3B Films Ltd. IPO: Key Details

3B Films

• 3B Films is coming out with an initial public offering (IPO) of 67,50,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share.
• The issue will open on May 30, 2025 and will close on June 3, 2025.
• The shares will be listed on SME Platform of BSE.
• The share is priced 5.00 times higher to its face value of Rs 10. 
• Book running lead manager to the issue is Nirbhay Capital Services.
• Compliance Officer for the issue is Janki Raj.

Profile of the company

3B Films is engaged in the manufacturing and supply of CPP & CPE films tailored to meet the diverse needs of the flexible packaging industry and high-end thermoforming applications and thus play a pivotal role in delivering innovative packaging solutions to its clients of a wide array of industries. The company’s product portfolio includes a wide range of CPP films designed to address the specific needs of various industries, including food and beverage, clothing, flowers and other consumer goods. From high-clarity films for premium packaging to high-barrier films for extended shelf life, it offers solutions that cater to the evolving demands of the market as it presently is equipped with such a manufacturing facility capable of producing CPP & CPE films spanning a thickness range from 15 to 250 microns.

As part of its commitment to operational efficiency, the company reprocesses the scrap generated during the manufacturing of CPP & CPE films. This scrap is reprocessed into granules, which are subsequently sold in the market. These granules serve as a valuable raw material in various industries, contributing to the circular economy by minimizing waste and maximizing resource recovery. Meanwhile, the company has a quality control and assurance division (Quality Division) to carry out the required tests on the materials received including raw materials which are used in the manufacturing process and also on the final products to ensure that the quality is built throughout the process. It ensures adherence to the domestic and international standards laid down for its products.

The company is equipped with the necessary facilities to carry out research and development which carry out necessary tests and trials to develop and devise the quality film suitable to the nature of the product and the requirement of the various domestic and international packaging regulations and standards. It carries out its research within its manufacturing unit itself with an objective to implement a performance-oriented approach with the help of imported technologies installed in the company. Its Personnel are having an experience for the development of new films. With availability of Research & Development facilities, the company ensures that the packaging needs and demands of its customers suitable to their final products are effectively met. 

Proceed is being used for:

• Meeting the capital expenditure
• Meeting working capital requirements
• Meeting general corporate purposes

Industry Overview

The India Packaging Market was estimated to be worth $50.5 billion in 2019 and is projected to grow at a compound annual growth rate (CAGR) of 26.7% to reach $204.81 billion by 2025. The packaging industry stands as the fifth largest industry in India, the government plans to adopt several initiatives that focus on the sustainability manufacturing methods, minimizing of plastic packaging and adoption of sustainable material for the packaging industry. The packaging industry value chain in India encompasses several key stages, starting from the feedstock supplier to the end consumer. It begins with raw material providers who supply materials like wood pulp, recycled paper, plastic resins, metals, and glass. These raw materials are then processed by manufacturers into suitable forms for packaging production, including pulp mills for paper, plastic manufacturers for plastic pellets, and metal refiners for metal sheets. Packaging producers further convert these materials into various packaging solutions such as paperboards, plastic containers, metal cans, and glass bottles.

Plastics comprise a diverse group of synthetic organic polymers that form an integral and ubiquitous component of the operation of modern society. Since the mass production of plastic products began in the 1940s, the amount of plastic being manufactured has increased considerably, with the global plastic market valued at 712 billion U.S. dollars in 2023 and expected to experience considerable growth over the next decade. Plastics are versatile materials that are used in a wide range of products and applications.

However, not all plastics are the same. There are approximately seven broader types of plastic that are produced and consumed in large quantities: polyethylene terephthalate (PET), high-density polyethylene (HDPE), polyvinyl chloride (PVC), low-density polyethylene (LDPE), polypropylene (PP), polystyrene/100tilizati (PS), and miscellaneous plastics. Among them, polypropylene (PP) stands out with a production volume of 75.40 million metric tons in 2020, projected to reach 107.20 million metric tons by 2050. India exports plastic to more than 200 countries in the world. The total value of exports to the USA, the largest consumer of the Indian plastic industry, stood at $2.31 billion in 2022-23, a decrease of 4.71% YoY. The total plastic exports from India to France during 2022-23 was around $211.4 million. Going forward, India has recently signed a free-trade agreement with UAE and Australia, which will give the plastics industry new opportunities. 

Pros and strengths

Advanced manufacturing facility: The company boasts of its fully automated manufacturing facility equipped with 100% imported machineries from Italy and Germany, ensuring high precision and efficiency in the production of CPP and CPE films. These automated machines are designed to minimize wastage and optimize production efficiency, outperform their counterparts from other manufacturers. With a focus on durability, reliability, and efficiency, these machines enable it to deliver quality products while minimizing operational costs. The advanced technology and automation in its manufacturing process enable it to maintain consistent quality standards and meet the diverse requirements of its customers. These advanced machines incorporate the latest innovations in film extrusion, coating, and finishing processes, allowing it to produce films of the high quality with precision and efficiency which caters, diverse packaging applications and industry requirements.

Own manufacturing unit and self-reliant manufacturing process: The company as having own manufacturing unit allows it to have full control over every stage of manufacturing, from raw material procurement to final product delivery. Owning its manufacturing unit enhances its supply chain resilience by reducing reliance on external suppliers and mitigating risks associated with supply chain disruptions. It has greater control over production schedules, inventory management and logistics that enables it to optimize costs and improve cost competitiveness in the market. The location of its unit is connected to major cities of Gujarat by highway and airports which enhances its capability of supplying its products in time and on a cost-effective basis to its clients.

Wide product range and customized product offering: With its imported manufacturing facility, the company has the capability to produce various types of CPP and CPE films, catering to a wide range of applications in the packaging industry. Its diverse product portfolio includes clear films, metallized films, specialty films, and high-performance films, offering customers flexibility and choice to meet their specific packaging needs. By offering a diverse array of films, it provides customers with the flexibility to choose products that best suit their specific packaging needs. Its experienced team works closely with customers to understand their exact specifications and requirements. Leveraging its expertise and advanced manufacturing capabilities, it develops tailored solutions that address their specific packaging challenges and objectives.

Risks and concerns

Maximum revenue comes from few customers: The company has derived 54.28%, 42.34% and 70.46% of its total revenue from top 5 customers in FY22, FY23 and FY24, respectively. The company’s customers often undertake vendor rationalisation to reduce costs related to procurement from multiple vendors. Since it is largely dependent on certain key customers for a significant portion of its sales, the loss of any one of its key customers or a significant reduction in demand from such customers could have a material adverse effect on its business, financial condition, results of operations and future prospects.

Requires significant amount of working capital: The company’s business requires significant amount of working capital for carrying-out its activities. Consequently, there could be situations where the total funds available may not be sufficient to fulfil its commitments, and hence it may need to incur additional indebtedness in the future, or utilize internal accruals to satisfy its working capital needs. The company’s future success depends on its ability to continue to secure and successfully manage sufficient amounts of working capital. Further, its ability to arrange financing and the costs of capital of such financing are dependent on numerous factors, including general economic and capital market conditions, credit availability from banks, investor confidence, the continued success of its operations and other laws that are conducive to its raising capital in this manner.

Dependent on third-party transportation for supply of raw materials and delivery of finished products: The company’s success depends on the supply and transport of the various raw materials required for its manufacturing facilities and of its finished products from its manufacturing facilities to its customers and distributors, which are subject to various uncertainties and risks. Currently, the company is using its own 2 vehicles for the purpose of transportation of its manufacturing products. In addition, raw materials and finished products may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be a delay in delivery of raw materials and products which may also affect its business and results of operations negatively. In the event it fails to maintain a sufficient volume of raw materials and delivery of such materials to it is delayed, it may be unable to meet its purchase orders in a timely manner or at all, which may result in loss of sales opportunities that its competitors may capitalize on, thereby adversely affecting its business, financial condition, results of operations, and cash flows.

Outlook

3B Films is a Vadodara, Gujarat based company engaged in the manufacturing and supplying of Cast Polypropylene (CPP) and Cast Polyethylene (CPE) films for packaging and thermoforming applications. The company's products include transparent, metalized, white opaque, retort, anti-fog, easy-peel, and EVOH films. With advanced facilities and R&D, it leads in specialty films, offering innovative packaging solutions worldwide. The company has its own manufacturing unit and self-reliant manufacturing process coupled with wide product range and customized product offering. On the concern side, the company is significantly dependent on few customers for its revenue in a particular financial year. The loss of any one or more of such customer may have a material effect on its business operations and profitability. It derives a significant portion of its revenue from sales to its top 5 customers. Any failure to maintain relationships with such customers could adversely affect its revenue and financial condition. Further, the company is dependent on third-party transportation providers for the supply of raw materials and delivery of its finished products.

The company is coming out with an IPO of 67,50,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 50 per equity share to mobilize Rs 33.75 crore. On performance front, the total revenue from operations for the year ended on FY 2023-24 was Rs 7574.89 lakh as compared to Rs 7179.90 lakh during the FY 2022-23. Moreover, PAT increased to Rs 429.17 lakh in FY 2023-24 from Rs 91.76 lakh in the FY 2022-23. PAT was 5.62% and 1.26% of Total Revenue of the company for the year ended on March 31, 2024 and March 31, 2023 respectively.

The company’s strategy is to build upon its competitive strengths and business opportunities to become one of the leading packaging companies in the world. Its focus is to leverage its core strengths and expand its operations in existing and new markets. With its extensive bouquet of products, it wishes to enter unexplored markets and establish itself as leading plastic packaging supplier. This will pave the way for it to acquire a larger share in the competitive market. Its goal is to continue providing good quality packaging products to its clients and drive business growth by leveraging its strengths and implementing its strategies like; focusing on its core competence, continue to provide one stop solution and expanding its existing product portfolio.