MOLD TEK PACKAGING---dividend plus growth

I reached out to the company secretary and was told that we can convert the warrants before May 2022 (18 months from issue). So we need to act before that.

For the partly paid-up equity shares, I was told that they might issue a notification for payment around November 2021. So I am waiting till November 2021 and then acting because we might be able to take care of the warrants and partly paid up shares at one go.

Thanks.

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Dear All,

Has anyone here converted their warrants into equity shares yet? I was looking for some help on the process.

I hold some warrants of Mold Tek that I wanted to convert into Equity Shares. My DP is Sharekhan.

When I went to fill in the DIS Slip, there is a Reason Code that we have to provide for the Off Market Transaction. Is anyone aware of what is the Reason Code that one has to provide?

I checked with the DP, but they are not aware and they said to ask the Company.

I asked the Mold Tek Company Secretary and they mentioned a code of 99 OTHERS, but that doesnt seem to be there in the NSDL list of defined codes for Off Market Transactions. Now the Company Secretary is saying to check with the DP.

If you have converted your warrants into shares, what is the code that you provided?

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The reason code you can provide is 28

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I got it checked with Ventura. They said reason code 12 ie buyback. And no consideration amount to be mentioned.

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Thanks Longterm and Ameet. I will submit it tomorrow with the reason code and will provide an update once it goes through.

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I finally submitted the Off Market Transaction with a Reason Code of 29 (Deposit of securities with Escrow Agent and its return). Here is the complete process that I followed

  1. Filled up the DIS Slip with the DP with the Reason code as 29 and specified execution date as next day. The DP keeps the original slip with them and gives you a counterfoil.

  2. On the transaction execution day, you must provide your consent, following which the warrants will move from your DP Account to Ventura’s account. Early morning at around 7.30AM I received an sms as well as an email from NSDL with a link to confirm the transaction. Clicking the link takes you to the NSDL eServices website where you have to enter your PAN and then confirm the transaction.While confirming the transaction, you can clearly see the Target DP(Ventura Securities) , Target Client(MTPL Rights Demat Escrow Account Warrants), Quantity, etc.

  3. After providing consent, by evening, the warrants get debited from your DP and you can no longer see them. Thus you know that your warrants have got transferred into the DP Account.

  4. I then couriered the application form, demand draft(you can also use cheque/pay order), and a copy of the counterfoil to Mold Tek(Address specified on the application form)

Last week, after putting this post up, I called up the Company again and got a gentleman on the line(couldnt get his exact name and designation unfortunately), but he took the efforts to clearly explain to me the entire process, thanks to that, I was able to complete steps 1-4 seamlessly. He mentioned that the management usually meets in the mid of the month to approve the conversion of warrants into shares, and within a week from that, the shares get credited into your account. So I anticipate that I will get my shares somewhere after 20th September. There may be a delay this time due to ongoing preparations for the AGM.

I was very much wowed by the way in which he took the trouble to explain the process. Most people usually do not provide you with satisfactory information and redirect you to others which was what I was experiencing prior to getting him on the line.

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Are this detergent PODs packaged by moldtek?

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Slightly dated though.

Mold Tek commands 25% market share and P&G is a client so more likely it is theirs.

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Did not see any post regarding Q1 FY22 results, so am posting the same after going through the Concall recording:-

  • July month went better than last year. Pumps have also started picking up pace. Vizag and Mysore plants are running at high capacity
  • “Will try to achieve 15-20% volume growth in FY22, aiming at 20-22% margins, We will be able to maintain Rs 40+ EBITDA/kg going forward”
  • Lost a couple of tool room engineers due to covid :frowning:
  • Have launched sweet boxes and due to festive season seeing decent demand coming. Any product has a life cycle it takes a couple of years to penetrate and come into a sizeable business quantum - sweet boxes maybe 4-5 Cr this year they can become 15-25 Cr in the next FY.
  • Hyderabad plant has been upgraded to cater to the increase in demand for F&F (inaugurated in June 2021)
  • Have acquired 2.7 acres of land at Sandila Industrial Area in UP, just next to Berger Paints’ upcoming plant. The plant will get constructed in year 22-23, and will go to production simultaneously when Berger is ready to go with their new plant (this new plant will focus on Berger, Nerolac, and edible oils) (Total Capex around 20 crores)
  • Installed capacity is 42,000 MTPA, from 34,000 from the beginning of FY21 (20% growth). Going forward this year, it will grow to 45/46000 MTPA because of Kanpur leased facility.
  • Out of the 42,000 installed capacity around 32,000 is in use actively i.e. 75% capacity utilization.
  • Revenue Q1 FY22 - 71 cr for paints, 29 cr for lubes, 30 cr for F&F, and 3.5 cr for pumps.
  • IML products (40-45 rs/kg) give much better margins to the company than non-IML ones (less than 30 rs/kg)
  • Market size for pail packaging in lubes and paints - INR 2,000 crores (long way to go ahead, ample room to grow) :slight_smile:

Pumps

  • Had started in March/April’21.
  • Eyeing 12-15 cr revenue from pumps in FY22. Can go up to 40-50 cr in FY23, and eyeing for 100+ crores after 3-4 years. (which means around 25 crores per quarter which is more than their lubes business as of Q1 FY22!)
  • Volume as of July: 1-1.5 million/month, by Q3 FY22, will go up to 2-2.5 million/month and by Q4 FY22 will go up to 3 million/month (which is 50% capacity utilization, max capacity is 6-7 million/month as of now)
  • In the FY23, the capacity utilization for pumps will go up to 70-75%, which is similar to other products.
  • Margins (in terms of EBITDA/kg) for pumps would be close to or better than margins of F&F.

QR-coded IML Technology

  • Can be deployed in all segments. Lubricants are the segments that are most dying for this product because they face a lot of duplication and counterfeit issues. One QR code is present inside (reverse coded QR code) the product container also and that can be scanned only once, and this gives an anti-counterfeit feature.
  • Promotion can also be done via QR-coded IML containers, because a single scan can take customers to the website, and companies can give schemes to customers. Some developed countries also have this technology, but they use it more for promotion strategies than anti-counterfeit, as it is not a big issue there. But in India, we have a bigger issue of counterfeiting. The applications are many, just have to see for a few years how this gets evolved.
  • Company has also approached the agriculture ministry of Telangana for QR-coded IML to prevent fake seed racquets that they faced recently.
  • JLR looks very optimistic about this tech

New additions

  • Got a big order from BPCL in Q4 FY21 after a long time, again in business with PSUs. Order worth INR 70 crores to supply products in next 2 FY starting from June 2021.
  • Bagged orders from multiple customers - Gulf Oil (worth 15-20 cr), Kem Agro, Ganapathy Herbal, Virtual Packaging & Association, Satyam Food Processing, Bio Veda Action Research Company, Redex Aqua Solutions, etc.
  • In F&F, received many orders. Most of the clients gave small orders i.e. 1-2 crores per year business. Some orders also include research products, aqua products, nutrients, etc.
  • Plans to add around 6-10 containers of different shapes and sizes for different applications every year, which will keep adding to growth in the coming years.
  • Will introduce some cheese and butter packs by October, November and a new range of ice cream containers by December.

Questions (would be great if anyone could provide insights)-

  • Asian Paints and Castrol (Castrol has already submitted their artwork) had shown interest in QR-coded IML containers, but have they signed any contract yet? (news had to come in August for Asian Paints)
  • How much is the company’s export vs domestic revenue? This website shows 2 shipment orders to Vadilal Industries USA in April’21. (Mold Tek Packaging Ltd | See Recent Shipments | ImportGenius)

Disc. - Invested

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Great summary. About your last question. I thought the management mentioned it is not (no more) economical to import plastic containers from China for FMCG. Because it is too much cost as plastics are light weight and takes too much volume for unit weight of material transported. I am bullish on this company from a import substitution and uptake of good/fancy packaging as part of branding point of view.

Any reasons why you would think the company should do sizeable exports in future?

Disc - Invested and adding

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No reason, in particular, I see for sizeable exports. Maybe they can if they get some huge order so shipping costs make sense.

But the company has obtained licenses under Export Promotion Capital Goods Scheme (EPCG) and Merchandise Exports from India Scheme (MEIS) schemes which means it would be doing at least some exports in the future.

EPCG -

  • Under the EPCG scheme of the Central Government, a service provider or a manufacturer may import capital goods without payment of Customs duty, subject to the condition that such person fulfills an export obligation equivalent to 8 times of the duties, taxes, and cess saved on capital goods, which is to be fulfilled in 8 years from the date of issue of authorization. Capital goods include plant and machinery and/or accessories.
  • The Company may avail and enjoy the benefits under this scheme by importing capital goods without payment of duty subject to fulfillment of export obligations.”

MEIS -

  • Introduced in the Foreign Trade Policy (FTP) for the period 2015-2020 and launched as an incentive scheme for the export of goods. The rewards are given by way of duty credit scrips to exporters. The MEIS is notified by the DGFT (Directorate General of Foreign Trade) and implemented by the Ministry of Commerce and Industry. Till 30th June 2020, the Company has received Rs.49.98 lakhs and as of 30th June, 2020 balance of Rs.8.60 lakhs is receivable.

Source - https://www.bseindia.com/downloads/ipo/Letterofoffer_231020201940.pdf

Disc. - Invested

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Dates for paying balance money to get rights entitlement of shares will be between 4th & 19th Oct

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Exporting of packaging containers usually wont make financial sense to the packaging company. First, cost is a biggest issue out there. Company’s profitability will get compromised. This is precisely why MoldTek had setup a plant in Dubai to sell packaging containers in those markets. That’s a different thing it didn’t take of for multiple reasons. Hence you willl amost always find packaging companies setting up plant close to the client factory. Second, customers, who usually are of larger size than packaging cos, can’t risk distruption of supply of containers at any cost. Hence they prefer packaging companies in close proximity to themselves. Third and last, to get export based customers, one need to invest in right kind of sales force. Getting customer on boarded is atleast year long process with lot of iterations. Travel cost, sales cost etc will eat up the margins.

Having said that, there is humungous opportunity in India itself. MoldTek does not need to step out to get the growth atleast for the forseeable future.

That’s my two cents. Been tracking MoldTek for last 5 years.

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Attended the AGM FY21 today. Following are some points -

  • MTPL is expanding to Injection Blow Molding (IBM) technology. This will help them to get into the pharma, cosmetic sectors. Will have IML technology in IBM also.
    More than INR 5,000 crore opportunity in IBM packaging. Until now, the company was purely in injection molding only.

  • This tech. has a lot of applications in India. Will focus on 3 fields -

  1. Regulated Pharmaceutical Market - Highest focus will be here (predominated by India pharma giants, they supply it to the US, European nations, etc.) These are tablet packs. Our strategy is to launch designs while working with design consultants in the pharma space.
    Major requirements in this field are - quality expectations and cleanroom standards are very high. Takes a long time to set up and getting filing and FDA approvals. Profitability is very high, higher than F&F also. Will take next 6 months to set up. Have finalized 10-12 designs to go ahead with.
    2 bottle caps are there - CT and CRC (more interesting - completely injection molding - new technology, have a design in mind to go ahead with)

More details below

  1. Cosmetics and FMCG - will be the first time in India to introduce IML+IBM for cosmetics and FMCG. Have already been approached by cos. like Unilever, Mondelez etc. for IBM + IML tech. High hygiene requirements, new innovations in products in this space

  1. Domestic pharma and nutraceutical market - requires hygiene, innovative new concepts. Small market as of now (margins will not be very high, but will help to utilize plants established) Initially, we want to get comfortable with the pharma sector in 3-4 years and then will introduce various new designs for driving aesthetics and new designs

Entire Project Timeline

Misc. points -

  • Edible oil cos. use tin cans in times of high RM prices or acute cost-cutting as they cost 90-100 Rs, whereas packs supplied by MTPL costs them around 125 Rs. so
  • We are in touch with Aditya Birla Group for supplying to their paints business (Grasim Industries)
  • Did not go well with JSW paints, their volumes are too low so do not fit our pricing model.
  • The Kanpur Nerolac plant will also focus on Neroclac’s plant in Amritsar. Unless their Amritsar plant has high enough volumes, we will not set up a separate plant there.
  • All our products are 100% recyclable. We will try to use recyclable plastics for non-edible packaging and focus more on sustainability in next coming years.
  • Co. will invest INR 200 crores in next 3 years
  • Target to reach INR 600 crores turnover in FY 22 (25% growth over FY21), targets to reach INR 1,000 crores turnover in next 3-4 years (entire Press release will be out soon)
  • All the growth factors + IBM/IML ensure co. has good growth for next 5-7 years.

All in all, positive and aggressive move by the company. Looking forward to how their plan plays out.

Disc. - Invested

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Thanks for sharing! Can we get the recording or the transcript of agm somewhere? Missed this agm😅

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I don’t think the company or any other website uploads transcript/recording of AGM for mold-tek. Only Press Release is available.

Disc. - Invested

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Well summarised! Do you have any sources/ videos to understand IBM in pharma and fmcg industry? Also how is the existing competition structure here in pharma/ cosmetic packaging
Any one has any insights on this please reply

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I have been tracking Mold Tek Packaging for sometime now, I got a chance to enter last year during the price fall in March and further increased some stake through the purchase of RE and warrants. I will try to play the ‘devil’s advocate’ here and try to counter some of the views put forth by the management in terms of the rapid growth that they foresee over the next few years.

While the management is ‘hopeful’ of achieving 600cr in sales for FY22 and 1000cr in the next 3-4 years, ultimately their growth will depend on the success of the end user industries. Currently, the company caters to three industries, Paints, Lubricants and Food & FMCG, with Paints contributing > 50% of revenues. If there is a slowdown in any of the industries, it will reflect in their sales, as seen in 2017 when the Paints industry was in a slowdown.

While it is miles ahead of the competition due to its innovation, it becomes difficult for it to become the ‘main’ supplier to its clients, as its end clients do not wish to restrict themselves to a single supplier as part of their de-risking strategy. So it will grow steadily, but not rapidly. Besides in the F&F space, not too many of its end client products are essential daily use products.

While moving into IBL and entering the pharma space is a good sign and will give the company more sources of revenues, it will take time for it to penetrate the segment. Hence the sales growth will be a more steady 10-15% over the next few years.

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I have been looking to understand how they plan to fund 200cr capex? Their cash on hand is 1 cr (What I see on screener.in). And CFO is around 60-70 cr. Any idea/info from management regarding the same?

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I will be fearful if they increase debt and d/e goes above 1

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