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Saturday, May 14, 2011

Galaxy Surfactants Limited (GSL) IPO review- Nothing left on the table.

Report on Galaxy Surfactants Limited (GSL)
Galaxy Surfactants Limited IPO analysis report

Galaxy Surfactants Limited (GSL)
Analysis by:  Avadhoot Nasikkar (

Issue Details
Total issue:  59,30,000 equity shares, which would constitute as 25 % of fully diluted post issue capital
Issue type: 100% Book Building
Allocation Details
QIB: Up to 29,50,000 equity shares
Non institutional bidders: Not less than 8,89,500 shares
Retail bidders: Not less than 20,75,500 shares
Face value: 10
Price Band: Rs. 325-340
Market Lot: 20
Issue opens on: 13 May 2011
Issue closes on: 19 May 2011 (For QIB 18 May)
Industry: Surfactants (FMCG ingredients)
Maximum Retail Limit: 29 lots (1,97,200 Rs.)

Objectives of the issue:
(1) To fund the capital expenditure of its subsidiary GC Egypt
(2)To fund the capital expenditure for setting up new manufacturing facility at Jhagadia, Gujarat
(3)To expand the capacities at existing units at Tarapur and Taloja

Analysis by:  Avadhoot Nasikkar (
Industry Overview: FMCG ingredients, better known as surfactants mainly used in PHC (Personal and Home Care) segment. Surfactants are also used in textile and construction industry. 
PHC comprises of PCI and HCP sub-segments-
PCI (Personal Care Ingredients): PCI are used in personal care products which are broadly classified into hair care, skin care, color cosmetics, oral care, toiletries and fragrances.
Global market size of PCI industry is $ 145 billion (2007 figure) and the industry is growing at CAGR of 5%. Asia Pacific region including Japan accounts for 33% of total global demand.
HCP (Household Cleaning Products): HCP includes products like detergents, soaps, dishwashing products and other household cleaning products.
Total market for HCP is $28 billion. Asia Pacific region including Japan accounts for 33% of total global demand.
Company Profile: GSL manufactures the FMCG ingredients, better known as surfactants which are mainly used in PHC (Personal and Home Care) segment. Surfactants are also used in textile and construction industry. 
Presently GSL has a portfolio of 66 products with sales spread over 70 countries.
GSL is certified supplier and preferred vendor for leading companies in the field of Personal
Care and Home Care. Few global customers are Beiersdorf, Ecolab, Henkel, Diversey, L’Oreal, Reckitt Benckiser and Unilever. GSL’s domestic customers include Ayur, CavinKare, Dabur, Emami, ITC, Marico, Procter & Gamble Home Products and many more.
SWOT analysis:
(1)Global brands like L’Oreal, Ecolab, and Henkel are customers.
(2)Wide range of products (presently 66) to offer.
(3)Strong presence in India. Personal care market is growing at CAGR of 10% in India and GSL enjoys 60% of market share in its product range.
(4)Strong R&D capabilities. GSL has 18 patents in India and 10 patents in USA.
(5)GSL has got location advantage. Its existing manufacturing units at Tarapur and Taloja have an easy excess to JNPT, Navi Mumbai.

Weaknesses: (1) GSL significantly depends on few customers, top 10 customers’ accounts for 70% of sales.
(1)GSL plans to double its capacity in next 2 years to 3,00,000 MTPA of production.
(2)Manufacturing facility at Suez, Egypt shall open doors to high growth markets like Africa, Latin America, Middle East and east Europe. This facility shall be in free zone so no taxes (direct or indirect) except value added tax.
(3)GSL acquired US-based TRI-K in 2009 for about $ 5 million (USD) which produces ingredients of high margin segment.
(4)In Fiscal 2010, GSL’s international business accounted for 57.7% of total sales which represents less than 1% of global personal care ingredients market. This indicates tremendous growth opportunity in the future.

(1) Increasing Emphasis on natural resources based ingredients might put cost pressures.
(2)Competition from companies like Clariant, BASF ltd, Rhodia etc.

Analysis by:  Avadhoot Nasikkar (

Complete Report Download



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