Engineered quartz stones manufacturer Global Surfaces is expected to start the first day first trade with 5-10 percent premium at 10 am on March 23, given the improvement in equity markets from the day's low and good IPO subscription numbers.
However, concerns like falling operating margins and weakening key return ratios may cap the upside for the stock.
This is going to be the fourth debut on the bourses in the current calendar year after Divgi TorqTransfer Systems, Sah Polymers and Radiant Cash Management Services.
The natural stones processing company closed its Rs 155-crore maiden public issue on March 15 with 12.21 times subscription. High networth individuals provided the maximum support to the offer, subscribing 33.10 times, followed by qualified institutional buyers with nearly nine times and retail investors with 5.12 times subscription.
The opening date for the offer was March 13. The final offer price has been fixed at Rs 140 per share, the upper end of price band.
"Keeping in mind the recent improved market sentiment from the lows, we expect that the issue of Global Surfaces to open 8-10 percent above its issue price," Manish Chowdhury, Head of Research at Stoxbox, said.
Tradingo founder Parth Nyati also feels Global Surfaces might witness a positive listing with a premium of around 5-7 percent, as suggested by the grey market, where it is currently trading at a premium of around Rs 13.
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"But eventually, we have seen a decline in the grey market premium, and the current market is also volatile, which might impact its listing, so we can expect just some minor gains from its listing only if the market is favourable," he said.
Before opening the issue for subscription, Global Surfaces IPO shares had traded with a premium of Rs 50-60 over and above the issue price of Rs 140, which later declined gradually up to Rs 12-15, analysts said.
"This GMP trend indicates a positive market sentiment for the stock. If this trend holds, investors could potentially see listing gains of up to 25 percent," Krishna Raghavan, founder at Unlistedkart.
The benchmark Nifty50 traded around the 17,100-17,150 levels, showing a recovery of around 300 points from five-month low.
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Global Surfaces is engaged in processing natural stones and manufacturing engineered quartz with a wide product portfolio and multiple designs. The Rs 155-crore IPO comprised a fresh issue of Rs 119.3 crore and an offer-for-sale of Rs 35.7 crore by selling shareholders.
The company is going to utilise fresh issue proceeds for investment in its subsidiary, Global Surfaces FZE, which is setting up a manufacturing facility for engineered quartz at The Jebel Ali Free Zone, Dubai.
"This, in turn, will allow Global Surfaces to increase its product lines, catering to various applications like flooring, wall cladding, countertops, and more. The company's products are widely used across commercial and residential industries," Raghavan said.
Global Surfaces, which has two manufacturing units in Rajasthan and sells its products within and outside India, has recorded a 5.2 percent growth in consolidated profit at Rs 35.7 crore for the year ended March FY22 and 8.5 percent increase in revenue at Rs 190.3 crore compared to the previous year (FY21).
Operating performance, however, remained weak with EBITDA (earnings before interest, tax, depreciation and amortisation) falling nearly 12 percent to Rs 41.8 crore and margin falling 502 bps to 21.96 percent in the same period. Even the margin compared to FY20 (at 24.68 percent) was lower.
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