Gopal Snacks IPO: A Hot and Spicy Opportunity?
Gopal Snacks Limited, a leading snack manufacturer based in Rajkot, Gujarat, is going public with its initial public offering (IPO) of 16.21 million shares. The IPO opened for subscription on March 6, 2024 and will close on March 11, 2024. The price band is set at ₹381 to ₹401 per share, valuing the company at around ₹5,000 crore.
The IPO is entirely an offer for sale (OFS) by the promoters and other investors, who are selling 13.02% of their stake in the company. The company will not receive any proceeds from the IPO and will use them for general corporate purposes.
The company has reserved some shares for its employees, who will get a discount of ₹38 per share. The rest of the shares are divided among qualified institutional buyers (QIBs), non-institutional investors (NIIs) and retail investors in the ratio of 50:15:35.
Gopal Snacks is one of the leading players in the Indian snack market, which is estimated to be worth ₹1.5 lakh crore and growing at a compound annual growth rate (CAGR) of 10%. The company offers a wide range of products, including ethnic snacks, western snacks, bakery products, namkeens, sweets and beverages.
The company has a strong presence in Gujarat, Maharashtra, Rajasthan and Madhya Pradesh, and is expanding its reach to other states through its distribution network of over 1,000 distributors and 4 lakh retailers. The company also exports its products to countries like the US, UK, Canada, Australia and UAE.
The company has four manufacturing facilities in Rajkot, Indore, Nagpur and Bhiwandi, with a total installed capacity of 2.16 lakh metric tonnes per annum. The company follows stringent quality standards and has obtained various certifications, such as ISO 22000:2005, FSSAI and Halal.
Gopal Snacks - Financials
The company has a strong brand recall and loyalty among consumers, thanks to its innovative product portfolio, attractive packaging, aggressive marketing and celebrity endorsements. The company has roped in Bollywood stars like Akshay Kumar and Kriti Sanon as its brand ambassadors.
The company's financial performance has been impressive in the last three years. Its revenue grew from ₹1,026 crore in FY22 to ₹1,358 crore in FY24, registering a CAGR of 15%. Its net profit increased from ₹87 crore in FY22 to ₹132 crore in FY24, clocking a CAGR of 23%. Its earnings per share (EPS) stood at ₹10.60 for FY24.
The company's return on net worth (RONW) was 25.64% for FY24, while its debt-to-equity ratio was 0.18 as on December 31, 2023. The company has a positive cash flow from operations and has maintained a healthy dividend payout ratio of around 20%.
The company's peers in the snack industry include Prataap Snacks, DFM Foods, Bikanervala Foods and Haldiram's. Based on the upper price band of ₹401 per share, the company's price-to-earnings (PE) ratio works out to be 37.83, which is lower than Prataap Snacks' PE ratio of 54.77 and DFM Foods' PE ratio of 46.28.
The company's price-to-book value (PBV) ratio is 9.54, which is higher than Prataap Snacks' PBV ratio of 7.01 and DFM Foods' PBV ratio of 6.63. However, the company's return on equity (ROE) is also higher than its peers at 25.64%, compared to Prataap Snacks' ROE of 12.79% and DFM Foods' ROE of 14.29%.
Subscription Status On Day 2
The company's IPO has received a positive response from investors on the second day of bidding. As of March 7, 2024, the IPO was fully subscribed with a total demand of 68.07 million shares against the offer size of 16.21 million shares.
The retail portion was oversubscribed by 0.95 times with bids for 53.71 million shares against the quota of 56.43 million shares. The employee portion was oversubscribed by 1.78 times with bids for 1.71 million shares against the quota of 0.96 million shares.
However, the QIB and NII portions remained under-subscribed as of March 7, 2024. The QIB portion received bids for only 6,290 shares against the quota of 32.24 million shares, while the NII portion received bids for 12.58 million shares against the quota of 24.18 million shares.
The grey market premium (GMP) for the company's shares was ₹40 as of March 7, 2024, indicating a premium of 10% over the upper price band of ₹401 per share. The estimated listing price for the company's shares was ₹441 per share, which is 9.98% higher than the upper price band.
The company has received positive reviews from various analysts and brokerage houses, who have recommended subscribing to the IPO. Reliance Securities has given a 'subscribe' rating to the issue, citing the company's strong brand equity, diversified product portfolio, robust distribution network, healthy financials and attractive valuations.
The company's IPO is a hot and spicy opportunity for investors who are looking for a bite of the growing snack market in India. The company has a proven track record of growth and profitability, and has a competitive edge over its peers in terms of product innovation, quality and marketing.
However, investors should also be aware of the risks involved in investing in the IPO, such as the high competition in the snack industry, the dependence on a few key markets and distributors, the fluctuations in raw material prices and availability, and the regulatory and legal uncertainties.
The final decision to invest in the IPO should be based on the investor's risk appetite, financial goals and market conditions. Investors should also read the red herring prospectus (RHP) carefully before applying for the IPO.
Please read the detailed review of Gopal Snacks Limited - HERE
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