Reblog: Galaxy Surfactants IPO review

Galaxy Surfactants Ltd. (GSL) is India’s one of the leading manufacturer of surfactants and other specialty ingredients for the personal care and home care industries. Its products find applications in a host of consumer-centric personal care and home care products including skin care, oral care, hair care, cosmetics, toiletries and detergent products. Over the years, GSL has significantly expanded and diversified its product profiles, client base and geographical footprints. Currently, its product portfolio comprises over 200 grades which are marketed to more than 1700 customers in over 70 countries. GSL is supplying its products to FMCG companies in India such as Cavinkare Pvt. Ltd., Colgate Palmolive, Dabur India, Henkel, Himalaya, L’OREAL, Procter & Gamble, Reckitt Benckiser, Ayur Herbals, Jyothy Lab and so on. It is exporting its products to Africa Middle East Turkey, Asia Pacific, Americas and Europe FMCG giants. To meet global demands, GSL has established step-down subsidiaries and manufacturing facilities is Egypt and USA. GSL has at present strategically located 7 manufacturing facilities out of which 5 are in India and 2 located overseas. It has registered 47 patents since 2002 and 38 patent applications pending. GSL’s products find applications across “mass”, “mass-tige” and “prestige” range of products and is the most preferred supplier to leading brands.

It will be worthwhile to mention that the company tried to launch its maiden IPO in May 2011 for around Rs. 120 crore but had to withdraw it due to the bad market condition. Lead Managers to that IPOs were different. However, this did not affect its expansion plans as it got the required funding from IFC and have proved their mettle with improved performances thereafter.

For listing gains, GSL is coming out with a maiden IPO as an offer for sale of 6331674 equity shares of Rs. 10 each via book building route with a price band of Rs. 1470-1480 per share to mobilize Rs. 930.76 – Rs. 937.09 crore (based on lower and upper price bands). No fund is going to company being OFS. Issue constitutes 17.86% of the post issue paid-up equity capital of the company. The issue opens for subscription on 29.01.18 and will close on 31.01.18. Minimum application is to be made for 10 shares and in multiples thereon, thereafter. Post allotment shares will be listed on BSE/NSE. BRLMs to this offer are ICICI Securities Ltd., Edelweiss Financial Services Ltd. and JM Financial Institutional Securities Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue. It raised equity at par during May 1986 to February 1995 except for just 6000 shares issued at a price of Rs. 26 per share in September 1994. Thereafter it raised further equity at a price ranging from Rs. 55 to Rs. 110 between May 1995 and March 2010. It has also issued bonus shares in the ratio of 7 for 5 (January 1995), 1 for 2 (March 1997), 1 for 1 (November 2009) and 1 for 1 (December 2011). The average cost of acquisitions of shares by the promoters is Rs. 4.13, Rs. 4.41, Rs. 5.37 and Rs. 6.39 per share. Being OFS, it’s paid up equity capital remains same at Rs. 35.46 crores.

On the performance front, GSL has (on a consolidated basis) posted turnover/net profits of Rs. 1701.58 cr. / Rs. 76.00 cr. (FY14), Rs. 1876.03 cr. / Rs. 67.46 cr. (FY15), Rs. 1808.76 cr. / Rs. 102.72 cr. (FY16) and Rs. 2171.70 cr. / Rs. 146.31 cr. (FY17). For the first half of current fiscal, it has reported a net profit of Rs. 75.16 cr. on a turnover of Rs. 1197.28 cr. According to management, due to GST (Goods and Service Tax) and LBT (Local Body Tax) implementation, it had some impact on its working for the first half of the current fiscal, but now everything is stabilized. The issue is priced at a P/BV of 8.26 based on its NAV of Rs. 179.11 as on 30.09.17. For last three fiscals, GSL has posted an average EPS of Rs. 33.46 and average RoNW of 25.85%. It has no listed peers to compare with, thus it is a first mover in this segment. If we annualize latest earnings and attribute it to the post issue equity, then asking price is at a P/E of around 35. GSL has posted 24.40% CAGR in profit after tax for FY14 to FY17. It will attract first mover fancy in this segment which is very lucrative and has bright prospects going forward.

On BRLM’s front, the three merchant bankers associated with this issue have handled 54 public issues in the past three financial years out of which 11 public issues closed below the issue price on listing date.

Conclusion: With the widest range of grades, the company enjoys a virtual monopoly in the segment and is poised for bright prospects ahead as personal care/home care products market is going to widen. Being the first mover in the segment, the company will gain fancy post listing. Investment may be considered for short to long term. (Subscribe).

The original review is written by Dilip Davda, appears on and is available here.

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