Global Surfaces IPO opens for subscription, GMP rises; should you apply-

Global Surfaces IPO opens for subscription, GMP rises; should you apply?

Global Surfaces IPO opened for subscription on Monday and will conclude on Wednesday, 15 March. The price band for the IPO has been fixed at Rs 133-140 a share. Global Surfaces IPO comprises a fresh issue of 85.20 lakh equity shares and a sale of 25.5 lakh shares by promoters, Mayank Shah and Sweta Shah. 

Ahead of the IPO, the company raised Rs 46.5 crore from anchor investors. At the upper edge of the price band, the IPO seeks to raise Rs 154.98 crore. Global Surfaces shares were commanding a grey market premium (GMP) of Rs 35 today. The shares of the company are expected to list on the stock exchanges on Thursday, 23 March 2023.

To expand the presence in the international markets, Global Surfaces propose to set up a new facility in Dubai, UAE for manufacturing engineered quartz. This proposed facility shall be set up through their wholly owned subsidiary, Global Surfaces FZE, incorporated in UAE.

Should you subscribe to Global Surfaces IPO?Dilip Davda: May apply

“The company is in the business of processing natural stones and manufacturing engineered quartz. It has shown declining trends in its RoE and RoCE. Based on FY23 annualized earnings, the issue is aggressively priced. It is also in the highly competitive segment. The initial listing will be in the “T” group and there may not be any speculative move on debut. Hence well-informed/cash-surplus investors may consider an investment with a long-term perspective.”

Religare Broking: Neutral

“The company started their business activities with processing of natural stones and post that they branched out to manufacturing engineered quartz, this led to add a wide range of products in its portfolio. Going ahead, their plan is to keep a constant focus on adding new products, identifying new markets and introducing high quality products which are in demand.

“The company’s Revenue and PAT grew by 9.4% and 30.4% CAGR over FY20-22. On the valuation front, at an EPS of 10.5 in FY22, the company trades at P/E of 13.3x. Key Risk: 1) Highly dependent on few customers and geography (USA) for revenue. 2) The company does not have any long term arrangements/ agreements with customers or suppliers and this can impact business operations.”

Capital Markets: Neutral

“The clientele profile of the company is concentrated with the company deriving around 65.4% and 60.1% of its revenue in FY22 and H1FY23 from top 3 customers and about 82.8% and 83.1% of its revenue from top 10 customers. So loss of any key customers or delay in placing orders by a client will impact the performance of the company. Similarly top 10 suppliers account for 76.99 and 66.38% of its total purchases of raw materials in FY22 and H1FY23.

“Tariff barriers to protect local manufacturers in key export markets of the company will adversely impact the competitiveness of the company. For instance, sales of engineered quartz surface products from India are presently subject to anti-dumping duty of 3.19% applicable from July 2022 and counter-vailing duty ranging from 2.34% to 1.57% with effect from June 2020.”

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