Global Surfaces attracted good interest from investors on its listing day as the stock climbed 23 percent intraday on March 23, on the back of a positive mood in the equity markets and healthy subscription numbers reported during its initial public offering.
Experts told Moneycontrol that investors who have got shares in allotment can book profits given the strong listing gains, as most of them said they were worried about the company's weakening operating margin performance of the natural stones processing company.
The stock opened at Rs 164 on the National Stock Exchange, up 17 percent over its issue price of Rs 140 a share, and extended gains as the day progressed. It touched an intraday high of Rs 172.20, up 23 percent.
The trading volume on the NSE was 53.19 lakh shares and 4.09 lakh shares on the BSE.
The listing price was largely better than analysts' expectations as well as ahead of the grey market premium which was around 8-10 percent over the issue price.
"We advise investors who have been allotted shares to book profits on the listing day, as we feel that the declining margin profile of the business and deterioration in key return ratios remain a cause of concern," said Manish Chowdhury, head of research at Stoxbox.
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Global Surfaces reported single-digit growth in revenue and profit but there was pressure in the operating performance. Its consolidated profit for the financial year 2021-22 grew by 5.2 percent to Rs 35.7 crore and revenue from operations by 8.5 percent to Rs 190.3 crore year-on-year.
However, EBITDA (earnings before interest, tax, depreciation and amortisation) fell nearly 12 percent to Rs 41.8 crore with margin declining sharply by 502 basis points to 21.96 percent compared to FY21.
As of September 2022, the company's net debt stood at Rs 50.68 crore, up significantly from Rs 37.29 crore as in March 2022.
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Parth Nyati, founder of Tradingo, said they would not recommend a fresh buy in the stock as recently there has been a decline in its margin and, secondly, the company is in a very competitive segment and most of its revenues are derived from exports.
So allottees who applied for the public offering for listing premium are advised to maintain their stop-loss below 10 percent of their issue price, he said.
The engineered quartz stones manufacturer with two units Rajasthan and plans to set up another unit in Dubai through its subsidiary Global Surfaces FZE derived 99 percent of its revenue from exports in FY22 and 98 percent in the six months to September FY23.
The company has exported its products to the US, Canada, Australia and West Asia.
Its products (including granite, limestone, marble, slate, quartzite, onyx, sandstone, travertine, etc) have applications in flooring, wall cladding, countertops, cut-to size and other items and are used in both commercial and residential industry within and outside India.
Global Surfaces raised Rs 155 crore through its maiden public issue at the higher end of the price band of Rs 133-140 per share. The fresh issue funds of around Rs 119 crore will be utilised for setting up the Dubai facility.
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