Stove Kraft IPO Review – Issue Details, GMP, Price Band and IPO News
Stove Kraft IPO would open for subscription on 25th January, 2021. Stove Kraft Limited is one of the largest Kitchen appliance supplier in India. This company has incurred losses in FY18, generated thin margins in FY19 and FY20 and surprisingly shows higher margins just 3 months before coming up for public issue. Should you invest in a Stove Kraft IPO then? What are the risk factors an investor should keep in mind before applying for this IPO? Let me review this IPO in this article.
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About Stove Kraft Limited
Company is one of the leading brands of kitchen appliances in India. It is one of the dominant players for pressure cookers and amongst the market leaders in the sale of free standing hobs and Cooktops. They are engaged in the manufacture and retail of a wide and diverse suite of kitchen solutions under its Pigeon and Gilma brands. It also proposes to commence manufacturing of kitchen solutions under the BLACK + DECKER brand, covering the entire range of value, semi-premium and premium
kitchen solutions. Its kitchen solutions comprise of cookware and cooking appliances across its brands, and home solutions comprise various household utilities, including consumer lighting. This not only enables them to be a one stop shop for kitchen and home solutions, but also offer products at different price points to meet diverse customer requirements and aspirations
Issue Details of Stove Kraft IPO
Here are the IPO issue details.
| Stove Kraft IPO – Issue Details | |
|---|---|
| IPO Date | January 25th to 28th, 2021 |
| Face Value | Rs 10 per share |
| IPO Price band | Rs 384 to Rs 385 per share |
| Issue Size | Total of Rs 412.63 Crores (approx) Fresh issue – 95 Crores OFS – 317.6 Crores |
| IPO Lot Size | 38 |
| Lead Managers | Edelweiss Financials and JM Financials |
| Listing at | BSE and NSE |
Objects of Stove Kraft IPO Issue
The objects of the IPO:
1) Offer for sale (OFS): Under offer for sale, selling shareholders would sell the shares and the company would not get any proceeds here.
2) Repayment /Pre-payment in full or part of certain borrowings availed by the company
3) General corporate purposes
Who are the company promoters?
Rajendra Gandhi and Sunita Rajendra Gandhi are promoters of the company.
Company Financials
Here is the summary of the financial information of the company.
| Fin. Year ending |
Total Revenues (Rs in Millions) | Profits after tax (Rs in Millions) |
Profit % |
|---|---|---|---|
| Mar-2018 | 5,345.8 | -120.1 | -2.2% |
| Mar-2019 | 6,425.9 | 7.3 | 0.1% |
| Mar-2020 | 6,729.1 | 31.7 | 0.5% |
| 6 Months ending Sep-20 | 3,295.0 | 287.7 | 8.7% |
Its EPS for FY2020 is Rs 1.05. If we annualize 6 months ending Sep-20 EPS, it works out to Rs 19.14.
What are the key strengths of Stove Kraft Limited?
Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.
1) A one stop shop for well recognized, award winning portfolio of kitchen solutions brands with a diverse range of products across consumer preferences.
2) Widespread, well connected distribution network with a presence across multiple retail channels and a dedicated after-sales network.
3) Strong manufacturing capability with efficient backward integration.
4) Consistent focus on quality and innovation.
5) Professional management with successful track record and extensive experience in the kitchen solutions industry, and a young and dynamic workforce
6) Strong track record and financial stability
What are the various strategies of Stove Kraft Ltd?
Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.
1) The increase is geographical reach and expansion of the addressable market
2) Scale up branding, promotional and digital activities
3) Expand its portfolio in the existing product categories
4) Invest in new plants and increase automation in existing manufacturing facilities
5) Focus on and augment its LED consumer lighting business
6) Increase exports
Why to invest in this IPO?
Here are a few reasons to invest.
1) Stove Kraft is one of the largest kitchen applies supplier in India.
2) Stable revenue growth in the last 3.5 years.
Risk Factors of investing in this IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand them before investing.
1) It has incurred losses for FY2018 and generates thin margins for FY19 and FY2020 (0.5%). However, its margins jumped to 8.7% for 6 months ended Sep-2020.
2) Trade margin of Pigeon brand is the subject matter of litigation and there is no assurance that companies can protect in the future
3) Company source raw materials from third parties with whom they don’t have long term contracts neither price guarantees
4) Company relies heavily on brand portfolio. Its inability to successfully maintain a brand portfolio can affect results of operations.
5) Covid-19 outbreak has impact on business and it may continue for future too
6) There are various proceeds involving company, promoters and director. If determined against them, it would have an impact on business
7) Its promoter and MD Rajendra Prasad may be required to vacate as directorship from company board due to non filing of annual returns for a company (PAPL) where he is one of the director
Stove Kraft Promoter Holding โ Pre and Post IPO
Pre-issue share holding โ 61.31%
Post issue share holding โ %
Stove Kraft IPO GMP
Stove Kraft Company IPO Grey Market Premium (GMP) is at Rs 100 to 110 as on 22nd January, 2021.
Stove Kraft IPO Dates / Timetable (Including Listing date)
| Stove Kraft IPO Schedule | |
|---|---|
| Offer Open | 25-Jan-21 |
| Offer close | 28-Jan-21 |
| Finalization of Basis of Allotment | 02-Feb-21 |
| Unblocking of ABSA and Initiation of Refunds | 03-Feb-21 |
| Credit of shares to Demat Accounts | 04-Feb-21 |
| IPO Shares Listing Date | 05-Feb-21 |
Stove Kraft Share price valuations
Here is how the valuations look like.
1) On the upper price band of Rs 385 and EPS of Rs 1.05 for FY20, the P/E ratio works out to be 366x. ย We cannot compute P/E based on last 3 years average EPS, as company incurred losses in FY2018.
2) If we annualize FY21 EPS based on 6 months ending Sep-20 EPS, the P/E works out to 20x.
3) Means, the company is asking the issue price of Rs 385 of the upper price band in the P/E range of 20x to 366x.
4) There is listed peers Butterfly appliances trading at P/E of 284x (Highest) and Hawkins trading at 42x (Lowest) and the industry average is 123x. While 6 months ending Sep-20 margins are high, but it cannot decide the issue price, hence we can assume that this issue is over priced.
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Stove Kraft Company IPO โ Should you invest?
Stove Kraft is a leading kitchen appliance supplier in India. It has stable revenue growth. It has incurred losses in FY2018 and generates thin margins till FY2020. Surprisingly, it shows higher margins for the 6 months ended Sep-2020 which is 3 months before the IPO. Its issue price is highly priced. Considering all these negative factors, I would like to stay away from such IPO as of now. I will not be surprised that investors would again bet on such companies too and make over subscription by X times.
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Nice and detailed Analysis
. Thank u
Thank you Vishal
Not only nice and detailed analysis but upfront conclusion also. Thank you, Sir.
Thank you Kamal ji for your comments.
Sure.Stay away.It appears even IPO market is operator driven!
Thank you Ramakrishna