Karur KCP Packaging - Rs.66.00

Beginning as supplier of jute bags to cement companies, Karur KCP Packaging Ltd. (KKPL) has today become a one-stop shop for the packing requirements of any industrial sector. Since its inception in 1961, the group has grown into multi-dimensional and multi-product group manufacturing paper, paper bags, polypropylene bags and flexible intermediate bulk containers (FIBC). In fact, KKPL is the only company in India manufacturing extensible sack kraft paper (ESKP) that is used for making multiwall sacks. Currently, 75% of its revenue is contributed by the paper and paper bags division and the rest by PP bags and FIBC.

KKPL’s hi-tech plant for paper and paper bag division is located at Pondichery whereas its reputed manufacturing facility for PP bags and FIBC is at Mayanur near Karur. Its paper bag division produces eco friendly paper bag using imported ‘bottomer’ machines from Japan having an installed capacity of 9 million bags per month. The paper unit manufactures special paper called ESKP thru CLUPAC, which is a patented US technology and has a production capacity of 70 TPD. Catering mainly to cement companies, its PP bag division produces 5 million bags per month. Also, its latest plant for FIBC manufactures world-class Jumbo bags of 500 kg to 2500 kg capacity with the entire production earmarked for exports to USA and EU countries. Last year, KKPL diversified into the non-cement sector namely Carbon Black, Tea, Fertilizers, Grains, Spices, Chemicals and Dyes etc. Due to this increasing demand, the company is planning to increase its Paper production capacity from 65 TPD to 80 TPD. Similarly, the FIBC bags capacity will be increased from 300 TPM to 400 TPM.

From jute to polypropylene then paper and now FIBC, KKPL is continuously growing its product range and expanding capacity. For Dec.’05 qtr., its sales increased by 15% to Rs.56.50 cr. whereas profit after tax spurted by 125% to Rs.2.30 cr. Company is estimated to end FY06 with sales of Rs.220 cr. and NP of Rs.8 cr. i.e. EPS of Rs.8 on an equity of Rs.10 cr. Incidentally, company has a total debt of around Rs.115 cr. on which it pays an interest of Rs.19 cr. @ whopping 16% p.a. To fund its expansion and reduce its debt substantially, KKPL is coming out with FCCB to raise around Rs.70 cr. which may dilute equity to the extent of 100% going forward. Hence only aggressive investors are advised to buy as the scrip can give 50% returns in a bullish market in 6~9 months.