R&D driven firm Galaxy Surfactants offers long-term value

By VS Fernando

Galaxy Surfactants: R & D driven company offers long term value!

The company is promoted by technocrats experienced in the line of business. Good financial report card, reasonable valuation and strong reliance on R & D promise long term value. However, its Egyptian manufacturing foray is a bit of a concern.

OFFER AT A GLANCE
Name	Galaxy Surfactants Ltd
Offer Quantity	59,30,000 eq shares of Rs 10 each
% on Total Equity	25.07%
Offer Amount	Rs 192.7 cr to Rs 201.6 cr
Offer Price	Rs 325 to Rs 340
Bid Quantity	20 & multiples of 20
Bid/Offer Opens	May 13, 2011
Bid/Offer Closes	May 19, 2011
Rated By	CRISIL
Rating	4/5
Lead Managers	Motilal Oswal Investment Advisors, Centrum Capital
Registrars	Link Intime India

Issue Objective

The company is making the current issue to part finance the following projects:

1.Capex of its step down subsidiary, GC Egypt, which is setting up its manufacturing facility in Egypt at a cost of Rs 212 cr.

2.New manufacturing facility at Jhagadia, Gujarat, costing Rs 70 cr.

3.Expansion of capacities at its Tarapur and Taloja plants at Rs 60 cr.

Parentage

Incorporated in 1986, Galaxy Surfactants Ltd (GSL) is promoted by technocrats comprising of U. Shekhar, G. Ramakrishnan, S.R. Shanbhag and S.D. Patil. Before promoting GSL, the promoters have been associated with multinational companies of repute like Hindustan Unilever and Colgate Palmolive. The company also boasts of an experienced and erudite board of directors.

Business

The company manufactures surfactants and specialty chemicals for the personal home care (PHC) segment. Surfactants are surface active agents which reduce tension between two phases. Starting with only 2 products initially, GSL now manufactures and markets 66 products globally. These products find applications in skin, hair, oral and sun care, body wash, household cleaners and fabric care segments. 

GSL commands a dominant position in the Indian surfactant market with a market share of over 60%. The company