Galaxy Surfactants IPO Review, Should you Invest?

Galaxy Surfactants Ltd., India’s leading specialty ingredients manufacturer, has planned to raise up to Rs 937 crore through an Initial Public Offer (IPO). Galaxy Surfactants IPO is a complete offer for sale, in which the promoters has planned to sell 6,331,674 equity shares.

Galaxy Surfactants has 7 strategically-located manufacturing facilities, out of which 5 are located in India and 2 are located overseas. The company’s product portfolio comprises of over 200 product grades, that are marketed to more than 1,700 customers in over 70 countries.

Further, the company is an established global supplier to major FMCG brands with proven track record. The major FMCG brands which the company deals include Cavinkare, Colgate, Dabur, Henkel, L’ORÉAL, P&G and Unilever etc. The company’s product portfolio cater to wide range of diverse customer needs, has proven R&D capabilities with dedicated focus on innovation and has strong global footprint supporting local reach.

Key Dates  

This issue will open on 29th of January 2018 and will close on 31st January 2018.

IPO Price Band

The company has set a price band of Rs 1,470-1480 for this issue. The investors can make bids in minimum lot of 10 equity shares and then can be invested in multiples of 10 shares thereafter.

Purpose of the IPO

This IPO does not contain any fresh issue. The company will not directly utilize any proceeds of the offer and all the proceeds of the IPO will go to the selling shareholders in the proportion of the equity shares offered by them. Post issue, the promoters shareholding will fall by 6% to 71% from 77% pre-issue.

The company expects that listing of the equity shares will increase its visibility and brand image and will also provide liquidity to its existing shareholders.

Business Risks

The company is highly dependent on the manufacturing facilities, there are fluctuations in the prices of raw materials, the company’s inability to accurately project the demand or price for products, and manage inventory.

Further, the company is dependent on key personnel, including directors and senior management and dependence on major customers.

Should you Subscribe Galaxy Surfactants IPO?

Galaxy Surfactants has grown at 25% CAGR in the last 3 years in earnings and expects to grow further at the rate of 20% CAGR.

At the upper end of the price band of ₹1,480, the IPO is priced at P/E of 35x (post dilution) on FY17 and 34.9x on H1FY18 (annualized) basis, that seems to be fairly valued.

The investors may “subscribe” for the issue, looking at company’s growth prospects.