Global Surfaces makes stellar debut; zooms 23% over issue price

Natural stone processor Global Surfaces made a stellar debut on the bourses on Thursday beating grey market expectations. The stock listed 17 per cent higher at Rs 164 per share on NSE as against the issue price of Rs 140 apiece. On the BSE, the stock debuted at Rd 163.

As per IPO Watch, the stock was commanding a premium of 11 per cent in the grey market over its issue price prior to listing.

The share touched an intra-day high of Rs 172.2 on the NSE, and, eventually, closed at Rs 172.15, higher by 23 per cent against the issue price. The market capitalisation of the company stood at Rs 729.6 crore.

The initial public offer of Global Surfaces had garnered 12.2 times subscription. The retail portion of the issue was subscribed 5.1 times, while the high networth portion (HNI) was covered a whopping 33 times. The institutional investor portion of the issue was subscribed nearly 9 per cent.

Through the IPO, Global Surfaces issued new shares worth about Rs 120 crore. The offering also consisted of secondary share sale worth Rs 36 crore. The price band for the IPO was Rs 133-140 per share.

Global Surfaces is engaged in processing natural stones and it also manufactures engineered quartz. Under natural stones, the B2B seller processes granite, marbles, soft quartzite, phylites & soapstone while under engineered quartz, it makes stratum, prismatic, kalmasa & aurora.

The company’s natural stones are widely applied in flooring, wall cladding, countertops, cut-to size and other items for commercial and residential purposes. Engineered quartz too are used in the countertop industry majorly.

It earns 99 per cent of its revenues from overseas markets like US, Canada and the Middle East. Segment wise, engineered quartz make for 83 per cent of its revenue while natural stones make for 17 per cent.

The company aims to use the proceeds of the IPO to set up a manufacturing facility in Jebel Ali Free Trade Zone, Dubai, UAE, which is expected to commence production by FY24.

Dubai is situated centrally and has new manufacturing lines established strategically at Free Trade Zone. This positioning of the manufacturing units near the port leads to optimization of freight and transportation charges. The companies and production facilities located in Free Trade Zones of Dubai are exempt from income tax too, it said in its roadshow presentation.

Further, given the anti-dumping duties on imports of quartz surface products from China, India and Turkey, it is a strategic move of the company to set up a facility in Dubai to expand our presence in US, it said.

Meanwhile, in a pre-IPO note, analysts had Anand Rathi Brokers recommended ‘Avoid’ rating to the company’s issue citing “sectoral headwinds, high revenues concentration from the US & other countries coupled with challenging external environment and heightened competitive intensity”.

“On the valuations front, Global Surfaces is valued at a FY22 PE of 16.7x post-issue and 21.8x its FY23 annualized earnings, which seems fairly valued as compared to its only listed peer Pokarna Ltd which is trading at P/E of 29.5x as of FY22 earnings,” the note said.