Will the IPO of this salty-spicy products manufacturing company be sweet for investors?

Take a closer look at the exclusive details of Gopal Snacks Ltd’s IPO inside

About the Issue:  

Gopal Snacks Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 1 each. The IPO price range is set between Rs 381 and Rs 401 per equity share, resulting in a total issue size of Rs 650 crore at the upper price band.  

The IPO is scheduled to commence on March 06, 2024, and will conclude on March 11, 2024. The market lot size for the IPO is 37 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 481 shares or a total investment of Rs 1,92,881 assuming the upper price band.   

Objects of the Issue  

Considering that the offer is solely designated as an offer for sale, it's important to emphasize that the company won't be receiving any funds from this offering, as it's facilitated by the promoter selling shareholder. Instead, the proceeds from the offer for sale will accrue to the promoter selling shareholder.

Promoter holding  

Bipinbhai Vithalbhai Hadvani, Dakshaben Bipinbhai Hadvani and Gopal Agriproducts Pvt Ltd are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 93.50 per cent in the company.   

Company profile  

The company operates within the fast-moving consumer goods sector and presents a diverse range of savoury offerings under its renowned brand 'Gopal'. During Fiscal 2023, the brand secured the position of the fourth largest within the organized sector of ethnic savouries, which includes gathiya, based on market share in India.

Its product portfolio encompasses a broad spectrum, featuring ethnic snacks like namkeen and gathiya, as well as Western snacks such as wafers, extruded snacks, and snack pellets. Additionally, it offers popular consumer staples like papad, spices, gram flour (besan), noodles, and soan papdi.

As of September 30, 2023, the company’s product range consisted of 84 distinct products, totalling 276 SKUs spanning multiple categories to cater to diverse tastes and preferences. The company has significantly broadened its presence across India, with its products available in over 523 retail outlets across ten states and two union territories by the same date.

The company operates six manufacturing facilities, divided into three primary and three ancillary sites. The primary facilities, situated in Nagpur, Maharashtra; Rajkot, Gujarat; and Modasa, Gujarat, are dedicated to the production of finished goods. In contrast, the ancillary facilities specialize in manufacturing besan or gram flour, raw snack pellets, seasoning, and spices. These ancillary sites primarily serve internal consumption needs, providing essential ingredients for producing finished products like gathiya, namkeen, and snack pellets.

Financials  

It seems like the company has been experiencing a positive trend in its financial performance over the last few years, with consistent growth. Even though there was only modest revenue growth in FY23 compared to FY22, the company managed to substantially increase its profit before tax (PBT) by over 180 per cent and its net profit by 170 per cent.

Furthermore, the performance in the first half of FY24 appears to be consistent with the previous year's performance, suggesting that the company has been able to maintain its growth trajectory. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 39 per cent and 43 per cent, respectively, for the fiscal year 2023.

Valuation and outlook 

The issue is priced with a P/BV ratio of 14.43 times, calculated using its Net Asset Value (NAV) of Rs 27.78 as of September 30, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 45.

Gopal Snacks Ltd boasts PE and PB ratios in line with its listed peers, yet stands out significantly by surpassing them in return ratios. Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.