Astron Paper & Board Mill Ltd.

IPO Paper Industry India Research 702, Embassy Centre, Nariman Point, Mumbai 400 021. Tel.: 61539100 Fax: 61539134 E-mail: research@ nvswealthmanagers.com Astron Paper & Board Mill Ltd. Fresh Issue of upto 1.4 Crs. Equity Shares of FV Rs. 10/- each by Astron Paper & Board Mill Ltd. on BSE & NSE Exchange at a Price band of Rs. 45-50 per share, aggregating up to Rs. 70 Crs. Issue Opens: 15 th December, 2017 Issue Closes: 20 th December, 2017 I. Astron Paper & Board Mill Ltd. (APBML) The Background & its Product Profile APBML, promoted by Mr. Kirit Patel, Mr. Ramakant Patel, Mr. Karshanbhai Patel and Asian Granito India Ltd., incorporated in 2010, is an ISO 9001:2008 and an ISO 14001:12004 company. Mr. Kirit Patel, Mr. and Ramakant Patel have an experience of around two decades in paper packaging industry. APBML is engaged in manufacturing of Kraft papers having applications in packaging industry for manufacturing corrugated boxes and liners, corrugated sacks and composite containers. The product basket ranges from High RCT, Kraft Liner, Liner and Corrugated Medium Paper with High RCT constituting around 50% share in the revenue of the Company. The company has since its inception adopted the use of waste paper as raw material instead of traditional usage of wood thus promoting the eco friendly world. The Company is certified as FSC Standards since 2014 by SGS South Africa (Pty) Ltd. The company has a state of the art manufacturing facility which is located at Halvad, Gujarat with an annual capacity of 96,000 tonnes Kraft papers (capacity utilization of 79.2% as on FY2017) ranging mainly from 140 GSM to 350 GSM and 22-35 BF. APBML s manufacturing facility is strategically located at Halvad, Morbi, Gujarat which is approx 200 Kms away from Mundra Port and facilitates ease of import (majority of the raw materials are been imported from USA, UK and Middle East). Further the Company is accredited with Authorised Economic Operator T1 certificate which entitles to many benefits such as better facilitation in imports and export of their consignments, thereby ensuring shorter cargo release time, facility of Direct Port Delivery (DPD) of their import containers and/ or Direct Port Entry (DPE) of their Export Containers. II. APBML The Shareholding Pattern Category of Shareholders No. of Shares Pre IPO Shareholding % of total Share holding Total Equity Share Capital (FV Rs. 10) Post IPO Shareholding No. of Shares % of total Share holding Total Equity Share Capital (FV Rs. 10) Promoter 2,03,57,250 62.64 20,35,72,500 2,03,57,250 43.78 20,35,72,500 Public 1,21,42,750 37.36 12,14,27,500 2,61,42,750 56.22 26,14,27,500 Total 3,25,00,000 100.00 32,50,00,000 4,65,00,000 100.00 46,50,00,000 III. APBML Objective of the Issue The proceeds of the Issue are to be utilized towards the following objects: Objectives Setting up of additional facility for manufacturing of lower GSM and lower B.F Kraft Paper Part Repayment of unsecured loan Funding the working capital requirements of the Company General corporate purposes *To be determined after deducting Issue related expenses Est. Amount Rs. 23 Crs. Rs. 8.1 Crs. Rs. 2.4 Crs. TBD*

IV. APBML Manufacturing Facility APBML s state of the art manufacturing facility is strategically located at Halvad, Morbi, Gujarat which is approx 200 Kms away from Mundra Port and facilitates ease of import as majority of the raw materials used by the company are imported from USA, UK and Middle East. The manufacturing facility is well equipped to conduct processes commencing from the raw material testing till dispatch of the final product. The Company have also installed in house power plant of 3 MW to support its electricity requirements. APBML has got a huge land bank admeasuring to approximately 24.5 acres of which the manufacturing facility is spread over approximately 4.5 acres of land. Further the additional manufacturing facility can be constructed in the existing area. Such unutilized land bank may prove to be competitive advantage for future expansion opportunities. Capacity Utilization at Halvad manufacturing facility: Particulars Actual Projected FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 Installed (T/pa) 66,000 72,000 80,000 1,01,500 1,29,000 1,29,000 Utilization (T/pa) 54,340 56,669 63,371 81,600 1,06,350 1,08,000 Capacity Utilization (%) 82.33% 78.71% 79.21% 80.39% 82.44% 83.72% V. APBML Growth Drivers for Kraft Paper Industry Increase in demand for packaging: Raw material for corrugated box is Kraft paper. The demand of kraft paper is estimated to increase to 6 MT by 2025 from 3.5 MT in 2016 with a growth of 8% p.a. With sustained growth in e commerce industry and increase in consumer spending power in e-commerce in India, demand for packing material is increasing multifold resulting in high demands for corrugated boxes thus for kraft papers. Corrugated boxes accounts for 85 90 percent of the total demand for kraft paper. Consumer awareness: The increase in consumer awareness pertaining to use of recycled products is anticipated to further boost the demand for recycled paper packaging products, thereby driving growth of the market in coming years. As the major raw material used by APBML is waste paper, the demand for the product manufactured by APBML will grow in years to come. Consumer priorities: As kraft paper packs find themselves increasingly moving from the warehouse onto supermarket shelves, there is a demand for grades that can carry the high quality graphics that allow them to compete with other packaging formats for the shopper s attention. As APBML manufactures high quality kraft papers finding applications in food and beverages industry, the demand for its superior quality product will continuously grow with consumers becoming more brand conscious and consumer focus more on the presentation and packaging of the product. Growth in end user industry: Strong growth in end user sectors such as pharma, horticulture, ready to eat foods, marine products, textiles, consumer durables and other industrial products is expected to result in a buoyant growth for kraft paper. VI. APBML- The Current Expansion Setting up of additional manufacturing facility: APBML is setting up additional manufacturing facility of 33,000 tonnes p.a. to manufacture lower GSM and lower B.F Kraft paper. The proposed facility will ensure to meet the requirements of the customers who require lower GSM and lower B.F Kraft paper. This facility will complement the existing product mix manufactured by APBML. Expand the domestic geographical reach through marketing network: Currently APBML s 65% of the sale is in the state of Gujarat and Rajasthan. To expand their business, the company intends to aggressively penetrate in the domestic markets and expand their domestic market presence by expanding their sales and distribution network. To augment their efforts in increasing the sales of their products, APBML intends to deploy additional field force consisting of sales and marketing representatives who shall meet customers/ prospective customers to market the product.

Exponential growth in E-Commerce: Internet shopping as a trend continues to expand rapidly, and is fuelled by the increasing use of smart phones and tech-savvy customers. In line with the increasing sale of products through online retail, the potential for the packaging industry may increase and thereby the demand for Kraft paper for manufacturing corrugated boxes may also increase. VII. APBML Financial Performance at a glance PARTICULARS (Rs. Crs.) H1FY2018 FY2017 FY2016 FY2015 FY2014 FY2013 Total Income 111 183 157 152 106 27 EBITDA 15 22 20 19 11 2 PAT 9 10 6 4-3 -4 EPS 2.9 3.1 1.9 1.3-1 -1.5 Equity Capital (FV- RS.10) 32.5 32.5 32.5 32.5 31 27 Reserves 22 13 3-3 -7-4 Net Worth 54 45 35 29 24 23 BVPS 16.6 13.9 10.9 9.0 7.6 8.4 Total Debt 86 81 70 65 65 56 Debt / Equity 1.6 1.8 2 2.2 2.7 2.4 Ratios EBITDA Margins 13.2% 11.8% 12.4% 12.6% 10.4% 6.6% PAT Margins 8.5% 5.4% 3.9% 2.7% NA NA ROE 17.5% 22.1% 17.4% 14.2% NA NA APBML has a consistent financial performance for last 4 years and for the current year ending 31 st March, 2017, the Total income grew at a CAGR of 19.9% to Rs. 183 Crs. (Rs. 106 Crs. in FY2014), EBITDA grew at a CAGR of 25.5% to Rs. 22 Crs. (Rs. 11 Crs.), PAT grew to Rs. 10 Crs (loss of Rs. 3 Crs) on an equity capital of Rs. 32.5 Crs. On the issue price of Rs. 50 the P/E multiple works to 12.3 times on its FY2018E EPS of Rs. 4.1. Further the post issue Book Value is expected to be about Rs. 28.6 per share and this also works out to a P/BV multiple of 1.7 times on the IPO Price. VIII. APBML - Valuation & Recommendation APBML has consistently performed well, with an EPS of Rs. 2.9 in H1FY2018. The current offering at Rs. 45-50 per share works out to a P/E multiple of 10.9-12.3x on its FY2018E EPS of Rs. 4.1. The post issue book value of the company is around Rs. 28.6 per share and the P/BV also works out at 1.7 times based on the IPO price. We believe APBML s valuations on these parameters appear extremely reasonable. Kraft paper is one of the key raw materials used to manufacture corrugated boxes, these corrugated boxes find a major application in food and beverages industry along with demand from e-commerce companies. Thus, the growth of the industry, in turn, is expected to drive growth of the corrugated box market in years to come. The increase in consumer awareness pertaining to use of recycled / environment friendly products is anticipated to further boost the demand for recycled paper packaging products, thereby driving growth of the company over the forecast period. APBML is setting up additional manufacturing facility of 33,000 tonnes p.a. which would take their total manufacturing capacity to around 1,29,000 tonnes p.a. The proposed facility will ensure to meet the requirements of the customers who require lower GSM and lower B.F Kraft paper. This facility will complement the existing product mix manufactured by APBML thus fostering growth in coming years. APBML IPO is being launched at a price band of Rs. 45-50 per share. In H1FY2018, APBML has already posted PAT of Rs. 9.45 Crs. (full year FY2018 estimate being Rs. 18.9 Crs., generating an adjusted EPS of Rs. 4.06). At higher price band of Rs. 50 per share, the issue price works out to a modest PE of 12.3x its FY2018E EPS. APBML IPO which will be listed on BSE and NSE appears to be attractive for the investors and offers decent scope for growth and appreciation to the investors and particularly the long term investors of 1 2 years can look forward to rich dividend. We recommend all investors to SUBSCRIBE to this issue.

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