What you must know Durlax Top Surface IPO?

About Durlax Top Surface Ltd

Durlax Top Surface Ltd was incorporated in the year 2010 to manufacture solid surface materials. The company has already established 2 very formidable and popular brands in its portfolio viz. LUXOR (ACRYLIC UV SOLID SURFACE) and ASPIRON (MODIFIED SOLID SURFACE). Both have reported high levels of customer and Channel Partner satisfaction. Its plant located at Vapi, near Mumbai, produces its own solid surface at its state of the art continuous casting. The total capacity is to produce 2,00,000 sheets per annum. Acrylic solid surface is man-made solid material and finds extensive applications in modern furniture, kitchens, offices etc. Among the two popular brands (LUXOR and ASPIRON); the LUXOR brand offers acrylic UV solid sheets while ASPIRON offers modified solid sheets. The commonality is that both these brands offer seamless designs, antibacterial and fire-retardant properties with stylish and durable commercial and residential applications. 

LUXOR Acrylic UV solid surfaces are best suited for any design application in interior or exterior of the building, homes, and offices. On the other hand, the ASPIRON is a solid surface offering superior design possibilities and durable long-term performance. It predominantly finds applications in hotels, healthcare, retail, and marine. ASPIRON is available in over 60 colours in India but more importantly, ASPIRON can be carved, routed, and worked like wood, moulded, thermoformed or inlayed. Overall, the company brings to the table more than 15 years of experience; with combined manpower running into several hundred years. Durlax Top Surface Ltd has delivered more than 500 projects till date and its products are sold through a network of more than 120 distributors across India. Apart from a robust Indian market, Durlax Top Surface Ltd also exports to more than 90 countries. It has over 150 employees on its rolls. 

Highlights of the Durlax Top Surface IPO

Here are some of the highlights of the Durlax Top Surface IPO on the SME segment of the National Stock Exchange (NSE). 

•    The issue opens for subscription on 19th June 2024 and closes for subscription on 21st June 2024; both days inclusive.

•    The stock of the company has a face value of ₹10 per share and it is a book built issue. The price for the book building issue is set in the price band of ₹65 to ₹68 per share. Being a book built issue, the final price will be discovered within this band.

•    The IPO of Durlax Top Surface Ltd has a fresh issue component and also an offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, the OFS is just a transfer of ownership and  hence is not EPS or equity dilutive.

•    As part of the fresh issue portion of the IPO, Durlax Top Surface Ltd  will issue a total of 42,00,000 shares (42.00 lakh shares), which at the upper band IPO price of ₹68 per share aggregates to fresh fund raising of ₹28.56 crore.

•    As part of the offer for sale (OFS) portion of the IPO, the issue will see an offer / sale of 18,00,000 shares (18.00 lakh shares), which at the upper band IPO price of ₹68 per share aggregates to overall OFS issue size of ₹12.24 crore. The entire OFS of 18 lakh share is being offered by the promoter shareholder, Shravan Suthar.

•    Therefore, the overall IPO size will also comprise of the fresh issue and an OFS of 60,00,000 shares (60.00 lakh shares) which at the upper band IPO price of ₹68 per share will aggregate to overall IPO size of ₹40.80 crore.

•    Like every SME IPO, this issue also has a market making portion. The company has set aside a total of 3,00,000 shares as quota for market making inventory. Globalworth Securities Ltd has already been appointed as the market makers to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs.

•    The company has been promoted by Shravan Suthar and Lalit Suthar. The promoter holding in the company currently stands at 95.44%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 60.35%.

•    The fresh issue funds will be used by the company to part finance its working needs in the normal course of running the business. A small part of the IPO proceeds has also be set aside for general corporate purposes.

•    Expert Global Consultants Private Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Globalworth Securities Ltd.
The IPO of Durlax Top Surface Ltd  will be listed on the SME IPO segment of the NSE.

Durlax Top Surface IPO – Key Dates

Durlax Top Surface IPO opens on Wednesday, 19th June 2024 and closes on Friday, 21st June 2024. Durlax Top Surface IPO bid date is from 19th June 2024 at 10.00 AM to 21st June 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 21st June 2024.

IPO KEY DATES:

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on June 25th 2024, will be visible to investors under the ISIN Code – (INE0OUW01013). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO Allocation and Minimum Investment lot size

Durlax Top Surface Ltd  has announced a market maker allocation of 3,00,000 shares, which will be used as inventory for market making. Globalworth Securities Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall Durlax Top Surface IPO in terms of allocation to categories are captured below.

Data Source: Company RHP

The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹1,36,000 (2,000 x ₹68 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 4,000 shares and having a minimum lot value of ₹2,72,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

There are no upper limits for investments by HNIs / NIIs in the IPO of Durlax Top Surface Ltd. 

Financial Highlights: Durlax Top Surface Ltd 

The table below captures the key financials of Durlax Top Surface Ltd for the last 3 completed financial years. 

Data Source: Company RHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years; i.e., from FY22 to FY24, being the latest year. 

•    The revenues over the last 3 years have been fairly steady in terms of growth. However, if you look at the sales of FY23 and compare with FY21, then the net revenues almost doubled in this 2-year period. That is a robust story. However, what is more important is that the net profit margins or PAT margins have also been building momentum.

•    While net margins of the company are modest at 5.56% in the latest year, the margins have grown sharply in the last 3 years. The return on equity (ROE) stands at 23.12% in FY24, while the return on assets (ROA) is modest at 4.79% in FY24. The numbers have been fairly steady in the last 3 years.

•    The asset turnover ratio or the sweating ratio is relatively low in the latest year at 0.86X and that is not too encouraging if you look at ROA. However, this business bas built traction on sales revenues and hence this figure should get better with time.

The company has latest year EPS of ₹4.06 and we have not included the weighted  average EPS, since the growth has been quite steady. The latest year earnings are being discounted by the IPO price of ₹68 per share at 16-17 times P/E ratio. That looks slightly on the higher side, especially if you consider the net margins on the stock and the ROA, that are slightly lower. However, with the sales revenues building up, that should see traction too. The data is up to FY24, so there is no extrapolation that we can do at this point, since latest financial update is already available for the company. The traction going ahead will only be known from Q1 and Q2 results in the next 6 months.

To be fair, Durlax Top Surface Ltd some bring some intangible advantages to the table. It has built long and deep relationships with marquee brands with its wide and diverse offerings. Also, it focuses on multiple user industries, which derisks the business model. Its strong distribution network is another big advantage; and, also, an entry barrier. However, this is an industry that has a huge market and can give good returns in the coming years, especially with the expanding demand for such durable surfaces. Investors in the IPO must be prepared for a higher level of risk and a holding period of over a year, but the prospects look good, despite the relatively rich valuations.