Shreenath Paper IPO Listing: Stock lists at 20% discount on BSE SME

Shreenath Paper IPO Listing

Shreenath Paper IPO Listing: A Shocking Start with a Lower Circuit as Shares Enter at a Steep Discount

Shreenath Paper Products, a prominent supplier of paper products to various industries including FMCG, textiles, pharmaceuticals, packaging, food and beverages, and e-commerce, recently launched its Initial Public Offering (IPO) on the BSE SME platform.

The company had high hopes for its public debut, especially given the strong response it received from retail investors during the subscription period. However, the listing day results were far from what investors had anticipated, raising questions about the company’s future performance.

The IPO saw overwhelming demand from retail investors, with the offering being oversubscribed by more than 3 times.

The retail portion of the IPO, in particular, was subscribed 3.18 times, indicating strong market enthusiasm for Shreenath Paper. Despite this, the company’s stock debuted at a significant discount on the BSE SME, much lower than the IPO issue price.

This stark discrepancy between the issue price and the listing price has sent shockwaves through the investment community, leaving many investors puzzled and concerned about the company’s prospects.

A Rocky Start: Shares Enter at a Massive Discount

Shreenath Paper’s shares were issued at an IPO price of ₹44 per share, but upon listing, they opened at ₹35.20 on the BSE SME platform.

This represents a significant 20% drop from the IPO price, catching investors off guard. The situation quickly worsened as the stock price continued to slide, hitting the lower circuit limit of ₹33.44 within hours of listing, representing a loss of 24% for IPO investors.

This steep decline in the stock price raised immediate concerns about the company’s valuation and its ability to generate investor returns, despite the initial buzz during the subscription period.

The stock’s performance on its listing day underscores the unpredictability and volatility that often accompany the small and medium enterprises (SME) segment of the stock market.

While the company had attracted significant attention from retail investors, it appears that the enthusiasm did not translate into post-listing confidence, leading to a sharp sell-off.

The price drop also indicates a lack of confidence in the company’s immediate financial outlook, with many investors now wondering whether the stock will be able to recover in the near future.

How Will the Funds Raised from the IPO Be Utilized?

Shreenath Paper raised ₹23.36 crore through its IPO, which was open for subscription from February 25 to 28. Although the listing debut has been disappointing, the company has clear plans for the utilization of the funds raised.

The primary aim of the capital infusion is to meet the company’s increased working capital requirements.

As Shreenath Paper expands its product offerings and customer base, additional working capital will be essential to sustain day-to-day operations and facilitate growth.

In addition to working capital, the company also plans to use the funds for general corporate purposes, including investments in new technology, infrastructure improvements, and potential business expansion.

These initiatives are designed to strengthen Shreenath Paper’s market position and provide a solid foundation for its future growth.

However, given the initial poor performance of its shares post-listing, the company will need to act quickly to restore investor confidence and demonstrate that the funds raised will be effectively utilized to drive business expansion.

Company Overview: Growth and Market Position

Founded in 2011, Shreenath Paper Products specializes in providing paper materials to industries such as FMCG, textiles, pharmaceuticals, packaging, and e-commerce.

The company offers a wide range of paper products, including coated, food-grade, machine-glazed, and adhesive papers.

These products are essential in the manufacturing processes of various industries, including the production of packaging materials, labels, and other paper-based goods.

Among the key products supplied by Shreenath Paper are sublimation base paper, thermal base paper, straw paper, cup stock paper, security PSA sheets, high-strength paper, and C2S/C1S papers.

These products serve multiple industries and are in constant demand as businesses across sectors like food and beverages, healthcare, and e-commerce rely heavily on paper materials for their operations.

The company has established a strong presence in Maharashtra, Gujarat, and Madhya Pradesh, where its products are widely distributed.

As the demand for sustainable packaging and eco-friendly materials continues to grow, Shreenath Paper is well-positioned to capitalize on these trends, providing products that meet the needs of modern industries seeking to reduce their environmental impact.

Financial Health: Steady Profit Growth with Revenue Fluctuations

Shreenath Paper’s financial performance over the past few years presents a mixed picture. In FY 2022, the company reported a net profit of ₹1.34 crore, which grew substantially to ₹4.38 crore in FY 2023.

This positive momentum continued into FY 2024, with the company posting a net profit of ₹4.39 crore.

This consistent growth in profit is a positive sign, indicating that the company has been able to effectively manage its operations and generate returns for its stakeholders.

However, when it comes to revenue, Shreenath Paper has experienced fluctuations. In FY 2022, the company generated a revenue of ₹141.75 crore, which grew to ₹206.7 crore in FY 2023.

Yet, in FY 2024, the company’s revenue declined slightly to ₹189.67 crore, signaling that growth may not be as steady as the profit numbers suggest.

This revenue volatility raises questions about the company’s ability to sustain growth in a competitive and dynamic market.

For the current financial year (2024-25), Shreenath Paper has reported a net profit of ₹2.41 crore and a revenue of ₹78.62 crore for the period between April and December 2024.

While these figures are encouraging, it is important to note that the company will need to maintain a strong revenue stream and avoid any further declines to ensure its long-term viability and ability to meet investor expectations.

Looking Ahead: Challenges and Opportunities

Despite the disappointing listing day performance, Shreenath Paper still has opportunities to prove itself in the market.

The company’s ability to innovate and meet the growing demand for sustainable packaging materials could be a significant driver of growth in the coming years.

Moreover, if the funds raised through the IPO are used wisely to support business expansion, the company could improve its financial performance and regain investor confidence.

However, the company will need to address its current challenges, including revenue volatility and market skepticism following the poor listing performance.

Building a consistent track record of revenue growth and profitability will be essential for Shreenath Paper to establish itself as a reliable player in the paper products industry.

Final Remarks: A Rocky Start, But Not the End

While Shreenath Paper’s IPO may have had a rocky start with its disappointing post-listing performance, it is important to remember that IPOs, especially in the SME sector, are often volatile in the early days.

The company has a solid product base and has shown consistent profit growth in recent years. If it can successfully manage its working capital and continue its focus on expanding its product offerings, it may be able to recover from this rough start and generate value for investors in the long term.

The coming months will be critical for Shreenath Paper as it navigates the challenges of post-listing performance, manages investor expectations, and executes its business plan effectively to ensure sustainable growth.