The fourth public issue of the calendar year 2021, Stove Kraft initial public offer (IPO) is in progress on January 25. Price band has been fixed at Rs 384-385 per share.
Lot size of Stove Kraft IPO is 38 shares. A retail-individual investor can apply for multiples of 13 lots, thereafter for a minimum amount of Rs 14,630 and maximum of 494 shares for Rs 190,190. The book running lead managers to the IPO are Edelweiss Financial Services and JM Financial. KFin Technologies Private Ltd is the registrar to the issue. The company has already raised Rs 185 crore via anchor investors portion that was open for subscription on January 22, 2021.
The Rs 412.62 crore IPO, that closes on January 28 comprises fresh issue of shares worth Rs 95 crore and an offer-for-sale (OFS) of up to 82.50 lakh equity shares. Currently, company promoters Rajendra Gandhi and Sunita Rajendra Gandhi hold 1,84,43,919 equity shares, representing 61.31% of the pre-offer paid-up equity capital. The Stove Kraft IPO allotment status is expected on or around February 2, 2021. As per analysts, the shares are likely to list on February 5, 2021 on BSE and NSE.
Keshav Lahoti, Associate Equity Analyst, Angel Broking said," The company is one of the leading brands for kitchen appliances in India, and are one of the dominant players for pressure cookers and amongst the market leaders in the sale of free-standing hobs and cooktops. Company is engaged in the manufacture and retail of a wide and diverse suite of kitchen solutions under our Pigeon and Gilma brands, and propose to commence manufacturing of kitchen solutions under the BLACK + DECKER brand, covering the entire range of value, semi-premium and premium kitchen solutions, respectively. IPO is priced at 34.5x PE on a trailing basis."
Incorporated in 1999, Stove Kraft has a strong distribution network under the "Pigeon" brand. It has 651 distributors in 27 states and 5 union territories and 12 distributors for exports and under the "Gilima" brand, it has 65 stores across 4 states and 28 cities. It has manufacturing facilities located at Bengaluru (Karnataka) and Baddi (Himachal Pradesh).
Axis Securities said in its IPO note, " Stove Kraft's flagship brands, Pigeon and Gilma, have enjoyed a market presence of over 13 years and enjoy a high brand recall amongst customers for quality and value for money. Pigeon has been listed as one of the "India's Most Admired Brands 2016" by White Page International. As a result of their co-branding initiative over 7 years with LPG companies such as Indian Oil Corporation Ltd and Hindustan Petroleum Corporation Ltd to utilise their sale and distribution channels, their Pigeon brand has enjoyed a wide customer outreach and continues to have a high brand recall value."
According to the draft red herring prospectus (DRHP), the manufacturer of kitchen appliances plans to utilise the net proceeds from the fresh issue towards repayment or pre-payment of certain borrowings availed by the firm and for other general corporate purposes.
Reliance Securities said in its note," The IPO is valued at 301x FY20 and 22x FY21E annualized earnings, which look to be at par compared to Butterfly Gandhimati and 50% discount to TTK Prestige. Notably, these peers enjoy stronger balance sheet and proven earnings record compared to SKL. Hence, IPO is valued aggressively. Despite being into operation for more than two decades and setting up a strong distribution network, SKL has not delivered up to the marks. While sharp improvement in earnings in 1HFY21 bodes well, we are not certain about the sustainability of the same."
The brokerage added," SKL's financials have not been encouraging despite seeing a remarkable improvement in margins. Its net profit stood at mere Rs32mn in FY20, which improved to Rs288mn in 1HFY21, mainly led by cost control measures and lower promotional expenditures. Further, its net worth stands negative of Rs300mn as on Sept'20. Further, its gross debt has contracted significantly Jan'21 led by conversion of CCDs."
Stove Kraft filed its draft papers with the regulator in February and obtained Sebi's observations on April 30 last year.