India’s leading speciality ingredients manufacture, Galaxy Surfactants Initial Public Offer (IPO) to raise up to Rs 937 crore opens for subscription on Monday, 29th January 2018. We take a look at four key details, and what top brokerages have to say about the issue.
India’s leading speciality ingredients manufacturer, Galaxy Surfactants Initial Public Offer (IPO) to raise up to Rs 937 crore opens for subscription today. Since their incorporation in 1986, Galaxy has significantly expanded and diversified their product profile, client base and geographical footprint. At present, it has 7 strategically-located manufacturing facilities, out of which 5 are located in India and 2 are located overseas. It has also set-up 1 pilot plant at Tarapur, Maharashtra, for the scaling up of new products and processes from labscale to plant-scale. The company manufactures surfactant or surface-active substance. According to a report by HDFC Securities, its product portfolio comprises over 200 product grades, which are marketed to more than 1,700 customers in over 70 countries. While investors may be mulling whether to subscribe to the issue, we take a look at four key details, and what top brokerages have to say about the issue.
Galaxy Surfactants IPO is a complete offer for sale, in which the promotes look to sell 6,331,674 equity shares. At the higher end of the price band, issue would be worth Rs 937 crore. The OFS is being done by some of its pre-issue investors and promoters. The company has set a price band of Rs 1,470-1480 for the issue. The issue will open on 29th of January 2018, and remain open till 31st January 2018. Bids can be made in minimum lot of 10 equity shares and in multiples of 10 shares thereafter. The promoter shareholding will fall by 6% post issue to 71% from 77% pre issue.
Objects of the offer
According to Galaxy Surfactants IPO prospectus, the objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and the sale of equity shares by the selling shareholders. Further, Galaxy Surfactants expects that listing of the shares will enhance its visibility and brand image and provide liquidity to its existing shareholders. Notably, since it’s a complete offer for sale and does not contain any fresh issue, the company will not directly receive any proceeds of the offer and all the proceeds of the offer will go to the selling shareholders in the proportion of the equity shares offered by them.
Pointing to the strengths of the company, HDFC Securities notes that Galaxy Surfactants is an established global supplier to Major FMCG brands with demonstrated track record; robust product portfolio addressing diverse customer needs; proven R&D capabilities with dedicated focus on innovation and global footprint supporting local reach. “Galaxy has evolved from being a local supplier to now a global supplier to FMCG companies across major geographies, such as India, Africa, Middle East Turkey (AMET), Americas (North and South) and Europe. Its sticky customer base comprises a host of major FMCG companies like Cavinkare, Colgate, Dabur, Henkel, L’ORÉAL, P&G and Unilever,” Angel Broking said in a note.
Noting the key concerns of the company, HDFC Securities says that Galaxy Surfactants has high dependence on manufacturing facilities, and the risks associated with manufacturing process and operations; fluctuations in the prices of raw materials; Inability to accurately forecast demand or price for products, and manage inventory; dependence on key personnel, including directors and senior management and Dependence on major customers.
Angel Broking has a subscribe rating on the issue given the growth potential of the company. “At the upper end of the price band, the P/E multiple works out be 36x (pre issue equity base) of FY17 EPS. The company has seen 25% CAGR in the last 3 years in earnings. We expect the company to maintain a 20%+ growth trajectory in the coming few years, considering growing personal care markets, its increasing product offerings and geographies. We recommend ‘SUBSCRIBE’ on the issue for a mid-to-long term period,” noted Angel Broking.
(First published on 29-01-2017 at www.financialexpress.com)