CARE has assigned ‘CARE IPO Grade 3’ to the proposed IPO (Initial Public Offer) of Tulsi Extrusions Limited (TEL). CARE IPO Grade 3 indicates average fundamentals. CARE assigns IPO grades on a scale of Grade 5 to Grade 1, with Grade 5 indicating strong
fundamentals and Grade 1 indicating poor fundamentals. CARE’s IPO grading is an opinion on the relative assessment of the fundamentals of that issuer. TEL proposes an IPO of 5,700,000 equity shares of face value of Rs 10 each.

The price band has not yet been decided.The grading draws strength from the proven track record of the promoters, successful operations of the PVC pipes & fittings business, growth in revenue as exhibited since two years, and favourable prospects of the PVC pipes industry due to increase in end uses.

The grading also draws strength from the recent consolidation of TEL’s operations. The grading is, however, constrained by TEL’s small size of operations, order-dependent nature of business, moderate corporate governance practices, large expansion plans in relation to its size, volatility in raw material prices, unorganised and highly competitive industry in which the company operates. The grading is also constrained by the risks associated with the proposed deployment of funds from the IPO in setting up a new manufacturing unit and its ability to efficiently manage its working capital requirements post expansion.

TEL was incorporated in the year 1994 as Tulsi Extrusions Private Limited, by Mr. Pradip Mundhra at Jalgaon, for manufacturing of various types of PVC pipes and fabricated fittings, with an installed capacity of 1440 metric tonnes. Later in June 1995, it got converted into a public limited company. Subsequently, as on Mar. 31, 2007 the total
installed capacity after takeover of businesses of Gopal Extrusions Pvt. Ltd, Narvada Industries and M/s Tulsi Pipe Industries increased to 10,483 mt.

TEL is a closely-held public limited company with Mr Pradip Mundhra, Promoter-Managing Director, and Mr. Sanjay Taparia Promoter- CEO, both belonging to the same family, managing the helm of affairs. Both the promoters possess nearly 20 years experience in PVC extrusion industry. TEL has three manufacturing units in Jalgaon which are headed by different project heads at various levels, with few of them also being members of the promoters’ families. Out of a total strength of eight directors, TEL has five non-executive directors (four independent and one non- independent) on its board.

All the appointments of the directors, key managerial personnel and formation of committees (audit, remuneration and investors grievance) were carried out during 2006-07 in view of the IPO.

TEL operates in two divisions namely (i) PVC pipes & products manufacturing and (ii)
trading in related products - which it plans to phase out of. Presently, TEL’s products find
their reach across states of Maharashtra, Madhya Pradesh, Chattisgarh, West Bengal and
Rajasthan. TEL sells its products broadly under the brand name ‘TULSI’, which is yet to be registered in the company’s name. In order to facilitate entry into the construction sector, the company’s branches indulged in trading activities of various construction input items.

During FY07, the income from this division contributed to nearly one third of the total
income for the year. The company is proposing to make a fresh public offer of 57 lakh equity shares of Rs 10 each for cash which would constitute 45.62% of the fully diluted post-offer paid-up capital of TEL. The IPO proceeds to be deployed for expansion of manufacturing facilities to an installed capacity of 17,971 mt, setting up new branches and as margin money for working capital.

The company’s sales grew at a CAGR of 66% from FY04 to FY07. However, significant
growth in the company’s revenue has come in the past two years, after the take-over of
the businesses of Tulsi Pipes Industries, Narvada Industries, and Gopal Extrusions Pvt Ltd.

PBILDT has grown at a higher CAGR of approximately 138%, during the review period, as TEL was able to control its manufacturing expenses and employee costs, despite the
inclusion of the businesses of the three new entities.

Following take-over, the equity share capital increased from Rs 0.83 crore in FY05 to Rs 5.68 crore in FY07, leading to improved gearing levels. The current ratio has come down over the years due to greater increase in current liabilities, mainly creditors and working capital borrowings, owing to increase in its operations.