Gopal Snacks Limited IPO Review
Gopal Snacks Limited is an FMCG company that deals in ethnic and western snacks, and other products in India and internationally. The company was founded in 1999 by Bipinbhai Vithalbhai Hadvani and his wife Dakshaben Bipinbhai Hadvani in Rajkot, Gujarat. They started the business with a vision to provide quality and hygienic snacks to consumers at affordable prices. The company's journey began with supplying snacks to the local market and has since grown into a well-respected brand offering a wide variety of savory and sweet products under the "Gopal" name.
The company offers a wide range of products, including namkeen, wafers, extruded snacks, snack pellets, spices, gram flour, noodles, rusk, and sweets. Some of their popular products are Vanela Gathiya, Fulvadi Gathiya, Moong Dal and Tikha Gathiya. The company has a strong presence in 10 states and two Union Territories in India, with three depots and 617 distributors. The company also exports its products to countries like USA, UK, Canada, Australia, and UAE.
The company has a state-of-the-art infrastructure with modern machinery and equipment. The company follows strict quality standards and hygiene protocols to ensure the safety and satisfaction of the customers. The company also has a dedicated research and development team that constantly innovates new products and flavours to cater to the changing preferences of consumers.
Competitive Strengths
If you are looking for a snack company that has a strong competitive edge, you might want to consider Gopal Snacks Limited. Gopal Snacks is one of the leading FMCG companies in India, offering a wide range of ethnic and Western snacks, as well as other products such as spices, gram flour, noodles, and rusk. Let's explore some of the key strengths of Gopal Snacks that make it a formidable player in the snack industry.
Revenue, Sales, and Profit
Gopal Snacks has shown impressive growth in its revenue, sales, and profit over the years. According to its draft red herring prospectus (DRHP) filed with SEBI, the company's revenue from operations increased from Rs 4,068.9 million in fiscal 2021 to Rs 5,551.2 million in fiscal 2023, representing a compound annual growth rate (CAGR) of 16.7%. Its net profit also increased from Rs 247.8 million in fiscal 2021 to Rs 403.6 million in fiscal 2023, representing a CAGR of 25.8%. The company's earnings before interest, tax, depreciation, and amortization (EBITDA) margin improved from 13.9% in fiscal 2021 to 15.4% in fiscal 2023.
Distribution Network and Geographic Reach
Gopal Snacks has a robust distribution network and a wide geographic reach that enable it to reach its customers across India and abroad. As on September 30, 2023, the company's products were sold in 10 states and two Union Territories in India, namely Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Chhattisgarh, Goa, Daman and Diu, Dadra and Nagar Haveli, Karnataka and Telangana. The company has a network of three depots and 617 distributors who supply its products to over 1.5 lakh retail outlets. The company also exports its products to countries such as the USA, Canada, Australia, New Zealand, UAE, Oman and Qatar.
Unique Features
Gopal Snacks has a strong focus on product innovation and quality that sets it apart from its competitors. The company offers a variety of products that cater to different tastes and preferences of its customers. Some of its unique products include gathiya (a traditional Gujarati snack), vanela gathiya (a soft and fluffy version of gathiya), fulvadi gathiya (a crispy and spicy version of gathiya), moong dal (a roasted split green gram snack), extruded snacks (such as cheese balls and rings) and snack pellets (such as pasta shapes and wheels). The company also offers a premium range of products such as dry fruits gathiya, kesar pista gathiya, and chocolate-coated wafers.
The company ensures that its products are made with high-quality ingredients and adhere to strict hygiene standards. The company has obtained various certifications such as ISO 22000:2005, FSSAI, HACCP, and BRC for its manufacturing facilities. The company also uses advanced technology such as automated frying systems, nitrogen flushing machines, and metal detectors to ensure consistent quality and freshness of its products.
Investment in Research and Development
Gopal Snacks has invested significantly in research and development (R&D) to enhance its product portfolio and improve its operational efficiency. The company has a dedicated R&D team comprising food technologists, engineers, and quality control experts who work on developing new products, improving existing products, optimizing processes, and reducing costs. The company has also collaborated with external agencies such as the Central Food Technological Research Institute (CFTRI) and the Indian Institute of Food Processing Technology (IIFPT) for technical assistance and guidance.
The company's R&D expenditure increased from Rs 18.4 million in fiscal 2021 to Rs 32.7 million in fiscal 2023, representing a CAGR of 32%. Some of the outcomes of the company's R&D efforts include launching new products such as cheese wafers, multigrain wafers, ragi wafers, and nacho chips; introducing new packaging formats such as zipper packs; reducing oil consumption by using vacuum frying technology; and increasing shelf life by using modified atmosphere packaging technology.
IPO: Initial Public Offering
An Initial Public Offering (IPO) marks a significant event for a company. It's the process by which a private company first sells its shares of stock to the general public. This essentially transitions the company from being privately owned to a publicly traded company. Here's a breakdown of the key aspects of an IPO:
What does it mean for the Company?
Raising Capital: The primary purpose of an IPO is for the company to raise capital. By selling shares, they gain access to a large pool of funds from public investors. This capital can be used for various purposes, such as:
Funding growth initiatives (expansion, product development)
Paying off debt
Increasing brand awareness
Providing liquidity for existing shareholders (founders, early investors) who may want to sell some of their holdings.
Increased Public Profile: Going public brings greater visibility and credibility to the company. Their financial performance becomes subject to public scrutiny, which can incentivize strong business practices.
The Process:
Investment Banks and Regulatory Requirements: The IPO process is typically overseen by investment banks. These banks help the company navigate the regulatory requirements imposed by stock exchanges and government bodies like the Securities and Exchange Commission (SEC) in the US.
Setting the Price and Timeline: Investment banks play a crucial role in determining the initial price of the shares offered through the IPO. This price is often set through a process called book building, where investor interest is gauged to determine the appropriate value. Additionally, the banks help establish the timeline for the IPO process.
Offering Shares to the Public: Once the price and timeline are set, the company's shares are offered to the public for purchase through a stock exchange. This can be done through fixed-price offerings or book-building methods.
Gopal Snacks Limited IPO
Issue Date: The issue date, also known as the offer date, signifies the day when the company officially starts offering its shares to the public for purchase. This marks the beginning of the subscription period during which investors can submit their bids to buy the shares at the offered price. (March 6, 2024 to March 11, 2024)
Listing Date: The listing date refers to the day when the company's shares are officially listed and begin trading on a stock exchange. This is typically several business days (3-6 days) after the issue date after processes like share allotment and finalization are completed. On this date, investors who were allotted shares during the IPO can begin selling them, and new investors can start purchasing them on the exchange at the prevailing market price. (Date not mentioned)
Face Value of Shares: The face value of shares is the nominal value of a stock that is determined by the issuer at the time of issuing the shares. It is usually a small amount, that does not reflect the actual market value of the shares. The face value of shares is used to calculate the accounting value of a company's equity, as well as the dividend payments and the par value of bonds. ( IPO Face Value: INR 1 per share)
Price Band: A price band of an IPO is the range of prices within which the investors can bid for the shares of a company that is going public. The price band is set by the issuer and the lead managers of the IPO, based on various factors such as the demand and supply of the shares, the financial performance and valuation of the company, and the market conditions. (IPO Price: INR 381 to INR 401 per share)
Lot Size: The lot size refers to the minimum number of shares an individual investor can apply for. This is set by the issuing company and aims to streamline the application process and manage the distribution of shares. Investors can then apply for multiples of the lot size, but not for quantities below it. (Lot Size: 37 Shares)
Total Issue Size: The total issue size represents the total number of shares the company is offering to raise capital through the IPO. This number is determined by the company and its advisors, considering factors like their funding needs and the expected investor demand. The total issue size is then divided by the lot size to determine the total number of lots available for purchase by investors. [Total Issue Size: 16,209,476 shares (aggregating up to ₹650.00 Cr)]
Offer for Sale: The offer for sale, which is the amount and type of shares that the company is selling to the public. The offer for sale can be either primary or secondary, or a combination of both. A primary offer for sale means that the company is issuing new shares and raising fresh capital. A secondary offer for sale means that the existing shareholders are selling their shares and receiving the proceeds. A combination offer for sale means that both new and existing shares are being sold. [Offers for Sale: 16,209,476 shares of INR 1 (aggregating up to ₹650.00 Cr)]
Issue Type: The type of an IPO can vary depending on the market and regulatory conditions. Some of the common types of IPOs are, Fixed priced IPO, Auction IPO, Book Building IPO, and Hybrid IPO. (Issue Type: Book Building IPO)
Listing At: An integral part of the IPO process is the listing. This refers to the day the company's shares officially begin trading on a stock exchange, such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) in India. Once listed, anyone with a brokerage account can buy and sell the company's shares on the exchange. (Listing at: BSE, NSE)
Retail Shares Offered: This refers to the portion of the total shares being made available specifically for individual investors, distinct from institutional investors like banks or hedge funds. Regulatory bodies often mandate a minimum percentage of shares be reserved for retail investors, aiming to promote broader public participation in the capital markets. (Retail Shares Offered: Not less than 35% of the net offer)
QIB Shares Offered: QIBs are institutional investors such as banks, mutual funds, insurance companies, pension funds, etc., who have expertise and financial resources to invest in the securities market. They are considered as informed and sophisticated investors who can assess the risks and returns of an IPO. QIBs can bid for up to 50% of the total shares offered in an IPO via the profitability route, or up to 75% of the total shares offered in an IPO via the QIB route. QIBs have to pay only 10% of the bid amount at the time of application, and the rest after the finalization of the basis of allotment. (QIB Shares Offered: Not more then 50% of the net offer)
NII (HNI) Shares Offered: NIIs are investors who are not QIBs or retail investors. They include high net-worth individuals (HNIs), corporate bodies, trusts, societies, etc., who bid for more than Rs 2 lakhs worth of shares in an IPO. NIIs can bid for up to 15% of the total shares offered in an IPO. NIIs have to pay 100% of the bid amount at the time of application. NIIs cannot bid at the cut-off price, which is the highest price at which the shares are allotted. HNIs are a sub-category of NIIs who bid for more than Rs 10 lakhs worth of shares in an IPO. (NII Shares Offered: Not less than 15% of the net offer)
Competitors of Gopal Snacks Private Limited
Gopal Snacks Limited faces competition from various players in the Indian snack market, categorized by the type of snacks they offer:
National FMCG Giants:
Nestle India Ltd.: A global giant with a strong presence in India, Nestle offers a wide variety of snack products, including chips, wafers, and chocolates. Their extensive distribution network and brand recognition pose a significant challenge.
Britannia Industries Ltd.: Another major player, Britannia, is known for its cookies, biscuits, and rusks. While their core offerings differ slightly from Gopal Snacks' savory focus, they compete in the overall snack category and leverage a vast distribution network.
Regional Powerhouses:
Bikaji Foods International Ltd.: Based in Bikaner, Bikaji is a strong competitor in the savory snacks segment, particularly with extruded snacks like pellets and kurkure. Their regional dominance and brand loyalty within a similar product category make them a significant rival.
Prataap Snacks: A manufacturer and seller of packaged snacks such as chips, savouries, and puffs under the brand name Yellow Diamond. The company was founded in 2003 and is based in Indore, Madhya Pradesh. The company has raised $40.5 million from investors like Peak XV Partners and Faering Capital. The company went public in 2017.
Other Notable Competitors:
Brandy (BRB): A rising star in the extruded snacks segment, BRB offers competitive pricing and innovative flavors, attracting a growing customer base.
MunchhOnn: A well-established brand known for its namkeens, MunchhOnn caters to a similar consumer base as Gopal Snacks, particularly in the traditional savory snacks category.
Healthy Snack Alternatives:
Yoga Bar: While not a direct competitor in terms of traditional snacks, Yoga Bar offers healthy alternatives like energy bars and muesli, appealing to health-conscious consumers who might be shifting away from fried and processed snacks.
Emerging Players:
The Indian snack market is witnessing a rise in new entrants focusing on specific niches. For example, companies like The Mumum target health-conscious consumers with snacks free from artificial ingredients and preservatives. These players can potentially chip away at Gopal Snacks' market share if they gain traction.
Gopal Snacks faces competition from established national players, strong regional competitors, and new entrants focusing on innovation and healthier alternatives. Their success will depend on maintaining a strong brand identity, diversifying their product portfolio while catering to regional preferences, and investing in R&D to keep pace with evolving consumer trends.
Conclusion
Gopal Snacks Limited's IPO presents an opportunity to invest in a well-established brand with a strong regional presence and a diversified product portfolio. The company boasts a strong track record of financial performance and a focus on quality, offering potential for future growth. However, the competitive landscape in the Indian snack market is dynamic, and investors should carefully consider the associated risks, including the company's limited operational history and the volatile nature of the IPO market. Thorough research, understanding your risk tolerance, and consulting with a financial advisor are crucial before making any investment decisions.
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Disclaimer: This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing securities, that suit your needs. The performance and returns of any equity stock can neither be predicted nor guaranteed.
FAQs
Q: What is an IPO?
An Initial Public Offering (IPO) is the first time a private company sells its shares to the public on a stock exchange.
Q: How can I apply for an IPO?
You can apply for an IPO through your brokerage account or a participating bank's online platform.
Q: What is ASBA?
ASBA (Application Supported by Blocked Amount) is a method of applying for IPOs where your bid amount gets blocked in your bank account only if your application is selected for allotment.
Q: Can everyone apply for an IPO?
While most IPOs are open to retail investors, some may have eligibility criteria based on income, investment experience, or other factors. Check the IPO prospectus for details.
Q: What is the minimum investment amount for an IPO?
The minimum investment amount varies depending on the IPO and the lot size (minimum number of shares) set by the company.
Q: What happens if my IPO application is not selected?
If your application isn't selected, the blocked amount (if applied through ASBA) will be released back to your bank account.
Q: When will I receive the shares if my application is successful?
Shares are typically credited to your Demat account within a few days after the allotment is finalized.
Q: Can I sell my IPO shares immediately after listing?
Yes, you can generally sell your IPO shares as soon as they are listed on the stock exchange. However, consider market conditions and investment goals before making any decisions.
Q: Can I make payment for an IPO through UPI (Unified Payments Interface)?
While not all platforms offer UPI yet, some online platforms and brokerages are increasingly integrating UPI as a payment option for IPO applications. Check with your chosen platform for confirmation.
Q: What are the risks involved in investing in IPOs?
IPOs involve inherent risks, as they are often from younger companies with less established track records. Their future performance is uncertain, and the share price can be volatile after listing. Carefully research the company and the IPO details before investing.