Gujarat-based pharma and food packaging company, Sorich Foils, is issuing 25 lakh shares at Rs 16. Is it worth applying to?
Find out in our unbiased review.
The company operates in a hugely competitive, low margin business (packaging food and pharma). The competition comes from both organized and unorganized sectors.
It is safe to say there is no moat.
Moreover, the plastics packaging industry’s profitability depends on crude prices which are red hot. This is another negative.
NEGATIVE CASH FLOWS
The image above speaks a thousand words. The consolidated flows are bad and the outflows are financed by loans in 5 out of 6 periods.
The profit and loss does not excite. Point to be noted is that profits have resulted because of inventories.
Credit period extended to debtors is 4+ months.
Inventories held are 33% of sales.
Post issue, capital will be 8.33 crores with no visible signs of sales or profitability increasing. If the company continues reporting 0.90% margins, the EPS will be extremely poor.
Sorich Foils IPO seems like an AVOID.