Stove Kraft Limited

IPO Size

`412.62 Cr

Price Band

`384-385 Per Share

Minimum Lot Size

38 Share

Face Value

`10 Per Share

Employee Discount

NA

Retail Allocation

35%

Issue Open Date

25 Jan 21

Issue Close Date

28 Jan, 21

Listing Date

05 Feb 21

About the Company:

Stovekraft Limited was incorporated in 1994 with the aim of manufacturing kerosene wick stoves. The company started manufacturing houseware products under the brands like BPL, Marlex and Inalsa. As company started gaining traction in the Indian kitchen market, the company enjoyed capital infusion from private equity firm Sequoia capital that fueled the firm for next stage of growth. In 2013, the company set up an automated Italian Plant to manufacture non-stick cookware, with annual capacity of 7.2 million units. Currently, the flagship brands of the company: Pigeon and Gilma have unique proposition and different go-to-market strategies across the country. The company offers premium kitchen solutions through wide range of products including pressure cookers, non-stick cookware, gas and induction cook tops, mixer grinders, chimneys and hobs among others.

Outstanding Litigation:

S.No. 1 - Company 2 - Directors 3 - Promoters
Entity Name By the Company Against the Company By the Director Against the Director By the Promoter Against the Promoter
Criminal cases 15.94 - - - - -
Material civil cases - 8.09 - 6.8 - 6.8
Taxation matters - 95.15 - - - -
Regulatory Procedings - 56.4 - - - -
Amt. (In Million Rs.) 15.94 151.55 - 6.8 - 6.8

Financial Statements:

Income Statement (in millions) FY20 FY19 FY18
Gross Operating Income 6729.14 6425.98 5345.85
Cost of Employee & Inventory 5238.79 5084.57 4179.69
Other Expenses 1121.9 1026.59 1010.11
EBITDA 368.45 314.82 156.05
Depreciation 124.1 123.38 112.25
Interest  209.01 179.2 169.35
Profit Before Tax 35.34 12.24 -125.55
Exceptional Items - - -
 Tax 3.64 4.88 -5.37
Profit After Tax 31.7 7.36 -120.18

Recommendation

As per CA Ajay Chouhan, SEBI Registered Research Analyst, recommendation is to ‘Subscribe’ but don’t expect healthy appreciation. Despite, having a few competitors, the company doesn’t have strong popularity in the Indian kitchen market segment due to less expenditure in advertisement and other promotional activities. On the financials front, the company is generating revenue from direct operations at a CAGR of 12.53%. The balance sheet of the company is equipped with long term borrowings amounting at Rs. 204.82 crores, which will be reduced due to net proceeds from fresh issue. This will reduce the interest cost and henceforth increase the profit for the shareholders. The company has turned profitable in last two years and its profit (after tax) has been increased by 450% this year. EBITDA margins of the company are increased by 17%. Stovekraft Ltd. is demanding a P/E multiple of 300.78x (considering the FY20 earnings and the upper price band) which is likely to reduce heavily after debt-reduction while its listed peers TTK Prestige and Hawkins are trading at 55.59x and 46.68x.

Promoter of the Company

The promoters of the company are Rajendra Gandhi and Sunita Rajendra Gandhi.

Peer Comparison

The houseware industry seems to be more promising in the upcoming years. The rising culture of nuclear family in Indian economy will continue to put an uptick in the sales numbers. As people are getting more conscious towards building a modular kitchen in their home, trend will continue to remain strong for houseware industry. The rising income of the people will bend their favor towards more houseware products too. In the listed space, the company will face tough competition from TTK Prestige and Hawkins.

Objectives of the Issue

Offer for Sale

The object of the Offer for Sale is to allow the shareholders to sell an aggregate of up to 82,50,000 equity Shares held by them. The company will not receive any proceeds from the Offer for Sale. Offer for Sale Size is of 8.25 million equity Shares aggregating up to ₹317.52 Cr (at an upper price band of Rs. 385).

Fresh Issue

The company has planned to raise fresh capital comprising an aggregate of 24,67,532 equity shares having Face Value ₹10 aggregating up to Rs. 95 Cr at the upper price band of Rs. 385. The net proceeds will be utilized for payout of certain borrowings amounting Rs. 76 crores while rest could be utilize for augmenting general corporate purposes.