII Quota
~ 15%
Retail Quota
~35%
Lead Manager
Beeline Capital Advisors
Registrar
Link Intime
Market maker
Sunflower Broking
About Pentagon Rubber:
Company was originally incorporated on April 26, 2004 as “Pentagon Rubber Private Limited”.
Company is an ISO 9001:2015 and engaged in manufacturing of Rubber Conveyor Belt, Transmission Belts, Rubber Sheets and Elevator Belts.
Pentagon Rubber products are ever evolving & continually perfected using latest developments in raw materials. It has competence and expertise in material handling and ore transportation systems across to complete system integration, and it offers products which meet the quality benchmark of various industries.
The manufacturing unit of Pentagon Rubber Limited is located in Dera Bassi, Punjab, which is 25 KMS from Chandigarh city.
It has installed one of the longest conveyor belting presses in India, with a production capacity of 21mtr in a single stroke. This technology allows it to produce conveyor rubber belting up to 3150KN/m, making it one of the top manufacturers in India. The production capacity is over 300 sq km of conveyor rubber belt per year.
Pentagon Rubber has a modern laboratory of international standards.
Company mainly offers Conveyor Rubber Belting in various grades along with elevator belting, rubber sheets, chevron belts.
Pentagon Rubber product Mix over the years
Particulars/ Rs. Lacs
9m Fy23
Fiscal 2022
Fiscal 2020
Fiscal 2021
Rubber Scarp
2.12
0.68
—
0.02
Rubber Belting
1949.57
2581.88
2188.43
73.72
Rubber Chemicals
1043.94
918.65
118.22
26.22
Fabric
0.49
1.46
—
0.04
Rubber
Rubber compound
—
—
8.09
—
Metal Scarp
—
—
1.65
—
Total
2996.12
3502.64
2316.39
100
Company is promoted by Mr. Anil Jain, Mr. Lalit Jain, Mr. Ashish Jain and Mr. Saurabh Jain.
Pentagon Rubber IPO: Financials
Particulars/ Rs. Lacs
9m FY23
31-Mar-22
31-Mar-21
31-Mar-20
Total Revenue
2997.88
3511.59
2319.69
1939.25
Profit before tax
312.97
316.01
107.89
99.24
Profit after Tax
215.86
308.66
110.3
93.81
Share Capital
540
400
400
400
Net Worth
770.3
554.43
245.78
135.48
Earnings Per Share
4
5.72
2.04
1.74
Net Asset Value Per Share (₹) (Post Bonus)
14.26
10.27
4.55
2.51
Total Borrowings
1669.79
1758.61
1649.42
1244.86
Post issue Share Capital
771
FV
10
IPO price
70
EPS Fy22
4.00
PE Fy22
17.49
EPS Fy23 ann
3.73
PE Fy23 ann
18.75
Market cap in Lacs
5397
Market Cap/sales
1.35
sales cagr
27%
net profit cagr
45%
Anchor Investors
Pentagon Rubber IPO: Salient Points
Conveyor belts find application in all areas of material handling.
Promoters holding is 100% at present and shall get diluted to 70.04%
Top ten suppliers contributed approximately 66.23%, 72.96%, 78.72% & 86.74% of our total purchases for the period ended December 31, 2022 and year ended March 31, 2022, March 31, 2021, March 31, 2020 respectively
As of December 31, 2022, its long term borrowings were ₹ 817.94 Lacs & short term borrowings were ₹ 851.85 Lacs.
Operations are labour intensive.
The Business of the Company is working capital intensive; hence₹1200 Lakhs from the Net Proceeds of the Issue will go towards meeting working capital requirements.
It also directly export to buyers across the globe and over the years have expanded presence in over 25 countries with major buyers in South America, Europe, Africa, Middle East & Asia.
Profits and revenues have shown a steady uptrend over the years.
Key Performance Indicators of the Company:
Rs in Lacs
Key Financial Performance
December 31, 2022
March 31, 2022
March 31, 2021
March 31, 2020
Revenue from Operations
2996.12
3502.65
2316.39
1933.03
EBITDA
381.05
421.3
230.07
205.73
EBITDA Margin
12.72%
12.02%
9.90%
10.64%
PAT
215.86
308.66
110.3
93.81
PAT Margin
7.20%
8.80%
4.76%
4.85%
The listed peers mentioned by the company in RHP are Somi Conveyor Belting Limited and International Conveyors Limited:
Particulars/ Rs. Lacs
Pentagon Rubber
Somi Conveyor
International Conveyors
Revenues 9m FY23
2996.12
5494.58
15998
EBITDA
381.05
480.64
3119
EBITDA Margin
12.72%
8.75
19.5
PAT
215.86
148.51
2167
PAT Margin
7.20%
2.7
13.55
PE
18.7
18.8
16.1
Pentagon Rubber has vailed loans from Axis Bank and HDFC Bank.
Its PE ratio is 18.7x (fy23 earnings annualized), 17.5x (FY22 earnings). There is increased tax component in Fy23, otherwise, FY23 performance is slightly better than Fy22
The lead book running manager is Beeline Capital Advisors. The IPOs lead managed by them have given a good return to the investors though some have ended in the red too. These include names like Remus Pharmaceuticals Limited, Sotac Pharmaceuticals Limited, Dev Labtech Venture Limited, Vertexplus Technologies Limited, Viaz Tyres Limited, RBM Infracon Limited, Vital Chemtech Limited, Viviana Power Tech Limited, Aristo Bio-Tech and Lifescience etc.
Sunflower Broking Ltd is the market maker for the issue and has been associated in this capacity with SME issues like Remus Pharmaceuticals Limited, Sotac Pharmaceuticals Limited, Viaz Tyres Limited, RBM Infracon Limited, Patron Exim etc.
I intend to apply in Pentagon Rubber IPO though it is an average issue and of late some SMEs have displayed weak listing. I have a positive view on the sector and hold some shares of International conveyers Limited.
GMP as reported on social media has been steady or rising and may be Rs. 25-28.
Please do your own diligence as SME IPOs are more volatile and risky than mainboard IPOs and need more funds.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.
