Durlax Top Surface coming with IPO to raise Rs 40.80 crore

Durlax Top Surface

• Durlax Top Surface is coming out with initial public offering (IPO) of 60,00,000 shares of Rs 10 each in a price band Rs 65-68 per equity share.  
• The issue will open for subscription on June 19, 2024 and will close on June 21, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 6.50 times of its face value on the lower side and 6.80 times on the higher side. 
• Book running lead manager to the issue is Expert Global Consultants.
• Compliance Officer for the issue is Komal Birla.

Profile of the company

The company is engaged in the business of manufacturing of solid surface material, which is sold across India, through an extensive distribution network of distributors and direct customers and also exported to various countries such as Dubai, Bahrain, Greece, Nepal. It operates through two brands namely LUXOR and ASPIRON, which provide a wide range of solid surfaces. Its LUXOR brand offers Acrylic UV Solid Surfaces, while ASPIRON offers Modified Solid Surfaces. Situated in Vapi, its manufacturing facility is equipped with German and South Korean technologies and advanced machinery to produce solid surface materials. It aims to meet the ever-evolving demands of its customers and create functional spaces across various sectors. 

Its solid surfaces find applications in residential, commercial, hospitality, healthcare, exterior, and diverse industries, providing stylish and durable solutions for countertops, vanities, offices, retail spaces, hotels, hospitals, outdoor projects, and more. The company is founded by Shravan Suthar and Lalit Suthar, both of whom are certified in interior designing. Shravan Suthar is primarily responsible for client acquisition and retention, diligently working to expand its client base and maintain strong customer relationships, fostering continuous business growth. On the other hand, Lalit Suthar oversees comprehensive business development endeavours, particularly focusing on brand marketing solutions.

Proceed is being used for:

• Part finance the working capital requirements 
• General corporate purposes
• Meeting the offer expenses

Industry overview

The India home furnishings market size reached Rs 48,625 crore in 2022. Looking forward, the market to reach Rs 78,536 crore by 2028, exhibiting a growth rate (CAGR) of 8.23% during 2023-2028. Home furnishings include furniture, appliances, rugs, cooking utensils, art objects, wall-to-wall carpeting, builtin ovens, ranges, and dishwashers. They aid in providing an appeal and comfortable ambiance to different spaces of a home, including the bedroom, living room, and dining room. There is currently a rise in the availability of innovative and affordable home furnishings across India.

The thriving e-commerce industry on account of the increasing internet penetration and reliance on smartphones, tablets and laptops represents one of the key factors propelling the growth of the market in India. Additionally, leading players operating in the country are focusing on visually attractive online product displays and aggressive 113 promotional campaigns to widen their existing consumer base. They are also offering customization to customers, which enable them to request for a specific material and colour of furniture upholstery to match their home décor. Apart from this, the Government of India is introducing campaigns like Make in India that aim at minimizing exports and encouraging domestic manufacturing of home furnishings to offer employment opportunities.

The most recent research report on the global ‘Corian Acrylic Solid Surface Market’ from 2023 to 2029 offers a comprehensive overview of the market, highlighting current trends, demand, and recent advancements that are anticipated to impact market growth in the near future. The report delves into various aspects including new business opportunities, pricing, revenue generation, gross margin, market size, market share, growth potential, and upcoming strategies employed by leading players. Additionally, it provides detailed profiles of major companies operating in the market, with a focus on market size for different product types (Casting Molding Solid Surface, Extrusion Molding Solid Surface), applications (Hospitals, Hotels), and geographical regions. The report also analyses the competitive landscape, current status, and emerging trends in the industry.

Pros and strengths

Focusing on multiple end-user industries: It has over the last few years introduced new categories/designs which have diverse end-use applications. Initially when it started with 20 colours and 2 ranges (6mm and 12 mm). Subsequently, it has successfully producing wide range of thickness (4 mm to 20 mm) with more than 100 different shades and colour option and also established a good presence in Indian and international market in Dubai, Saudi Arabia, Qatar, Greece, USA, Sri Lanka, Bahrain, Nepal, Thailand etc. which has helped it to diversify into more end-user industries such as residential, commercial, hospitality, healthcare, exterior, and diverse industries, and much more. This expansion has facilitated a diversified product portfolio and has helped us create demand for its solid surface across various end-user industries.

Wide and diverse range of product offerings: Over last few years, it has expanded its product brand portfolio to multiple product categories/designs. Having a wide portfolio of product categories/designs enables it to cross-sell to a large customer base (which, in its case, are majorly distributors) who in-turn reach out to large number of retail counters for serving the appliers and eventual end-customer. Having a wide product portfolio also enables the company to efficiently compete with larger solid surface players in the market who also have a wide product offering. Its constant efforts are focused towards continuously identifying market demands and introducing relevant products with high quality.

Diversified distribution network across India catering to customers: It has established its distribution network strategically over the last several years to meet its goals. Its sales team and distribution network cater to all major cities of India to support the distributor who supply the products to retailers/sub dealer who, in turn, make the product available for end-users like Architects, Interior designer, contractors. Its sales team services the retail network through the distributors by making regular visits, which help in generating secondary sales and increase market presence which results in growing market share of its products.

Risks and concerns

Do not have long term agreements with suppliers: Its purchases are concentrated to a few suppliers with its top 10 supplier contributing 86.18%, 84.30% and 83.50% respectively, of its purchases during the Fiscal 2024, 2023 and 2022, respectively. Production quantity and cost of its products are dependent on its ability to source raw materials and packaging materials at acceptable prices and maintain a stable and sufficient supply of its major raw materials. Its key raw materials include Acrylic Resin and Aluminium Hydroxide etc. It procures majority of raw material from import and local suppliers with whom it has no formal arrangements. There can be no assurance that it will be able to procure all of its future raw material requirements at commercially viable prices.

Dependent on third-party transportation providers: Its success depends on the supply and transport of the various raw materials required for its Unit and of its finished products from its Unit to its customers, which are subject to various uncertainties and risks. It relies on third-party freight and transportation providers for the delivery of its products to customers with whom it has no formal arrangement, to provide rail, road and other transportation facilities. It also depends on sea borne freight in respect of import and export operations. Such transportation providers are arranged on an as-needed basis. It maintains marine cargo open insurance policy to cover any damage to its products during transit. Transportation strikes, if any, could have an adverse effect on supplies and deliveries to and from its customers and suppliers.

Significant working capital requirement: It operates in a working capital-intensive industry therefore its business demands substantial funds towards working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, at a future date, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.

Outlook

Durlax Top Surface is engaged in the business of manufacturing of solid surface material, which is sold across India, through an extensive distribution network of distributors and direct customers and also exported to various countries such as Dubai, Qatar, Greece, Sri Lanka. It operates through two brands namely LUXOR and ASPIRON, which provide a wide range of solid surfaces known for their aesthetics and performance. Its LUXOR brand offers Acrylic UV Solid Surfaces, while ASPIRON offers Modified Solid Surfaces. On the concern side, it presently does not have any long-term or exclusive arrangements with any of its customers and it cannot assure that it will be able to sell the quantities it has historically supplied to such customers. In the event its competitors’ products offer better margins to such customers, there can be no assurance that it customers will continue to place orders with the company. In the event of frequent cancellations of purchase orders, the same could have a material adverse effect on its business, financial condition, results of operations and cash flows.

The company is coming out with an IPO of 60,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 65-68 per equity share. The aggregate size of the offer is around Rs 39.00 crore to Rs 40.80 crore based on lower and upper price band respectively. On performance front, the company's total revenue for the financial year 2023-24 is Rs 9,076.42 lakh. This represents a 36.00% increase compared to the previous financial year's total revenue of Rs 6,673.83 lakh. Profit after tax is Rs 505.07 lakh for the financial year 2023-24 in compared to Rs 209.44 lakh in financial year 2022-23. Meanwhile, the company’s strategy is focused towards introducing new product designs to meet the ever-changing demands of the market as well as garnering the attention of more end-users. This helps in strengthening the relationship with the existing customer network through a wide range of products while also onboarding new customers from untapped segments and regions.