Stove Kraft IPO opens on Jan 25 ; subscription details, IPO price
The kitchen solutions company is backed by private equity giant Sequoia Capital
Stove Kraft Ltd, a kitchen solutions and an emerging home solutions brand, is launching its initial public offer of equity shares on January 25. The company, promoted by Benguluru-based Gandhis, has raised a little over Rs 185 crore from anchor investors ahead of the over Rs. 400-crore IPO. Here are the details of the Stove Kraft public issue and the company’s business. Read on.
The public offer details
Stove Kraft Limited IPO opens on Jan. 25 and will close on Jan. 28. Shares are available for subscription at IPO price band of Rs. 384/- to Rs. 385/- per equity share. The Stove Kraft IPO minimum lot size is 38 equity shares, entailing a minimum investment of Rs 14,630.
Stove Kraft offer comprises a fresh issue of Rs. 950 million and Offer for sale of 82,50,000 equity shares. The offer for sale comprises up to 6,90,700 shares by promoter Rajendra Gandhi; up to 59,300 shares by promoter Sunita Rajendra Gandhi; up to 14,92,080 shares by Sequoia Capital India Growth Investment Holdings and up to 6,007,920 shares by SCI Growth Investments II.
The face value of each Stove Kraft share is Rs.10/-.
Listing of shares will be on BSE & NSE.
Resident Indian individuals, HUFs, Companies, Corporate Bodies, Scientific Institutions, Societies and Trusts, Eligible NRIs, Category III Foreign Portfolio Investors can invest in Stove Kraft IPO.
The book running lead managers to the offer are Edelweiss Financial Services and JM Financial.
Incorporated in 1999, Stove Kraft is engaged in the manufacture and retail of kitchen solutions under the Pigeon and Gilma brands. It proposes to commence manufacturing of kitchen solutions under the BLACK + DECKER brand, covering the entire range of value, semi-premium and premium kitchen solutions respectively.
The company is into cookware and cooking appliances across their brands, and their home solutions comprise various household utilities.
Sequoia had first picked up a significant minority stake in Stove Kraft in 2010 for Rs. 50 crore. In 2013, it had infused more capital into the company, and currently holds a 25.37% stake.
During the six month periods ended September 30, 2020 and September 30, 2019 and for Fiscals 2020, 2019 and 2018 their Pigeon branded products contributed 76.90%, 80.86%, 86.20%, 81.24% and 86.89% to their overall sales, respectively.
Stove Kraft’s Restated Total Income for the year ended March 31, 2020 Rs. 6,729.14/- million, while Restated Profit after tax for the year ended March 31, 2020 Rs. 31.70/- million.
The company’s Restated Return on Net worth for financial year ended on March 31, 2020 is 2.51%. Restated Net Asset Value (“NAV”) per Equity Share as on March 31, 2020 is Rs. 41.84/-, as per Kotak Securities.
The company’s leading brands in the market for certain products such as free standing hobs, cooktops, non-stick cookware, LPG, gas stoves and induction cooktops.
Use of IPO funds
|Company||Stove Kraft Ltd|
|Open date||Jan. 25|
|Close date||Jan. 28|
|Probable allotment date||Feb. 2|
|Approx. listing date||Feb. 4|
|Face value||Rs 10 per share|
|IPO band||Rs 384 to 385|
|Minimum order||38 shares|
The Sequoia Capital-backed firm (Stove Kraft) proposes 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.
The Indian consumer appliances market is expected to grow at a CAGR of ~9% during FY17-22. This growth will be driven by incremental
spending on consumer durable goods by Indian households bolstered by Government policies and initiatives.
Policies favourable for the consumer appliances industry include lower tax brackets (5%, 12% and 18%) for Indian kitchen items vs excise + VAT taxed at ~31% and the target to provide 5 Crore LPG connections to under privileged womenthrough the Pradhan Mantri Ujjwala Yojana, as per Ventura Securities.
Stove Kraft has three main positives.
1. It offers investors a one stop shop for well recognized, award winning portfolio of kitchen solutions brands with a diverse range of products across consumer preferences.
2. The company enjoys a widespread, well connected distribution network with a presence across multiple retail channels and a dedicated after-sales network. Stove Kraft has partnered with e-commerce platforms like Flipkart. It also exports its products in the U.S. and Mexico.
3. Stove Kraft IPO gives an opportunity for you to take advantage of manufacturing capability with efficient backward integration.
There are some investment concerns for Stove Kraft IPO.
Firstly, the trademark for their marquee brand ‘Pigeon’ is the subject matter of litigation.
Secondly, the company sources their raw materials from third parties with whom they do not have long term contract.
Thirdly, Stove Kraft relies heavily on their brand portfolio.
Also, there are various proceedings involving the Company, their Promoters and their Director.
Stove Kraft IPO has priced its issue at 34.5 times PE (price to earnings) on a trailing basis. Its much larger peers TTK Prestige and Hawkins Cookers are currently trading at 61.0 times and 47.5 times respectively, as per Angel Broking.
Do note the company’s brand value, margins and return on capital are lower than its peers.