PAG to Acquire Manjushree Technopack for ₹8,400 Crore: Strategic Deal with Strong Investor Potential
28 November 2024
In a landmark move, PAG, an Asia-Pacific-focused private equity firm, has emerged as the lead suitor to acquire Manjushree Technopack, India’s largest rigid plastic packaging company, for ₹8,400 crore ($1 billion). This acquisition marks a significant shift, as Advent International, which currently holds a 97% stake, has opted to sell to PAG, putting a halt to its earlier IPO plans.
Key Deal Highlights:
Transaction Overview:
- PAG will acquire 97% stake in Manjushree Technopack from Advent International for ₹8,400 crore.
- This acquisition is PAG’s largest India deal to date and marks its third $1 billion transaction globally in 2024.
- IPO Route: Advent had initially filed for a ₹3,000 crore IPO and was in advanced discussions regarding both an IPO and private sale. With the acquisition deal now in place, the IPO is officially on hold.
Company Financials:
- FY24 Revenue: ₹2,130 crore, showing strong growth from ₹1,474 crore in FY22.
- PAT: ₹140.7 crore, signaling a profitable business trajectory.
Valuation Insights and Market Dynamics:
Current Market Trading:
- Unlisted Shares: Currently trading in the unlisted market at a market cap of ₹6,700 crore, with an EPS of 20.78, resulting in a P/E ratio of 47.
- Post-Deal Valuation: The ₹8,400 crore valuation equates to a P/E ratio of 60, which is considered on the higher end of industry standards (where the median P/E is around 35).
Growth Potential:
- 25% Upside: Despite the higher P/E, this valuation offers a potential upside of 25% compared to its current market cap, assuming the company meets its growth targets.
- The company has aggressive projections, aiming for 70% EPS growth and 140% PAT growth for FY25, driven by ongoing acquisitions and expansion.
Strategic Position in the Market:
- Leading Packaging Player: Manjushree Technopack serves over 110,000 clients, including major brands like Reckitt Benckiser, PepsiCo, Britannia, and ITC, highlighting its strong presence across sectors such as food, beverages, pharmaceuticals, and consumer goods.
- Industry Growth: With a 1.9 lakh-tonne annual installed capacity, the company is well-positioned to continue benefiting from the growing demand for rigid plastic packaging in India.
The Road Ahead:
- Private Sale vs IPO: While Advent had initially filed for an IPO, the latest move to sell to PAG puts the IPO plans on hold, signaling that PAG’s offer likely met Advent's valuation expectations. The next phase for investors will be to evaluate how PAG’s strategic direction impacts growth and operational performance.
- Future Growth Prospects: Given Manjushree’s strong market leadership, aggressive growth targets, and established client base, the company is well-placed for continued expansion. The acquisition by PAG will provide additional support for inorganic growth and debt reduction, which could bolster future performance.
Conclusion:
Despite the high P/E ratio of 60, which reflects optimistic growth projections, Manjushree Technopack presents a compelling investment opportunity due to its strong market position, aggressive expansion strategy, and potential upside. Investors should keep an eye on the company’s performance in the coming months, especially with the new private equity backing from PAG, which could lead to substantial value creation.