Galaxy Surfactants IPO Review: On Strong Footing

Galaxy Surfactants Limited IPO

Galaxy Surfactants IPO consists of sale of 6.33 million shares by individual promoters and other existing shareholders. The public issue is pegged at around Rs 938 crore. Galaxy Surfactants, which was incorporated in May 1986, makes surfactants and other specialty ingredients for the personal care and home care industries. The Galaxy Surfactants IPO will result in a 17.85% stake sale to public investors.. The IPO comes about seven years after an earlier failed attempt to raise funds of Rs. 201 Crore through IPO in May 2011 by selling 25% of the company’s shares. At that point of the time the Galaxy Surfactants IPO garnered just 30% subscription and was withdrawn one day ahead of the closure of the issue.

Galaxy Surfactants  IPO: Details
  Mon, Jan 29, 2018 – Wed, Jan 31, 2018
Issue Details Offer for Sale of 6,331,674 Equity Shares (Rs. 937.08 Cr ) 
Price Band Rs.1,470 – 1,480
Bid Lot 10 Equity Shares and multiple thereof
Issue Structure :  
QIB 50% of offer -up to 3,165,836 Equity Shares-Rs. 468.54 Cr
NIB 15% of offer -up to 949,752 Equity Shares-Rs. 140.56 Cr
Retail 35% of offer-up to 2,216,086 Equity Shares-Rs. 327.98 Cr
Applications for 1x Retail Subscription 2,21,609
BRLMs ICICI Securities, Edelweiss Financial, JM Financial
Registrar Link Intime India Pvt. Ltd.
About Galaxy Surfactants Limited
  • Galaxy Surfactants is  a global leader supplying a wide range of innovative products to over 1000 customers in 103 countries. These include the world’s leading brands.

  • The Company has a wide range of specialty chemicals which includes Surfactants, Mild Surfactants, Rheology Modifiers, Pearlizing Agents, Conditioning Agents, blends based on innovative concepts, proteins, Quats for personal care.  Its products are used in consumer-centric personal care and home care products, including, skin care, oral care, hair care, cosmetics, toiletries and detergent products.

  • Galaxy is Certified Preferred Supplier to Colgate, Star Status Supplier for Unilever, Strategic Mind Partner with Henkel, Green Channel Holder of Reckitt Benckiser.

  • The company currently owns and operates seven manufacturing facilities, of which two are located outside India. In addition, it recently set-up one pilot plant at Tarapur, Maharashtra. As of September 2017, the company had more than 1,200 employees.

  • Unnathan Shekhar, Gopalkrishnan Ramakrishnan, Shashikant Shanbhag and Sudhir Dattaram Patil are the promoters of Galaxy Surfactants Limited  and   have been with the company since the beginning. 
Galaxy Surfactants Limited: Financials:
 (Rs. In Cr)
Particulars HYFY18 FY17 FY16 FY15 FY14
Net Revenue from Operations 1,192.47 2,161.34 1,801.91 1,873.93 1,697.30
Revenue Growth (%) 19.95% -3.84% 10.41%  
EBITDA as stated 145.13 278.05 239.59 191.76 219.8
EBITDA (%) 12.17% 12.86% 13.30% 10.23%  
Profit Before Tax 105.7 204.28 163.48 112.29 123.04
Net Profit after Tax 75.16 146.3 102.71 67.45 76
Net Profit Margin 6.30% 6.77% 5.70% 3.60% 4.48%
Share Capital 35.45 35.45 35.45 35.45 35.45
Reserves 599.58 537.15 412.31 342.43  
Net worth 635.04 572.61 447.77 377.88  
Long Term Borrowings 101.44 129.4 195.79 141.07  
Short Term Borrowings 211.94 204.13 142.35 233.14  
RONW(%) 12.45%^ 28.68% 24.88% 19.27%  
Net Asset Value (Rs.) 179.11 161.51 126.29 106.58  
EPS (Rs.)# 21.2 41.27 28.97 19.03  
IPO Price 1480
Face Value 10
Price/Book Value 9.16
EPS  (Fy17) 41.27
PE – (fy17 Earnings) 35.86
CAGR Sales 3 Yrs 8.39%
CAGR Net Profit 3 Yrs 24.40%
Market Cap 5246.60 crore
Market cap / Sales 2.43
Objectives of Galaxy Surfactants  IPO

Galaxy Surfactants IPO is purely an offer for sale.

 Rationale for Investment
  • Galaxy Surfactants Limited is  one of India’s leading manufacturers of surfactants and other speciality ingredients for the personal care and home care industries. Our products find application in a host of consumer-centric personal care and home care products, including skin care, oral care, hair care, cosmetics, toiletries and detergent products.
  • Since its incorporation in 1986, Company has significantly expanded and diversified its product profile, client base and geographical footprint. Its customers include some of the leading multinational, regional and local players in the home and personal care industries. Currently its product portfolio comprises over 200 product grades, which are marketed to more than 1,700 customers in over 70 countries.
  • Galaxy counts Cavinkare Pvt Ltd, Colgate-Palmolive (India) Ltd, Dabur India Ltd, Henkel, Himalaya, L’ORÉAL, Procter & Gamble Home Products Pvt Ltd, Reckitt Benckiser and Unilever, among others as its key clients.
  • Itsproducts are organized into the following product groups:
    • Performance Surfactants: Comprises over 45 product grades, and includes anionic surfactants and non-ionic surfactants. 
    • Speciality Care Products: This comprises over 155 product grades, and includes amphoteric surfactants, cationic surfactants, UV filters, preservatives, preservative blends and surfactant blends, speciality ingredients such as mild surfactants, syndet and transparent bathing bars and proteins, fatty alkanolamides and fatty acid esters, and other care products.
  • In addition to domestic sales in India, Galaxy Surfactants Limited has significantly increased its geographical footprints by focusing on certain emerging markets coupled with  manufacturing facilities in Suez, Egypt, and New Hampshire, USA which enable it  to service the international demand for its products.
  • To increase its global foot print, Galaxy Surfactants Limited has set-up sales offices in India, Egypt and USA, and representative offices in Netherlands and Turkey .
  • Company has a qualified and experienced in-house R&D  team focuses on the  development of high-performance products and formulations for the consumer-centric home and personal care industries, including collaborative product development with its customers
  • Since 2002, a total of 47 patents have been granted to the company and currently, 10 patents in USA, and 2 (two) patents each in China, the European Union, India, Japan and Russia, are being maintained by it. Galaxy Surfactants Limited has applied for an aggregate of 38 patents globally, of which 21 applications have been made in India, and an aggregate of 17 applications have been made for the registration of patents in Brazil, China, the European Union, Russia and USA.
  • Galaxy Surfactants Limited has seven strategically-located manufacturing facilities, out of which five are located in India and two are located overseas. It has also have set-up 1 (one) pilot plant at Tarapur. Many of its key customers have audited and approved its manufacturing its  facilities and processes.
  • Company has a professionally managed organization, we are driven by a qualified and dedicated management team, comprising of seasoned professionals with experience across various sectors
  • Company has won any certificates of recognition and preferred supplier from companies like  Hindustan Unilever Limited, ,Colgate-Palmolive (India) Limited, L’ORÉAL, Marico Limited,  Dabur etc.
Risks & Concerns:
  • Galaxy Surfactants Limited business depends on the availability of reasonably priced, high quality raw materials like lauryl alcohol, which is primarily purchased from South East Asia, fatty acids, phenols, DMAPA and PAA, which we primarily source from India, South East Asia, USA and Europe. Company has not entered into long-term supply contracts with raw material suppliers and thus is exposed to volatility in the prices of raw materials.
  • Company’s operations are subject to various hazards associated with the production of chemical and other products, such as the use, handling, processing, storage and transportation of hazardous materials, as well as accidents such as leakage or spillages of chemicals. 
  • Galaxy Surfactants Limited generates a significant portion of its revenues from limited number of major customers. For the HY2018 and Fiscals  2017, 2016 and 2015, its top ten customers contributed 58.51%, 54.75%, 53.51% and 60.05% of its total revenues from operations, respectively
  • The company business is subject to extensive government regulation and it is  required to obtain and maintain a number of statutory and regulatory permits and approvals under central, state and local government rules in India, Egypt and USA.
  • Rise in Crude oil price could pose a risk to raw material prices.
Galaxy Surfactants IPO: Assessment
  • While Galaxy Surfactants Limited commenced its operations as a local supplier to FMCG companies in India, it has significantly expanded and diversified its scale and scope of operations over the years so as to become a global supplier to FMCG companies across the globe.
  • Galaxy Surfactants Limited has long-standing relationships with several multinational and Global FMCG Companies.
  • Company has established its reputation and reliability as a supplier of high-quality products and customized solutions, and this has enabled it to receive recurring business as well as attract new customers.
  • On the IPO price of Rs. 1480 the Price/Earning multiple works out be 35.86 on of FY17 Earnings. The Half yearly results (HY FY18) may have a seasonality component but appear upward considering issues like GST in the first half.
  • Galaxy Surfactants IPO could enjoy +ve sentiments as it is a unique play which no peers in this segment and caters to FMCG sector which in general enjoys better valuations.
  • Galaxy Surfactants Limited earlier IPO offer in 2011 had failed and was withdrawn. Even though the pricing is again bit stiff, Galaxy Surfactants Limited has come a long way from there on and proven its credentials to a good degree. Despite steep price being demanded, I intend to  apply in the Galaxy SurfactantsIPO but will also keep a on QIB subscription as the IPO opens.
  • Investors my keep in mind that Listing price of Galaxy Surfactants IPO issue could be affected either way  due to presentation of Union budget on Ist Feb 2018  and to that extent the returns from IPO specifically on Listing may be affected.
  • 29/01/18: A strong Anchor Book further reposes faith in Galaxy Surfactants IPO. I have applied in the IPO without any second thought. 

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.

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