Roshan Packages Limited was incorporated in 2002 with the objective of manufacturing quality packaging for its group company Roshan Enterprises which exports fruits. Since its incorporation, the company has grown each year and has now become one of the largest manufacturer and seller of packaging products in Pakistan.

Roshan Packages is part of the Roshan Group, which has been operating in Pakistan since 1959. The group companies include Urdu Digest, Roshan Enterprises, Roshan Sun Tao Paper Mills (Pvt.) Limited. The group was founded by Dr. Aijaz Hassan Qureshi in 1959, who after completing his PhD from Germany launched Urdu Digest.

The new generation of the group ventured into new businesses with Roshan Enterprises to export famous citrus fruits of Pakistan.

Roshan Packages manufactures two types of products, which are used by variety of industries. The first type is corrugated, which is used in packaging of fruits, vegetables, food, snacks, home appliances, pharmaceuticals, paint and textile.

The second type of product is flexible, which used in packaging of soaps, detergents, confectionery, beverages, cereals and ice-cream wrappers.

Roshan Packages has two plants. The flexible division plant is located 40 kilometers outside Lahore, while the corrugated plant is located in Sunder Industrial Estate.

Roshan Packages clientele includes some of the top companies operating in Pakistan. Revenue-wise the biggest customer of the company is Pepsi. Other clients include Lotte Kolson, Unilever, Continental Biscuits, Chase International, Tapal Tea, Prime Fruits International and Coronet Foods.

The company supplies its products to more than 500 customers out of which 60 have been in business with the company for over five years.

IPO Purpose

Roshan Packages Limited is looking to raise Rs1,137.5 million by issuing 32,500,000 shares at a floor price of Rs35. The funds will be utilized for expansion of production facilities to keep up with the expected demand of packaging material. 80 percent of the funds will be utilized for expansion.

The company also wants to pay off its short-term borrowings, and 11 percent of the funds will be utilized for this purpose.

Lastly, 9 percent of the funds will be used to meet the working capital requirement of the company.

Book building process of the IPO will take place from 17th to 18th January, 2017 for institutions and high net worth individuals. The general public subscription date has been set from 30th to 31st January, 2017.

Historical Performance

Roshan Packages financial performance has been stable over the last few years. According to the prospectus, the sales of the company have grown at compounded annual growth rate (CAGR) of 31 percent since 2009. Profit after tax grew at a CAGR of 48 percent during the same period. After the installation of flexible packaging product plant in 2011, the company witnessed a remarkable top line growth of 60 percent in a single year.

The gross and net margins of the company have been maintained at respectable levels. During FY16 the gross and net margins of the company were at 16 percent and 7 percent respectively.

Shareholding Pattern

Roshan Packages Limited currently has 75 million outstanding shares pre-IPO. All the shares are held by sponsors and directors. Mr. Tayyab Aijaz, the CEO of the company holds 28.8 million shares.

Industry

Packaging industry in Pakistan can be divided in to two sectors. The unorganized sector currently has 45 percent market share, while the organized sector contributes about 50 percent. Roshan Packages is part of the organized sector that includes listed companies like Century Paper and Board Mills (PSX: CEPB) and Packages Limited (PSX: PKGS)

The packaging industry with its direct link to the consumer sector and overall growth of the economy enjoys high valuation on the stock market.

Outlook

Roshan Packages has been increasing its sales to the FMCG sector over the last five years. Currently 64 percent of the sales are generated from the FMCG sector, which is expected to grow as the Pakistan economy accelerates. The company expects the consumer spending in Pakistan to increase from Rs27 billion to Rs34.8 billion in 2018. Being a direct supplier to the top consumer companies, Roshan Packages is in the sweet spot to cash in from this growth.

Moreover, investment activities from CPEC will also benefit the company as new industries and expansion will bring in more jobs which would increase the overall consumer spending in the country.

B.R.



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Roshan Packages - Historical Performance (Rs mn)

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Particulars FY11 FY12 FY13 FY14 FY15 FY16

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Sales 1,389 2,220 2,740 3,066 3,568 3,622

Cost of Sales 1,159 1,888 2,359 2,663 3,116 3,034

Gross Profit 230 332 381 403 453 588

Gross Margin 16.6% 14.9% 13.9% 13.1% 12.7% 16.2%

EBITDA 161 231 253 268 301 412

EBITDA Margin 11.60% 10.40% 9.20% 8.70% 8.40% 11.40%

Profit before Taxation 126 164 194 151 167 282

Profit after Taxation 79 142 139 100 133 262

Net Margin 5.7% 6.4% 5.1% 3.3% 3.7% 7.2%

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Source: Company Prospectus, AHL



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Roshan Packages Recent Performance

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Particulars (Rs. mn) 3MFY17 3MFY16 YoY

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Sales 1,050 824 27%

Cost of Sales 903 742 22%

Gross Profit 147.7 81.8 81%

Gross Margin (%) 14% 10% up 400 bps

Administrative Expenses 25 17 47%

Selling and Distribution Expense 19.8 15.9 25%

Other Operating Expense 4 3.4 18%

Other Income 0.397 3.7 -89%

Finance Costs 15.2 7.6 100%

Profit before Taxation 83.7 41.1 104%

Taxation - -

Profit after Taxation 83.7 41.1 104%

Net Margin 8% 5% up 300 bps

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Source: Company Prospectus, AHL



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Roshan Packages Shareholding Pattern

Shares held by Sponsors/Directors

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Mr. Tayyab Aijaz 28,854,401

Mr. Saadat Aijaz 12,750,000

Mr. Zaki Aijaz 12,752,681

Mr. Khalid Eijaz Qureshi 15,750,000

Mr. Quasim Aijaz 3,179,214

Mr. Muhammad Jameel 1,713,700

Shares held by Independed Directors

Mr. Malik Asad Ali Khan 2

Mr. Naveed Tariq 2

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Total 75,000,000

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IPO Allocation to Insitutions and HNWI 24,375,000

IPO Allocation to General Public 8,125,000

Post IPO Grand Total 107,500,000

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Source: Company Prospectus