Standard Glass Lining Technology is one of the top five specialised engineering equipment manufacturers for pharmaceutical and chemical sectors in India within house capabilities across the entire value chain.

Its portfolio comprises core equipments used in the manufacturing of pharmaceutical and chemical products, which can be categorized into: (i) Reaction Systems; (ii) Storage, Separation and Drying Systems (SSD Systems); and (iii) Plant, Engineering and Services (including other ancillary parts). Of the FY2025 revenue, about 56.71% came from reactions systems, 30.08% from SSD systems, and 13.21% from plant, engineering and services. It manufactures process equipment using various types of materials or alloys (i.e. stainless steel, carbon/ mild steel and nickel alloy, etc.) with thickness ranging from 1 mm to 60 mm, which are used in food, pharmaceutical and fine chemical industries. As of September 30, 2024, its comprehensive product portfolio consisted of more than 65 products and offerings across pharmaceutical and chemical industries.

Its capabilities include producing process equipment customized to the requirements of its customers. It also provides turnkey automated equipment solutions, optimizing processes like vacuum distillation, solvent recovery and gas dispersion.

The company possesses in-house capabilities to manufacture all the core specialised engineering equipment required in the active pharmaceutical ingredient (“API”) and fine chemical products manufacturing process. Its capabilities include design, engineering, manufacturing, assembly, installation and commissioning solutions as well as establishing standard operating procedures for pharmaceutical and chemical manufacturers on a turnkey basis. Over the last decade it has supplied over 11,000 products.

Engineered solutions of the company are used in processes across pharmaceutical, chemical, food and beverage, biotechnology and fertilizer sectors. In FY2024, about 81.79% of revenue came from Pharmaceuticals, 12.54% from Chemicals and 5.67% from others. In H1FY2025 revenue, 75.1% from pharma, 13.1% from chemicals and 11.8% from others.

The customer base of the company was a strong 347 companies as of September 30, 2024. Its marquee customer base includes 30 out of approximately 80 pharmaceutical and chemical companies in the NSE 500 index as of June 30, 2024. Some of its customers include Apitoria Pharma, Aurobindo Pharma, CCL Food and Beverages, Cohance Lifesciences, Cadila Pharmaceutical, Deccan Fine Chemicals (India), Dasami Lab, Laurus Labs, Granules India, Macleods Pharmaceuticals, MSN Laboratories, Natco Pharma, Honour Lab, Hetero Drugs, Hetero Labs, Hazelo Lab, Piramal Pharma, Sanvira Biosciences, Suven Pharmaceuticals, Tagros Chemicals India, Vamsi Labs and Viyash Life Sciences.

The company has entered into an agreement with HHV Pumps (“HHV”), for supply of vacuum pumps along with a private label arrangement. It also has a supply and purchase arrangement for India with Japan based Asahi Glass plant Inc. and GL Hakko Co. (“GL Hakko”) for procurement of specified grades of glass for its glass lining division. These partnerships have enabled it to fortify its position in the Glass Lining and Vacuum Pumps market in India. Further, it has entered an exclusive collaboration with GL Hakko for exclusively purchasing glass lined tubes manufactured by GL Hakko using which it will manufacture and sell shell and heat tube exchangers under the name of GL Hakko in India and abroad except Japan.

It has a monthly installed capacity of 150-200 glass lined vessels and operates through eight manufacturing facilities spread across built-up or floor area of over 400,000 sq. ft., strategically located in Hyderabad, Telangana.

The Issue, Object of the Issue

The Initial Public Offer comprises a fresh issue of equity shares of Rs 210 crore, and an offer for sale of up to 14289367 equity shares of Rs 10 face value each.

Of the OFS, sales from promoters and promoter group are 13225367 equity shares and balance 1064000 equity shares are from other selling shareholders.

Of the net proceeds from the fresh issue of equity shares, about Rs 10 crore will be used to fund capital expenditure requirement of the company; Rs 130 crore for repayment/prepayment of certain borrowing availed by the company or its wholly owned subsidiary (i.e. S2 Engineering Industry); Rs 30 crore towards investment in S2 Engineering Industry for funding its Capex; Rs 20 crore towards funding inorganic growth through strategic investments and/or acquisitions and balance towards general corporate purposes.

Total consolidated outstanding borrowings as of end of September 2024 stood at Rs 198.335 crore.

Strengths

The company is one of top three manufacturers of glass-lined, stainless steel, and nickel alloy based specialised engineering equipment as well as suppliers of PTFE (poly tetra fluoro ethylene) lined pipelines and fittings in India in terms of revenue in FY2024.

Customized and innovative product offering across the entire pharmaceutical and chemical manufacturing value chain

Has a diversified customer base including end users operating in a range of sectors across pharmaceutical, chemicals, paint, biotechnology and food and beverages.

Long-term relationships with marquee clientele (excess of 3 years with 13 of its top 20 customers) across sectors and repeat orders from more than 80% of top customers in each of the last 3 fiscal as well as H1FY2025.

Over the years, it has been successfully able to increase its product portfolio due to its in-house capabilities, partnerships and acquisitions.

Weakness

Most of its revenue comes from customers in the pharmaceuticals and chemical sectors and thus any slowdown in capex in these 2 industries will impact the business prospects of the company.

Predominantly focused on the domestic market with exports contributing to less than 1% of its revenue from operations in the last 3 fiscals.

All its eight Manufacturing Facilities are situated in Telangana, India

Is dependent on a limited number of suppliers for its key raw materials such as stainless steel, carbon/ mild steel, nickel alloy, forgings, castings, chemicals and poly tetra fluoro ethylene powder.

Witnessed negative cash flow from operating activities in the past.

Filed an application for the registration of corporate logo along with certain other brand names, which are currently pending.

The company had, in the past, failed to comply with certain provisions of the Companies Act.

Has in the past entered certain related party transactions and may continue to do so in the ordinary course of its business.

There have been certain instances of delays in payment of statutory dues by the company in the past.

May not derive the anticipated benefits from its strategic investments and acquisitions and may not be successful in pursuing future investments and acquisitions

Valuation

Consolidated re-stated revenue for the fiscal ended March 2024 stood higher by 9% to Rs 543.67 crore. With OPM expanded by 30 bps to 17.5%, the growth of operating profit was 11% to Rs 94.91 crore. Finally, the net profit was up by 9% to Rs 58.38 crore.

For the half year ended September 2024, the net profit was Rs 34.26 crore on sales of Rs 307.20 crore.

The EPS for FY2024 on expanded equity (on the upper price band) was Rs 2.9. The PE on upper price band works out to 48.3 times and P/BV stood at 4.3 times.

In comparison, HLE Glascoat and GMM Pfaudler quotes at a PE of 76 times and 29.7 times of their FY2024 consolidated EPS and 5.1 and 5.8 times of their P/BV, respectively.